Strategic Moves - Regional Environmental Center for Central and ...

The Priority Environmental Investment Programme for South Eastern Europe (PEIP) 

Strategic Moves 

Eight Years of Environmental Infrastructure 

Investment Planning in South Eastern Europe

The Priority Environmental Investment Programme for South Eastern Europe (PEIP) 

Strategic Moves 

Eight Years of Environmental 

Infrastructure Investment Planning 

in South Eastern Europe 

Contributors: 

Ellen Baltzar 

Raisa Gerasina 

Dusan Sevic 

Ruslan Zhechkov 

Szentendre, Hungary 

SEPTEMBER 2009

About the REC 

The Regional Environmental Center for Central and Eastern Europe (REC) is a non-partisan, non-advocacy, 

not-for-profit international organisation with a mission to assist in solving environmental problems in Central 

and Eastern Europe (CEE). The REC fulfils this mission by promoting cooperation among non-governmental organisations, 

governments, businesses and other environmental stakeholders, and by supporting the free exchange of information 

and public participation in environmental decision making. 

The REC was established in 1990 by the United States, the European Commission and Hungary. Today, the REC is legally 

based on a charter signed by the governments of 29 countries and the European Commission, and on an international 

agreement with the government of Hungary. The REC has its head office in Szentendre, Hungary, and country offices 

and field offices in 17 beneficiary countries: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, 

Estonia, Hungary, Latvia, Lithuania, the former Yugoslav Republic of Macedonia, Montenegro, Poland, Romania, Serbia, 

Slovakia, Slovenia and Turkey. 

Recent donors are the European Commission and the governments of Albania, Austria, Bosnia and Herzegovina, Canada, 

Croatia, the Czech Republic, Estonia, Finland, Germany, Hungary, Italy, Japan, Latvia, Lithuania, Luxembourg, the former 

Yugoslav Republic of Macedonia, Montenegro, the Netherlands, Norway, Poland, Romania, Serbia, Slovakia, Slovenia, Spain, 

Sweden, Switzerland, Turkey, United Kingdom and the United States, as well as other inter-governmental and private institutions. 

The document has been produced with the financial assistance of the European Union. 

The views expressed herein can in no way be taken to reflect the official opinion of the European Union. 

During the drafting of this publication it was referred to by the working title 

“Environmental Infrastructure Investments in South Eastern Europe” 

The entire contents of this publication are copyright 

©2009 The Regional Environmental Center for Central and Eastern Europe 

No part of this publication may be sold in any form or reproduced for sale 

without prior written permission of the copyright holder 

ISBN: 978-963-9638-45-7 

Published by: 

The Regional Environmental Center for Central and Eastern Europe 

Ady Endre ut 9-11, 2000 Szentendre, Hungary 

Tel: (36-26) 311-199, Fax: (36-26) 311-294, E-mail: info@rec.org, Website: http://www.rec.org/ 

Printed in Hungary by Typonova 

This and all REC publications are printed on recycled paper or paper produced 

without the use of chlorine or chlorine-based chemicals

C O N T E N T S 

Abbreviations 6 

Foreword by the European Commission 11 

Foreword by the Executive Director of the Regional Environmental Center 12 

Authors and acknowledgements 13 

Executive summary 19 

Introduction 31 

Objectives 31 

Target 32 

Scope 32 

Methodological approach 33 

Other considerations 35 

Chapter 1 The role of the Priority Environmental Investment Programme for SEE 37 


The nature of PEIP support 39 

Assistance provided by the PEIP team 40 

The role of the PEIP 42 

Chapter 2 The status of environmental infrastructure in the SEE region 45 


Infrastructure status in the water sector 47 

Infrastructure status in the waste sector 51 

S T R AT E G I C M O V E S 3

4 


Chapter 3 Challenges to environmental financing in SEE 55 


Obstacles to environmental infrastructure financing — national level 57 

Obstacles to environmental infrastructure financing — municipal level 63 

Chapter 4 Economic development and the EU accession process 71 

Economic development in SEE 71 

EU accession 75 

Infrastructure investment implications of the EU directives 79 

Environmental investment needs and benefits 89 

Chapter 5 National strategic and institutional framework 99 

Update on progress in national environmental legislation 101 

Enforcement of environmental legislation in the water and waste sectors 107 

Environmental institutions 109 

Chapter 6 Water and waste utilities in SEE — Status and reform 119 


Status of utilities and status of reforms in the water sector 122 

Status of utilities and status of reforms in the waste sector 130 

Other considerations in water and waste utility reform 136 

Chapter 7 Financing environmental infrastructure investments 145 


Domestic sources of finance 147 

International financial assistance 157 

Project preparation facilities 174 

Regional cooperation frameworks 180 

Donor coordination frameworks 184 

Chapter 8 Prioritisiation of infrastructure projects: The PEIP lists 187 

Dynamics of the PEIP lists of priority projects 189 

S T R AT E G I C M O V E S


Chapter 9 The way forward 203 


Overall challenges for national governments 205 

Overall challenges at local and regional level 209 

Annexes 213 

Annex 1 Environmental institutions and their responsibilities 215 

Annex 2 Key government functions under the water acquis 220 

Annex 3 Strategic documents providing guidance for infrastructure investment 

in the water and waste sectors in SEE countries 221 

Annex 4 Selected REC publications in the field of environmental infrastructure 

investments and financing 224 

Annex 5 PEIP priority project lists 226 

Notes 248 

References 249 


6 

A B B R E V I AT I O N S 

S T R AT E G I C M O V E S 

BAT Best available techniques 

BERCEN Balkan Environmental Regulatory Compliance and Enforcement 

Network 

BiH Bosnia and Herzegovina 

BMW Biodegradable municipal waste 

CARDS Community Assistance for Reconstruction, Development 

and Stabilisation 

CEB Council of Europe Development Bank 

CEE Central and Eastern Europe 

CW Croatian Waters 

CSE Communal service enterprises 

DABLAS Danube and Black Sea Initiative 

DG REGIO Directorate General for Regional Policy, European Commission 

DSIP Directive-specific implementation plan 

EAR European Agency for Reconstruction 

EBRD European Bank for Reconstruction and Development 

EC European Commission 

ECENA Environmental Compliance and Enforcement Network for Accession 

EEC European Economic Community 

EFFBiH Environmental Fund of the Federation of Bosnia and Herzegovina 

EFRS Environmental Fund of Republika Srpska, Bosnia and Herzegovina 

EIA Environmental impact assessment 

EIB European Investment Bank 

EIP Environmental Investment Programme 

ENPI European Neighbourhood and Partnership Instrument 

EPA Environment Protection Agency 

EPEEF Environmental Protection and Energy Efficiency Fund, Croatia 

EPF Environmental Protection Fund, Serbia 

EPOP Environment Protection Operational Programme 

EPPF Environmental Project Preparation Facility 

ELV Emission limit value 

ESMP Environmental and social management plan 

ETF European Task Force 

EU European Union 

EU-10 10 new member states that entered the EU in 2004 

EU-15 15 member states that formed the EU prior to enlargement

EUR Euro 

EUWI EU Water Initiative 

EWBJF European Western Balkans Joint Fund 

FBiH Federation of Bosnia and Herzegovina 

FOPIP Financial and Operational Performance Improvement Programme 

FYROM The former Yugoslav Republic of Macedonia 

GDP Gross domestic product 

GEF Global Environment Facility 

H2020 Horizon 2020 Initiative 

HCW Healthcare waste 

HZWM Hazardous waste management 

IBRD International Bank for Reconstruction and Development 

IFC International Finance Corporation 

IFI International financial institution 

IFI AG International Financial Institutions Advisory Group 

IMF International Monetary Fund 

IPA Instrument for Pre-accession Assistance 

IPF Infrastructure Preparation Facility 

IPPC Integrated pollution prevention and control 

ISPA Instrument for Structural Policies for Pre-Accession 

IWMS Integrated waste management system 

JICA Japan International Cooperation Agency 

KEAP Kosovo Environmental Action Plan 

KEPA Kosovo Environment Protection Agency 

KfW Kreditanstalt fur Wiederaufbau (a German bank) 

KLMC Kosovo Landfill Management Company 

KM Convertible mark (Bosnia and Herzegovina) 

KTA Kosovo Trust Agency 

LCP Large Combustion Plants Directive 

LSGU Local self-government units 

MBT Mechanical biological treatment 

MIFF Multi-annual indicative financial framework 

MIPD Multi-annual indicative planning document 

MISP Municipal Infrastructure Support Programme, Serbia 

MSW Municipal solid waste 

MSWM Municipal solid waste management 

MW Municipal Window 



8 



NGO Non-governmental organisation 

NEAP National environmental action plan 

NEIS National Environmental Investment Strategy (the former Yugoslav 

Republic of Macedonia) 

NIB Nordic Investment Bank 

NIMBY “Not in my backyard” syndrome 

NIP National investment plan 

NSDS National Sustainable Development Strategy, Serbia 

NSEA National strategy for environmental approximation 

NSSD National strategy for sustainable development 

NUTS Nomenclature of Territorial Units 

NWMP National waste management plan 

NWMS National waste management strategy 

ODA Official Development Assistance 

OECD Organization for Economic Cooperation and Development 

OP Operational Programme 

PEIP Priority Environmental Investment Programme for South Eastern 

Europe 

Phare Poland and Hungary: Assistance for Restructuring their Economies 

PIP Public investment programme 

PIU Project implementation unit 

PMU Project management unit 

PPF Project Preparation Facility 

PPIAF Public-Private Infrastructure Advisory Facility 

PPP Public-private partnership 

PSP Private sector participation 

PUC Public utility company 

PWSE Public water supply enterprises 

RCC Regional Cooperation Council 

REC Regional Environmental Center for Central and Eastern Europe 

REReP Regional Environmental Reconstruction Programme for South 

Eastern Europe 

RS Republika Srpska (Bosnia and Herzegovina) 

RWMC Regional waste management centre 

SAA Stabilisation and association agreement 

SAP Stabilisation and Association Process 

SAPARD Special Accession Programme for Agriculture and Development

SAS Sector approximation strategy 

SEA Strategic environmental assessment 

SEE South Eastern Europe 

SEPA Serbian Environment Protection Agency 

SIDA Swedish International Development Cooperation Agency 

SME Small and medium-sized enterprises 

SPA Strategic Planning for Approximation 

SWM Solid waste management 

SWMMP Strategic waste management master plan 

SWMP Solid waste management project 

SWMS Solid waste management strategy 

ToR Terms of reference 

UfW Unaccounted-for water 

UK United Kingdom 

UNDP United Nations Development Programme 

UNEP United Nations Environment Programme 

UNEP-FI United Nations Environment Programme Finance Initiative 

UNSCR United Nations Security Council Resolution 

USAID United States Agency for International Development 

UWWTD Urban Waste Water Treatment Directive 

ViK Vodovod i Kanalizacija (water and sewerage company) 

WB World Bank 

WBICP Western Balkans Investment Coordination Platform 

WBIF Western Balkans Investment Framework 

WFD Waste Framework Directive 

WLD Waste Landfill Directive 

WM Waste management 

WMC Waste management centre 

WURP WG Water Utility Reform Plan (WURP) working group 

WWTP Wastewater treatment plant 



10 


The candidate countries and potential candidates are working to align their 

policies with EU environmental norms and standards in preparation for their future 

membership of the EU. Meeting EU environmental standards poses a major 

challenge for the countries including, inter alia, the need to conduct policy reforms, 

develop appropriate environment infrastructure and build up administrative capacity. 

The preparation of environment infrastructure projects is especially challenging 

as it requires specialist skills, knowledge and experience, financial and 

human resources and the effective coordination of many stakeholders. Therefore 

I welcome this publication, as a very comprehensive analysis of the challenges and 

progress achieved in financing environment infrastructure projects. The Priority 

Environmental Investment Programme provided strategic advice to the countries 

on how to plan and prepare environment investment projects. The lessons learnt 

from the implementation of the programme will be taken into account in the activities 

of the future Regional Environmental Network for Accession (RENA) 

which is the initiative being established to continue, along with other elements, 

the collaboration initiated under this programme. 

Foreword from 

the European Commission 

Timo Makela 

Director International Affairs and LIFE 

Environment Directorate-General 

European Commission 


12 

Foreword from 

the Regional Environmental Center 


The development and approval of the Priority Environmental Investment Programme 

for South Eastern Europe (PEIP) was one of the milestones in the process of 

environmental reconstruction and EU approximation in South Eastern Europe (SEE). 

In the period 2001 to 2009, the Regional Environmental Center for Central and Eastern 

Europe (REC) was deeply engaged in assisting the region to identify and prioritise 

environmental infrastructure projects; building capacity at local, national and 

regional level; facilitating dialogue between project proponents and financing organisations; 

and transferring best practices from the new EU member states. 

This book presents national policy development, national environmental institutions, 

environmental infrastructure investments, water and waste utility companies, 

lists of priority projects and their development dynamics, key constraints 

and challenges to investments and possible actions to address them, and other investment-related 

issues in SEE. 

The publication targets both REC’s beneficiaries in SEE within the national 

and regional administration, as well as donors, international financial institutions 

(IFIs) and international organisations active in the region. 

Building on the 2005 REC publication Targeting the Environmental Investment 

Challenge in SEE, the present publication attempts to capture the many positive 

changes that have taken place in the region since 2005. At the same time, it 

contains analysis of the obstacles and blockages to more active investments in quality 

environmental infrastructure. 

I would like to extend my gratitude to the European Commission for the valuable 

guidance provided in the implementation of the PEIP and for making possible 

this publication. I would also like to express my thanks to the ministries of 

environment in SEE, municipalities in the region, local consultants, international 

peer reviewers, and staff from the REC’s head office and country offices — thank 

you to everyone who contributed to the success of the PEIP. 

Marta Szigeti Bonifert 

Executive Director 

Regional Environmental Center for Central and Eastern Europe

Authors and acknowledgements 

This publication has been drafted by Ruslan Zhechkov, Ellen Baltzar, Dusan 

Sevic and Raisa Gerasina, members of the Environmental Financing Topic Area 

(EFTA) at the REC. Detailed comments have been provided by Oreola Ivanova- 

Nacheva, Venelina Varbova, Miriam Markus-Johansson, Ana Petrovska (REC former 

Yugoslav Republic of Macedonia), Joanna Fiedler (European Commission) 

and Jennifer McGuinn (consultant). 

Ruslan Zhechkov has 10 years’ experience in SEE working in the field of environment 

and environmental financing. He has worked full-time for the REC for eight 

years and is currently a leader of the REC’s Environmental Financing Topic Area. 

Ruslan has extensive experience and knowledge of SEE countries and has worked 

in all of them on a variety of assignments linked to environmental financing. Ruslan 

was a grants manager in the environmental project financing facility EcoLinks 

between 2001 and 2003, covering several areas including water supply and water 

management in companies. For the past two years Ruslan has been managing the 

EU-funded Priority Environmental Investment Programme for South Eastern Europe 

(PEIP), working closely with the European Commission (EC), IFIs and the 

Infrastructure Preparation Facility (IPF) etc. He was part of the team that drafted 

the National Environmental Investment Strategy of the former Yugoslav Republic 

of Macedonia, which was adopted by the government in 2009. He has been project 

director of several pre-feasibility studies in water supply and waste management 

in Bosnia and Herzegovina, Croatia and the former Yugoslav Republic of Macedonia. 

He was also part of the team reviewing the Macedonian Environmental 

Fund and participated in trainings for the establishment of an environmental fund 

in Montenegro. 

Ellen Baltzar has worked for the REC since 2007 as a junior expert in the field of 

environmental financing. Ellen was part of the PEIP team between 2007 and 2009. 

In the course of several years’ work on regional projects, Ellen has gained broad experience 

of working with environmental policy issues in Central and Eastern Europe 

(CEE) and SEE. She holds a master’s degree in environmental social science 

with a specialisation in human ecology from the University of Gothenburg, Sweden. 

Dusan Sevic is an environmental assessment expert with more than 13 years’ experience 

in CEE and SEE in the fields of environmental impact assessment (EIA), 


14 

A U T H O R S A N D A C K N O W L E D G E M E N T S 


strategic environmental assessment (SEA) and environmental financing. He has 

been working for the REC for four years and is a leader of the REC’s Environmental 

Assessment Topic Area. Dusan has broad experience in quality reviews of 

EIA and SEA projects and the provision of training on EIA and SEA; environmental 

project management; institutional strengthening; and capacity-building 

activities at national and international level in all SEE countries. 

Raisa Gerasina is a specialist in environmental engineering. She works as a junior 

expert in environmental financing and her areas of expertise include environmental 

financing, environmental information and environmental education projects 

implemented in the SEE and CEE regions and Commonwealth of Independent 

States (CIS) countries. Raisa holds a master’s degree in environmental sciences and 

policy from the Central European University, Budapest, Hungary. 

Oreola Ivanova-Nacheva has been working for the REC for more than 13 years. 

In 2000, she became head of the Environmental Policy Programme, and in parallel, 

between 2003 and 2008, she was the REC’s deputy executive director for strategy 

and development. Oreola contributed to the development of the Regional 

Environmental Reconstruction Programme for South Eastern Europe (REReP) 

and the Priority Environmental Investment Programme for South Eastern Europe 

(PEIP). As project director, she provided continuous strategic leadership and guidance 

throughout the implementation period. Before joining the REC, Oreola 

worked for the Bulgarian Ministry of Environment. One of her major assignments 

was the preparation and organisation of the 1995 Ministerial Conference “Environment 

for Europe” in Sofia. 

REC Country Offices 

Experts from the REC’s country offices have been instrumental in implementing 

the PEIP. They have been in charge of project updates, the collection of information 

and liaising with relevant policy makers. 

Albania 

Mihallaq Qirjo, Country Office Director; Eduart Cani, Senior Project Manager; 

Alken Myftiu, Senior Project Manager 

Bosnia and Herzegovina 

Jasna Draganic, Country Office Director; Sunita Selak, Project Manager 

Croatia 

Irena Brnada, Country Office Director; Zeljka Medven, Project Manager; 

Vjakoslav Radisic, Project Manager

Kosovo (as defined under UNSCR 1244) 

Zeqir Veselaj, Field Office Director; Shqipe Neziri, Project Manager 

The former Yugoslav Republic of Macedonia 

Katarina Stojkovska, Country Office Director; Kornelija Radovanovic, Project 

Manager; Ana Petrovska, Project Manager 

Montenegro 

Srna Sudar Vilotic, Country Office Director; Mira Puric, Project Manager 

Serbia 

Jovan Pavlovic, Country Office Director; Ivana Tomasevic, Project Officer 

Other contributors 

During the implementation of the PEIP, staff from the REC’s head office and 

country offices have relied on a variety of sources to receive updates on policy matters. 

These experts have contributed to numerous PEIP events, and their input and 

insights have been used in the writing of this book and other publications. 

Albania 

Daniela Godo, Specialist and PEIP Focal Point, Project Department, Ministry of 

Environment, Forestry and Water Administration; Enkelejda Gjinali, Advisor to 

the Prime Minister of Albania on water issues; Shpresa Mezini, Specialist, Project 

Department, Ministry of Environment, Forestry and Water Administration; Aspri 

Kapo, Specialist, Ministry of Environment, Forestry and Water Administration; 

Aida Seseri, Director of the Directorate for Community Service Policies, Ministry 

of Public Works, Transport and Telecommunication; Vladimir Bezhani, Specialist, 

Sector for Solid Waste, Ministry of Public Works, Transport and 

Telecommunication; Roza Dedja, Specialist, Department for Institutional Support 

in the Integration Process, Ministry of European Integration; Anila Tola, 

General Directorate of Water Supply and Sewerage; Petrit Tare, Director, Korça 

Water Supply and Sewerage Utility 


Nermina Skejovic-Huric, PEIP Focal Point, Ministry of Foreign Trade and Economic 

Relations; Alma Imamovic, Federal Ministry of Agriculture, Water Management 

and Forestry; Almira Kapetanovic, Federal Ministry of Environment 

and Tourism; Branislav Blagojevic, Water Agency of Republika Srpska 



16 



Croatia 

Vlatka Lucijanic Justic, PEIP Focal Point, Head of Department for EU Infrastructure 

Development Programmes, Ministry of Environmental Protection, Physical 

Planning and Construction; Mladen Glavocevic, Senior Expert Advisor, 

EU Division, Department for EU Infrastructure Development Programmes, Ministry 

of Environmental Protection, Physical Planning and Construction; Karmen 

Cerar, Head of Sector, Division of Water Policy and International Projects, Sector 

for International Projects, Ministry of Regional Development, Forestry and Water 

Management; Davor Hadjim, Expert Advisor, Division of Water Policy and International 

Projects, Sector for International Projects, Ministry of Regional Development, 

Forestry and Water Management; Predrag Culjak, Senior Expert 

Advisor, Department for Managing the EU Pre-Accession Funding Instruments, 

Environmental Protection and Energy Efficiency Fund; Davor Indjic, Principal 

Banker, Municipal and Environmental Infrastructure, European Bank for 

Reconstruction and Development 


Zymer Mrasori, PEIP Focal Point, Head of Division for Overall Environmental 

Policies, Ministry of Environment and Spatial Planning; Muhamet Malsiu, PEIP 

Focal Point 2007–2008, Director of the Department for Environment, Ministry 

of Environment and Spatial Planning; Albana Hajrizi, Department of Environment, 

Ministry of Environment and Spatial Planning 


Vesna Indova, PEIP Focal Point, Ministry of Environment and Physical Planning; 

Kaja Sukova, Head of the Sustainable Development and Investment Department, 

Ministry of Environment and Physical Planning; Kiril Kalkashliev, Advisor on Investments, 

Sector for Sustainable Development and Investments, Ministry of Environment 

and Physical Planning 

Montenegro 

Sinisa Stankovic, ex-Deputy Minister of Tourism and Environment; Ana Krunic, 

PEIP Focal Point, Ministry of Spatial Planning and Environmental Protection; 

Snezana Didanovic, Advisor, Ministry of Spatial Planning and Environmental 

Protection; Igor Jovanovic, Advisor, Ministry of Spatial Planning and Environmental 

Protection; Borko Raicevic, Advisor on energy efficiency, Ministry of 

Economy; Dragan Darmanovic, Head of Department for Debt and Cash Flow 

Management, Ministry of Finance; Dragana Dukic, Independent Advisor to the 

Ministry of Agriculture, Forestry and Water Management; Vera Vujosevic, Coordinator 

of the Unit for Communal Activities, Ministry for Spatial Planning and 

Environmental Protection

Serbia 

Aleksandar Vesic, PEIP Focal Point, Assistant Minister, Sector for Planning and 

Management, Ministry of Environment and Spatial Planning; Nebojsa Pokimica, 

Head of Project Management Department, Sector for Planning and Management, 

Ministry of Environment and Spatial Planning; Sava Sladic, Advisor, Sector for 

Planning and Management, Ministry of Environment and Spatial Planning; Tanja 

Petrovic, Advisor, Sector for Planning and Management, Ministry of Environment 

and Spatial Planning; Biljana Blazevic Zec, Advisor, Project Planning and Development 

Department, Environment Protection Fund; Dragana Milovanovic, Head 

of Department for Strategic Planning and Management and International Cooperation 

in the Water Sector, Water Directorate, Ministry of Agriculture, Forestry and 

Water Management; Dmitar Zakula, Senior Advisor, Water Directorate, Ministry 

of Agriculture, Forestry and Water Management; Paul Dax, Public Administration/Institutional 

Expert, Municipal Infrastructure Support Programme 



18 


The countries of South Eastern Europe (SEE) face a number of environmental 

problems, mainly in the area of water pollution due to the uncontrolled discharge of 

untreated communal and industrial wastewaters into rivers, lakes and seas, and uncontrolled 

waste disposal that often poses a threat to drinking water sources. Investing 

in environmental infrastructure is an important way to address the problem of 

pollution from point sources in order to improve environmental conditions in SEE. 

During the process of accession to the European Union (EU), extensive work will 

need to be done to adapt legal, institutional and financial systems to the requirements 

of the environmental acquis. Environmental infrastructure is an important area that 

needs improvement and significant capital investments. The institutions associated 

with environmental investments also require reorganisation and strengthening. 

The aim of the present publication is to provide an overview of developments 

in environmental infrastructure investments in the water and waste sectors in the 

SEE region in relation to the major investment-heavy directives. The book addresses 

economic, financial and legal issues but also covers other important aspects 

of environmental investments such as the enforcement of key EU directives, institutional 

capacity and international assistance. 

The publication draws on the experiences gathered through the Priority Environmental 

Investment Programme for South Eastern Europe (PEIP), implemented 

between 2001 and 2009, and on the accumulated knowledge and lessons learned 

in the framework of this programme. Work carried out within the PEIP is thus the 

main source of information, in addition to three regional surveys (one in 2008 and 

two in 2009) on water and waste. Desk research was also carried out to complement 

this accumulated information. 

The 2005 REC publication Targeting the Environmental Investment Challenge 

in South Eastern Europe covered the period 2001 to 2005. The present publication, 

which focuses mainly on developments since 2005, is the third in a series of 

publications released by the REC in 2009. The two preceding publications are 

Strategies for Reform: A Manual for Water Utilities in SEE and Speeding up Investments 

in the Waste Sector: A Manual for Waste Utilities in SEE. 

Since 2005, significant and dynamic changes have taken place in SEE, including 

progress in the legislative and strategic framework, utility reforms, and efforts towards 

EU accession. The authors have attempted to map and analyse such changes in areas 

that have a bearing on environmental financing. The publication also highlights positive 

results in the region, while not disregarding areas that need improvement. 

Executive summary 


20 

E X E C U T I V E S U M M A R Y 


It is hoped that this publication will be of use in the future development of environmental 

investments in the SEE region through its analysis of key national and regional 

constraints to environmental investments. It proposes a strategic and coherent 

process for planning and developing environmental infrastructure projects; maps obstacles 

and bottlenecks to environmental infrastructure development; and, where possible, 

recommends ways to overcome them. The SEE region is to be understood here 

as covering Albania, Bosnia and Herzegovina, Croatia, Kosovo (as defined under 

UNSCR 1244), the former Yugoslav Republic of Macedonia, Montenegro and Serbia. 

An overview of each country’s economic situation and approximation status is 

provided, based on the premise that environmental investments do not happen in 

isolation but are part of a wider system. The status of environmental infrastructure 

in SEE is reviewed, as is the status of the utilities and of utility reforms. 

The thematic focus of the book is water and waste, as the majority of public investments 

are concentrated in these sectors. Since air falls mainly under the Integrated 

Pollution Prevention and Control (IPPC) and Large Combustion Plants 

(LCP) Directives and is, to a large extent, the responsibility of the private sector or 

of individual state-owned companies, it is not examined extensively. However, the 

importance of investments in air is acknowledged, and many of the conclusions 

and recommendations are equally valid for the air sector. 

Although this publication focuses on the construction of environmental infrastructure, 

this should not be considered as a remedy for all environmental problems 

in the region. Environmental problems should be considered from the broader perspective 

of sustainable development, taking into account the economic and social situation 

of the countries of the region. In a context in which the polluter pays principle 

would burden citizens with additional financial contributions, it is essential to consider 

poverty levels and the social aspects of infrastructure development. 

The possibilities for minimising the need to develop environmental infrastructure 

by identifying alternative solutions also need to be discussed. For example, 

by cutting down on the use of resources (efficient water use, waste prevention, 

recycling and energy efficiency), improving inefficient systems (reducing leakages 

from water supply systems and improving maintenance) and improving industrial 

technologies, infrastructure needs can be optimised. 

The main findings in each chapter are presented below, including recommendations 

for the way forward. Some conclusions present a level of generalisation 

that, in some cases, does not fully take into consideration national differences and 

specificities. The authors have tried, as far as possible, to refrain from conclusions 

that are too general and to point out national differences where they exist. 

The role of the Priority Environmental 

Investment Programme 

The PEIP has facilitated a process of strategic environmental investment planning 

by national environmental authorities through identifying and prioritising 

necessary and relevant projects. The programme has provided valuable informa-

tion to the donor community on environmental and institutional needs and priorities 

and on the status of environmental investment planning in the region. 

During the 2007–2009 period, the PEIP has maintained lists of priority projects; 

organised nine national workshops and four regional meetings; and drafted 

manuals on water reform and waste sector investments. Managing a pipeline of 

projects was part of continuing efforts to make available the most up-to-date information 

on projects selected as priorities by the governments. The regional meetings 

were intended to provide an overview of progress in the different countries in 

terms of environmental investments, but also to attract donors and IFIs and to draw 

their attention to the issue. The national workshops were an opportunity to have 

in-depth discussions on a selected topic (water or waste), to attract a wide range of 

stakeholders, and to initiate a productive debate and exchange of experience. The 

manuals are targeted at all water and waste utilities in the region but are also of interest 

to policy makers. They are intended to serve as a source of reference beyond 

the duration of the project. 

At the start of the PEIP in 2001, the SEE countries lacked experience in strategic 

planning and the prioritisation of environmental investments projects, as well 

as knowledge of available sources of funding. Through the activities outlined above, 

and by serving as an information exchange platform, the PEIP has contributed to 

filling this gap and to raising awareness. While significant progress has been 

achieved in priority project identification and project preparation, there is still a 

need for improvement. These issues will continue to be addressed under the Regional 

Environmental Network for Accession (RENA). 

Status of environmental infrastructure in SEE 

The condition of the physical environmental infrastructure varies among SEE 

countries, Croatia being ahead of the other countries in the region especially in relation 

to wastewater treatment infrastructure. However, there is a big margin for improvement 

in all countries and significant financial resources will be required for 

many years to come. 

Water supply infrastructure in SEE is relatively developed in urban areas, while 

sewerage, wastewater treatment and waste management infrastructure are far less 

developed and in a poorer physical condition. The situation is worst in rural areas 

and efforts should be made to integrate the whole territory of each country in water 

supply systems. Proper waste management is a health and environment issue that 

should be tackled as a priority. Wastewater treatment is a huge challenge that needs 

to be addressed with careful planning and prioritisation. 

Common problems facing the water sector in SEE countries include the relatively 

low level of drinking water supply in rural areas; big water losses due to ageing 

infrastructure; and significant unaccounted-for water (Uf W). These problems 

need to be addressed as part of holistic national water reforms, including the reform 

of the water utilities comprising regionalisation, corporatisation and other suitable 

measures that will lead to them operating according to more market-based princi- 



22 



ples. Creating conditions for private sector participation is one of the ways to increase 

access to capital and to introduce much-needed know-how. 

Waste management infrastructure in SEE is inadequate and there are only a few 

landfills in the region that comply with EU regulations. There are also a huge number 

of illegal dumpsites or landfills with low standards. Urban areas in the SEE region 

are relatively well covered by waste collection and transportation services, 

unlike rural areas. At the same time, there is and will be pressure to change the situation 

fundamentally as a number of EU directives stipulate the establishment of 

integrated waste management systems, including separate collection, recycling, sanitary 

landfills etc. All the SEE countries are on the right track in this respect as they 

have all adopted the more economically justifiable regional approach. However, 

the big challenge will be to implement it in practice in the coming years. 

Bosnia and Herzegovina, Croatia and Serbia have made the biggest progress in 

project preparation for regional sanitary landfills, while Croatia and Kosovo (as 

defined under UNSCR 1244) have been successful in closing and remediating the 

biggest number of non-sanitary landfills. Closing and remediating old illegal dumpsites 

is a precondition for establishing new waste management centres. 

Challenges to environmental financing 

in SEE on the national level 

Financing environmental infrastructure projects in compliance with the EU 

environmental acquis requires the establishment of a clear legal and strategic framework 

and the reform of institutional and financial systems. The process necessitates 

strong and persistent political will. At the same time, it is of the utmost 

importance for governments to realise the political and financial opportunities presented 

to the countries during the pre-accession period and to capitalise on them. 

Political will for accession is currently relatively strong and many financial opportunities 

are available. 

The global economic recession has led to further constraints on the financial situation 

in the SEE region and has affected investments in environmental infrastructure, 

with some infrastructure projects having to be suspended. However, the 

crisis is also an opportunity to carry out reforms that are less resource consuming. 

In relation to affordability, in many cases large-scale infrastructure investments 

are not attractive due to the long payback periods and other constraints. It is therefore 

very important to make intelligent use of the resources available from the EC 

and other bilateral donors in order to address the affordability issue. 

The full transposition of the investment-heavy directives is an important driver 

for environmental infrastructure projects as it will place a legal burden on national 

and local governments to create the necessary conditions for investments to take 

place. The lack of key sectoral and environmental investment strategies delays environmental 

investments, since strategies set the framework and direction for follow-up 

laws and regulations. This is also valid for local management plans. One of 

the benefits of drafting strategies and plans through wide stakeholder dialogue is

that different interests are taken into account at an early stage and support can be 

attracted for future actions. National strategic frameworks should therefore be finalised 

as early as possible. 

The insufficient level of enforcement of environmental legislation in SEE countries 

represents an obstacle to the proper functioning of environmental infrastructure 

investments. The capacity of the inspectorates is weak and there is no real 

culture of compliance; the link between the inspectorates and line ministries is not 

always strong, nor is the connection between the inspectorates and the prosecution. 

The current capacity of the environmental ministries may prove to be insufficient 

for the administration of all future environmental requirements. However, 

there is pressure from ministries of finance to minimise increases in staff numbers. 

Challenges to environmental financing 

in SEE at the local level 

Local governments struggle with a multitude of competing funding priorities, 

some of which are more visible and tangible than environmental priorities and, as 

such, more likely to be placed high on the political agenda. While legal pressure is 

therefore needed for the implementation of environmental obligations, at the same 

time local governments need assistance in project preparation, improved awareness, 

and better access to funding. 

There is an imbalance between the obligations devolved to the municipalities 

as a result of decentralisation, and their financial and human resource capacities to 

manage these obligations. Intensive efforts are therefore needed to assist local governments 

to understand environmental infrastructure investments in the context 

of a market economy, including issues of social affordability, cost recovery, depreciation, 

and the appropriate use of subsidies. 

Local governments and their associated bodies generally lack adequate skills to 

prepare investment projects and to oversee and cooperate with expert consultants 

in project preparation. They often have a limited knowledge of possible sources of 

financing and lack understanding of their specific rules and requirements. 

Water and waste utilities in SEE are highly fragmented and there is a low level 

of cooperation between municipalities. At the same time there are (and will be) 

economic pressures to achieve economies of scale. Targeted work is needed on a national 

level to improve the culture of cooperation and to assist local governments 

in establishing regional bodies legally, administratively and financially. 

Economic development in SEE 

The transition to a market-based economy began after 2000 and has been slow, 

which has had a profound impact on the region’s competitiveness and foreign investment 

flows. There has been strong economic growth in SEE countries, sustained 

at between 4 and 8 percent between 2004 and 2008. Levels of GDP (PPP) 



24 



range from USD 2,600 in Kosovo (as defined under UNSCR 1244) to USD 

16,500 in Croatia. However, due to the economic recession, economic activity in 

SEE contracted sharply in the second half of 2008 as a result of reduced foreign direct 

investment, lower demand for exports, and less cross-border lending. 

In Albania, Croatia, Montenegro and Serbia, the unemployment rate in 2008 

ranged between 11 and 14 percent, while in the former Yugoslav Republic of Macedonia 

it was around 33 percent and in Kosovo (as defined under UNSCR 1244) 

and Bosnia and Herzegovina it was approximately 40 percent. Unemployment levels 

have a direct impact on affordability and willingness to pay for environmental 

infrastructure services. 

The region’s mid-term macroeconomic outlook remains favourable but is dependent 

on the maintenance of internal and regional stability, the continuation of 

structural reforms, market liberalisation, infrastructure restructuring and privatisation. 

EU accession 

The countries of SEE have moved closer to EU membership in recent years as 

the region has, to varying degrees, made progress in reforms and in meeting the criteria 

and conditions established under the Stabilisation and Association Process. 

For SEE countries, future EU accession is the strongest driver for reforms and is a 

high priority on national agendas. The pre-accession period provides a unique window 

of opportunity for reforms. It is a chance to develop human capacities and to 

consolidate and strengthen institutions in order to increase their ability to implement 

the EU environmental acquis. 

Lessons learnt from CEE show that early emphasis should be given to institutional 

and administrative reform, and that rushed and insufficiently coordinated transposition 

may lead to non-integrated, unclear, complicated and poor-quality legislation. 

Relevant EU policies and related investments 

The implementation of environmental legislation, and especially of certain investment-heavy 

directives, requires significant efforts for the upgrading and construction 

of new environmental facilities in the water and waste sectors, which will 

entail significant public and private costs representing more than 2 to 3 percent of 

the countries’ GDP. On the other hand, compliance will eventually lead to a range 

of benefits linked to improved health and better living environments. 

Experiences from the EU-10 have shown that certain environmental investments 

will be particularly costly to implement. In the waste sector, the following directives 

pose a significant financial challenge for the public sector: 

• Waste Framework Directive (2008/98/EC) 

• Landfill Directive (1999/31/EC) 

• Incineration Directive (2000/76/EC)

• Hazardous Waste Directive (91/689/EEC) 

• Sewage Sludge Directive (86/278/EEC) 

The EU waste policy is based on the waste hierarchy: the options range from 

prevention, as the most favourable, to the least favourable, landfilling. The new 

Waste Framework Directive (2008) completes the EU waste policy framework. 

The Waste Framework Directive is not associated with significant capital costs but 

rather with the provision of an adequate institutional structure, the establishment 

of competent authorities and the preparation of waste management plans. The 

highest costs are incurred in relation to the waste stream–related directives and the 

Landfill Directive. 

Among the water-related directives, the following require the heaviest investments: 

• Drinking Water Directive (98/83/EC) 

• Urban Waste Water Treatment Directive (91/271/EEC) 

• Dangerous Substances in Water Directive (2006/11/EC) 

• Nitrates Directive (91/676/EEC) 

• Bathing Water Directive (2006/7/EC) 

The biggest investment implications in water in SEE are associated with the 

Drinking Water and Urban Waste Water Treatment Directives. 

In the air sector, the new Directive on Ambient Air Quality and Cleaner Air for Europe 

(2008/50/EC) merges most of the existing legislation into a single directive with 

no change to existing air quality objectives. The main public investment in air is associated 

with establishing a network of monitoring equipment, while significant private 

investments will be needed for the implementation of the IPPC and LCP Directives. 

Development, transposition and enforcement 

of national environmental legislation 

The SEE countries have made significant progress in drafting and adopting 

new laws and strategies in accordance with the EU environmental acquis, but despite 

the progress achieved, considerable efforts are still needed to meet the requirements 

of the EU environmental acquis. Transposition and implementation 

of EU environmental legislation is a precondition for unblocking environmental 

investments in SEE countries. 

The enforcement of EU water and waste legislation is as important for unblocking 

environmental infrastructure investments as the adoption and transposition 

of targeted, quality laws and regulations. 

There is currently a low level of awareness among citizens and businesses of the 

importance of compliance with environmental legislation and, even more importantly, 

of its benefits. There should therefore be ongoing efforts to introduce a widespread culture 

of compliance and an understanding of its benefits for companies and citizens. 



26 



The inspection culture in SEE focuses predominantly on punishment for infringements 

rather than on prevention, education and dialogue. The reform of the 

inspectorates should therefore introduce inspection practices that are based on 

greater dialogue and cooperation. 

The current capacity of the inspectorates in terms of numbers, knowledge and 

equipment is relatively weak. The environmental expertise of the police, prosecution 

and courts is also weak. The reform of environmental inspection is an integral 

part of a wider regulatory and judicial reform. There is a need to strengthen all aspects 

of the functioning of the inspectorates and to separate the enforcement and 

regulatory functions of the administration. 

Companies lack strong monitoring and reporting systems, which decreases the 

efficiency of inspectors’ work. Increased efforts in this direction will improve selfmonitoring 

practices and facilitate the work of the inspectorates. 

Institutions for the environment 

The current capacities of environmental institutions (ministries, agencies etc.) 

may prove to be insufficient for the administration of all the requirements of the 

acquis. The experience of the new member states (EU-10) has shown the importance 

of proper human resources planning for institutions at central and local government 

level in line with the newly acquired environmental obligations. 

Environmental institutions in SEE countries often suffer from a high level of 

fragmentation and lack good systems for horizontal and vertical communication. 

This leads to unclear competencies and responsibilities. There is a low level of transparency 

and accountability in institutions’ operations at national and local levels. 

As the environmental acquis requires increased levels of cooperation among institutions, 

communication and coordination systems need to be set up in a timely 

manner in order to optimise funds and improve institutional efficiency. 

Environmental funds are only one of the options for addressing institutional 

deficiencies. However, their success is dependent on the principles of transparency, 

autonomy and accountability, and governments must abide by these 

principles if they decide to go for this institutional option. The work of any 

body/department dealing with environmental investments should be based on 

similar principles in order to increase public trust in a context of limited funds 

and competing projects. 

Water and waste utilities in SEE: 

Status and reform 

As a result of the decentralisation process, responsibility for water, solid waste 

and sewage treatment services now falls on the lowest self-governing municipal 

level. Local governments and the utilities that belong to them have found themselves 

unprepared for the new tasks and increased obligations.

Among the problems faced by water and waste utilities in SEE are low tariffs 

and bill payment rates; overstaffing; and the absence of sound organisational management 

inherited from the past. This creates a situation in which full cost recovery 

becomes difficult to achieve. In addition, there is a high level of fragmentation 

in utilities throughout the region. There have been no significant efforts to reorganise 

public utilities into more efficient organisations operating according to 

sound economic principles. The political independence of the utilities, their human 

resources capacity, organisational set-up and financial health are preconditions for 

successful investments. Significant efforts should therefore be made to restructure 

utilities in line with modern organisational and management practices. 

The benchmarking and self-assessment of public utility companies (PUCs) in 

order to improve their operational efficiency has proved to be beneficial. However, 

these are only one source of pressure for change and reform and need to be accompanied 

by a holistic national strategy. 

Domestic sources of financing 

environmental investments 

Public (state, county, municipal etc.) budgets, although insufficient in most cases, 

have an essential role in financing rehabilitation and capital investments in environmental 

infrastructure. They have an important role in indicating priorities and providing 

co-financing to EU, IFI and bilateral donors’ loans and grants. Governments 

should therefore aim to optimise the use of national funds in terms of constructing 

new high-priority environmental infrastructure and providing co-financing. 

The coordination of environmental financing flows at national level is of primary 

importance to ensure the complementarity of financing and to stimulate cooperation 

between the relevant ministries. Eventually, governments can make better 

use of funds by avoiding overlapping, by not funding low-priority projects and by 

not using funds for political purposes. 

The countries of SEE are slowly increasing the proportion of environment-related 

expenditure and are approaching the respective levels of the new member states. 

However, funds are insufficient to cover all the expenditures needed. Governments 

may set as benchmarks the levels of national spending on environment in the new 

member states and slowly increase their budgetary allocations to these levels. 

International financial assistance 

Financial assistance through the Instrument for Pre-accession Assistance 

(IPA) is given to support the countries to introduce the necessary political, economic 

and institutional reforms in line with EU standards. Under the EU IPA, 

which replaces previous pre-accession mechanisms, special emphasis is given to 

institution building, strengthening capacities and structures for the management 

of pre-structural funds, and financing infrastructure investments. A key challenge 



28 



in the implementation of the IPA is the countries’ capacity to absorb funds — 

that is, to set up the necessary institutions; to prepare the required project documentation, 

including feasibility studies; and to provide co-financing. The 

staffing and administrative capacities of project proponents are often inadequate, 

and in some cases the number of employees involved in project preparation, and 

their expertise, have been underestimated. 

Assistance from international bilateral donors plays an important role in knowhow 

transfer, institutional strengthening, capacity building and the co-financing of 

infrastructure projects. Funding from IFIs is also significant due to its favourable 

terms. Governments would benefit from having clear strategies on how to combine 

all the available sources of funding. One way to do this is by drafting national 

environmental investment strategies that are closely linked to, or that are an integral 

part of, their approximation strategies. 

Project preparation facilities 

Project preparation facilities are used by the EC and IFIs to fund technical assistance 

for the preparation of a pipeline of sound infrastructure projects and to 

promote them to financers. The activities of the Environmental Project Preparation 

Facility (EPPF) have had a significant beneficial impact on project proponents by 

ensuring high-quality pre-feasibility and feasibility studies, and subsequently a 

strong project pipeline for future funding. The Infrastructure Project Facility (IPF) 

supports infrastructure project preparation and builds project pipelines in the energy, 

transport, environment and social sectors. 

In 2008, the EC and partner IFIs initiated the Western Balkans Investment 

Framework (WBIF) to be launched by 2010. The WBIF will, in addition to infrastructure, 

provide support to investments in other sectors, such as the private 

sector (including SMEs) and energy efficiency. 

Regional cooperation frameworks 

Regional cooperation is essential for peace and stability in the SEE region. It is 

also a tool and a prerequisite for moving towards EU integration; tackling transboundary 

environmental pollution and infrastructure development; and creating 

a fruitful climate for investments in SEE. Regional cooperation creates an opportunity 

for the cross-border sharing of knowledge and good practice. Donors and 

IFIs often have a regional approach to programming, which expands the investment 

market thus making it more interesting for investments. 

Prioritisation of infrastructure projects 

Building lists of projects that present a harmonised approach to investment 

planning in SEE countries has been a cornerstone of the PEIP. The absence of such

an approach was a significant barrier that prevented the donor community from delivering 

targeted environmental assistance. Developing and updating the PEIP lists 

of priority projects has been a major learning exercise for SEE countries. However, 

for many of the projects it is still difficult to obtain adequate data. Those projects 

that have made more rapid progress have had good-quality project documentation 

from the outset, prepared with the active participation of PUC staff. 

At the national level, strong project preparation units are a driving force, as 

demonstrated in Croatia, Montenegro and Serbia. This is an additional argument 

for strengthening project preparation capacities at national and local levels. The 

IPA application process provided capacity building for project preparation at both 

local and national level. The proper inclusion of stakeholders from the beginning 

of the process ensured that any potential problems in relation to location or similar 

issues were resolved in time. 

Looking at the status of environmental infrastructure in the region, the need for 

improvement is evident. Bearing in mind the aim to improve environmental standards 

in SEE through the effective implementation of environmental infrastructure, 

the assistance provided under the PEIP has facilitated project preparation and 

the financing of identified projects. The PEIP lists contain 121 projects — 48 in 

the waste sector and 68 in the water sector. Five air projects remain on the list. During 

the PEIP 2007–2009 period, 15 projects were fully financed and were thus removed 

from the list, totalling investments of approximately EUR 314 million. If 

projects that have received sufficient funding to enter the implementation phase are 

included, the investments allocated amount to EUR 435.5 million. Implementation 

of the projects on the lists will improve the environmental situation in the SEE 

region and will also lead to the implementation of the key EU investments. 

Conclusions 

For SEE countries, future EU accession is the strongest driver for reform and is a 

high priority on national agendas. The pre-accession period provides a unique window 

of opportunity for establishing a framework fruitful for reform, including the development 

of environmental investment projects. During this period, political will in the 

countries is relatively strong, and the available financial support and technical assistance 

present opportunities to develop human capacity and consolidate and strengthen 

institutions to increase their ability to implement the EU environmental acquis. 

In recent years, SEE countries have made progress in relation to the financing 

of environmental investment projects and in drafting and adopting new laws and 

strategies in accordance with the EU environmental acquis. However, despite the 

progress achieved, considerable efforts are still needed to meet the requirements 

of the EU environmental acquis. 

The current capacities of environmental institutions at both national and local 

levels are generally low and often insufficient to fulfil the requirements of the EU 

acquis. Building the capacities of environmental institutions and of local consultants 

is critical for creating efficient processes and for successfully developing and fi- 



30 



nancing environmental investment projects. Capacities need to be built in the enforcement 

of legislation, project identification and preparation, and pre-feasibility 

and feasibility studies. 

In order to bridge the huge gap between the available funds and the funds required 

for the necessary investments, advantage must be taken of all the available 

sources of funding. In a context of limited budgets, it is critical to streamline available 

resources in order to achieve efficient financing. Prioritising projects and presenting 

a strategic and consolidated approach towards investment planning are key 

tasks for SEE countries. Developing environmental investment strategies will facilitate 

the efficient and coordinated financing of environmental projects.

Objectives 

Among the many pressures on the environment in South Eastern Europe (SEE) 

are the lack, or the inefficient operation, of environmental infrastructure in the water 

and waste sectors. The main purpose of this publication is therefore to provide an 

overview of environmental infrastructure investments in SEE that are linked to the 

implementation of the major heavy-investment EU water and waste directives. 

The publication relies extensively on the Priority Environmental Investment 

Programme for South Eastern Europe (PEIP), implemented over the period 2001 

to 2009, and draws on the accumulated knowledge and on lessons learned in the 

framework of the programme. 

Since the 2005 REC publication Targeting the Environmental Investment Challenge 

in SEE, there have been significant changes in the region resulting from 

progress in the legislative and strategic frameworks; utility reforms; and efforts towards 

joining the European Union. Overall, there is sustained political commitment 

to the transposition and implementation of the environmental acquis. 

However, this is not always backed up by the necessary financial, administrative 

and institutional support. The present publication attempts to map and analyse 

changes in the legal and institutional environment that have a bearing on environmental 

financing. It also highlights positive examples in the region of the financing 

of environmental infrastructure. 

The ultimate objective of the publication is to contribute to the future development 

of environmental investments in the SEE region. It proposes a strategic 

and coherent approach to planning and developing environmental infrastructure 

projects, identifying obstacles and bottlenecks and, where possible, recommending 

ways to overcome them. 

This publication: 

• analyses the key national and regional constraints and challenges to environmental 

investments; 

• presents progress made in national environmental policy since the REC’s 2005 

publication; 

• highlights macroeconomic indicators for SEE in order to illustrate the region’s 

potential for creating favourable conditions for environmental infrastructure 

development and financing; 

Introduction 


32 

I N T R O D U C T I O N 


• emphasises the implications of the key EU directives related to infrastructure 

investments; 

• illustrates country funding needs in relation to compliance with EU directives; 

• briefly presents enforcement-related problems; 

• provides an overview of institutional challenges to the countries in connection 

with environmental investments; 

• reviews the status of environmental infrastructure in SEE, as well as the status 

of utility reforms; 

• reviews levels of expenditure from national budgets, IFIs and bilateral donors; and 

• presents the updated lists of priority environmental infrastructure investment 

projects. 

Target 

This publication will primarily be of interest to: 

• decision makers responsible for strategic environmental investment planning 

in SEE, as a supportive tool presenting the regional context of investment 

planning; 

• donors and IFIs, for whom it can be an important tool to support the design of 

their assistance programmes for the SEE region; and 

• all other stakeholders interested in developing environmental infrastructure 

investment projects. 

Scope 

The present publication covers South Eastern Europe — that is, Albania, 

Bosnia and Herzegovina, Croatia, Kosovo (as defined under UNSCR 1244), the 

former Yugoslav Republic of Macedonia, Montenegro and Serbia. All references to 

Kosovo in the text are understood as the territory defined under UNSCR 1244. 

Any abbreviations of the names of these countries in the text and tables are used for 

presentation purposes only and should always be understood as indicating the full 

names of the countries. Lessons learned from the new EU member states (EU-10), 

which joined in 2004, as well as from Bulgaria and Romania, which joined in 2007, 

are used in the text where relevant. 

The publication focuses on the period between 2005 and August 2009. The 

information presented has been distributed for consultation to a wide group of 

stakeholders, including focal points of SEE ministries of environment, in order to 

ensure that the information included is correct and up to date. 

The authors have concentrated on major public environmental infrastructure 

investments in the water and waste sectors, since this was the focus of the PEIP between 

2007 and 2009. The majority of air-related investments fall within the scope

of the Integrated Pollution Prevention and Control (IPPC) Directive and the 

Large Combustion Plants (LCP) Directive. They are primarily the responsibility 

of the private sector or of individual state-owned companies and are not therefore 

a priority within the PEIP. References to other sectors are included only in order 

to provide a broader context. 

In this context, environmental infrastructure investment projects are understood 

as projects that require significant financial resources and time to complete. 

Examples include infrastructure for the provision of systems and services such as 

drinking water supply, sewage treatment or waste management leading to compliance 

with EU environmental directives. 

The publication gives priority to describing projects that have a regional (SEE) 

impact on the environment. Wherever generic comments are made on infrastructure 

development, they are of relevance to both urban and rural infrastructure development. 

Nevertheless, the focus of the analyses is on urban infrastructure development. 

Targeting the environmental investment challenge means addressing all stages 

of project cycle management. However, the present publication focuses on the early 

stages of project cycle management, such as programming and project preparation. 

The experience of the new EU member states illustrates how mistakes during the 

early stages of project cycle management can significantly reduce the chances of 

completing a project successfully. With this in mind, particular emphasis is given 

here to project cycle management up to the point at which funds are secured for 

project implementation. Later aspects of project cycle management are also mentioned 

but are not analysed in detail. 

Methodological approach 

Sources of information 

In drafting the present publication, the following main sources of information 

were used: 

• Related reports and publications on the situation in SEE and CEE. 

• Two regional surveys linked to the drafting of the PEIP water and waste manuals. 

The surveys were prepared by the PEIP team in summer 2008 (water) and 

spring 2009 (waste) and circulated to relevant ministry officials and national authorities 

in the water and waste sectors. The information was cross-checked 

against the available national strategic documents by the REC country offices 

in the SEE countries. 

• An additional survey carried out in all SEE countries in August 2009 for the 

present publication. Like the surveys carried out for the manuals, this survey 

was circulated to national authorities and the information provided was 

checked against national strategic documents in the relevant sectors. 

• Desk research on the experiences of new EU member states and candidate 

countries in relation to the preparation and implementation of infrastructure 

investment projects. 



34 



• Lessons learned from the REC’s work under the PEIP, including materials from 

analytical country reports, national workshops and regional meetings. 

• Lessons learned from the REC’s work on other key projects related to environmental 

investments and environmental institutions. 

Structure of the publication 

• In Chapter 1, the role played by the PEIP in the field of environmental infrastructure 

investments in SEE is described. During the past eight years, the PEIP 

has provided a framework for numerous activities in the region, and as such defines 

the structure of this publication. 

• The status of environmental infrastructure has a direct bearing on the size of the 

investment challenge. The analysis of this area in Chapter 2 indicates how far 

countries are from full implementation of respective directives. 

• The authors have identified key constraints and challenges to investments and 

have linked them with potential responses in Chapter 3. Challenges are divided 

between national and municipal, as they are quite different in nature. Political, 

economic, financial, legal, institutional, planning and project preparation challenges 

are also discussed. 

• In Chapter 4, the economic situation is analysed in order to define the wider 

framework for environmental investments. The state of the economy and of 

the national budget have a direct implication for all investments, including environmental 

infrastructure investments. Some of the main obstacles and benefits 

in the countries’ progress towards EU integration are outlined and the status 

of each country with respect to EU accession is presented. Investment-heavy 

directives are explicitly mentioned as they represent the legal basis and the main 

pressure for investments in environmental infrastructure. National environmental 

investment needs are presented in order to obtain an idea of the scope 

of the problem and to be able to compare the needs against the available funding 

from different sources. 

• The legal and strategic framework of the SEE countries is explored in Chapter 5 

in order to gauge the speed of transposition and the completeness of the legal 

framework. This is an indication of the political will in the country as well as of 

the legal pressure to undertake reforms. Enforcement is a critical aspect that has 

very often been a stumbling block in countries that have made excellent progress 

in transposition. The legal pressure to carry out environmental infrastructure investments 

will be effective only if there is a high level of compliance through a 

robust enforcement system. National institutions are of key importance in carrying 

out environmental investments. An analysis of such institutions illustrates the 

extent to which one of the main bottlenecks to investments has been removed. 

• The status of utilities and of utility reforms is directly correlated to their readiness 

to attract investments in water and waste. This is even more important in 

times of economic crisis, as explained in Chapter 6.

• As described in Chapter 7, domestic expenditure is one of the pillars of financing 

environmental infrastructure investment. The level of expenditure 

is an indication of national commitment and the relative priority that the 

government attaches to the issue. International financial assistance is the other 

major source of funding for environmental infrastructure. Investigating trends 

and major figures provides an indication of the relative importance of this 

source and of donors’ priorities. The European Commission has designed and 

implemented several project preparation facilities that are making a significant 

contribution to meeting project preparation needs in SEE. Regional cooperation 

frameworks also play an important role in stimulating investments 

and sharing good practice. 

• One of the main deliverables of the PEIP are the lists of priority projects. The 

analysis of their dynamics in Chapter 8 provides an insight into the speed of financing 

and the changing of priorities. 

• This book has a practical character in that the challenges outlined are associated 

with potential responses. Chapter 9 presents the main findings of the PEIP 

and provides recommendations for developing the environmental investments 

needed in the SEE region. 

Other considerations 

Although this publication focuses on constructing environmental infrastructure, 

this cannot be considered a remedy for all environmental problems in the region. 

Viewed from the broader perspective of sustainable development, the 

economic and social situation of the countries of the region must be taken into account 

when addressing environmental problems. As the application of the polluter 

pays principle would burden citizens with additional financial contributions, it is 

important to take into consideration poverty levels and the social aspects of developing 

infrastructure. 

Although the conclusions and recommendations for the future presented in 

this publication focus on developing environmental infrastructure in the SEE region, 

minimising the need to develop such infrastructure by identifying alternative 

solutions should also be discussed. For example, by minimising the use of 

resources (efficient water use, waste prevention, recycling, and energy efficiency); 

improving inefficient systems (reducing leakages from water supply systems and 

improving maintenance); or developing industrial technologies, the need for infrastructure 

can be optimised. Nevertheless, environmental infrastructure is sorely 

needed in the SEE region in order to improve environmental conditions. 

Public versus private financing 

The publication does not discriminate between different sources of financing 

and considers increased and targeted domestic spending to be as important 

as funding from the EC, loans from IFIs and other commercial banks, or bilat- 



36 



eral donor support. These sources of funding are complementary and each has 

a niche. It is up to the national governments to adopt the right strategic approach 

and create the optimal financial mix. 

Limitations 

While developing the publication, the main limitation was the availability of reliable 

official data and reports. Relevant ministries in the SEE countries and other 

stakeholders were given the opportunity to review and approve the data presented. 

The authors have done their best to avoid factual mistakes, although in such a rapidly 

evolving situation minor errors may have been overlooked. 

Some of the conclusions present a level of generalisation that, in some cases, 

does not fully take into consideration national differences and specificities. The 

authors have tried, as far as possible, to refrain from conclusions that are too general 

and to point out national differences where they exist.

Chapter 1 

The role of the 

Priority Environmental Investment 

Programme for SEE 


38 


Introduction 

The PEIP was funded by the European Commission Community Assistance 

for Reconstruction, Development and Stabilisation (CARDS) regional programme. 

The PEIP was implemented in three periods: 2001 to 2002; 2003 to 

2005; and 2007 to 2009. The overall objective of the programme was to reduce 

pressure on the environment in the SEE region through assistance to national governments 

and municipal authorities in planning strategic environmental investments, 

preparing environmental investment projects, and identifying donors for 

the realisation of projects in the air, water and waste sectors. 

Through the Stabilisation and Association Process (SAP), SEE countries are 

moving towards the harmonisation of national legislation with the EU environmental 

acquis, and are implementing new legislation according to prescribed schedules. 

In the environmental sector, this requires serious capital investment into 

infrastructure. This presents a particular challenge for SEE countries as they lack 

readily available investment capital and market-based financing mechanisms. 

The nature of PEIP support 

PEIP support to environmental investment planning 

The programme facilitates a process of strategic environmental investment planning 

by national environmental authorities through identifying and prioritising 

necessary and relevant projects and by providing institutional strengthening and capacity 

building. The programme covers the air, water and waste sectors, which represent 

the priority environmental investment needs in the region. The programme 

also provides valuable information1 to the donor community2 , including: 

• background information on environmental and institutional needs and priorities; 

• the status of environmental investment planning in the region; and 

• a pipeline of priority environmental infrastructure projects in a strategic framework 

(see Annex 5). 

The PEIP approach 

The PEIP methodology included projects prioritised according to regionally 

agreed criteria for SEE. This has enabled a long-term process of compliance with 

the EU acquis and of environmental improvement in the region by providing a regional 

framework for investment planning and good practices. The programme introduced 

a multi-stakeholder approach to investment planning, involving all key 

players. This regional approach is particularly important when looking at the contributions 

of the SEE region to European environmental pressures and, more generally, 

to pressures on a global scale. 


40 

C H A P T E R 1 

T H E R O L E O F T H E P R I O R I T Y E N V I R O N M E N TA L I N V E S T M E N T P R O G R A M M E F O R S E E 


Components of PEIP assistance 

The assistance provided within the PEIP from 2001 focused on the following 

objectives: 

• Identification and prioritisation of investment infrastructure projects, in line 

with EU requirements. 

• Development of environmental infrastructure project concepts. 

• Provision of assistance to formulate environmental problems into bankable investment 

project proposals. 

• Facilitation of dialogue between project proponents and financing organisations. 

• Facilitation of exchanges of information and experiences between environmental 

financing experts from SEE and other European countries. 

• Drafting of manuals on investments in the water and waste sectors. 

Assistance provided by the PEIP team 

Assistance provided in the period 2001 to 2002 

Assistance provided to the ministries focused on: 

• identifying regional priority environmental sectors — agreed as the reduction 

of sulphur-dioxide emissions; municipal waste generation and treatment, and 

sewage treatment; 

• compiling a set of hotspots, comprising 143 locations with multiple, priority environmental 

problems; and 

• analysing national environmental priorities, providing an overview of SEE 

countries’ policy responses and their relation to the regional environmental priority 

sectors and hotspots. 

Development of the PEIP methodology 

During this period the team developed a methodology for compiling lists of 

priority environmental investment projects. The methodology included a system 

of criteria, a project identification form, and a prioritisation exercise. As a result, 79 

high-priority projects were identified. 


The PEIP team targeted investment challenges while assisting the countries’ 

capacity-building efforts to: 

• identify investment projects in line with EU requirements; 

• formulate project concepts to be presented to interested financial institutions; and 

• identify appropriate institutions willing to finance investment projects.



Technical assistance provided in relation to institutional strengthening included: 

• analysing options for financing environmental investment projects in SEE and developing 

donor profiles to assist project proponents to identify financing sources; 

• analysing the status of environmental investment planning, thus providing decision 

makers in the SEE region and donors with an overview of progress 

achieved in transposing key investment-heavy EU directives; 

• developing a database of sites (hotspots) screened against the requirements of 

selected key investment-heavy EU directives; 

• formulating 33 project concepts in the water, air and waste sectors in line with 

key investment-heavy EU directives in order to assist project proponents in the 

33 pilot hotspots to obtain donor financing; 

• analysing critical conditions for developing bankable projects in the region; and 

• updating the lists of priority environmental investment projects. 

Focus on capacity-building workshops 

Within the capacity-building activities of the PEIP between 2003 and 2005, six 

regional workshops were held with the participation of project proponents from 

the selected 33 pilot hotspots in the air, water and waste sectors; sector experts 

from the ministries of environment; and representatives of international financing 

institutions and the donor community. 

The first series of workshops took place during 2004 and focused on the development 

of environmental investment projects. The rationale of the workshops 

was the increase in demand from SEE countries for environmental infrastructure 

investments that are in line with EU requirements. The workshops targeted the 

environmental investment challenge at both the national level (the need to ensure 

that environmental investment planning complies with EU directives), and the 

local level (the challenge of formulating and developing individual investment projects). 

The second series of workshops was held in 2005 and took the form of separate 

workshops for the air, waste and water sectors. These attempted to address the 

needs formulated by participants by placing special emphasis on the setting of tariffs 

and on developing financially viable environmental investment projects. 


Between 2007 and 2009, activities from the previous periods were continued. 

Further emphasis was given to capacity building and to updating the lists of priority 

projects. 

Seven national capacity-building workshops were held in 2008 and 2009. The 

workshops focused on the water and waste sectors in each beneficiary country and 

were designed to strengthen the capacities of national and local authorities to realise 

proposed investments; to provide information to donors and other relevant financial 

institutions about proposed environmental investment projects within the PEIP lists; 


42 




and to provide opportunity for direct dialogue and the exchange of information between 

project proponents, donors, financial institutions and relevant authorities. 

The updating of the lists of priority environmental investment projects was intensified 

during this period, being carried out twice annually in order to create a living, 

up-to-date document for the benefit of the countries and of the regional 

cooperation framework using the lists. 

The PEIP team continued their mission to SEE countries to promote the PEIP 

lists and to identify synergies between IFIs, regional cooperation facilities and donors. 

Two manuals were produced, targeted at waste and water utility companies in 

the SEE region. 

Publications within the PEIP 

The present book follows a number of other publications produced within the 

framework of the PEIP: 

Developing a Priority Environmental Investment Programme for South Eastern 

Europe (2003) — This report introduced the PEIP methodology and presented the 

results of PEIP development up to 2003, including SEE regional environmental 

priorities and a list of priority environmental projects for the SEE region. The report 

lists conclusions and future actions needed to implement the PEIP. 

Targeting the Environmental Investment Challenge in South Eastern Europe 

(2005) — This publication comprises a comprehensive analysis of the situation in 

terms of environmental infrastructure in the SEE region up to December 2005. It 

explores the developments in environmental infrastructure investment projects in 

the air, water and waste sectors and provides recommendations for the way forward. 

In 2009, two manuals were developed targeted at water and waste service utilities 

in SEE countries: Strategies for Reform: A Manual for Water Utilities in South 

Eastern Europe (April 2009); and Speeding up Investments in the Waste Sector: A 

Manual for Waste Utilities in South Eastern Europe (August 2009). The manuals are 

based on the premise that the capacity of the utilities is the main bottleneck to investments 

in water and waste infrastructure, rather than the availability of funding. 

The manuals cover the institutional reform of the water and waste utilities as well 

as organisational reform, starting with better strategic planning and focusing on 

the topics of human resources management and options for cost savings. The other 

side of the equation is also tackled through a discussion of methods for enhancing 

revenues through suitable tariff designs. 

A list of other relevant REC publications in the area of environmental infrastructure 

investments and financing is provided in Annex 4. 

The role of the PEIP 

During the implementation of the programme there have been significant developments 

in the area of environmental investments in SEE countries. At the start 

of the programme, countries lacked experience in strategic planning and in priori-



tising investment projects. There was no comprehensive, coherent way of tackling 

the issue, and knowledge of available sources of funding was insufficient. Eight 

years later, at the time of writing, countries have developed a far greater understanding 

of the issue at all levels and the capacity of national authorities has substantially 

increased. In the light of this development, the role of the PEIP can be 

described as that of a catalyst. 

Within the PEIP, the set of regional environmental priorities and the lists of 

priority projects were compiled at regional (SEE) level for the first time, based on 

a unified methodology and with the active participation of stakeholders. This unified 

methodology, which was approved by the SEE countries, introduced a systematic 

approach to investment planning that stressed the regional aspect of 

environmental protection over political and historical divisions. It provided a sound 

basis for long-term investment planning, especially in relation to the challenges 

arising from the Stabilisation and Association Process and the implementation of 

EU requirements. The features of this approach are replicable and can be applied 

in other regions or countries. 

The PEIP has served as a vehicle for networking activities aimed at developing 

effective mechanisms for identifying and implementing environmental initiatives. 

This process has been important for stimulating information exchange and cooperation 

between SEE countries. The active involvement of stakeholders (SEE ministries 

of environment, the donor community, IFIs and NGOs) enabled dialogue 

that facilitated the development and later implementation of projects, and provided 

an opportunity to gather up-to-date information. Cooperation and synergies 

were established with regional cooperation facilities such as the Regional Cooperation 

Council (RCC) and the newly launched Western Balkans Investment Coordination 

Platform (WBICP). The PEIP also provided a basis for the strategic 

planning and investments component of the Regional Environmental Network for 

Accession (RENA), to be launched in 2009. The PEIP lists have been taken up 

and used by several regional cooperation facilities and regional project preparation 

facilities. They have been used as a mechanism for project identification by the Infrastructure 

Preparation Facility (IPF), and in the water sector they have provided 

input to the Danube and Black Sea (DABLAS) priority list. 

The programme has helped to build the capacity of stakeholders, especially 

ministries of the environment. Training was provided on project cycle management, 

investment planning, priority setting, prioritising investment projects and 

identifying investment programmes. 

The workshops provided an opportunity for local project proponents, national 

decision makers at the ministerial level and the donor community to clarify differing 

requirements and expectations, as well as to exchange experiences in preparing 

and financing investment projects. The workshops covered the requirements 

and implications of the relevant EU environmental directives and provided information 

about available technical assistance and cooperation facilities. They also 

identified further needs for the capacity building of project proponents, and of national 

decision makers in particular, in relation to the preparation of bankable and 

financially viable projects. 


44 




In summary, the knowledge and capacities of national authorities improved significantly 

during the implementation of the PEIP. The success of the PEIP has 

been linked to the determination on the part of the countries to achieve practical 

results. However, many gaps still remain and capacity is still lacking compared 

to the challenges they face. Further efforts are therefore needed in this field, for 

example to build capacities for the development and enforcement of economic 

instruments, and to prepare bankable environmental investment projects. Experiences 

gathered in the course of programme implementation will be of great benefit 

to further work in this area. 

General observations 

• The PEIP has facilitated a process of strategic environmental investment planning 

by national environmental authorities by identifying and prioritising necessary 

and relevant projects. The programme has provided valuable information 

to the donor community on environmental and institutional needs and priorities, 

and on the status of environmental investment planning in the region. 

• Between 2007 and 2009, the PEIP maintained the lists of priority projects; organised 

nine national workshops and four regional meetings; and drafted manuals 

on water reform and waste investments. 

• When the PEIP was launched in 2001, SEE countries lacked experience in strategic 

planning and the prioritisation of environmental investment projects, and 

had insufficient knowledge of available sources of funding. The PEIP has contributed 

to filling this gap and to raising awareness by providing capacity building; 

drafting publications; and serving as a platform for information exchange.

Chapter 2 

The status of environmental 

infrastructure in the SEE region 


46 


Introduction 

The differences among individual countries are huge in terms of physical environmental 

infrastructure. In general, the water supply infrastructure is at a relatively 

satisfactory level, while the sewerage, wastewater treatment and waste 

management infrastructure show deficiencies. Croatia is far ahead of other countries 

in the region regarding physical infrastructure, especially wastewater treatment 

infrastructure. In Kosovo (as defined under UNSCR 1244) and the former 

Yugoslav Republic of Macedonia, there is a huge margin for improvement. Serbia, 

Bosnia and Herzegovina and Croatia have made the biggest progress in project 

preparation for regional sanitary landfills, while Croatia has been successful in closing 

and remediating non-sanitary landfills. 

The status of the water and waste infrastructure in the region is directly correlated 

to the investments that need to be made in order to reach full compliance 

with EU legislation. The poorer the quality of the infrastructure, the higher the 

investment required to bring the infrastructure first to an acceptable level, and later 

to full compliance. This chapter provides an overview of the situation with respect 

to water and waste infrastructure, summarising some of the key parameters. It draws 

to a large extent on the PEIP manuals on water and waste produced earlier this 

year (REC, 2009a and b). 

Infrastructure status in the water sector 

Investments are urgently needed in the water infrastructure in SEE in order to 

provide all members of the population with drinking water, to improve the quality 

of drinking water, and to reduce pressure on the environment through the treatment 

of wastewater. 

Some of the common problems facing the water sector in SEE countries are: 

• the relatively low level of drinking water supply for the population in rural areas; 

• big water losses due to ageing water supply infrastructure; 

• significant unaccounted-for water (Uf W), at between 60 and 70 percent; and 

• the poor operating efficiency of the utilities. 

Figure 1 shows that Croatia and Montenegro have the most developed water 

supply infrastructure in the region, while in Kosovo (as defined under UNSCR 

1244) the connection rate is almost half that of the best performers. Where separate 

data are available, it can be seen that rural areas have a far less developed water 

supply infrastructure than urban areas. 

As shown in Figure 2, Croatia, the former Yugoslav Republic of Macedonia (urban 

areas) and Bosnia and Herzegovina (urban areas) have a connection rate to sewerage 

networks of around 70 percent of the population, while in Kosovo (as defined under 

UNSCR 1244) the connection rate is only 28 percent of the population. 

The greatest disparity in the region can be seen in the number of wastewater 

treatment plants (WWTPs). With 89 plants, Croatia has the highest number, cov- 


48 


S TAT U S O F E N V I R O N M E N TA L I N F R A S T R U C T U R E I N T H E S E E R E G I O N 

FIGURE 1: Percentage of the population connected to water supply 

% 

100 

90 

80 

70 

60 

50 

40 

30 

20 

10 

0 

Albania 

(rural) 

Bosnia and 

Herzegovina 

(urban) 

Source: REC survey, 2008 


Serbia (urban) 

Albania (rural) 


Herzegovina 

(rural) 

Serbia (rural) 

Kosovo (under 

UNSCR 1244) 

(overall) 


Herzegovina 

(overall) 

FYR Macedonia 

(overall) 

Montenegro 

(Overall) 

Croatia 

(Overall) 

ering 28 percent of the population, mainly in urban areas. Kosovo (as defined under 

UNSCR 1244) has no WWTPs in operation, while Albania and Montenegro each 

have two WWTPs (REC survey, 2008). Specific features and problems related to 

water infrastructure in each country are presented below. 

In Albania, the estimated proportion of the population supplied with water is 

85 percent in urban settlements and 65 percent in rural areas. The estimated proportion 

of the population connected to sewerage networks is 40 percent. Water 

losses are high and the estimated Uf W reaches 67 percent. Two wastewater treatment 

plants are in operation in Kavaja and Pogradec; work on another has been 

completed and three more are under construction. However, surface waters are still 

affected by uncontrolled leakages from the illegal dumping of solid waste (EC 

SEC[2009] 1339). According to the Albanian Implementation Plan for the Reform 

of the Water Supply and Sewerage Sector, 2007–2009 (Gjinali and Olldashi, 

2008), another 10 wastewater treatment plants should be built by the end of 2011. 

These projects are included in the national PEIP lists.

FIGURE 2: Percentage of the population connected to sewerage networks 

% 

100 

90 

80 

70 

60 

50 

40 

30 

20 

10 

0 

Croatia Serbia Albania Montenegro Kosovo 

(under 

FYR 

Macedonia 


UNSCR 1244) (rural) 

The water supply and sewerage sector in the country has shown important improvements 

in the last two years from both a technical and a financial point of view. 

Although improvements have been made, many deficiencies still exist, especially 

in rural areas. 

In Bosnia and Herzegovina, some 56 percent of the population has access to 

water through a public water supply system (91 percent in urban areas, and 48 percent 

in rural areas). Overall water losses are estimated at 50 percent. In urban areas, 

73 percent of the population is connected to sewerage networks, while in rural 

areas the proportion is extremely low. Overall, 4 percent of the population is connected 

to wastewater treatment plants. Untreated discharges of wastewater remain 

a key environmental challenge, and both access to drinking water and wastewater 

treatment infrastructure require additional investments (EC SEC[2009] 1338). 

Croatia has the most developed water infrastructure in the region, and 80 percent 

of its population is connected to a municipal water supply. Up to 75 percent 

of the urban population is connected to sewerage networks, while 28 percent of the 

overall population is connected to 89 wastewater treatment plants. Many plants 

constructed in the 1980s are too big since they were designed according to the existing 

development and spatial plans, for the intake of a considerable amount of industrial 

wastewater, and for a higher percentage of the population connected to 



FYR 

Macedonia 

(urban) 


Herzegovina 

(urban) 


50 



FIGURE 3: Number of wastewater treatment plants in SEE countries 

100 

90 

80 

70 

60 

50 

40 

30 

20 

10 

0 


Albania Bosnia and 

Herzegovina 


Croatia FYR 

Macedonia 

Kosovo (under 

UNSCR 1244) 

Montenegro Serbia 

the sewerage system than has been achieved. At present, about 25 percent of the 

total municipal wastewater in Croatia is treated; approximately 76 percent of this 

is mechanically treated. Around 18 percent undergoes secondary treatment, which 

represents only around 4.4 percent of the total amount of municipal wastewater 

(website of Croatian Waters). Estimated national average physical water losses are 

40 percent, and Uf W 67 percent. The relatively high water losses indicate that 

huge investments are needed for the reconstruction of water supply networks. According 

to the EC progress report, significant efforts have to be made to increase 

investments in this sector (EC SEC [2009] 1333). 

In Kosovo (as defined under UNSCR 1244) the water infrastructure is relatively 

underdeveloped. One of the most severe problems is water shortage: water 

cuts affect the general population as well as the industrial and agricultural sectors. 

Although accurate statistics are not readily available, it is estimated that 44 percent 

of the population is connected to water supply services. The rate of Uf W is 59 percent, 

and the technical condition of the water and wastewater systems is rather 

poor (REC survey, 2008). 

Only 28 percent of the population is connected to a sewerage network. There 

are no wastewater treatment plants in operation. A WWTP was recently built in the 

municipality of Skenderaj/Srbica, but due to unsettled ownership issues in relation 

to the expropriated land, the necessary connections are not yet in place and the plant

is not in operation. The construction of seven WWTPs is foreseen in the draft development 

strategy and the Kosovo Environmental Action Plan (REC survey, 2008). 

In the former Yugoslav Republic of Macedonia, the communal service enterprises 

(CSEs) are public enterprises founded and owned by local governments. 

The water supply system reaches 72 percent of the population of the country, albeit 

with persistent problems such as a high level of Uf W. The wastewater sector 

is far less developed, with seven small and outdated urban wastewater treatment 

plants to which 12 percent of the population is connected. The existing infrastructure 

is outdated, resulting in high water and energy losses. Of the existing 68 

water supply networks, 58 need upgrading; of the existing 68 sewerage networks 

59 need upgrading; and of the seven existing wastewater treatment plants, two 

need reconstruction and 59 new (smaller and larger) plants are needed in order to 

comply with the relevant EU directives. 

Montenegro has a relatively well developed water supply system, connecting 

80 percent of the population. However, the sewerage system is less well developed, 

connecting only 38 percent of the population. Two obsolete WWTPs exist in Podgorica 

and Niksic. Water shortages are common and the level of Uf W is high, at 

between 50 and 75 percent. The Waste Water Feasibility Study for the Coastal Region 

of Montenegro and the Municipality of Cetinje, and the Sewerage and Wastewater 

Strategic Master Plan for Central and Northern Montenegro envisage, by 

the end of 2015, the rehabilitation of existing pumping stations, the construction 

of new WWTPs and pumping stations, and the reconstruction and expansion of 

existing infrastructure throughout the republic. 

Serbia has 150 water utilities with obsolete and deteriorating water infrastructure. 

Poor technical performance results in water losses at an average level of 35 

percent, while in some municipalities losses are as high as 50 percent. The proportion 

of the population connected to water supply in urban areas is 83 percent, while 

in rural areas it is 49 percent. Some 60 percent of the overall population is connected 

to sewerage networks and there are 28 WWTPs. The wastewater treatment 

infrastructure throughout the country needs upgrading. 

Infrastructure status in the waste sector 

The level of waste collection, transportation, treatment and disposal in SEE 

countries is below that required for compliance with EU standards. The available 

facilities and capacities for the treatment and disposal of waste are inadequate; legislation 

and standards are not effectively enforced; and current waste management 

practices are contributing to the pollution of air, water resources and land. 

Investments in the municipal solid waste infrastructure in South Eastern Europe 

(SEE) are urgently needed in order to reduce the pressure on the environment resulting 

from indiscriminate dumping and from the depositing of waste in landfills 

with low or no standards. This pressure is exacerbated by the increased generation 

of municipal solid waste associated with GDP growth during the years before the 

economic crisis, and with the accompanying growth in private consumption. 




52 




Across Albania there are 65 legal — albeit unmanaged and uncontrolled — 

landfills for urban settlements, as well as an unknown number of illegal waste dumps 

in rural areas. There is no separation of household waste from industrial, construction 

or hazardous waste. Some medical waste is incinerated in four obsolete incinerators 

causing air pollution hazardous to human health. No waste stream is sorted 

formally into recyclable components, although there is a small-scale informal market 

among individual collectors and small companies. None of the existing landfills 

meet international construction and health standards (location, protective lining, 

drainage system, leachate treatment, gas collection etc.). Landfills and illegal waste 

dumps often catch fire, releasing dioxins and furans. The Ministry of Environment, 

Forestry and Water Administration envisages the construction of four landfills in Elbasan, 

Fier, Gjirokaster and Berat, and the closure of five existing dumpsites in Elbasan, 

Durres, Berat, Lezhe and Pogradec. Over the last three years, rehabilitation 

and restructuring work has been undertaken at the Sharra landfill in Tirana. 

Bosnia and Herzegovina is at an early stage of investment in solid waste management. 

Approximately 36 percent of the country is covered by municipal solid 

waste management services. There are 75 legal but non-sanitary landfills, as well as 

around 1,200 illegal ones. It is estimated that Republika Srpska has 25 municipal 

landfills and a large number of illegal dumpsites; while in the Federation of Bosnia 

and Herzegovina there are 50 municipal dumpsites and a large number of illegal 

disposal sites. Up to eight regional landfills are needed in order to achieve compliance 

with relevant EU directives. 

The 2003 National Environmental Action Plan (NEAP) proposes two options 

for an intermediate solution: regional landfills at 16 (entity option) or 14 (interentity 

option) locations, which would ultimately result in a long-term solution 

comprising six major regional landfills in Bosnia and Herzegovina, located in Banja 

Luka, Tuzla, Mostar, Bijeljina, Bihac and Livno. Since 2003, two sanitary regional 

depots have been built in Banja Luka and Sarajevo. The 2008 Instrument for Preaccession 

Assistance (IPA) project “Strengthening Bosnia and Herzegovina’s Environmental 

Institutions: Preparation for Pre-accession Funds and Support to 

Environmental Infrastructure Development” is providing technical assistance for 

the preparation of environmental infrastructure investment projects (feasibility 

studies) for the regional landfills in Sarajevo and Banja Luka, as well as those envisaged 

in Gorazde, Srednje Bosanski canton,Visoko, Ljubuski region, Prijedor, 

Derventa and Trebinje. This has been complemented by World Bank International 

Development Association (IDA) loans for Sarajevo, Zenica, Tuzla, Bihac, Banja 

Luka and Bijeljina. During the implementation of this project, 145 illegal dumpsites 

have been closed and remediated, and another 40 are due to be closed. 

According to the Croatian National Waste Management Plan (NWMP), all existing 

299 registered local landfill sites should be remediated or closed, or transformed 

into transfer stations for future regional management centres by the end 

of 2011, with a transition period to 2015 (EU Waste Landfill Directive). The closing 

of old dumpsites is a precondition for establishing new waste management centres. 

Closure and remediation work has been completed at 63 landfills.

The National Waste Management Strategy (NWMS) envisages the construction 

of up to 21 regional landfills, depending on the results of the regionalisation 

process for waste utilities. As of February 2009, the Croatian Environmental Protection 

and Energy Efficiency Fund (EPEEF) is assisting nine regional waste management 

centre (RWMC) projects in preparing project documentation. Three out 

of these nine projects have applied for IPA funds — Mariscina (Primorsko-goranska 

county), Kastijun (Istria county) and Lecevica (Split-Dalmatia county) — while 

the fourth (Bikarac in Sibenik-Knin county) has already received funding through 

the Instrument for Structural Policies for Pre-Accession (ISPA). The phase one 

costs for these RWMCs vary from around EUR 20 to 60 million, depending on the 

size of the region. Despite progress, continuous efforts are needed for the remediation 

of existing landfills and hotspots and the further establishment of systems for 

the collection and management of waste streams. According to the EC, preparations 

in this area are progressing well (EC SEC [2009] 1333). 

In Kosovo (as defined under UNSCR 1244) an estimated 70 percent of all 

waste is illegally dumped (on the streets, around rivers, lakes and mountains, and 

in rural areas). Waste collection services cover approximately 39 percent of the population 

(WWRO, 2009), and services are provided mainly in urban areas. There is 

no separation of waste streams. 

Kosovo (as defined under UNSCR 1244) has inherited 30 legal but non-sanitary 

municipal landfills. Of these, 26 have been rehabilitated and closed with the 

support of the European Agency for Reconstruction (EAR). Five new landfills 

have been built (also funded by EAR), which are now used regularly for waste disposal. 

Projects are currently being implemented on the rehabilitation of old landfills 

in Prizren, Gjakova, Kacanik, Ferizaj, Gjilan and Lipjan. Another two projects 

for non-municipal waste (medical and hazardous waste) are under preparation. 

In the former Yugoslav Republic of Macedonia, regular waste collection services 

are mainly limited to urban areas. In total, around 70 percent of the Macedonian 

population benefit from regular waste collection services. (In rural 

settlements the proportion is around 10 percent.) Municipal landfills do not comply 

with sanitation standards, and waste disposal practices do not comply with any 

technical and/or environmental standards. The NWMS envisages up to eight regional 

landfills. 

The 2008 National Environmental Investment Strategy (NEIS) includes a provision 

for a call for proposals for the construction of eight regional sanitary waste 

landfills and for the closure and reclamation of the existing 54 non-compliant municipal 

landfills. According to the EC, investments in this area need to be increased 

(EC SEC [2009] 1335). 

Since 2008 there has been only one sanitary landfill functioning in Montenegro, 

a (de facto) regional landfill serving the city of Podgorica and the town of 

Danilovgrad and the surrounding settlements. The other existing landfills are legal 

and illegal municipal non-sanitary landfills. According to the national plan for 

waste management and one regional plan, the seven regional sanitary landfills still 

required are due to be constructed, as well as an envisaged nine transfer stations, 




54 




eight recycling centres and 26 smaller recycling units, and up to five composting facilities. 

The construction of a regional recycling centre at the location of the existing 

landfill in Podgorica is under way, with a capacity of 90,000 tonnes of mixed 

municipal waste per year. Feasibility studies and environmental impact assessments 

on six regional sanitary landfill locations were finalised and projects are being designed. 

According to the EC, alignment with European standards needs to be 

strengthened and accelerated, in particular concerning the Landfill Directive and 

the Waste Shipments Regulation (EC SEC [2009] 1336). 

Currently there is only one sanitary landfill in Serbia. According to the 2003 Waste 

Management Strategy, Serbia needs 29 regional sanitary landfills, 44 transfer stations, 

17 recycling centres, seven or more composting facilities, and four incinerators. There 

are five ongoing regional projects in which several municipalities will use the same 

landfill: Duboko landfill serving Cacak, Uzice and seven minor towns; and Muntina 

Padina landfill serving four municipalities in the Pirot region. These two publicly 

owned regional landfills are expected to be commissioned by the end of 2009. 


• The condition of the physical environmental infrastructure varies among the 

SEE countries. Croatia is ahead of other countries in the region, especially in 

terms of wastewater treatment infrastructure. However, there is a big margin 

for improvement in all countries. 

• Water supply infrastructure in SEE is at a relatively satisfactory level, especially 

in urban areas, while sewerage, wastewater treatment and waste management infrastructure 

are far less developed and in a worse physical condition. 

• Common problems facing the water sector in SEE countries include a relatively 

low level of drinking water supply in rural areas; big water losses due to ageing 

infrastructure; and significant levels of unaccounted-for water (Uf W). 

• Waste management infrastructure in SEE is inadequate. There are only a few 

landfills in the region that comply with EU regulations and there are a huge 

number of low-standard illegal dumpsites or landfills. 

• Urban areas in the SEE region are relatively well covered by waste collection 

and transportation services, in contrast to rural areas. 

• Bosnia and Herzegovina, Croatia and Serbia have made the biggest progress in 

terms of project preparation for regional sanitary landfills, while Croatia and 

Kosovo (as defined under UNSCR 1244) have been successful in closing and 

remediating the biggest number of non-sanitary landfills. Closing and remediating 

old illegal dumpsites is a precondition for establishing new waste management 

centres.

Chapter 3 

Challenges to environmental 

financing in SEE 


56 


Introduction 

This chapter gives an overview of the main challenges in relation to developing 

environmental investment projects in SEE countries. The challenges outlined here 

are then explored in greater depth in subsequent chapters. 

Financing environmental infrastructure projects in compliance with the EU 

environmental acquis is a serious legal, financial and institutional challenge for any 

country. It requires the establishment of a clear legal and strategic framework — 

through the transposition of the EU water and waste acquis — that creates sufficient 

incentives and pressure on both the state administration and municipal project 

proponents to result in concrete actions for the reform of all relevant systems, 

both institutional and financial. The process necessitates significant financial allocations 

as well as the political will to reform the main institutions — the water 

and waste utilities — so as to make them capable of implementing the investments. 

“Constraints” and “challenges” are used here interchangeably, since all the factors 

discussed below hamper and slow down environmental infrastructure investments 

and thus need to be overcome. 

The authors use two criteria to classify the constraints/challenges to environmental 

infrastructure financing. The first criterion is administrative level: that is, 

national or municipal. 

This classification allows us to look at environmental infrastructure investment 

from the point of view of national governments and ministries, but also from the 

point of view of the municipalities that are responsible for the practical implementation 

of the relevant water and waste acquis. 

The main policy and planning work is carried out on the national level through the 

transposition of EU legislation and through the drafting of strategic documents that 

set out priorities and timeframes. On the other hand, local governments have the difficult 

task of implementing obligations that have been devolved to them following the 

process of decentralisation. They are faced with the obligation to implement investments 

that far exceed their budgetary means. In addition, they have to balance these 

investments with other, competing priorities linked to social and regional development. 

It is also the local governments that have to embark on a programme to reform 

the utilities that will be responsible for the investments in water and waste. 

The second criterion is the nature of the challenge/constraint, that is, political, 

economic, financial, legal, institutional, planning, or project preparation. 

Obstacles to environmental 

infrastructure financing — national level 

Political 

Low level of political will 

One of the main constraints to environmental infrastructure investments in 

SEE is the insufficient political drive for reform in connection with environmental 

financing. The level of political will is generally in direct correlation with the sta- 


58 


C H A L L E N G E S T O E N V I R O N M E N TA L F I N A N C I N G I N S E E 

TABLE 1: Key challenges and constraints at national level 

TYPE CONSTRAINTS DESCRIPTION ADDRESSED IN 

GREATER DETAIL IN 

Political Low level of political will This is in direct correlation with 

the status of the country 

regarding EU accession 

Chapter 2 

Economic Low levels of GDP Leads to relatively low nominal 

amounts for environmental 

infrastructure investment from 

the national budget 

Chapter 2 

Budgetary deficit in Leads to suspension of Chapter 2 

times of economic crisis infrastructure projects 

Financial High level of investments Due to poor-quality water and Chapter 2 

needed for full compliance waste infrastructure; long years 

of under-funding; and obsolete 

water and waste systems 

Legal Planning for approximation Missing in most countries 

Strategic documents Missing in certain countries 

and sectors 

Transposition Relatively low level of 

transposition of key directives 

Chapter 2 

Enforcement Lack of capacity for the 

enforcement of newly 

transposed directives 

Chapter 2 

Institutional Capacity of ministry Relatively low number of staff Chapter 2 

and specialised agency for an increased body of 

environmental legislation 

Lack of specialised Few of the countries have Chapter 2 

institutions (environmental specialised institutions, e.g. 

fund, national regulators) environmental funds 

Coordination Insufficient coordination among 

line ministries — competition 

for scarce funds and power, 

associated political influence on 

the process of project selection 

Chapter 2 

Investment Lack of national environmental Necessary to properly map 

planning and investment strategies funding needs, available funding 

project by sources, as well as other issues 

identification such as institutional approaches 

Weak pipeline management Lack of proper coordination and 

communication between 

institutions in managing pipelines 

of environmental investment 

projects 

Lack of key sectoral Some sectoral plans and 

strategies and plans programmes for the 

implementation of directives 

are missing 


tus of the country regarding EU accession. A certain political stability is needed to 

fulfil the obligations taken on with the Stabilisation and Association Agreement 

(SAA). Political will is needed for the whole spectrum of reforms, from institutional 

restructuring (administration and utilities) to the alignment of the legal 

framework and the enforcement of commitments undertaken. 

Economic 

Low levels of GDP 

With the exception of Croatia, the SEE countries have relatively low levels 

of per capita GDP. Croatia has relatively higher GDP, at a level comparable to 

that in the new EU member states in CEE. The SEE countries are all countries 

in transition, requiring serious reforms in all sectors of society, including road 

infrastructure, education and health care. The proportion of the state budget 

earmarked for the environment is still relatively low, although it is growing (Eurostat 

website). The amounts in the budget dedicated to environmental infrastructure 

investment are therefore extremely low compared to the overall 

investment needs. (For further details see Chapter 4.) 

The global economic recession 

In the past year, the global economic recession has deepened, affecting almost all 

areas of life, including investments in environmental infrastructure. National budgets 

are feeling the pressure of decreasing revenues, and as a result some infrastructure 

projects have been suspended for the time being in order to balance national budgets. 

One of the reasons for this is the lack of clarity regarding the link between environmental 

infrastructure investments and regional economic development. In 

addition, due to the financial and economic crisis some of the problems faced by 

the water and waste utilities even in good economic times are escalating — for example 

the non-payment of bills, difficulties in accessing loans etc. Many banks and 

investors have less capital, and where capital is available, borrowing terms are far less 

favourable, making the requirements of project proponents themselves far stricter. 

Consequently, financiers are less inclined to take big risks and would rather invest 

in solid and well-managed operations. Funding that is relatively stable and that only 

slightly decreases becomes even more valuable. (For further details on the economic 

situation see Chapter 4, and on utility reforms see Chapter 6.) 

Affordability of environmental investments and availability of subsidies 

Due to low GDP and low levels of development, most SEE communities will 

have difficulty affording the investments that are required in order to ensure the 

protection of their environment and their quality of life, and compliance with 

new legislative requirements. In particular, users of the new infrastructure will be 

unable to afford the user charges that are required in order to ensure the operation 

and maintenance of that infrastructure, let alone to secure capital investment. 

(For further details on affordability see Chapter 6.) 




60 




Financial 

High level of investment needed 

The investments in water and waste infrastructure that are needed in order to 

reach full compliance are extremely high relative to the GDPs of SEE countries. The 

EU water and waste acquis introduce high EU standards for inbuilt infrastructure. 

Compliance with the EU environmental acquis requires the construction of new 

infrastructure such as sanitary landfills, wastewater treatment plants for towns with 

fewer than 10,000 inhabitants etc. Even the EU-10 countries experience difficulties 

achieving compliance years after joining the EU. Some of them are even facing legal 

actions. The situation is even less favourable in SEE, where existing infrastructure has 

suffered from years of underinvestment. (For further details see Chapter 2.) 

Poor bankability of proposed investments 

Related to affordability, in many cases large-scale infrastructure investments 

that are needed for compliance with legislative requirements (e.g. the construction 

of mechanical WWTPs or sophisticated waste management and disposal sites) are 

not attractive investments due to long payback periods and other constraints. This 

greatly inhibits the availability of investment capital and also requires more sophisticated 

project planning and preparation, which is lacking in the region. 

Legal 

Low level of transposition of key directives 

The full transposition of the investment-heavy directives is an important driver 

for environmental infrastructure projects, as it will place a legal burden on national 

and local governments to create the conditions and undertake the actions necessary 

for investments to take place. The CEE experience has shown that very often the 

process is carried out within a short period of time, and that compromises are often 

made in terms of quality. (For further details see Chapter 4.) 

Strategic framework 

The drafting of national and local horizontal and sectoral (water and waste) 

strategies also belongs among the “planning” challenges. However, it also has strong 

legal implications as strategies set the framework and the direction for subsequent 

laws and regulations. Drafting strategies through wide stakeholder dialogue has 

the benefit of combining different interests at an early stage and attracting support 

for future actions. Significant progress has been made in strategy drafting in SEE 

during the last two to three years. The drafting of strategic horizontal and sectoral 

documents is very important as it “translates” the vision of the government in a 

given sector, creates the institutional framework, and provides the legal technology. 

The availability of strategic documents is indispensable for the absorption of funding 

from the Instrument for Pre-accession Assistance (IPA). (For further details on 

strategic documents see Chapter 5, and on IPA see Chapter 7.)

Enforcement 

The proper functioning of environmental infrastructure investment is impossible 

without the strong enforcement of legislation. In general, the region is 

characterised by insufficient enforcement of environmental legislation and insufficient 

imposition of fines, due in part to the weak capacity of the inspectorates 

in terms of numbers, knowledge and equipment. Another reason for the 

low level of enforcement of legislation in general is the absence of a culture of 

enforcement and compliance. The link between the inspectorates and the line 

ministries is not always strong enough. The connection between the inspectorates 

and the prosecution is weak, and inspectors are rarely trained to carry out 

investigations. Additionally, there is a vast body of EU environmental legislation, 

and the resources available for inspection fall far short of the laws to be enforced. 

Experience in CEE has shown that in the rush to transpose EU legislation, the aspect 

of enforcement has often been disregarded. The financial benefits of enforcement 

are often vague and difficult to quantify, which means that an 

important pressure factor is missing. (For further details on enforcement see 

Chapter 5, and on the benefits of enforcement see Chapter 9.) 

Institutional 

Capacity of central-level institutions 

The adoption of the EU environmental acquis will force environmental institutions 

in SEE to adapt all their systems for the implementation of the acquis. As the 

environment has a prominent role in the EU acquis, governments will have to adapt 

national and regional environmental institutions in order to reflect EU priorities. 

Based on the experience of CEE countries, it is likely that the current capacity of 

the environmental ministries will turn out to be insufficient for the administration of 

all the requirements arising from the adoption of the acquis. One of the mistakes 

made in CEE countries is the failure to ensure proper human resources planning in 

relation to the requirements of the EU acquis. In general, environmental institutions 

should significantly increase their staff. However, it is very probable that the ministries 

of finance will exert pressure in the opposite direction and push for staff cuts. 

The availability of environmental experts in general, and of environmental investment 

experts in particular, is of the utmost importance and governments should adapt 

university programmes in this direction. They should also take advantage of the available 

twinning and other training programmes that draw on the experiences of other 

EU member states to improve the skills and capacities of their staff. 

Communication and coordination 

Inter-institutional communication and coordination, as well as the relationship 

between the central level and local levels of governance are also areas of critical importance. 

(For further details on institutions, see Chapter 5.) 




62 




Investment planning 

National environmental investment planning and project identification 

Only the former Yugoslav Republic of Macedonia has adopted a national environmental 

investment strategy (NEIS). Such strategies provide a clear overview 

of the national environmental investment needs on the one hand, and of the national 

financial framework on the other, including budgetary allocations, IPA funding, 

bilateral grants and IFI financing. They also analyse institutional capacity to 

carry out investments. In an ideal case, environmental investment strategies should 

come up with ranked priority lists based on clear and transparent criteria and comprising 

projects that are clearly supported by the government. 

Project identification and preparation 

Although at one time the countries lacked capacity for project identification 

and preparation, huge progress has been made since 2001, partly due to the implementation 

of the PEIP. However, there is still room for improvement. Project 

preparation gaps have been covered by project preparation facilities. 


• Financing environmental infrastructure projects in compliance with the EU 

environmental acquis requires the establishment of a clear legal and strategic 

framework and the reform of institutional and financial systems. The process 

necessitates significant financial allocations as well as the political will to reform 

the main institutions. 

• The global economic recession has added further constraints to the financial situation 

in the SEE region and has affected investments in environmental infrastructure; 

some infrastructure projects have been suspended. 

• In relation to affordability, in many cases large-scale infrastructure investments 

are not attractive due to long payback periods and other constraints. 

• The full transposition of the investment-heavy directives is an important driver 

for environmental infrastructure projects as it will place a legal burden on national 

and local governments to undertake the necessary actions for investments 

to take place. 

• The lack of key sectoral and environmental investment strategies delays environmental 

investments as strategies set the framework and the direction for follow-up 

laws and regulations. The same is valid for local management plans. 

Drafting strategies and plans through wide stakeholder dialogue has the benefit 

of combining different interests at an early stage and of attracting support for 

future actions. 

• The insufficient level of enforcement of environmental legislation in SEE countries 

is a hindrance to the proper functioning of environmental infrastructure

investments. The capacity of the inspectorates is weak and a culture of compliance 

is lacking; the link between the inspectorates and the line ministries is not 

always strong and the connection between the inspectorates and the prosecution 

is weak. 

• The current capacity of environmental ministries may turn out to be insufficient 

for the administration of all future environmental requirements. However, there 

is pressure from ministries of finance to avoid an increase in staff numbers. 

Obstacles to environmental infrastructure 

financing — municipal level 

Political 

Local governments in SEE often suffer as a result of the deficiencies of the national 

political system. In many cases the mayor represents a party that is not in 

power, thus his or her leverage to attract funding and implement environmental 

investment projects is limited. Conversely, those municipalities close to the governing 

party may receive extra funding. 

Local governments also struggle with a multitude of competing funding priorities 

such as road and transport infrastructure, health, education etc. In many cases, 

these investments are more visible and tangible than environmental investments 

(with the exception of water supply, waste collection and the prevention of illegal 

dumping), thus local politicians tend to give them priority. This is a particular 

problem in the case of wastewater projects, where the population and elected leaders 

are able to refer to traditional methods of household wastewater disposal, the 

negative environmental impacts of which are not immediately visible (REC, 2005). 

Economic/financial 

Devolvement of responsibility without adequate resources 

As a general rule, following the process of decentralisation there is a serious mismatch 

between the obligations of the municipalities and their financial capacities 

to manage these obligations. This is particularly true for waste and water management. 

Municipal budgets are almost always insufficient to cover investments in environmental 

infrastructure, and in most cases municipalities are prevented by legal, 

political and capacity-related obstacles from raising sufficient resources to carry 

out the investments needed in order to fulfil their obligations in these sectors. Very 

often local governments’ hands are tied — they are legally prevented from taking 

on significant debts (by debt service ratio laws), and from adjusting the amount 

and type of charges imposed on users of infrastructure or penalties for non-payment 

(by state controls on tariffs). They often face political constraints in the reorganisation 

of utilities to better manage and collect fees to cover the operation 

and maintenance of their infrastructure. However, with the implementation of the 

EU acquis, much of this is changing for the better in the region. 




64 



TABLE 2: Key challenges and constraints at municipal level 



Political Political affiliation Mayors from the ruling party are 

favoured at the expense of 

mayors from opposition parties 

Lack of political will Results from the election cycle 

and the need to raise tariffs and 

lay people off 

Chapter 4 

Competing priorities Budgets are limited and 

politicians sometimes prefer the 

more tangible projects 

Economic/ Insufficient municipal Budgetary allocations for Chapter 3 

financial budget (revenue and municipalities are generally lower 

expenditure mismatch) than the funds needed to achieve 

compliance with legal investment 

Over-reliance on grants Fostering a grant-dependent 

culture prevents local governments 

from implementing other reforms 

Economies of scale Organisational difficulties are 

experienced in setting up 

regional associations 

(e.g. for waste management) 

Institutional Decentralisation (also has Some important environmental Chapter 3 

legal aspects) functions have been devolved to 

local governments, whose 

capacities remain weak 

Local government Local governments have increased Chapter 3 

staff capacity environmental responsibilities with 

no or few members of staff 

Unreformed water Results in lack of utility Chapter 2 

and waste utilities independence, fragmented water 

utilities, and the cross-subsidising 

of costs from stronger 

to weaker departments 

Cooperation between Modern waste management is Chapter 2 

waste utilities carried out at regional level and 

cooperation is needed between 

utilities 

Cooperation with Lack of regular consultations Chapter 3 

national authorities between national and local 

authorities 

Planning Lack of regional waste 

and water management plans 

Environment as a Other issues such as road 

relatively low priority infrastructure and social services 

may have a higher relative 

priority than environment, 

especially waste management 


TABLE 2: Key challenges and constraints at municipal level (continued) 

Inadequate capacity for financial, environmental 

and investment planning 

Many local governments lack the capacity to understand environmental infrastructure 

investments in the context of a market economy, including issues of social 

affordability, cost recovery, depreciation and the appropriate use of subsidies. 

They are reluctant to take on loans, either due to legal restrictions on debt servicing 

or insecurity about their repayment capacities stemming from inadequate financial 

management practices. They therefore prioritise investments that can be 

serviced by grants or inexpensive soft loans from the central government or foreign 

donors, rather than real needs driven by rational environmental and financial 

planning (REC, 2005). In the meantime, necessary but more expensive and complex 

investments are postponed; the environment and society are further degraded; 

and necessary institutional reforms and popular awareness-raising programmes are 

not implemented. While not denying that local governments should optimise 

funding by using the “free” grant options first, this should not be done at the expense 

of revenue-increasing reforms or a clear analysis of the affordability of environmental 

investments. 

Legal/institutional 

Decentralisation and institutional capacities 

All SEE countries have devolved significant environmental responsibilities to 

the local governments. The decentralisation process has been accomplished in all 

countries except for Serbia. In Albania, decentralisation is partly accomplished, 

having been completed in the water and waste sectors. In the process of decentralisation, 

SEE countries have transferred competencies for environmental services to 

the municipal level. In many cases, these are new responsibilities at the local government 

level, and the institutions have not managed to adjust their staff and capacities 

to properly manage the obligations. So far there has been no sufficient 

human and financial resource planning in connection with the newly acquired responsibilities 

in environment. The human resources capacity of local governments 





Project Low capacity for 

preparation project preparation 

Low level of project maturity Lack of feasibility studies prior to 

initiating the design phase; lack of 

EIAs; failure to take into account 

institutional and financial issues 

when planning environmental 

infrastructure 


66 




in SEE is generally low relative to the increasing obligations under the decentralisation 

process. This also has a bearing on the financial challenge discussed above, 

linked to insufficient available municipal budgets compared to the legal obligations 

of the municipalities. After new functions and responsibilities are devolved 

to the local level, most of the responsibility for identifying, preparing and implementing 

bankable projects is also shifted to the local level (REC, 2005). Other institutional 

constraints include the capacity of local consultants and the shortage 

of professional project managers able to take responsibility for the overall process 

— not only the preparation of the technical documentation but also the facilitation 

of smooth teamwork and consensus building across various groups of stakeholders. 

Enforcement of laws 

As local governments do not have at their disposal sufficient budgets for the 

implementation of their responsibilities, the state does not have the moral right to 

impose real sanctions for non-compliance. Local governments are not therefore 

“punished” by higher levels of administration if they are unable to carry out certain 

mandatory activities due to financial and capacity problems. Additionally, the municipalities 

do not have the power to impose local fines on polluters who represent 

higher levels of the state. The polluter pays principle is seldom fully and effectively 

applied at the national level, thus municipalities have little leverage over large polluters 

that provide employment in a community, and that may be owned by a state 

holding company or even a ministry (REC, 2005). 

Cooperation with national authorities 

Cooperation with national authorities is critical to the successful implementation 

of infrastructure investment projects. National authorities generally control environmental 

investment priorities for the country and, through this, access to 

international grants and loans as well as funds from the countries’ own national 

capital investment budgets (REC, 2005). 

Planning 

Local and/or regional environmental sector plans (waste management plans and 

water management plans) are a basic prerequisite for carrying out environmental investment 

projects. Investment projects are very often based on perceived infrastructure 

needs rather than on a holistic approach that investigates all aspects of an environmental 

problem and proposes an appropriate solution. Furthermore, these plans are 

legal requirements of the water and waste framework directives and a precondition 

for accessing certain international grant funding such as the EU IPA. 

Aspects of project preparation 

Detailed environmental investment preparation is generally the responsibility 

of the project proponent — that is, the institution that will own and manage the 

investment. In most cases in SEE, for the water and waste sectors this will be a re-

gional or local institution — an authority or utility company owned by the local authority. 

In general, local governments and their associated bodies lack not only adequate 

skills to prepare investment projects, but also the skills to oversee and 

cooperate with expert consultants, whether domestic or international, in the preparation 

of their environmental investment projects. Some of the issues that complicate 

project preparation are presented below. 

Willingness to pay 

In general, the problem of unpaid bills in SEE is significant. In a context in 

which water supply and waste management services were previously provided almost 

free of charge, any hike in price is likely to result in resistance. 

Regionalisation 

Both water and waste utilities in SEE are currently highly fragmented. New 

EU-compliant infrastructure requires high levels of investment but is also intended 

to serve a bigger population. There is therefore a need for better cooperation between 

municipalities, as well as the establishment of new financial, legal and institutional 

incentives, and this need will remain in the future. 

Availability of data 

It is very important to adapt the size of the project to current and future needs. 

Updated population data and reliable forecasts of population growth and demographic 

changes are vital to proper project sizing. 

Locating infrastructure 

When locating infrastructure, project proponents can opt for a “centralised” 

approach, where all elements of the infrastructure are placed in one location; or a 

“decentralised” approach, where elements of the infrastructure are placed in different 

locations. In general, there is no ready formula for success in a given project 

location, as conditions differ for each project. Nevertheless, the chosen project location 

can have an impact on many other areas of municipality activities such as 

economic development, biodiversity protection and unemployment. Locating infrastructure 

projects stimulates the NIMBY (“not in my back yard”) syndrome 

within the local community. 

Identification of sources of finance 

Once the project has been formulated, an important activity is the identification 

of possible financing sources. In terms of external sources of finance, other 

than the project proponent itself, the options for the SEE region include national 

government sources; grants from the EC and/or bilateral donors; loans from commercial 

banks and/or IFIs; and private sector involvement. The challenge here is 

that local governments very often have limited knowledge of potential sources of 

financing and lack understanding of their specific rules and requirements. Local 




68 




governments are often dependent on guidance and permission from national authorities 

to access sources of financing, and this can be hampered by political and 

communication issues. Lack of understanding of the priorities and requirements of 

external sources of finance results in local governments being unable to communicate 

their investment projects effectively in the terms required to attract financing, 

and being unable to prepare the documentation required to access it. 


• Local politicians struggle with a multitude of competing funding priorities: 

those that are more visible and tangible than environmental priorities may end 

up higher on the political agenda. 

• There is a mismatch between the obligations imposed on municipalities as a 

result of the decentralisation process, and the financial and human resources 

capacities at their disposal to manage these obligations. 

• Many local governments lack an understanding of environmental infrastructure 

investments in the context of a market economy, including issues of social 

affordability, cost recovery, depreciation and the appropriate use of subsidies. 

• Local governments and their associated bodies generally lack adequate skills to 

prepare investment projects and to oversee and cooperate with expert consultants 

in the preparation of their environmental investment projects. They often 

have a limited knowledge of possible sources of financing, and lack understanding 

of their specific rules and requirements. 

• Water and waste utilities in SEE are highly fragmented and cooperation between 

municipalities is poor. At the same time, there are (and will be) economic 

pressures for economies of scale.

Chapter 4 

Economic development and 

the EU accession process 


70 


Economic development in SEE 

The level of economic development of a country and a region has a direct bearing 

on ability to invest in public projects in general, and in environmental infrastructure 

projects in particular. The size of the national budget is directly correlated 

with the budgetary amounts allocated to the institutions (in most cases ministries) 

in charge of investments in water and waste infrastructure. It also defines the budgetary 

amounts that trickle down to the local governments for carrying out their 

often newly acquired legal obligations in the waste and water sectors. 

The current economic situation and the related per capita income, the number 

of unemployed people and the number of people living below the poverty line 

all have an influence on the political climate at the local level. They also influence 

the level of political will to reform the water and waste utilities, since an impoverished 

local population will not accept — politically or financially — a serious increase 

in water and waste tariffs. 

The process of economic transition to a market-based economy, or at least its 

acceleration in the majority of SEE countries, started after 2000 because of the wars 

FIGURE 4: GDP per capita at purchasing power parity in SEE countries 

USD 

18,000 

16,000 

14,000 

12,000 

10,000 

8,000 

6,000 

4,000 

2,000 

0 

2004 2005 2006 2007 2008 


Herzegovina 

Croatia FYR 

Macedonia 


Source: IMF country reports, national banks, Eurostat, national and federal statistical offices, the World Bank, NCB, SEE ministries of finance 

Kosovo (under 

UNSCR 1244) 


72 


E C O N O M I C D E V E L O P M E N T A N D T H E E U A C C E S S I O N P R O C E S S 


in the mid-1990s and the political situation in some of the countries. The process 

was delayed by around 10 years compared to Central European countries and Bulgaria 

and Romania — a fact that has had a profound impact on the region’s competitiveness 

and foreign investment flows. 

The process of economic transition was enhanced by big inflows of aid and accompanied 

by strong economic growth sustained at an average of between 4 and 

7 percent between 2004 and 2008. Kosovo (as defined under UNSCR 1244) 

demonstrated the lowest economic growth of 4.2 percent, followed by Croatia and 

the former Yugoslav Republic of Macedonia with 4.5 percent average growth, and 

Montenegro, Bosnia and Herzegovina and Albania with growth varying between 

5.5 and 6 percent. Serbia achieved the most significant growth rates of 6.6 percent 

on average (EC, Economic and Financial Affairs website). The majority of countries 

with GDP at purchasing power parity (PPP) per capita ranging from USD 

6,800 (Albania) to USD 16,500 (Croatia) were classified by the World Bank as 

middle-income countries in 2008 (World Bank website). Kosovo (as defined under 

UNSCR 1244), with USD 2,600, falls behind all the SEE countries. 

The major factors contributing to sustainable economic development were the 

dynamic development of the private sector, price liberalisation, the restructuring 

and privatisation of key industrial enterprises, the modernisation of the financial 

sector, increased revenues and a robust growth in exports. Additional factors seen 

as facilitating stable economic growth were the improvement in the transparency 

and accountability of public services, the creation of institutions for the regulation 

and supervision of the market economy, the provision of necessary legislation, the 

stimulation of private consumption, the widening of retail trade and ongoing financial 

intermediations. In all countries inflation rates were kept low and currencies 

remained stable in recent years due to national governments’ cautious monetary 

and fiscal consolidation policies (EC, Economic and Financial Affairs website). 

However, inflation trends have begun to reassert themselves as a consequence of rising 

global food and oil prices and weakened pressure on the demand side in 2008. 

Poverty, unemployment and the exclusion of vulnerable strata of society are still 

a cause for concern for many SEE countries. The long period of instability, isolation 

and economic turmoil had an adverse effect on living standards for the majority of 

the region’s population and was accompanied by a deterioration in social and health 

services. The labour market situation is steadily improving in Albania, Croatia, 

Montenegro and Serbia, where the official unemployment rate in 2008 ranged between 

11 and 14 percent. In the former Yugoslav Republic of Macedonia, unemployment 

stood at 33 percent of the labour force in 2008, while Kosovo (as defined 

under UNSCR 1244) and Bosnia and Herzegovina had the worst employment figures 

at approximately 40 percent unemployment in 2008. Nevertheless, real levels of 

unemployment are lower, since a significant number of people who are registered as 

unemployed are working in the grey economy (EC, Economic and Financial Affairs 

website). The absolute poverty level is also constantly decreasing.

FIGURE 5: Foreign direct investments in SEE 

% of GDP 

18 

16 

14 

12 

10 

8 

6 

4 

2 

0 

The current account deficit of national governments has tended to increase in 

all SEE countries as a consequence of reduced aid flow, the rise in oil and commodity 

prices, and greater imports of goods triggered by credit growth. In recent 

years the account balance was positive only in Kosovo (as defined under UNSCR 

1244). The trade account deficit also remains relatively high due to the orientation 

of national economies towards imports. Foreign direct investment saw a significant 

boost in the region, driven by large purchase deals, privatisation processes 

and growing interest on the part of investors in the financial, construction and 

manufacturing sectors (EBRD website). 

The region’s mid-term macroeconomic outlook remains favourable and is dependent 

on the maintenance of internal and regional stability, the continuation of 

structural reforms, reforms in the business and labour sectors, market liberalisation, 

infrastructural restructuring, and the privatisation of strategic enterprises (EBRD 

website). Reduced state intervention, the stimulation of private sector development, 

and the reform of the public administration and judiciary system should also be addressed 

in country-specific mid- and long-term development plans and strategies. 



2004 2005 2006 2007 2008 


Herzegovina 

Croatia FYR 

Macedonia 


Source: IMF country reports, national banks, Eurostat, national and federal statistical offices, the World Bank, NCB, SEE ministries of finance 


74 




The impact of the global economic recession on economic 

development in SEE 

The deep financial crisis and the contraction of global economic activity have had 

a serious impact on SEE countries. This impact has been transmitted mainly through 

a decline in investments, exports and consumption (World Bank website). 

The growth trend recorded in SEE countries in recent years slowed down in 

the second half of 2008 and is expected to continue to slow down throughout 2009. 

According to the latest estimates, SEE countries demonstrated an average GDP 

growth of 5.7 percent in 2008, lower than the 6.7 percent recorded a year earlier. 

Industrial production saw the largest decline among economic sectors, showing a 

drop of 21 percent. Croatia and Serbia, followed by the former Yugoslav Republic 

of Macedonia and Bosnia and Herzegovina, were most affected by the crisis. Forecasts 

for 2009 are also pessimistic, as the negative implications of the economic crisis 

were more pronounced than was initially expected at the beginning of the year. 

Growth projections suggest a significant decline in real GDP by 2.1 percent on average 

(Kosovo Central Bank, Annual Report 2008), with the exception of Albania, 

which is expected to grow by 0.4 percent in 2009. The economic slowdown is anticipated 

to derive from a decline in credit in the real sector, and a further decline 

in exports and foreign direct investments. The recession taking place in developed 

countries will also substantially affect the level of remittances to SEE, which represent 

an important source of financing in these countries. The inflationary pressures 

experienced by EU countries in 2008 were also apparent in SEE, affected by 

increases in oil and food prices since energy and food represent the largest share of 

the consumer basket in the region. Annual average inflation reached 7.6 percent in 

SEE in 2008, compared to 3.3 percent in the previous year. However, economic 

projections for 2009 predict a significant decline in prices due to the global recession. 

Price increases and the decline in exports triggered by the world economic 

crisis resulted in a further deepening of the current account deficit in national 

economies. The average current account deficit to GDP ratio was around 16.6 percent 

in SEE in 2008, compared to 14.8 percent in the previous year. Foreign direct 

investments declined in most countries in the region, accompanied by a significant 

decline in exports. Furthermore, the recession in EU countries will significantly affect 

tourism revenues. 


• The transition to a market-based economy was delayed by around 10 years, beginning 

only after 2000. This had a profound impact on the region’s competitiveness 

and foreign investment flows. 

• There was strong economic growth sustained at between 4 and 8 percent between 

2004 and 2008. Levels of GDP (PPP) range from USD 2,600 in Kosovo

(as defined under UNSCR 1244) to USD 16,500 in Croatia. However, due to 

the economic recession, economic activity in SEE has contracted sharply since 

the second half of 2008 as a result of less foreign direct investment, a reduced 

demand for exports, and less cross-border lending. 

• In Albania, Croatia, Montenegro and Serbia, the unemployment rate in 2008 

ranged between 11 and 14 percent; in the former Yugoslav Republic of Macedonia 

it was around 33 percent; and in Kosovo (as defined under UNSCR 

1244) and Bosnia and Herzegovina it was approximately 40 percent. This has 

a direct impact on the affordability of, and willingness to pay for, environmental 

infrastructure services. 

• The region’s mid-term macroeconomic outlook remains favourable but is dependent 

on the maintenance of internal and regional stability, the continuation 

of structural reforms, market liberalisation, the improvement of 

infrastructure, and privatisation. 

EU accession 

EU accession as a driver for change 

For SEE countries, EU accession is by far the biggest driving force and incentive 

for development and for political and economic reforms, just as it once was 

for CEE countries. The EU agenda is therefore a high priority in these countries. 

The pre-accession period provides a unique window of opportunity for reforms, 

and political will is generally strong. This opportunity is supported by the available 

benefits of accession in the form of, for example, technical support, guidance, capacity 

building and financial assistance. The pre-accession period is therefore a 

chance to develop human capacity and to consolidate and strengthen institutions 

to increase their ability to implement the EU environmental acquis. 

The SEE EU accession challenge 

The transposition and implementation of the environmental acquis is a huge 

challenge for SEE countries. The challenges are to be found at almost all levels 

of society — legislative, institutional, economic and political. The process requires 

the harmonisation of national legislation and clear descriptions of the 

roles and responsibilities of ministries and local authorities. Reforms must be 

undertaken at all levels. 

An underlying principle of the negotiations is that, by the time of accession, 

countries must have fully transposed and implemented EU legislation. Transitional 

measures can be granted for specific pieces of legislation, provided that the measures 

are limited in time and scope. However, transitional periods are not usually 

granted for horizontal legislation (EIA, access to information etc.) or for framework 

legislation (such as waste or water framework legislation). 




76 




On the institutional level, the tasks ahead include strengthening the administration 

capacity of national and local authorities, clearly defining responsibilities, 

identifying investment needs, developing financing strategies and implementation 

plans, and strengthening the capacity of water and waste utilities. 

Upgrading environmental infrastructure requires major capital investments as 

well as joint efforts by local and national authorities. It is estimated that infrastructure 

investments will represent more than 2 or 3 percent of SEE countries’ 

GDP (REC, 2005). National budgets in SEE are currently limited, and the share 

allocated to the environment is usually small. 

Political will is of great importance in the implementation of the wide reforms 

needed. Governments in all SEE countries have committed themselves to this objective 

and are, to varying degrees, implementing reforms. While public opinion in 

SEE is largely in favour of EU integration, this support will rapidly be withdrawn 

if governments fail to deliver. According to EC Communication 2008/127, societies 

remain divided on a few key issues such as the integration of different communities 

and also, in some cases, constitutional reform. Further efforts are therefore 

needed in order to achieve consensus on such issues and to proceed with the necessary 

political and economic reforms (EC COM [2008] 127). Delivering on environmental 

infrastructure improvements is an aspect of the EU accession process 

that is highly visible and that leads to tangible improvements in quality of life. 

Experience from the EU accession process in CEE countries illustrates that the 

adoption of the acquis raises the importance of the environment on the national 

agenda. Lessons learnt show that early in the process focus should be placed on institutional 

and administrative reform. Hasty and insufficiently coordinated transposition 

of the acquis has been seen to lead to non-integrated, unclear, complicated 

and low-quality legislation. Restructuring responsibilities among ministries can reduce 

fragmentation and lead to good governance. 

The road to accession 

The EU enlargement process currently covers the countries of SEE, Turkey, and 

more recently Iceland. In recent years, SEE countries have moved closer to the EU 

and have embarked on political, administrative and legislative reforms (EC 2008, 

IP/08/378). Croatia and the former Yugoslav Republic of Macedonia have 

achieved the status of candidate countries. Accession negotiations with Croatia 

started in October 2005. The former Yugoslav Republic of Macedonia became a 

candidate country in December 2005. In October 2009, the Commission recommended 

that negotiations for EU accession should be opened. Albania, Bosnia and 

Herzegovina, Kosovo (as defined under UNSCR 1244), Montenegro and Serbia 

are all potential candidates that have the prospect of beginning EU membership negotiations 

when they are ready. Albania submitted its application for candidate status 

in April 2009 and Montenegro in December 2008 (EC COM [2009] 533).

TABLE 3: Stabilisation and Association Agreements 

In the SEE countries, the Stabilisation and Association Process (SAP), established 

in 1999, is the negotiation framework designed to bring the countries increasingly 

closer to the EU. 3 Through the SAP, SEE countries benefit from free 

access to the EU single market as well as access to EU financial support for their reform 

efforts. The SAP also includes assistance for reconstruction, development 

and stabilisation (CARDS/IPA). Central to the process is the stabilisation and association 

agreement (SAA), which defines the contractual relationship between 

the EU and each individual SEE country and encompasses mutual rights and obligations. 

The SAP has three aims: 

• to stabilise the countries and encourage their swift transition to a market 

economy; 

• to promote regional cooperation; and 

• to lead to eventual membership of the EU. 

An important factor in the SAP is regional cooperation, which is a vital 

component for regional stability and prosperity. Cooperation is essential in 

successfully tackling transboundary issues, including environmental issues, and 

key common challenges (such as energy shortages, pollution, and transport 

infrastructure). 4 

The SAAs constitute powerful engines for trade integration, domestic reform 

and rapprochement to the EU, not least through clauses that encourage legislative 

approximation and the building of administrative capacity. Benefits of the agreements 

include economic development through enhanced trade and economic cooperation 

leading to the creation of attractive conditions for investments, not least 

in the environmental sector. At the same time, they encourage individual entrepreneurial 

initiatives and generate employment. Another benefit is progress in po- 



COUNTRY SIGNED ENTERED INTO FORCE 

Albania June 2006 April 2009 

Bosnia and Herzegovina June 2008 Interim agreement in force since July 2008 

Croatia October 2001 February 2005 

FYR Macedonia April 2001 April 2004 

Montenegro October 2007 January 2008 

Serbia April 2008 Interim agreement in force since April 2008 

Kosovo (as defined under UNSCR 1244) Participation through the Stabilisation Process Tracking 

Mechanism. In March 2007, enhanced SAP tracking 

mechanism structures were set up. 

Source: EC national progress reports 2009, DG Enlargement website http://ec.europa.eu/enlargement/index_en.htm 


78 



BOX 1: Planning for approximation 

National Strategy for Environmental Approximation, 2007 

the former Yugoslav Republic of Macedonia 

The National Strategy for Environmental Approximation (NSEA) was adopted in 2008 and provides a roadmap for 

the full and effective approximation process, addressing the required legal transposition and practical implementation 

actions, the timeframe, the responsible institutions and the related investments to achieve full compliance with EU environmental 

legislation. The main goal of the strategy is to set out the government’s approach to the complex obligations 

of the EU environmental acquis: it defines a sustainable, comprehensive framework of actions, with associated 

costs, for legal transposition and technical implementation in all 10 environmental sectors. 

Human and financial resources are optimised through the prioritisation of EU obligations and requirements. The 

NSEA provides financial arrangements to secure full compliance with environmental legislation and standards, 

taking into account the national economic circumstances and priorities, and the available and potential foreign 

aid for infrastructure projects. To this end, compliance with the heavy-investment directives is foreseen after the 

former Yugoslav Republic of Macedonia has become a member of the EU. 

The NSEA prepared 19 directive-specific implementation plans (DSIPs) and nine sector approximation strategies 

(SASs) based on 73 pieces of EU legislation. The process of developing the DSIPs, SASs and NSEA involved determining 

the present status of the approximation process and of specific national conditions and requirements; 

selecting the EU legislation on which the SASs and the NSEA should be based and for which DSIPs should be 

prepared; preparing gap analyses; defining all the actions necessary for full approximation; preparing the DSIPs 

and SASs; prioritising the implementation of EU legislation across sectors; and preparing the NSEA. An approximation 

plan was developed as an integral part of the NSEA, based on the prioritised EU legislation and taking into 

account the governmental priorities already identified and the financial implications and constraints. 


litical and economic reforms, including institution building and public administration 

reform. Further reforms are needed in order fully to enjoy the benefits of the 

agreements (EC COM [2006] 27 final). Kosovo (as defined under UNSCR 1244) 

participates in the SAP through the Stabilisation Process Tracking Mechanism 

(STM) that has been specially devised to promote policy dialogue between the EU 

and the Kosovan authorities on EU approximation matters. 

Financial Assistance from the European Community 

The EU Instrument for Pre-accession Assistance (IPA) 5 provides focused financial 

aid to the candidate countries and potential candidate countries. Introduced 

in 2007, the IPA replaced the mechanisms available between 2000 and 2006, notably 

CARDS, SAPARD, ISPA and Phare. Financial assistance through the IPA is 

given to support countries to introduce the political, economic and institutional reforms 

required in order to achieve conformity with EU standards. European Union 

funding aims at medium- and long-term changes in society and the economy as a 

whole, and the pace of reform is closely related to the pace of the accession process. 

The total IPA allocation for the period 2007 to 2013 is EUR 11.5 billion.

The IPA comprises five components. The first two components — transition 

assistance and institution building; and cross-border cooperation — are open to all 

beneficiary countries. The other three components — regional development (transport, 

environment and economic development); human resources development 

(strengthening human capital and combating exclusion); and rural development 

— require a high degree of financial administration capacity adapted to the EU 

system and are therefore reserved for candidate countries. Community assistance 

to cross-border cooperation under the IPA has been extended to cover the borders 

between SEE countries and countries with adjacent EU member states. This assistance 

was substantially increased for the period 2007 to 2011 as compared to previous 

years (EC COM [2008] 127). 


• The SEE countries have moved closer to EU membership in recent years as the 

region has made progress, to varying degrees, in carrying out reforms and in 

meeting the criteria and conditions established in the Stabilisation and Accession 

Process. 

• For SEE countries, the prospect of EU accession is the strongest driver of reform 

and is a high priority on the national agenda. The pre-accession period provides 

a unique window of opportunity for reforms throughout this process, as 

the political will is relatively strong. It is a chance to develop human capacities 

and to consolidate and strengthen institutions enabling them to implement the 

EU environmental acquis. 

• Lessons learnt from CEE show that early in the process emphasis should be 

given to institutional and administrative reform and that precipitous and insufficiently 

coordinated transposition may lead to non-integrated, unclear, complicated 

and low-quality legislation. 

• IPA financial assistance supports countries to introduce the necessary political, 

economic and institutional reforms in line with EU requirements. 

Infrastructure investment implications 

of the EU directives 

This section provides a brief overview of the EU environmental directives in 

the water, waste and air sectors that are most relevant to environmental investments, 

focusing on the changes that have taken place since 2005. The main implementation 

and investment implications per sector are presented in tables. More 

detailed information about the objectives, implementation and investment implications 

are provided in the 2005 REC publication. 




80 



FIGURE 6: The waste hierarchy 

BEST OPTION 

WORST OPTION 

Source: REC, 2009b 


Prevent waste 

in the first place 

Reuse the product 

Recycle or compost 

the material 

Recover the energy 

(by incinerating) 

Dispose of the product 

(in a landfill) 

Waste 

The goal of EU waste-related policies is to create a recycling society in the 

medium to long term by cutting the amount of waste generated, introducing initiatives 

to prevent new waste, making better use of resources, and encouraging a 

shift to sustainable consumption patterns. The EU waste policy is based on the 

waste hierarchy: the treatment options range from the most favourable and environmentally 

sound — that is, prevention — to the option with the highest environmental 

impact — landfilling. In the new Waste Framework Directive, 

incineration is categorised as a recovery option, providing that it meets certain energy 

efficiency standards. 

The policy instruments behind this approach are the new Waste Framework 

Directive (WFD) (2008/98/EC) and the Hazardous Waste Directive 

(94/31/EC) 6 . These are complemented by more detailed legislation setting standards 

in connection with some of the treatment options: the Waste Landfill Directive 

(99/31/EC), the Waste Incineration Directive (2000/76/EC) and the 

Sewage Sludge Directive (86/278/EEC). Recycling and recovery targets have been 

set for some of the major waste flows such as packaging (the Packaging Directive, 

94/62/EC). Other waste streams (such as waste electronic and electrical equipment, 

tyres, batteries and end-of-life vehicles) are also subject to “extended producer 

responsibility”, including recycling and recovery targets, with the main 

financial and physical responsibility falling on the producers. Some of the relevant 

directives are presented below. 

New developments in the EU waste acquis 

The Waste Framework Directive 

The new Waste Framework Directive (WFD, 

2008/98/EC), adopted in November 2008, is the main piece of 

EU waste legislation setting definitions and introducing new 

concepts. The directive emphasises the importance of prevention, 

recycling and reuse. In the context of the SEE countries 

applying for EU membership, this means that the construction 

of modern installations should not compromise national efforts 

to treat waste using alternative methods, as long as the objectives 

and benchmarking (including applicable limit values for 

air and water discharges) of the EU directives are being met. 

The WFD points out that “Member states shall take appropriate 

measures to establish an integrated and adequate network 

of disposal installations, taking account of the best available 

technology not involving excessive costs.” This text is the legal 

basis for designing national strategies calling for new, modern 

waste disposal facilities with a proper geographical coverage.

BOX 2: Planning sequence 

According to the Waste Framework Directive, the planning sequence is as follows: 

NATIONAL WASTE 

MANAGEMENT STRATEGY 

NATIONAL WASTE 

MANAGEMENT PLAN 

BOX 3: Investment implications of the Waste Framework Directive 

The WFD includes provisions for the separate collection of hazardous waste, 

waste oils and bio-waste. In practice, SEE countries should secure investments for 

the separate collection and treatment of all relevant waste streams. The WFD embeds 

the polluter pays principle in waste management that implies that the costs of 

disposal must be borne by the holder or the producer of the product. This will lead 

to one of the main paradigm changes in SEE and will entail a change in the perception 

of MSW management as a service with low costs and of relatively low quality. 

Another important principle in the WFD is the full cost recovery principle, 

including compensation of the real costs to the environment. 

Implementing the directive 

The WFD embeds the requirement for waste management plans to be developed 

at national/regional and local levels. The main purpose of these plans is to 

provide an outline of waste streams and treatment options. This is directly relevant 



REGIONAL WASTE 

MANAGEMENT PLANS 

MUNICIPAL WASTE 

MANAGEMENT PLANS 

The WFD does not itself introduce a requirement for significant capital costs. These are incurred as a result of the 

waste stream–related directives. The most significant cost element associated with the directive itself is the provision 

of an adequate institutional structure, establishing the competent authority/ies with the necessary technical 

and human resources; and the preparation of waste management plans. The main expenditures are: 

• Initial set-up costs: establishing the competent authority/ies; devising systems and procedures. 

• Providing training; preparing technical guidance notes; and preparing a waste management strategy and detailed 

plans. 

Ongoing costs include the issuing of permits and registrations; inspections of waste management facilities and 

requisite enforcement actions; reporting obligations; consultation and coordination procedures; and a communications 

programme. 

Capital and operational costs such as those related to the establishment, upgrading and operation of waste management 

facilities mainly fall under the waste stream–related directives. Ultimately, the full costs of facility provision 

and operation should be recovered from waste producers. Financial resources should preferably derive from 

the private sector, normally in the context of producer liability legislation. 


82 



TABLE 4: The main implementation and investment implications of the waste directives 

DIRECTIVE IMPLEMENTATION 

IMPLICATIONS 

INVESTMENT IMPLICATIONS LIKELY INVESTOR 

The Waste Development of waste The directive does not itself introduce Municipalities, waste 

Framework management plans at national/ a requirement for significant capital utilities/companies, 

Directive regional and local levels costs. The main expenditures can waste transporters 

(2008/98/EC) be summarised as initial set-up costs: 

Assessment of existing disposal establishing the competent 

installations to determine the authority/ies, devising systems and 

additional infrastructure needed procedures; providing training and 

in order to establish an preparing technical guidance notes; 

integrated and adequate and preparing a waste management 

network of disposal installations strategy and detailed plans 

Waste Landfill Different waste categories Establishment of sorting stations, Municipalities, waste 

Directive subject to special treatment and recycling facilities, biodegradable utilities/companies, 

(1999/31/EC) disposal and landfill ban 

Development of waste 

waste treatment facilities and 

proper sanitary landfills 

industry 

management strategies for Closure and remediation of 

different types of waste non-compliant landfills 

Incineration Permitting procedures for incine- 

Development of hazardous waste 

landfills and inert waste landfills 

as well as facilities for materials that 

may no longer be landfilled (tyres, 

healthcare waste, flammables, liquids) 

Installation of monitoring equipment Municipalities, waste 

Directive ration and co-incineration plants to monitor parameters, conditions utilities/companies 

(2000/76/EC) 

Technological requirements 

and mass concentrations relevant to the 

incineration or co-incineration process 

for incineration facilities and Upgrading of existing 

monitoring incineration and co-incineration plants 

Hazardous Waste 

Procedures on the public right 

of access to information, in 

particular with regard to the 

location of facilities 

Plans for the management of Upgrading or construction of Industry, waste 

Directive hazardous waste to be drawn infrastructure for: collection systems utilities/companies 

(91/689/EEC) up and made public and facilities; transportation; and the 

(to be repealed final safe disposal of hazardous waste 

by WFD on Integration with overall waste 

December 12, management strategies to 

2010) ensure proper treatment 


Design and implementation of 

systems for monitoring the 

landfilling of hazardous wastes

with respect to investments, since for many EU-funded projects the existence of 

a management plan is a precondition for receiving financing. Further requirements 

include carrying out an assessment of existing disposal installations in order to identify 

the additional infrastructure needed to establish an integrated and adequate 

network of disposal installations. 

Water 

The protection of water resources, of fresh-water and salt-water ecosystems, 

and of drinking and bathing waters is one of the cornerstones of environmental 

protection in Europe. The goals of the European Water Policy are to clean up polluted 

water and to ensure that clean water remains clean. The Water Framework Directive 

sets the objective of achieving good status in all surface water and 

groundwater bodies by 2015. It also introduces the principle of preventing any further 

deterioration in status. 

The directives making up the EU water framework are the Water Framework 

Directive (2000/60/EC), the Drinking Water Directive (98/83/EC), the Urban 

Waste Water Treatment Directive (91/271/EEC), the Dangerous Substances in 

Water Directive (2006/11/EC), the Nitrates Directive (91/676/EEC) and the 

Bathing Water Directive (2006/7/EC). The new Bathing Water Directive from 

2006 repeals the previous directive (76/160/EEC) and ensures that citizens are 

given better and earlier information about the quality of their bathing waters. The 

new directive has a stronger emphasis on bathing quality management and moves 

away from the simple sampling and monitoring of bathing waters. The directive is 

integrated into all other EU measures protecting the quality of waters through the 

Water Framework Directive (EC DG Enlargement website). 



TABLE 4: The main implementation and investment implications of the waste directives (continued) 


IMPLICATIONS 


Sewage Sludge Implemented in close Construction of facilities for the Municipalities, water 

Directive cooperation with authorities treatment of sewage sludge, including utilities/companies 

(86/278/EEC) responsible for implementing incinerators or other facilities to treat 

the Urban Waste Water those types of sludge that cannot be 

Treatment Directive used for agricultural purposes 

Requires adquate capacities of Development of monitoring infrastructure 

laboratories for testing sewage to test the quality of sewage sludge 

sludge 

Source: REC, 2005; REC and Umweltbundesamt GmbH, 2008; and EC COM(2001) 304 


84 



TABLE 5: The main implementation and investment implications of the water directives 


IMPLICATIONS 


The Water Identification of river basins and The directive does not itself Regional governments 

Framework their assignment to individual introduce the requirement of (river basin 

Directive river basin districts significant capital costs. The main authorities), industry 

(2000/60/EC) costs relate to: the institutional and agro-industry 

Establishment of competent autho- set-up; and establishing an 

rities, using existing structures or appropriate monitoring system 

creating new ones, and the covering groundwater and surface 

establishment of administrative 

arrangements 

waters 

Drinking Water 

Member states are obliged to draw 

up river basin management plans 

by the end of 2009, setting the 

objectives to be reached in rivers, 

lakes coastal waters and 

groundwaters across the EU 

Identification and assessment of Upgrading of water supply systems Municipalities, water 

Directive the current status of infrastructure in order to minimise pollution utilities/companies 

(98/83/EC) risks and to provide adequate 

The main responsibility for the 

upgrading of infrastructure will be 

service 

borne by municipalities or by public Upgrading of the equipment 

utility companies delivering water of water treatment stations to 

ensure the removal from water of 

Special attention should be given 

to cooperation with authorities 

all substances listed by the directive 

responsible for sewage collection and Establishment of efficient 

treatment, as the construction monitoring infrastructure to 

of water supply systems should be measure the quality of water 

accompanied by sewerage 

connection infrastructure 

delivered to customers 

Urban Waste Ensuring appropriate technical Upgrading of sewage collection Municipalities, water 

Water Treatment infrastructure networks utilities/companies, 

Directive industry 

(91/271/EEC) Establishment of emission limits for Construction of wastewater 

concentrations of specific substances 

in urban wastewater discharges 

treatment plants 

and from certain industrial sectors Installation of monitoring 

equipment to control the quality 

Establishment of “sensitive areas” 

and “less sensitive areas”, influenced 

by the quality of discharged waters 

of effluent water 


Attention should be given to 

coherence with the Sewage Sludge 

Directive when constructing 

wastewater treatment plants

Air 

Since the 1970s, EU air quality policy has aimed to control emissions from mobile 

sources, improve fuel quality and promote and integrate environmental protection 

requirements into the transport and energy sectors. The EU uses different 

ways to reduce exposure to air pollution, for example through legislation, the reduction 

of cross-border pollution or the development of a thematic strategy such 

as Clean Air for Europe (CAFE). 

Bearing in mind EU air quality legislation and the experiences of EU new member 

states, it is clear that the directives presented in this section represent a significant 

investment challenge and require infrastructure development and upgrading. 



TABLE 5: The main implementation and investment implications of the water directives (continued) 


IMPLICATIONS 


Dangerous Setting up of programmes to Municipalities and industrial Municipalities, industry 

Substances in reduce the discharge of dangerous companies will have to invest in 

Water Directive substances cleaner technologies as well as 

(2006/11/EC) in the treatment and pre-treatment 

Identification of point sources of wastewater for certain 

of pollution substances 

Establishment of monitoring systems 

The directive should be implemented 

in close cooperation with the IPPC 

Directive and in the broader context 

of the Water Framework Directive 

Installation of water quality 

monitoring equipment 

Nitrates Directive Detection of water pollution, or Reconstruction of manure storage Agro-industry 

(91/676/EEC) threat of pollution, by nitrogen facilities on farms with sizeable 

and the designation of vulnerable 

zones with a significant 

concentrations of livestock 

contribution of nitrogen to the Installation of water quality 

environment monitoring equipment 

Bathing Water 

Development of action plans 

and the monitoring of their 

implementation 

Assessment of the current status of Upgrading of wastewater treatment Municipalities, water 

Directive bathing waters, followed by an effort plants for both municipal utilities/companies 

(2006/7/EC) to identify sources of pollution and industrial sewage 

Development of a plan for the Installation of monitoring 

upgrading of facilities equipment 

Source: REC, 2005; REC and Umweltbundesamt GmbH, 2008; and EC COM(2001) 304 


86 



BOX 4: Investment implications of the Directive on Ambient Air Quality and Cleaner Air for Europe 

The conducting of preliminary assessments and the continuous monitoring of ambient air quality require public 

sector investments to establish air quality monitoring equipment and modelling capacity. In areas with bad ambient 

air quality, it may be difficult to identify investment projects before conducting the assessments. In areas in 

which levels of pollutants are above the permitted norms, public and private sector investments are needed in 

order to reduce pollutant emissions and to achieve compliance. 


Achieving and maintaining compliance with EC policies and legislation on 

air quality management presents a major challenge to candidate countries: in 

order to minimise the associated administrative burden and costs, this challenge 

needs to be managed in a systematic and cost-effective manner. The Handbook 

on the Implementation of the EC Environmental Acquis (2008) provides guidance 

on efficient implementation procedures. A checklist of key questions to be 

considered when implementing the directives and preparing corresponding 

strategies is provided. 

New developments in the EU air acquis 

The Directive on ambient air quality and cleaner air for Europe (2008/ 

50/EC), adopted in 2008, merges most existing legislation into a single directive 

with no change to existing air quality objectives 7 , with the exception of the fourth 

daughter directive relating to arsenic, cadmium, mercury, nickel and polycyclic aromatic 

hydrocarbons in ambient air. The directive extends existing standards to include 

objectives for fine particulate matter (PM2.5), including the limit value and 

exposure-related objectives (exposure concentration obligation and exposure reduction 

targets). It introduces the possibility to discount natural sources of pollution 

when assessing compliance against limit values. 


The implementation of the directive involves a similar procedure to that for 

the Air Quality Framework Directive. The first step should be the designation 

of the competent authorities and bodies responsible for implementing the directive, 

assessing ambient air quality, approving the measuring devices, ensuring 

the accuracy of measuring devices and their compatibility with European 

quality requirements, assuring overall standards, analysing assessment methods 

and coordinating Community-wide quality assurance programmes on their territory. 

The second step is to develop a system for assessing the quality of ambient 

air based on common methods and criteria. A system should also be 

developed for gathering, reporting and publishing information, including the 

dissemination of that information to the public.

BOX 5: Investment implications of the IPPC Directive 

Integrated Pollution Prevention and Control (IPPC) Directive 8 

The directive replaces Council Directive 96/61/EC of September 24, 1996 on 

the same subject. The purpose of the directive is to achieve the integrated prevention 

and control of pollution arising from a range of listed activities. It lays down 

measures to prevent or reduce emissions to air, water and land from these activities, 

including measures on waste, in order to achieve a high level of protection for the 

environment as a whole. The IPPC Directive represents a major change in the permitting 

system for certain installations. It introduces an integrated permitting system 

for industrial and agricultural activities with a high pollution potential. The 

permit must contain specific conditions including emission limit values and the 

application of best available techniques (BAT), and can only be issued if certain 

environmental conditions are met. The companies themselves bear responsibility 

for preventing and reducing any pollution they may cause. This includes using all 

appropriate pollution-prevention measures — preventing all large-scale pollution; 

avoiding waste production; using energy efficiently; and ensuring accident prevention 

and damage limitation. 


Implementing the IPPC Directive entails setting up, or restructuring, a regulatory 

body (e.g. a competent authority) and any agencies that it might require. 

It also requires drawing up an IPPC inventory and assessing the current situation. 

Guidance documents on IPPC principles and the use of BAT must be provided. 

The IPPC Directive specifies that permit conditions should include 

emission limit values for various pollutants, in particular the main air-polluting 

substances listed in Annex III. 


• The EU waste policy is based on the waste hierarchy: the options range from 

prevention as the most favourable, to the least favourable — landfilling. 

• The Waste Framework Directive is not associated with significant capital costs. 

Costs are related to the provision of an adequate institutional structure, the establishment 

of competent authority/ies, and the preparation of waste manage- 



The IPPC Directive imposes extensive obligations and substantial costs on industry and the government at all levels. 

However, the investment implications of compliance for industry will be far greater than the direct costs of 

implementing the legislation. Investments related to enforcement include mainly the setting up and operation 

of the necessary institutional framework and authorities; the development of guidance documents; the training 

of staff and inspectors etc. 


88 



TABLE 6: The main implementation and investment implications of the air directives 


IMPLICATIONS 


The Air Quality Designation of the competent Establishment of air quality monitoring Local and regional 

Framework authorities and bodies responsible equipment and modelling capacity governments, 

Directive for implementing the directives industry 

(96/62/EC) In areas of bad ambient air quality, it 

Assessment of ambient air quality might be difficult to identify investment 

projects before conducting the 

Ensuring the accuracy of measuring 

devices and their compatibility 

assessments. 

with European quality requirements, Public and private sector investment 

assuring overall standards is needed in areas where pollutant levels 

are above permitted norms in order to 

Development of a system for assessing bring down emissions of polluting 

the quality of ambient air based 

on common methods and criteria 

substances and achieve compliance 

Directive on 

Development of a system for gathering, 

reporting and publishing information, 

including dissemination to the public 

See the Air Quality Framework See the Air Quality Framework Directive As above 

Ambient Air 

Quality and 

Cleaner Air for 

Europe 

(2008/50/EC) 

Directive above above 

Large Ensuring that existing plants are Investments should focus on introducing Industry, energy 

Combustion modified to comply with required new processes for cleaner technologies utilities 

Plants emission levels and that new plants (retrofitting) and introducing air 

Directive 

(2001/80/EC) 

comply with specified emission limits pollution control systems in installations 

Designating institutions responsible Installations put into operation after 

for identifying all installations falling 1987 must comply with the directive 

under the directive, separately for 

old installations (in operation 

before 1987) and newer ones 

as of the day of EU accession 

Integrated 

Establishing a system for inspection 

and monitoring 

Setting up or restructuring a Investment costs related to enforcement Industry, agro- 

Pollution body (e.g. a competent include mainly the setting up and running industry and 

Prevention and authority) and agencies of the necessary institutional framework waste utilities 

Control (IPPC) and authorities, the development of 

Directive Requires the identification of guidance documents, the training 

(2008/1/EC) installations requiring control 

by the IPPC and the assessment 

of their current situation 

of staff and inspectors etc. 


Guidance documents on IPPC 

principles and the use of BAT 

must be provided 

Source: REC, 2005; REC and Umweltbundesamt GmbH, 2008; and EC COM (2001) 304

ment plans. The highest costs are incurred as a result of the waste stream–related 

directives and the Landfill Directive. 

• The strategic framework for water has been in place since 2000, when the Water 

Framework Directive was adopted. The biggest investment implications in 

water in SEE are associated with the Drinking Water and the Urban Waste 

Water Treatment Directives. 

• The Directive on Ambient Air Quality and Cleaner Air for Europe 

(2008/50/EC) merges most of the existing legislation into a single directive 

with no change to existing air quality objectives. The main public investment 

in air is associated with the establishment of a network of monitoring equipment 

while significant private investments will be needed for the implementation 

of the IPPC and LCP Directives. 

Environmental investment needs and benefits 

The implementation and enforcement of environmental legislation is one of 

the most important areas of work for SEE countries in relation to environmental 

infrastructure development. As previously indicated, this process requires significant 

efforts towards the upgrading and construction of new environmental facilities 

such as wastewater treatment plants and sanitary landfills. In order to identify 

where the financial challenge will be the most significant, this section looks at investment 

needs as required by EU environmental legislation and highlights the implementation 

and investment implications for SEE countries. 

Benefits for South Eastern European countries of compliance 

with the environmental acquis 

Implementing the EU environmental acquis entails large costs. However, it is important 

to bear in mind that the process will also eventually lead to a range of benefits 

for all sectors of society. In a study commissioned by the EC DG Environment in 

2007, the total monetary benefits for SEE countries is estimated at between EUR 1.4 

and 2 billion per year (Arcadis Ecolas NV and IEEP, 2007). The total benefits of clean 

drinking-water supply for SEE countries are estimated to amount to up to EUR 851 

million per year upon full compliance. Furthermore, the implementation of the air-related 

environmental acquis is expected to lead to approximately 4,475 fewer cases of 

premature death from respiratory diseases and lung cancer per year. 

The calculation is based on direct benefits with respect to public health and includes 

the reduction of illness and mortality, resource benefits (for example those 

gained from reduced water pre-treatment costs as water quality improves; forest products 

and sustainable agriculture), and eco-services gains such as the protection of 

species, habitats and ecosystems. Wider socioeconomic benefits relate to increased 

employment through environmental investments, eco-efficiency gains, the develop- 




90 



TABLE 7: Benefits of implementing the EU environmental acquis over different sectors 

BENEFIT TYPE AIR WATER WASTE 

Health Reduction in respiratory Households benefiting from Reduced share of population at risk 

diseases and early mortality connection to (improved) of exposure to contaminated water/ 

quality water hazardous substances/odour/ 

explosion (methane) 

Resource Reduced damage to building Reduction of contaminants in Reduced primary inputs through 

stock, crops etc. surface water recycling, energy recovery etc. 

Eco-systems Reduced pollution stress to Likely changes in river and Avoidance of leachates, methane emis 

terrestrial and aquatic 

eco-systems (acidification and 

ground-level ozone) 

lake water quality sions 

Social Quality of life Confidence in drinking water Reduced discrimination by fewer low 

income households living close to 

unprotected landfills etc. 

Wider Employment in air pollution Employment via tourism Employment for recycling etc. 

control equipment, increased 

locational quality 

related to water recreation 

Source: Arcadis Ecolas NV and IEEP, 2007 


ment of new and existing industries or economic sectors, and economic benefits from 

natural resources (e.g. tourism). Some benefits arising from the implementation of directives 

— such as biodiversity protection — are more difficult to estimate in monetary 

form. The environmental benefits will increase if principles of sustainability are 

implemented horizontally in other sectors, such as transport, energy and agriculture. 

Environmental capital investment needs 

An analysis of the state of the environment and the status of utilities for environmental 

services in SEE countries exposes the deficiencies in the environmental 

infrastructure. Experiences from the new EU member states show that the development 

of realistic, long-term national strategies for implementing the environmental 

acquis was a crucial step in the overall process, and assisted in the 

mobilisation of domestic and foreign sources of finance. In the case of the new EU 

member states, overall assistance from the EC and foreign sources constituted only 

a small proportion of the total amount needed. Certain environmental directives 

will be especially difficult to implement, not only because of the investment required, 

but also because of the amount of infrastructure to be built. Some of the 

most financially demanding directives are presented in Box 6. 

It has been estimated that the candidate countries will have to spend on average 

between 2 and 3 percent of their GDP over several years in order to achieve full 

implementation (REC, 2005). Table 9 shows the estimated investments needed in 

order to comply with the total EU environmental acquis.

Main costs for upgrading infrastructure 

Waste sector 

It will be necessary to upgrade the quality and environmental 

performance of existing facilities to ensure that they reach 

compliance with the environmental standards set as part of national 

policies and strategies. The costs incurred in establishing 

new facilities will depend on the number, type and capacities of 

the additional facilities required. Funds need to be raised for capital 

investment expenditures and to cover recurrent operational 

costs. Ultimately, the full costs of facility provision and operation 

should be recovered from waste producers. 

Meeting the requirements laid down in the Waste Framework 

Directive, the Hazardous Waste Directive and the Landfill 

Directive is likely to be very costly. The provision of 

facilities of a higher standard, together with the creation of an 

adequate institutional structure, will constitute the largest elements 

of the overall cost of achieving compliance. It should 

be appreciated that the provision of facilities will incur not 

only initial capital costs but also significant recurring annual 

costs for operation and maintenance, together — in the case of 

landfills — with long-term costs for remediation and aftercare. 

A study on the costs of implementing EC waste management 

legislation in Slovakia estimates the total capital costs (net present 



TABLE 8: Total benefits (in EUR million) for SEE countries of full compliance with the water-related directives 

ANNUAL BENEFITS TOTAL DISCOUNTED BENEFITS 

LOW ESTIMATE HIGH ESTIMATE LOW ESTIMATE HIGH ESTIMATE 

Albania 60.5 103.6 495 847 

Bosnia and Herzegovina 75.3 95.8 616 783 

Croatia 60.6 378.6 610.0 3810.9 

FYR Macedonia 66.7 80.5 546 658 

Montenegro 66.2 71.8 541 587 

Kosovo (as defined 

under UNSCR 1244) 

14.3 21.1 117 172 

Serbia 467 521 3,818 4,260 

TOTAL 811 1,272 6,743 11,118 

Note: Value in EUR of the annual benefits upon full compliance with the water directives and the total discounted benefits over 20 years of 

compliance with the water directives in the respective countries. 

Source: Arcadis Ecolas NV and IEEP, 2007 

BOX 6: Investment-heavy directives 

Air sector 

• Air Quality Directive (96/62/EC) 

• Large Combustion Plants Directive 

(2001/80/EC) 

Waste sector 

• Landfill Directive (1999/31/EC) 

• Incineration Directive (2000/76/EC) 

• Hazardous Waste Directive (91/689/EEC) 

• Sewage Sludge Directive (86/278/EEC) 

Water sector 

• Drinking Water Directive (98/83/EC) 

• Urban Waste Water Treatment Directive 

(91/271/EEC) 

• Dangerous Substances in Water Directive 

(76/464/EEC) 

• Nitrates Directive (91/676/EEC) 

• Bathing Water Directive (76/160/EEC) 


92 



TABLE 9: Estimated funding needed to achieve compliance with the EU environmental acquis 

COUNTRIES ESTIMATED FUNDING TIMELINE REFERENCE 

NEEDED TO ACHIEVE 

COMPLIANCE WITH THE EU 

ENVIRONMENTAL ACQUIS 

OF ESTIMATE 

Albania EUR 252 million for Until 2013 National Strategy for Development 

environmental investments 

and water and sanitation 

and Integration (March 2008) 

Bosnia and EUR 3.8 billion CARDS projects: Federal Environmental 

Herzegovina Strategy and Environmental Strategy in RS 

Croatia Between EUR 6 and 12 billion Until 2013 CARDS 2004 projects, IPA projects, 

EPEEF programmes 

FYR EUR 3.13 billion (EUR 2,947 Until 2030 CARDS 2005 project “Environmental 

Macedonia million capital costs and Management Strengthening” (Developing 

EUR 182.4 million a National Strategy for Environmental 

operational costs) Approximation) 

Montenegro EUR 32.5 billion 2008–2012 National Programme for Integration 

Serbia EUR 652 million (according Full EC SEC(2009) 

to estimates during implementation 

the preparation of the National of harmonised 

Programme for Environmental laws should be 

Protection) achieved by the 

end of 2012 

Kosovo (as EUR 21.5 million 2007–2013 Estimate based on national strategies 

defined under and medium-term expenditure 

UNSCR 1244) framework 



value in 1999 at 5 percent) to be EUR 1.17 billion. A similar study for Latvia shows 

capital costs of EUR 237.9 million. The latter study estimates only the impact of the 

Hazardous Waste and Waste Landfill Directives, which have the greatest cost impact. 

In addition, the implementation of the waste directives will require investments in 

human competencies, for example through the training of staff. Without sufficient, 

suitably trained staff, systems for waste management planning, regulation and enforcement 

cannot be effectively implemented. Adequate budgets therefore need to be 

ensured to enable the responsible institutions to perform their functions effectively. 

Salaries need to be set at appropriate levels to attract and retain qualified staff (REC 

and Umweltbundesamt GmbH, 2008). 

Water sector 

It will be necessary to upgrade facilities as a result of implementing the water directives. 

Finance needs to be raised for capital investment expenditures and recurrent 

operational costs. Ultimately, costs should be recovered from water users/polluters, 

that is, from consumers (domestic, industrial and agricultural sectors).

BOX 7: Financing regional waste management centres in Croatia 

The costs incurred in establishing new facilities are dependent on the standards 

that have to be adopted and the number, type and size of the facilities required for 

complying with these new standards. The current levels of treatment available for 

wastewater, drinking water, industrial discharges and agricultural practices are decisive 

in terms of final costs. Such a wide variety of changes are needed that it is impossible 

to give a precise figure of the costs of implementing water legislation. 

Although the majority of SEE countries have institutions devoted to the prevention 

of water pollution and to the permitting of installations, there is a need to upgrade them 

in order to implement the entire body of legislation, in particular the new framework 

directive. New working methods should be introduced in line with the new standards 

applied, such as emission limits, quality objectives, best available techniques and the 



The total investment needed in the waste sector in Croatia is estimated at EUR 3.25 billion. Depending on the 

final number of regional waste management centres (RWMCs), the assessed investments will range from EUR 350 

to 400 million in order to bring the landfills to operational level. The financing of RWMC construction is envisaged 

through public sources (state budget, budgets of local and regional self-government units, EU funds, the Environmental 

Protection and Energy Efficiency Fund [EPEEF], bank loans) as well as private sources (private 

investments in WMCs, public-private partnerships [PPP], concessions, the primary separation and collection of 

waste, recycling and collecting plants/facilities). In phase one of the RWMC financing structure, public costs 

(landfill site, infrastructure and transfer station) will be financed up to 80 percent from EU funds and the EPEEF; 

and 20 percent by local authorities. Bank loans will be used for the establishment of a collection system and for 

the construction of the municipal waste disposal system at the level of the local (regional) self-government. In 

phase two, the costs of mechanical biological treatment (MBT) plants will be financed by the private sector (PPP) 

and, if possible, the public sector. Investments are required for MBT facilities, landfills and infrastructure, the construction 

of transfer stations along with system set-up costs. 

Source: REC, 2009b 

BOX 8: Challenges to financing waste management in Kosovo (as defined under UNSCR 1244) 

Based on the medium-term expenditure budget for the years 2010 to 2012, foreseen expenditure in the field of 

environment for capital investments is EUR 14.8 million. For approved projects (2008 to 2012) the total is EUR 

3.425 million, and for new projects EUR 9.8 million. 

The main challenges identified in financing waste management projects in Kosovo (as defined under UNSCR 

1244) are, to a large extent, representative of the situation in several SEE countries. They include defining clear 

responsibilities at central and local level; settling ownership issues in relation to landfills and wastewater treatment 

plants; increasing the limited budget for environmental management; establishing eco-funds; providing 

mechanisms for obtaining international funds and loans; strengthening the existing financing system; and improving 

payment and fee collections. 

Source: REC survey, 2009; and REC, 2009b 


94 



TABLE 10: Indicative estimates of investment outlays for the waste sector 

BENEFIT TYPE AIR 

Albania Estimated investment needs up to 2022 are EUR 150 million for the waste sector; investment 

of EUR 9.8 million is foreseen for the Landfill Directive until 2012 

Bosnia and No information available 

Herzegovina 

Croatia Estimated investment needs are EUR 7.6 billion for the waste sector. Of this, EUR 11 million 

are needed for the WFD (2007–2010), EUR 191 million for the Landfill Directive (2010–2018); 

and EUR 9 million for the Hazardous Waste Directive (2009–2013) 

FYR Estimated investment needs up to 2012 are EUR 211 million for the waste sector. Of this, 

Macedonia EUR 400 million are needed for the WFD; EUR 6 billion for the Landfill Directive; 

EUR 500 million for the Hazardous Waste Directive; EUR 400 million for the Sewage Sludge 

Directive; and EUR 300 million for the Incineration Directive 

Kosovo (as Estimated investment needs up to 2012 are EUR 4.6 million for the waste sector. Of this, 

defined under EUR 1.2 million are needed for the WFD (2007–2013); EUR 0.7 million for the Landfill Directive 

UNSCR 1244) (2008–2012); EUR 1.041 million for the Hazardous Waste Directive (2007–2012); 

and EUR 1.75 million for the Incineration Directive (2008–2012) 

Montenegro Estimated investment needs are EUR 129.7 million, of which EUR 128.5 million are investments, 

remediation and management costs; and EUR 1.18 million administrative costs 


TABLE 11: Infrastructure facility needs identified in the waste sector in Serbia 

29 regional sanitary 44 transfer 17 recycling 7 composting 4 incinerators 

landfills for 160 stations for 63 centres for 160 facilities for for 160 

municipalities municipalities municipalities 146 municipalities municipalities 

Source: National Sustainable Development Strategy 2008 


need for wide-ranging monitoring together with facilities and data processing. As in 

the waste sector, budgets need to be allocated for human and institutional reorganisation 

and training (REC and Umweltbundesamt GmbH, 2008). 

Air quality sector 

The major costs of implementing the air quality directives will be borne by the 

source operators, who will need to cover the costs of emission abatement equipment, 

the upgrading of existing plants or the installation of new plants. Funds therefore 

need to be raised for capital investment and any recurrent operational costs. 

The application of the air quality directives will also require the provision of training 

to ensure that staff have sufficient competencies to perform the required tasks 

in relation to air quality monitoring, modelling, management, planning, and regulation 

and enforcement.

BOX 9: Cost implications for implementing the Water Framework Directive in Albania 

The costs of ensuring that large combustion plants reduce emissions to an acceptable 

level may include the construction of new plants to replace outdated ones, 

and the addition of new units to less-polluting plants to compensate for energy 

losses. The closure of certain industries will represent the biggest cost. In Estonia, 

the application of BAT to large combustion plants is estimated to require capital 

outlay of EUR 427.9 million by 2005 and EUR 801.8 million by 2010 (REC and 

Umweltbundesamt GmbH, 2008). 



In Albania, the cost of full transposition of the legal framework for the Water Framework Directive (WFD) is estimated 

at EUR 800,000. The total implementation costs for the institutional set-up amount to one-off costs of 

EUR 5.4 million and recurrent costs of EUR 524,000 per year. These costs will be sustained primarily by the national 

competent authority responsible for implementing the WFD and by the new river basin authorities. The total 

costs relate mainly to the establishment of the necessary administrative infrastructure and to building its capacity, 

as well as to establishing and operating the monitoring system, rather than to technical measures, which are 

assumed to arise under other directives. 

The total estimated cost of technical assistance projects — over EUR 4.8 million — reflects the ambitious scope 

of the directive. It has been estimated that the operating costs (excluding capital costs) of the monitoring required 

to comply with the WFD will be EUR 182,000 per year. However, the present allocation in the MoEFWA 

budget for monitoring (which also covers operating costs only) is just EUR 110,000 per year, an estimated third 

of which (EUR 37,000 per year) is available for water. On this basis, the additional operating costs required for 

water monitoring would be EUR 145,000 per year. 

Source: REC Survey 2009 

BOX 10: Capital investment needs in the water sector in Bosnia and Herzegovina 

Federation of Bosnia and Herzegovina (12-year period) 

• Water supply: EUR 594.4 million 

• Water protection: EUR 467.2 million 

Republika Srpska 

Investments are to be realised in two phases until 2033. 

• Infrastructure revitalisation 

• Water distribution network: EUR 143.3 million (KM 280 million) 

• Wastewater treatment plants: EUR 1.2 million (KM 2.3 million) 

• New system developments 

• Water distribution network: EUR 77.4 million (KM 151.4 million 

• Wastewater treatment plants: EUR 150.8 million (KM 295 million) 



96 



TABLE 12: Indicative estimates of investment outlays for the water sector 

Albania EUR 6.2 million for updating the legislation according to the Water Framework Directive 

Bosnia and EUR 2.83 billion for upgrading infrastructure according to the EU water acquis 

Herzegovina 

Croatia EUR 3.5 billion for upgrading infrastructure until 2023 according to the EU water acquis 

FYR EUR 724 million for upgrading infrastructure according to the EU water acquis 

Macedonia 

Kosovo (as EUR 3.5 million for updating the legislation according to the Water Framework Directive 

defined under 

UNSCR 1244) 

Montenegro EUR 769.9 million, of which EUR 765.7 million are investment costs and EUR 4.2 million 

administrative costs 

Serbia No data available 

Source: REC Survey, 2009 

TABLE 13: Identified investment needs in the water sector in the former Yugoslav Republic of Macedonia 

WATER SUPPLY WASTEWATER WASTEWATER 

NETWORK NETWORK TREATMENT PLANTS 

EXISTING UPGRADE EXISTING UPGRADE EXISTING UPGRADE NEW 

NEEDED NEEDED NEEDED 

Agglomerations 

over 15,000 p.e. 

27 20 27 21 4 1 22 

Agglomerations 

between 2,000 

and 15,000 p.e. 

41 38 41 38 3 1 37 




• The implementation of environmental legislation, and especially of certain investment-heavy 

directives, requires significant efforts towards the upgrading 

and construction of new environmental facilities in water and waste that will entail 

significant public and private costs representing more than 2 to 3 percent 

of the countries’ GDP. 

• Compliance will eventually lead to a range of benefits linked to improved health 

and a better living environment.

BOX 11: Main costs arising in relation to legislation in the air quality sector 



1. Establishing and maintaining a network of air quality monitoring stations and associated quality assurance 

equipment, and reporting the monitoring results. These costs will be borne by the central government. 

2. Preparing emissions inventories of greenhouse gases and pollutants that significantly affect air quality. 

These costs will be borne by the central government. 

3. Preparing plans and programmes to achieve compliance with ambient air quality limits. These costs will 

be borne by the central government. 

4. Compliance with emission limits and technical requirements under the directives, or the implementation 

of plans and programmes designed to improve ambient air quality. These costs will be borne by the polluters 

themselves (industry, householders, motorists etc.). 

5. Staff training. Without suitably trained staff, systems for air quality monitoring, modelling, management, planning, 

and regulation and enforcement cannot be effectively implemented. It is important to ensure that adequate 

budgets are provided to enable the responsible institutions to perform their functions effectively. 

Source: REC and Umweltbundesamt GmbH, 2008 

BOX 12: Cost of implementing the IPPC Directive in the former Yugoslav Republic of Macedonia 

In order to achieve compliance with the IPPC Directive, EUR 572 million investments and EUR 39 million annual 

operating costs have to be covered by industry (investment and operating costs in abatement systems), the Ministry 

of Environment and Physical Planning, and the municipalities (mainly training, administration and staff costs). 

(National Environmental Investment Strategy, 2009) 

TABLE 14: Indicative estimates of investment outlays for the air sector 

BENEFIT TYPE AIR 

Croatia Estimated investment needs up to 2011 are EUR 3.2 million. Of this, EUR 2 million are allocated to 

air quality directives; EUR 0.7 million to the IPPC Directive; and EUR 0.5 million to the LCP Directive. 

FYR Estimated investment needs between 2007 and 2011 are EUR 1.127 billion. Of this, EUR 5 million 

Macedonia are allocated to air quality directives; EUR 572 million to the IPPC Directive; and EUR 550 million 

to the LCP Directive. 

Kosovo (as defined 

under UNSCR 1244) 

Estimated investment needs between 2009 and 2012 are EUR 1.075 million. 

Montenegro Estimated investment needs up to 2012 are EUR 12.96 million. 



98 


Chapter 5 

National strategic and 

institutional framework 


100 


Update on progress 

in national environmental legislation 

One of the preconditions for developing environmental infrastructure is to have 

in place legislation of the appropriate quality. Over the past few years, SEE countries 

have made progress in drafting and adopting new laws that follow the requirements 

of the EU directives. The basic elements of the legislative structure are 

in place, and work on drafting secondary legislation is ongoing in all countries. In 

general, despite the progress achieved, considerable efforts are needed in the forthcoming 

period in order to meet the requirements of the EU environmental acquis. 

The first challenge is related to the further drafting and adoption of national legislation 

and strategies transposing the EU acquis. Once the legislative framework 

is in place, enforcement and compliance remain the biggest challenges. 

Below is an overview of the most significant developments with respect to the 

legislative and strategic framework in SEE countries since 2006. The information 

builds on data collected during the course of PEIP implementation and has been 

cross-checked with the EC progress reports from 2009 for the candidate and potential 

candidate countries. 9 A list of strategic documents providing guidance for 

infrastructure investment in the water and waste sectors in SEE countries can be 

found in Annex 3. 

Overview of environmental legislative 

and strategic developments in SEE 

In Albania, preparations in the field of environment are advancing slowly and 

remain at an early stage for a number of sectors. The new draft law on environmental 

protection, incorporating a number of important directives such as the 

IPPC, LCP and Water Framework Directives, has not yet been adopted (EC SEC 

[2009] 1337). The Crosscutting Strategy for the Environment was adopted in 2007 

and sets out the government’s policies in the field of environmental protection. 

The strategy is the first environmental strategy document adopted at national level. 

It foresees the steps necessary to achieve the approximation of the legal framework 

in the light of European integration, as well as measures for transferring the administration 

of natural resources to the community. The project “Implementation 

of the national plan for the approximation of environmental legislation” (August 

2008 to November 2010), funded by EU CARDS 2006, is expected to improve 

legislation in the water and waste sectors. In general, it can be concluded that there 

have been some positive legislative developments but that implementation and enforcement 

remain weak (EC SEC[2009] 1337). 

The water sector has seen the most notable developments in recent years. 

Progress has been underpinned by the adoption of the Reform of the Water Utilities 

in July 2008. Developments related to the water reform are aligned with EU 

water policy and are aimed at decentralisation, privatisation and full cost recovery 

operations. The reform has led to the improvement of existing strategies and 

will lead to the development of new policies. On the legislative side, the law on 


102 


N AT I O N A L S T R AT E G I C A N D I N S T I T U T I O N A L F R A M E W O R K 


the regulatory framework in the water supply and wastewater administration sector 

was adopted in 2008 and it is expected that the amended version of the National 

Water Strategy of 2003 will be adopted in 2010. Implementing legislation 

and action plans for legislative approximation to the Water Framework Directive 

and the Nitrates and Urban Waste Water Treatment Directives are pending 

adoption (EC SEC [2009] 1337). 

There is still a need to improve the legislative and strategic framework in the 

solid waste sector. Limited progress has been made on developing the Solid Waste 

Management Strategy, which is one of the bottlenecks to the improvement of waste 

management systems (waste collection, treatment services and final sanitary landfilling). 

The National Waste Management Plan is expected to be adopted in 2010. 

Although the government has earmarked a satisfactory budget for the waste sector, 

the need for good planning and for efficient policies and strategies is an immediate 

priority in order to make use of available EU funds and to invest efficiently. 

In Bosnia and Herzegovina, a state-level environment law ensuring harmonised 

countrywide environmental protection has not yet been adopted. The 

draft law will be presented in June 2010. The Environmental Law will define the 

establishment of the Environment Agency of Bosnia and Herzegovina. The preparation 

of accompanying strategies and secondary legislation is in process in both entities. 

Republika Srpska is currently preparing the Nature Protection Strategy and 

the Air Protection Strategy. The Federation of Bosnia and Herzegovina has completed 

the preparation of the Federal Strategy for Environmental Protection comprising 

four separate strategies — on nature protection, air protection, waste 

management and water management. The strategy is expected to be adopted by 

the end of 2009. According to the EC progress report, the transposition and implementation 

of the acquis in the field of horizontal legislation requires considerable 

improvement. The implementation of environmental legislation remains a 

concern and the integration of environmental aspects in other sectors remains weak 

(EC SEC [2009] 1338). 

In Bosnia and Herzegovina, the main developments have been registered in the 

water sector. The implementation of the Water Framework Directive has begun via 

the entity water laws (in the Federation in 2006, and in Republika Srpska in 2006). 

The adopted water laws envisage the greater involvement of local government units 

in project identification and preparation activities. Implementing legislation has 

been adopted for water laws and water charges, and for harmful and dangerous 

substances and their maximum levels in surface waters. Water agencies have been 

operational in the Federation of Bosnia and Herzegovina since January 2008. Agencies 

are still to be established in Republika Srpska: two agencies are planned in Bijeljina 

and Trebinje. The adoption of the Water Management Strategy in the 

Federation is expected at the beginning of 2010 (EC SEC [2009] 1338). 

The Solid Waste Management Strategy in Bosnia and Herzegovina, developed 

through an EU/Phare project, was adopted in 2000. The legislative framework in the 

waste sector is incomplete, which creates an obstacle to the development of physical 

infrastructure. Little progress has therefore been achieved in the construction of regional 

sanitary landfills and in the rehabilitation and closure of unregulated landfills.

BOX 13: Planning hierarchy in Croatia 

There has been some progress in the adoption of implementing regulations with respect 

to waste products that can no longer be disposed of in landfills without pre-treatment 

(such as medical waste). However, no progress has been made in relation to rules 

or regulations governing the system for the recycling and recovery of priority waste 

streams, such as packaging, motor oil and tyres (EC SEC [2009] 1338). 

Croatia has made significant efforts to harmonise its national legislation with 

the EU environmental acquis. Several acts have been passed in the air, water and 

waste sectors, and strategic documents have been drawn up. The National Strategy 

for Sustainable Development was adopted in 2009. 

The Act on Waters and the Act on Water Management Financing, which will 

constitute the primary legislation for water management, have not yet been enacted. 

This is hampering the foreseen restructuring of the sector and is slowing 

down the transposition process. The existing versions of both acts are from 2005 

and are currently being amended. In addition to these two acts, water management 

in Croatia is regulated by approximately 40 subordinate acts. Implementing legislation 

in relation to hazardous substances in waters and wastewater has been enacted. 

The Water Management Strategy was adopted in 2008. Despite this 

progress, considerable efforts will be needed to further align with and implement 

the acquis in the water, industrial pollution control and risk management, climate 

change and horizontal sectors. Monitoring and reporting activities need to be improved 

(EC SEC [2009] 1333). 

Implementing legislation has been adopted on waste from extractive industries 

and the management of polychlorinated biphenyls (PCB) and polychlorinated terphenyls 

(PCT). Amending legislation on the classification of waste and on the supervision 

of transboundary movements of waste has also been adopted (EC SEC 

[2009] 1333). The Waste Management Law was adopted in 2005 (amended in 

2006) and the complementary National Waste Management Strategy (NWMS) 

in 2005. The National Waste Management Plan (NWMP) for the period 2007 to 

2015 was adopted in 2007. Sustained efforts are needed towards the remediation 

of existing landfills and hotspots and the further establishment of systems for the 

collection and management of different categories of waste (EC SEC [2009] 1333). 

Kosovo (as defined under UNSCR 1244) is at an early stage in terms of alignment 

with European environmental standards. However, progress has been 

achieved in both the horizontal and vertical legislative framework in the water, 

waste and air sectors. The new draft Law on Environmental Protection was 



• Waste Management Strategy of the Republic of Croatia (Official Gazette, No. 130/05) — 2005. 

• Waste Management Plan of the Republic of Croatia for the period 2007 to 2015 (Official Gazette, No. 85/07) 

— June 2007. 

• According to the Waste Management Plan and obligations arising from the Waste Law (Official Gazette, 

No. 178/04, 111/06, 60/08), 21 counties prepared draft regional waste management plans in 2008. 


104 




adopted in 2009, and horizontal laws on EIA, SEA and IPPC were adopted in the 

first half of 2009. The Kosovo Environmental Action Plan (KEAP) 2006–2010 

(2006) is aimed at the gradual improvement of the environmental situation and 

the improvement of public health in general. The Environmental Protection 

Agency has been operational since 2007. 

The Law on Water was adopted in 2004. The Wastewater Treatment Strategy 

was adopted the same year. There has been no progress in the establishment of river 

basin authorities, envisaged by the Water Law. The Water Law provides for the establishment 

of a river basin authority that will be responsible for water resource 

management in the territory of the river basins. There is currently no national water 

management strategy. 

Water management is a key element in the Environmental Action Plan, given the 

growing scarcity of water in Kosovo (as defined under UNSCR 1244) and the region. 

In the KEAP, the construction of wastewater treatment plants is listed as a priority. 

The most important developments in the environmental sector in Kosovo (as 

defined under UNSCR 1244) have been achieved in the waste sector, although 

there is still a mixture of competencies between the Ministry of Environment and 

Spatial Planning (MESP) and the Water and Waste Regulatory Office (WWRO). 

The Law on Waste Management and Disposal (2006) was enacted along with 

a number of pieces of secondary legislation covering construction and demolition 

waste; used batteries and accumulators; end-of-life vehicles; packaging waste; the 

competencies of the owners and operators of waste treatment facilities; the administration 

of waste landfills; hazardous waste; waste electrical and electronic 

equipment; as well as medical products and waste. The Administrative Instruction 

on Conditions for the Designation of the Location and Construction of Landfills 

was approved in January 2009. The Draft Administrative Instruction on Licences 

for Waste Administration is expected to be adopted by the end of 2009 and will 

regulate the duties and responsibilities of the licensing authorities. The National 

Waste Management Strategy is being prepared and should be finalised in 2009. 

In the former Yugoslav Republic of Macedonia, the basic elements of the legislative 

framework are in place. A number of legal documents have been adopted 

and/or amended in compliance with the EU acquis. After passing the horizontal 

and vertical laws, the most intensive drafting of bylaws is taking place for the waste 

sector, and partially in the air, noise and water sectors. The strategic framework is 

well developed, with only a few gaps remaining 

The National Strategy for Sustainable Development (NSSD) is expected to be 

approved in 2009. The National Environmental Investment Strategy (NEIS), 

which was adopted in April 2009, sets clear national priorities, streamlining the 

available national funds and leveraging international financing sources towards 

solving priority environmental problems. 

Following the adoption of the new Law on Water, the major challenge is to establish 

an integrated water management approach and to overcome barriers resulting 

from the inherited institutional disparities. Activities will mostly comprise 

the adoption of the approximated laws and the transfer of competencies from the

Ministry of Agriculture, Forestry and Water Economy (MAFWE) and the Ministry 

of Transport and Communications (MTC) to the Ministry of Environment 

and Physical Planning (MEPP). 

The water strategy and respective river basin management plans must be put in 

place as an important prerequisite for the planning and further reform of existing 

institutions, as well as for the creation of new institutions (e.g. river basin management 

bodies). A national strategy on water management is currently being developed 

and is due to be completed by the middle of 2010. Transposition efforts 

need to be stepped up. No progress has as yet been achieved in applying the polluter 

pays principle (EC SEC [2009]1335). 

Amendments to the Waste Management Law have been enacted, including 

provisions on sanctions and on the level of fines (EC SEC [2009] 1335). The most 

important regulation to have been put into effect recently is the Ordinance on the 

Landfilling of Waste, which regulates disposal standards. With the enforcement 

of this regulation, the gradual closure of non-compliant landfills is foreseen, accompanied 

by the provision of additional landfill capacity through the construction 

of regional sanitary landfills. 

Sub-laws on hazardous waste management (OGRM No. 15/2008) have been 

adopted. One obstacle to the implementation of these regulations is the absence of 

a suitable institutional structure, even though it is required by the Law on Waste 

Management. Another area that has recently been covered by secondary legislation 

is the handling of healthcare waste (OGRM No. 146/2007). 

The National Waste Management Strategy (2008–2020), adopted in April 

2008, represents the basis for the preparation and implementation of an integrated 

and cost-effective waste management system. 

In Montenegro, activities have been carried out since May 2006 in relation to 

the ratification of international conventions in the environmental sector. The process 

of harmonising national laws with the relevant EU directives was given additional 

emphasis after November 2007 and a set of new laws was adopted, for example on 

EIA, SEA, air quality, waste management, water management and industrial pollution 

control. Harmonisation in these areas is continuing through the adoption of 

secondary legislation, and particular attention will be dedicated to areas where harmonisation 

remains at a low level. The Law on Environment was adopted in July 

2008 and was followed by the establishment of the Environmental Protection 

Agency. The National Programme for Integration into the EU for 2008 to 2012 

has been adopted. It includes a chapter on the environment (covering issues such as 

horizontal legislation, air quality and climate change, waste management, water 

management etc.). The government adopted a national environmental policy setting 

out national priorities and addressing cross-cutting issues, such as the need to bring 

gradually all environmental protection issues together under a single ministry. According 

to the EC progress report, Montenegro has made some progress on legislative 

alignment with European standards (EC SEC [2009] 1336). 

The Law on Waters regulates the legal status and integrated management of waters, 

shore land and water-related facilities. Funds for financing water management 

operations will be provided in accordance with the Law on the Financing of Waters, 




106 




which is in the drafting phase. The key strategic documents that provide guidance for 

the development of water supply and sewage facilities and wastewater treatment plants 

include master plans for wastewater drainage and treatment for the southern, and for 

the central and northern regions respectively (2004, 2005); and master plans for water 

supply (2006). Legislation in the area of water management will be harmonised with 

the EU acquis through the adoption of new secondary legislation. Alignment with 

European standards needs to be improved substantially and further efforts are required 

in order to improve implementation and enforcement (EC SEC [2009] 1336). 

The most significant progress has been observed in the waste sector. The Law 

on Waste Management (2008) represents the legislative framework in the field of 

waste management. Local self-government units will develop local waste management 

plans based on the Republic Waste Management Plan. The law introduces innovations 

in waste management practices, as local governments are obliged to 

comply with requirements on selective waste collection, waste disposal in sanitary 

landfills and waste treatment in accordance with EU standards. Financial and administrative 

limitations have delayed the implementation of the Waste Management 

Law from November 1, 2008 to January 1, 2010 (EC SEC [2009] 1336). 

The key documents that set the strategic directions for activities in waste management 

and provide for integrated regulation are the National Waste Management 

Policy (2004) and the Strategic Master Plan for Waste Management at Republic 

Level (2005). Developments can be seen in the implementation of the Strategic 

Master Plan for Waste Management, as the preparation of project documentation 

for identified priority projects has been initiated. According to the EC progress report, 

alignment with European standards needs to be considerably improved and 

accelerated, in particular concerning the Landfill Directive and the Waste Shipments 

Regulation (EC SEC [2009] 1336). 

There was little progress in the adoption of environmental laws in Serbia until 

May 2009, when a set of 16 environmental laws was adopted (amendments, new 

laws and regulations). The adopted laws are aimed at achieving harmony with EU 

regulations, and at introducing stricter penal policies. Among the laws adopted 

were the Law on Environmental Protection, the Law on Waste Management and 

the Law on Packaging and Packaging Waste. A National Sustainable Development 

Strategy (NSDS) was adopted in May 2008. It is structured around three pillars: 

knowledge-based sustainability; socio-economic conditions; and the environment 

and natural resources. Legislation enforcement at all levels has still to be ensured. 

Progress in the area of water quality is lagging behind and there is no legal or 

institutional framework in place (EC SEC [2009] 1339). There is a lack of longterm 

planning for the water sector, and there are currently no appropriate strategies 

for preparing and implementing water infrastructure investment projects at any 

level (national, regional, local). 

The new Water Act (last amended in 1996), which introduces new instruments 

for the financing of the water sector, including appropriate tariffs, is currently 

being drafted and had not been adopted as of the date of this publication. 

The draft of the new Water Act will be harmonised with EU directives as well as 

with relevant national legislation.

The current Water Management Strategy was prepared in 1991 and adopted 

in 1996, and is not in compliance with the EU water acquis. The future strategy for 

the development of the water sector should define the reorganisation of the water 

sector in order to achieve long-term sustainable water management. Due to the 

then existing economic conditions, measures from the 2001–2005 mid-term plan 

for the water sector have not been implemented, nor has the mid-term plan for 

2006–2010 been adopted. 

Progress can be noted with the adoption of the Law on Waste Management 

(2009) that provides for the complete harmonisation of national legislation with 

the EU acquis. The law regulates waste planning and management, as well as measures 

and procedures for the collection, transportation, reuse, recycling, treatment 

and disposal of all types of waste, including communal, medical and hazardous 

waste, from the national level down to the local level. Laws on packaging and packaging 

waste have also been adopted (EC SEC [2009] 1339). Twenty pieces of secondary 

legislation are in the drafting or adoption stage. The National Waste 

Management Strategy from 2003 is currently being revisited and the draft will be 

submitted for adoption procedure in 2009. The new strategy will define possible 

locations for regional waste management centres. 


• The countries of SEE have made significant progress in drafting and adopting 

new laws and strategies in accordance with the EU environmental acquis, but 

despite the progress achieved, considerable efforts are needed to meet the requirements 

of the acquis. 

• The transposition and implementation of EU environmental legislation is 

a precondition for unblocking environmental investments in SEE countries. 

• The development of an environmental investment strategy and of key policy 

objectives and priorities is essential to ensure effective financing for environmental 

infrastructure. 

Enforcement of environmental legislation 

in the water and waste sectors 

The enforcement of EU water and waste legislation is just as important for unblocking 

environmental infrastructure investments as the adoption of targeted, 

quality laws and regulations. Only strong pressure on national institutions and local 

governments to comply with commitments in the water and waste sectors can generate 

sufficient political will for reform. This pressure would come from strong and 

independent national and local enforcement institutions — that is, environmental 

inspectorates. Economic operators and citizens should also feel the consequences 

of illegal actions. There is a close link between the enforcement of legislation and 

its effect on the credibility and financial security of environmental infrastructure 




108 




investments. For example, it would be very difficult to proceed with the establishment 

of a regional solid waste management system and the construction of a new 

sanitary landfill with fair gate fees if no corresponding sanctions are imposed on the 

illegal dumping of waste. 

The current capacities of environmental inspectorates are relatively weak in 

terms of the number of inspectors and their expertise in the EU environmental acquis. 

Particularly in periods of economic crisis, governments tend to cut staff numbers. 

Outstanding agreements with the International Monetary Fund (IMF) 

represent an additional pressure to make staff cuts. 

The reform of environmental inspection is an integral part of a wider regulatory 

and judicial reform (World Bank, 2007). Even if the inspectorates are strong 

enough to spot environmental irregularities and, in more extreme cases, crimes, it 

is of little use if the link with the prosecution and the court is weak. This raises the 

entirely different issue of the need to enhance the environmental expertise of the 

police, the prosecution and the courts. 

In most SEE countries there is a separate water inspectorate, which raises problems 

especially in relation to the enforcement of the IPPC Directive, since it requires 

a multi-environmental media approach, joint inspections, and thus good 

coordination. 

Strengthened enforcement goes hand in hand with increased awareness — especially 

among citizens and businesses — of the importance of compliance with environmental 

legislation and, even more importantly, of the benefits of compliance. 

The modern and more successful approach to enforcement and compliance relies to 

a great extent on prevention, action, education and dialogue rather than punishment. 

Enforcement methods can also be combined with incentives, defined as the 

conscious use of rewards and penalties to encourage good performance. Non-binding 

mechanisms such as economic incentives to stimulate certain behaviour can also 

be used in the form of state subsidies, tax relief or lowered insurance premiums. 

Enhanced enforcement is inseparable from strong monitoring and reporting 

systems, which, unfortunately, are lacking in SEE countries, where there is much 

work to be done in this respect. This lack of monitoring and reporting systems ties 

the hands of inspectors and decreases the efficiency of their work. 

Since 2001, the REC has been the secretariat of a network of environmental inspectors 

in SEE. Between 2001 and 2005, the network was known as the Balkan Environmental 

Regulatory and Enforcement Network (BERCEN). In 2005, BERCEN 

was replaced by the Environmental Compliance and Enforcement Network for Accession 

(ECENA). BERCEN and ECENA have been addressing the above issues for 

the past eight years through trainings, exchange programmes and publications. 

For many years there has been a debate in Europe regarding the criminalisation 

of certain environmental offences. In 2008, the European Commission passed an 

important piece of legislation in this direction, which is presented in Box 15.


• The enforcement of EU water and waste legislation is just as important for unblocking 

environmental infrastructure investments as the adoption and transposition 

of targeted, quality laws and regulations. 

• There is a low level of awareness among citizens and businesses of the importance 

of compliance with environmental legislation and, even more importantly, 

of the benefits of such compliance. 

• The inspection culture in SEE is predominantly focused on punishment rather 

than prevention, action, education and dialogue. 

• The current capacities of inspectorates are relatively weak in terms of numbers, 

knowledge and equipment. The police, prosecution and courts have little environmental 

expertise. The reform of environmental inspection is an integral 

part of a wider regulatory and judicial reform. 

• In many cases, the enforcement and regulatory functions of the administration 

are not divided. 

• In most SEE countries there is a separate water inspectorate, which raises problems 

especially with respect to the enforcement of the IPPC Directive. 

• Companies lack strong monitoring and reporting systems, which reduces the efficiency 

of the inspectors’ work. 

Environmental institutions 

Human resources capacity 

The current capacity of environmental institutions (ministries, agencies etc.) will be 

insufficient for the administration of all the requirements arising from the adoption of 

the acquis. The increasing volume of environmental legislation will force governments 

to alter human resource capacities accordingly, or face understaffing. At the same time, 

it is highly probable that ministries of finance will exert pressure in the opposite direction 

and call for staff cuts due to budgetary constraints, agreements with IFIs etc. 

One of the mistakes made in CEE countries during the EU integration process 

was the lack of proper human resources planning linked to the requirements of the 

EU acquis. The availability of environmental experts in general, and of environmental 

investment experts in particular, is of the utmost importance and governments 

should adapt the educational system (including university programmes) to the new situation. 

Current staff should also receive training on the new environmental acquis. 

Figure 7 illustrates the response of Slovenia to the human resources issue in the 

pre-accession and post-accession periods. 

In SEE countries there is already an awareness of the institutional challenges, 

and the establishment of IPA implementation bodies is an example. This is not 

a straightforward process and institutional capacity is a serious problem that has to 

be tackled in a targeted way. 




110 



BOX 14: Environmental Compliance and Enforcement Network for Accession (ECENA) 

ECENA was established by high-level officials from SEE environmental ministries in March 2005. It is an informal 

network of environmental authorities from the member states, candidate countries and potential candidates. The 

members of ECENA are Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo (as defined under UNSCR 1244), 

the former Yugoslav Republic of Macedonia, Montenegro, Serbia and Turkey. The European Commission is also 

a member of ECENA. 

The mission of ECENA is to protect the environment in its member countries through the effective transposition, 

implementation and enforcement of EU environmental legislation by increasing the effectiveness of inspectorate 

bodies and promoting compliance with environmental requirements. ECENA builds on previous experiences gained 

through the activities of the Accession Countries Network for the Implementation and Enforcement of Environmental 

Law (AC IMPEL) and BERCEN. 

Further information: www.ecena.org 


Local-level institutions will be increasingly faced with the obligation to implement 

a growing volume of legislation following the process of decentralisation. 

If human resources are not properly planned, local-level institutions will also suffer 

from a chronic lack of human capacities. 

Institutional fragmentation 

One of the weaknesses of environmental institutions in SEE is their high level of 

fragmentation — that is, competencies are scattered between several institutions that 

sometimes do not have good systems of communication with one another. This is a 

significant problem and leads to the overlapping of responsibilities and funding. 

From Figure 8 it is clear that SEE countries have a high level of fragmentation 

compared to CEE countries, which were forced to streamline their institutions in 

the pre-accession period. For example, one of the most common reforms in CEE 

was to move water-related competencies to the core environmental ministry, as 

happened in Hungary, Bulgaria, Slovakia and Romania. 

Fragmented competencies sometimes lead to unclear responsibilities: in some 

cases, important tasks fall between two institutions and as a result do not receive 

the necessary attention. For example, in the former Yugoslav Republic of Macedonia, 

hazardous waste management is not recognised within the competencies of 

the Ministry of Environment and Physical Planning because the industrial sector 

is under the responsibility of the Ministry of the Economy. Likewise, chemicals 

come under the responsibility of the Ministry of Health, while pesticides are the responsibility 

of the Ministry for Agriculture, Forestry and Water Economy. 

Environmental protection agencies 

One of the common approaches to separating regulatory functions from policy 

functions is to establish environmental protection agencies (EPAs). This can 

reduce the fragmentation of institutions, create stronger links to the reporting

BOX 15: Environmental Crime Directive 

structure; and promote communication between different levels of government, 

given that many regulatory functions have been decentralised (World Bank, 2007). 

The following SEE countries have recently established EPAs — Croatia, Serbia, 

Kosovo (as defined under UNSCR 1244) and Montenegro. In Albania, the 

Agency for Environment and Forestry was established in 2006. 

Communication and coordination 

Many of the environmental directives, including the water and waste directives, 

concern more than one institution, thus adequate systems of inter-institutional cooperation 

and coordination must be established. Coordination and communication 

between central and local levels of governance is also vital. 

Reform of water and waste utilities 

Water and waste utility reform should also be included among the institutional 

challenges since these are the main institutions to implement environmental infrastructure 

investments. The status and competency of a utility are directly linked 

to the success of any potential investment. Although a large proportion of the work 

must be carried out at the local level (since in most cases utilities are owned by the 

municipalities), the impulse for reform and the principles of reform should come 

from the central level. (For further discussion of utilities see Chapter 6.) 

Environmental funds 

The establishment of a specialised institution for environmental financing 

(i.e. an environmental fund) is one of the options to help solve institutional deficiency. 

This option has already been put into effect in Croatia, Serbia and Republika 

Srpska (Bosnia and Herzegovina), and there are plans for the 



Directive 2008/99/EC on the protection of the environment through criminal law 

(minimum requirements to be implemented): 

• The directive lays down a list of environmental offences that must be considered criminal offences. 

• Offences should be subject to effective, proportionate and dissuasive criminal sanctions. 

• The directive sets only a minimum standard of environmental protection through criminal law. Member states 

are free to maintain or introduce more stringent protective measures. 

• Offences relevant to the current publication are: 

– the collection, transportation, recovery or disposal of waste, including the supervision of such operations 

and the aftercare of disposal sites, if they cause serious adverse consequences to people or nature; and 

– the shipment of waste in a non-negligible quantity. 

Further information: www.ecena.org 


112 



FIGURE 7: Staffing comparison to Slovenian Environment Ministry 

180 

150 

120 

90 

60 

30 

0 

Slovenia 

2004 

Source: World Bank, 2006 


Slovenia 

2006 

Serbia FYR 

Macedonia 

Albania Croatia Kosovo 

(under 

UNSCR 

1244) 

Bosnia Montenegro 

and 

Herzegovina 

establishment of environmental funds in Montenegro. However, experiences 

from CEE are mixed, thus authorities should take particular care to create institutions 

with clear, targeted responsibilities that are well funded and politically independent. 

10 (For further details see Chapter 7.) 

Institutional responsibility in the water and waste sectors 

According to the EC progress report, efforts are still needed in Albania to 

strengthen the administrative capacity of all institutions involved in environmental 

policy making. Cooperation and coordination between institutions remain 

poor. Additional monitoring and inspection capacity is required at regional level 

(EC SEC [2009] 1337). 

The main responsibility for environmental policy at the national level belongs 

to the Ministry of Environment, Forestry and Water Administration (MoEFWA) 

and the Ministry of Public Works, Transport and Telecommunications 

(MoPWTT). The MoEFWA is also responsible for river basin management. The 

MoPWTT manages a capital investment programme that contributes to the development 

of communal environmental infrastructure, including waste sector infrastructure. 

The MoEFWA is in charge of developing strategies, drafting laws and

FIGURE 8: Institutions with environmental competencies 

Fragmentation index 

7 

6 

5 

4 

3 

2 

1 

0 

Poland 

Estonia 


Latvia 

Czech 

Republic 

Hungary 

setting basic tariffs in the waste sector, while the MoPWTT is responsible for investments. 

The Ministry of the Economy, Trade and Energy (MoETE) drafts industrial 

waste management policy and collects statistics on the generation, recycling 

and disposal of industrial waste. The Ministry of Health bears responsibility for 

medical waste. In cooperation with the Institute of Public Health (IPH) and the 

State Sanitary Inspectorate (SSI), the Ministry of Health is responsible for monitoring 

the quality of drinking water and bathing water. 

According to the existing legislation, the municipalities and regions are responsible 

for municipal waste management (collection, transportation, treatment 

and final disposal). They also bear the responsibility for preparing local and regional 

waste management plans, suggesting the appropriate location for landfills 

in their territory and defining the fees. Municipalities can subcontract companies 

to perform certain tasks within the waste management systems. 

Administrative capacity in the environment sector remains generally weak in 

Bosnia and Herzegovina. According to the EC, the human and technical capacities 

of the inspectorates are inadequate to ensure compliance with environmental 

legislation at entity, canton and local level (EC SEC [2009] 1338). 

Lithuania 

Romania 

Slovakia 

Kosovo (under 

UNSCR 1244) 

Slovenia 



Montenegro 

Bulgaria 

Albania 

FYR Macedonia 


Herzegovina 

Serbia 

Croatia 


114 



BOX 16: Institutions for IPA implementation in the former Yugoslav Republic of Macedonia 

For the first IPA period, starting in 2007, the division of roles for IPA implementation has been agreed and is set out 

in a series of documents, including operational agreements between the Ministry of Finance, the Ministry of Environment 

and Physical Planning (MEPP) and the Ministry of Transport and Communication for Component III (regional 

development). Some institutions are already in place and have started their work. 

In the MoEPP, a unit is foreseen with the primary role of implementing IPA projects in the environment sector, and in 

2008 only six persons were engaged for this unit. According to the National Plan for the Adoption of the Acquis 

(NPAA), this unit should engage 20 persons for the successful implementation of the projects. It is therefore clear that, 

in the current situation, the structure is insufficient for dealing with IPA projects; and accreditation is still missing. Following 

their recruitment, new staff members will require training and capacity building in order to prepare them for 

their future duties. Sufficient time must therefore be planned for the starting phase. 


The Ministry of Foreign Trade and Economic Relations (MoFTER) and entity 

ministries are responsible for the environmental directives. More specifically, the 

ministries of health, the institutes for public health, the municipalities and the cantons 

are responsible for the implementation of the Drinking Water Directive. 

Waste management is handled at both state and entity levels. Solid waste management 

laws applicable to each entity within Bosnia and Herzegovina are developed 

and approved at entity level. Efforts are made to harmonise legislation in the 

entities. At federal level, waste issues fall under the responsibility of MoFTER. Municipalities 

are responsible for organising waste management services, usually 

through the department of communal affairs. The municipalities have attempted 

to compensate for the weakness of the national legislation in the waste sector by enforcing 

local regulations on waste management. 

The Federal Ministry of Agriculture, Water Management and Forestry and the 

Federal Ministry of Physical Planning, Environment and Tourism are responsible 

for river basin management in the Federation of Bosnia and Herzegovina. In Republika 

Srpska, this responsibility belongs to the Ministry of Agriculture, Forestry 

and Water Management. 

There has been overall progress in Croatia in terms of administrative capacity. 

However, the number of staff recruited is generally lower than is required to set up 

adequate administrative capacities at national, regional and local level. Improved 

coordination mechanisms and decision-making procedures are needed, given the 

high level of fragmentation of environmental responsibilities across ministries and 

public bodies (EC SEC [2009] 1333). 

In Croatia, the Ministry for Environmental Protection, Physical Planning and 

Construction (MoEPPPC) is responsible for the waste sector at the national level. 

Two important bodies in relation to financing environmental infrastructure are 

the Croatian Environment Agency and the Environmental Protection and Energy 

Efficiency Fund (EPEEF), which assists the waste sector in the preparation of technical 

documentation and IPA applications. 

Responsibility for water management and for public water utilities is centralised 

under Croatian Waters, a governmental institution. The Ministry of Regional De-

velopment, Forestry and Water Management (MoRDFWM) issues concessions 

for water extraction. The Ministry of Agriculture, Fisheries and Rural Development 

is responsible for monitoring the quality of drinking water. 

The administrative structures for the environment in Kosovo (as defined 

under UNSCR 1244) suffer from a lack of resources. By way of illustration, the 

budget of the Ministry of Environment and Spatial Planning is the lowest of any 

ministry in Kosovo (as defined under UNSCR 1244), and there is a shortage of 

staff. Some responsibilities have been transferred to the municipal level, although 

municipalities often lack environmental officers and inspectors. Efforts have been 

made to improve coordination between bodies, in particular relating to the position 

of the Environmental Protection Agency (EC SEC [2009] 1333). 

The Water and Waste Regulatory Office (WWRO) was established in 2007 

and is the independent economic regulator for water and solid waste services. Its 

responsibilities include licensing public enterprises; setting and approving service 

tariffs for regulated services; monitoring and enforcing compliance with service 

standards for licensed service providers; supervising and enforcing the disconnection 

regime and unlawful connections; and establishing and supporting customers 

in each service area (a total of seven regions). The activities of the WWRO are financed 

through licence fees payable by licensed service providers. 

The Association of Water and Waste Companies of Kosovo (SHUKOS) promotes 

the joint interests of regional companies responsible for water supply and 

sewerage services and provides operational assistance. 

The Ministry of Health, through the National Institute of Public Health, is responsible 

for reporting on drinking water quality. The Ministry of the Economy and 

Finance, through the Policy and Monitoring Unit, monitors publicly owned enterprises 

in order to ensure the accountability and transparency of their operations. It is 

responsible for monitoring and enforcing drinking water quality standards. 

Administrative capacity in the former Yugoslav Republic of Macedonia for the 

implementation and enforcement of environmental legislation remains far from sufficient 

at both central and local levels. The situation is particularly critical for the inspectorates. 

Coordination among administrative bodies responsible for environmental 

issues is inefficient. The government adopted a plan to strengthen environmental management 

capacity at central and local levels for the period 2009 to 2014. However, the 

lack of financial assessment and the absence of systems for monitoring and evaluating 

implementation are a continuing challenge (EC SEC [2009] 1335). 

The overall process of environmental approximation is embedded in the Ministry 

of Environment and Physical Planning (MoEPP). Various departments within 

the ministry have competency in policy making; information systems; regulation 

and standardisation; and inspection and supervision of the enforcement of laws 

and regulations in the area of environment. 

To implement environmental investments, continuous consultations and integrated 

actions must be carried out within the Ministry of Agriculture, Forestry and 

Water Economy, the Ministry of Transport and Communications, the Ministry of 

Health, the Ministry of the Economy, and the Ministry of Finance. There is a lack 

of coordination among these institutions. As a result, there are overlapping invest- 




116 




ment activities (e.g. at least three ministries finance water projects), while significant 

gaps exist in certain areas (hazardous waste management is not recognised as 

the responsibility of the MoEPP because the industrial sector is the responsibility 

of the Ministry of the Economy, chemicals are the responsibility of the Ministry of 

Health, and pesticides are the responsibility of the Ministry of Agriculture, Forestry 

and Water Economy). 

The competent authorities in water management issues are the Ministry of 

Agriculture, Forestry and Water Economy, the Ministry of Transport and Communications 

and the Ministry of Environment and Physical Planning. As of 2010, 

the MoEPP will be responsible for water protection issues and water inspection 

services in line with the new Water Act. 

As the MoEPP is currently preparing to take over the majority of water management 

functions in the near future (from 2010), it will be a major challenge to 

strengthen the human resources capacities of the ministry to take over water management 

tasks. The most critical issue will be the transfer of responsibilities (and 

power) from the Ministry of Agriculture, Forestry and Water Economy. 

Further efforts are needed in Montenegro to strengthen the administrative capacity 

of all institutions involved in environmental policy making and enforcement. 

According to the EC progress report, the sharing of responsibility for the 

water sector between the Ministry of Spatial Planning and Environmental Protection 

(MoSPEP) and other ministries needs to be streamlined. Coordination between 

the bodies involved in environmental protection issues, particularly in 

inspection activities, needs to be improved (EC SEC [2009] 1336). 

The newly established Ministry of Spatial Planning and Environmental Protection 

(formerly the Ministry of Tourism and Environment) is the main institution 

responsible for waste management activities in Montenegro. 

Waste management activities are also regulated at the local level and are the responsibility 

of local self-governments. The collection, transportation and disposal 

of waste are organised within municipal public utility companies (PUCs). The 

MoSPEP Project Implementation Unit was established in 2008. Its main goals are 

to provide support to local self-governments for the preparation of project documentation, 

and to assist in securing financing from international organisations and 

financial institutions. Also in 2008, permit issuing, inspection, monitoring and reporting 

functions were taken over by the newly established Environmental Protection 

Agency. 

The Directorate for Water within the Ministry of Agriculture, Forestry and 

Water Management, and the State Hydro-meteorological Service are responsible 

for river basin management. 

According to the EC, institutional capacity and technical and human resources 

in Serbia remain insufficient, especially at the local level. Better coordination is 

needed with the central level, and greater attention will have to be given to enforcement 

(EC SEC [2009] 1339). 

The institutions responsible for waste management include the Ministry of Environment 

and Spatial Planning (MoESP), the Serbian Environment Protection

Agency (SEPA), the Environment Protection Fund, and the Recycling Agency. 

The Ministry of Agriculture, Forestry and Water Management, through its 

Water Directorate, has overall responsibility for the water sector. The Water Directorate 

assists the water sector in project preparation and IPA applications, finances 

technical assistance for project preparation and co-finances the actual 

construction of infrastructure. The Jaroslav Cerni Institute for the Development 

of Water Resources assists the Water Directorate by preparing baseline studies. The 

public company Srbija Vode is responsible for maintaining regional water infrastructure 

(flood management etc.) but not municipal infrastructure. The Ministry 

of Health is responsible for monitoring the quality of drinking water. The province 

of Vojvodina has its own analogous institutions. The municipalities are responsible 

for environmental management and inspection. The municipal public utility 

companies provide water supply and wastewater treatment services. 

A table showing institutions with environmental responsibilities can be 

found in Annex 1. 


• The current capacities of environmental institutions (ministries, agencies etc.) 

may prove to be insufficient for the administration of all the requirements of the 

environmental acquis. 

• The experience of the new member states (EU-10) has shown the importance 

of proper human resources planning for institutions at central and local government 

levels to respond to the newly acquired environmental obligations. 

• Environmental institutions in SEE often suffer from a high level of fragmentation 

and are lacking adequate systems of communication with one another. This 

leads to an unclear division of competencies and responsibilities. 

• The level of institutional operational transparency and accountability at national 

and local levels is low. 

• One of the possible approaches to separating regulatory from policy functions 

is the establishment of environmental protection agencies. 

• Environmental funds are one option to address institutional deficiencies. 

However, their success depends on principles of transparency, autonomy and 

accountability. 




118 


Chapter 6 

Water and waste utilities in SEE — 

Status and reform 


120 


Introduction 

This chapter presents an overview of water and waste utilities, their operational 

efficiency, and their readiness for technical and organisational changes. 

Differences between countries with respect to utility reform are relatively small. 

All countries are at the very beginning of the utility reform process. The transfer of 

ownership from the state level to the local level has been completed (with the exception 

of Montenegro and Serbia). 

As a result of the decentralisation process, in most countries of the region responsibility 

for water services, solid waste services and sewage treatment falls 

squarely on the lowest self-governing municipal level. 

However, no significant efforts have been made to reorganise the public utilities 

into more efficient organisations that work according to sound economic principles. 

The public utility companies (PUCs) are burdened with obsolete 

infrastructure, leading to water and energy losses that increase their operational 

costs and decrease net income. Further inefficiencies stem from low tariffs and bill 

collection rates, overstaffing, and the absence of sound organisation and management 

inherited from the past. Without appropriate legislation, plans, strategies 

and support from the national level, the municipal PUCs are unable to improve 

their own status, organisation and efficiency, even where there is local-level political 

will to do so. 

In Croatia and Serbia, the national ministries (and in some cases funds) responsible 

for environment, water and/or infrastructure provide financial and technical 

assistance to the preparation of regional infrastructure projects and to 

construction. However, this financial and technical assistance is not accompanied 

by sufficient institutional assistance for the creation and development of the regional 

utility companies that should run these regional installations. 

Albania, Kosovo (as defined under UNSCR 1244) and Montenegro have made 

efforts to create regional companies 11 in a systematic way, while in Croatia and Serbia, 

regional companies are being established based on regional (waste management) 

infrastructure projects in the pipeline. Even though a systematic approach has the 

potential to achieve better results than a case-based approach, both groups of countries 

face great difficulties in establishing regional utility companies. The emerging 

regional utility companies are weak or virtually non-existent: they comprise one or 

two members of staff who, in most cases, do not have the required skills or leverage, 

and the municipal utility companies have not yet been integrated into them. 

In most SEE countries there are project preparation units/departments that belong 

to relevant ministries and/or environmental protection funds. 

The following two sections describe in greater detail the current state of infrastructure 

and the utility companies in each individual country. 

The current status of the water and waste utilities has a direct impact on the 

potential for investments in water and waste. The utilities’ political independence, 

adequate human resources capacity, sound organisational set-up and financial 

health are preconditions for successful investments: the water and waste utilities are 

the project proponents in any investments and must secure proper physical and fi- 


122 


WAT E R A N D WA S T E U T I L I T I E S I N S E E — S TAT U S A N D R E F O R M 

FIGURE 9: The “vicious” cycle of water supply and sewerage utilities 

WASTE MANAGEMENT CENTRE 


POOR OPERATIONAL 

EFFICIENCY 

DETERIORATED 

CLIMATE FOR 

PRIVATE SECTOR 

PARTICIPATION 

Source: REC, 2007 

LACK OF FINANCING 

SERVICE PERFORMANCE 

PROBLEMS 

POOR TARIFF COLLECTION 

AND COST RECOVERY 

LOW “BANKABILITY” OF MUNICIPAL UTILITY 

AND ITS INVESTMENT PROJECTS 

POOR MANAGEMENT 

PRACTICES 

WATER SERVICES 

DEMAND: 

CUSTOMER 

PERCEPTION, 

AFFORDABILITY 

AND POLITICAL 

ACCEPTABILITY 

nancial implementation of the projects. This section also presents an overview of 

the utility reforms currently under way. Reforms in most SEE countries are at a 

very early stage and there are a variety of approaches that will be described separately 

for the water and waste sectors. 

During 2008, the PEIP team conducted a survey regarding the status of reforms 

and the status of infrastructure in the water and waste sectors in PEIP countries. In 

addition, information from national PEIP workshops in Albania, Croatia, Montenegro 

and Serbia; individual interviews with key stakeholders; and already published 

national and regional reports by DABLAS (2006) and the World Bank 

(2006) have been used in order to provide an updated overview of the status of reforms 

in the water and waste sectors. 

Status of utilities and status of reforms 

in the water sector 

Water supply and wastewater services in SEE are traditionally the responsibility 

of municipalities. During recent reforms, the ownership of facilities in most 

SEE countries has been transferred from the state level to the municipalities. In 

Montenegro, assets are still owned by the state. Most utility operations in the region

FIGURE 10: Number of water utilities in SEE countries 

160 

140 

120 

100 

80 

60 

40 

20 

0 


Herzegovina 


Croatia FYR 

Macedonia 

are integrated in the municipal administration, thus the financial and operational 

status of the utilities tends not to be fully transparent, and decisions are politically 

influenced. The municipalities lack data on income, expenses, investment needs 

and quality of services. This greatly inhibits their chances of acquiring external capital 

funding for investment projects. 

The water utilities in all SEE countries face similar problems, with varying degrees 

of severity. These problems lead to low levels of operating-cost recovery — 

that is, the ratio of tariff revenues to operating costs. Furthermore, water and wastewater 

tariffs are not set at a level sufficient for cost recovery and there is a large proportion 

of unpaid bills, which does not allow the utilities to invest in the repair, let 

alone the expansion, of their infrastructure. 

There is a high level of fragmentation of utilities throughout the region. Kosovo 

(as defined under UNSCR 1244) recently carried out the regionalisation of its 

water utilities. Officially, seven regional utilities, responsible for both water and 

waste, were established in 2007. However, the Kosovo Trust Agency (KTA) that 

managed the process ceased to exist in 2008, and the regional utilities have still not 

become operational. It is still not clear who owns the regional utilities, thus in practice 

the municipal utilities are still operating on their own. In Albania, there are 54 

municipal water utilities and one regional water utility. 



Kosovo 

(under 

UNSCR 1244) 



124 



FIGURE 11: Unaccounted-for water (UfW) in SEE countries 

% 

80 

70 

60 

50 

40 

30 

20 

10 

0 



Herzegovina 


no data no data 

Croatia FYR 

Macedonia 

Kosovo 

(under 

UNSCR 1244) 


Individual utilities have a very limited impact on the development of the policy 

and regulatory framework, although they function within it and all aspects of 

their management and operations are directly dependent on it. A good policy and 

regulatory framework in the water and wastewater sectors is therefore essential in 

order to reform and to improve the performance of the water utilities. In addition, 

a robust institutional system for the regulation of the sector is of the utmost importance 

for enforcement and compliance with the policy framework. 

Figure 11 shows very high unaccounted-for water (Uf W), while Figure 12 indicates 

very low water invoice collection rates, especially in Kosovo (as defined 

under UNSCR 1244) and the former Yugoslav Republic of Macedonia. 

The water infrastructure investment programmes of IFIs such as the European 

Bank for Reconstruction and Development (EBRD), the World Bank and the German 

bank Kreditanstalt fur Wiederaufbau (Kf W) are often accompanied by a demand 

for institutional reform aimed at reducing operational and financial risk by 

improving transparency and accountability, but also by improving technical operations, 

service quality and organisational efficiency (see the example from the former 

Yugoslav Republic of Macedonia described below). In most cases, such 

demands are accompanied by an offer of technical assistance.

FIGURE 12: Water invoice collection rates (percentage) 

% 

80 

70 

60 

50 

40 

30 

20 

10 

0 


Herzegovina 


Montenegro Serbia Kosovo 

(under 

UNSCR 1244) 

According to the two-year water sector reform implementation plan, Albania 

had 56 municipal utility companies in 2008. Since then, two municipal companies 

(Berat and Kucova) have merged into a regional company (Berat region), 

which means that there are currently 55 municipal utilities and one regional water 

utility. By the end of the water reform process, there will be 12 regional water utility 

companies (Gjinali and Olldashi, 2008). According to the World Bank survey, 

tariff revenues in Albania cover on average less than half of the operating costs, the 

remaining costs being covered by subsidies. This prompted the launch of a comprehensive 

reform in 2007. In addition to decentralisation followed by regionalisation, 

the aim of the reform was to further commercialise the water supply and 

sewerage system and to make companies self-sustaining based on long-term plans 

to improve performance indicators and fulfil obligations towards customers. 

Albanian water utilities have 13 staff per 1,000 water supply connections on 

average. Only a handful of utilities have high enough tariffs to cover operating costs. 

The level of payment collection is 73 percent, which is the highest level reported 

among the SEE countries surveyed. Water disconnection is not allowed by law in 

Albania. Utilities receive an operating subsidy from the government, but the subsidy 

scheme is to be phased out by 2012 according to the water reform strategy. 



FYR 

Macedonia 

no data 

Croatia 


126 




The full transfer of the predetermined subsidy is conditional on improvements in 

performance, as measured by some of the indicators computed as part of the benchmarking 

programme: utilities need to reduce water losses, increase bill collection 

rates and reduce costs in order to be eligible for the whole of the subsidy. 

As a first step, during 2007 and 2008 the ownership of the utilities was completely 

transferred from the government to local authorities. The regionalisation of 

the currently fragmented water supply companies is a priority, as the government 

hopes that it will lead to lower service costs. The first case of regionalisation in Albania 

was the merger of the Berat and Kucova water companies, which was completed 

in 2008 with a EUR 6 million grant from the German Government directed 

to the (re)construction of the water supply infrastructure. 

The Albanian Government, with the support of the World Bank, provides 

benchmarking and technical assistance to the water and wastewater utilities of the 

country to prepare five-year operational plans. According to the two-year water 

sector reform plan, this practice has already been successfully adopted by five utilities, 

while the rest of the companies will follow (Gjinali and Olldashi, 2008). Based 

on the results of the benchmarking exercises, performance objectives are set for the 

companies, and the allocation of operating subsidies and investment grants from 

the government is partly based on progress made towards achieving these objectives. 

Furthermore, a training programme targeting the staff of 55 utilities is to be 

launched in Albania in 2009 (REC survey 2008; and Gjinali and Olldashi, 2008). 

In Bosnia and Herzegovina there is no national body regulating tariff setting. 

No reforms of the water utilities have taken place in either of the two entities, the 

Federation of Bosnia and Herzegovina (FBiH) and Republika Srpska (RS). Water 

laws at entity level were passed in 2006 and have been in force since January 2008. 

There are two water agencies in FBiH and two in RS. 

Water supply and wastewater services are highly fragmented and are the responsibility 

of 136 water utilities owned and controlled by municipalities. The current 

operational and financial condition of these utilities is generally weak. Bosnian 

water utilities have 13 staff per 1,000 water supply connections on average. 

The national average for Uf W is estimated at 50 percent. The estimated national 

average level of payment collection is 70 percent, and disconnection from the 

water supply is not allowed by law. The level of cost recovery varies among the utilities, 

but in most cases it is insufficient — that is, operating costs are not covered by 

revenues from tariffs. The government provides a total of about KM 30 million/year 

in operating subsidy to the water sector (REC survey, 2008; and UNDP, 2004). 

The process of transposition is ongoing and the water management strategies 

for FBiH and RS should be completed by the end of 2009. Some individual reform 

initiatives are outlined in the new legislation, such as the merging of public 

enterprises for catchments of the Sava River basin and the Adriatic Sea into agencies 

for the water area of the Sava River and Adriatic Sea. Private participation in 

the water sector is not yet developed, although the increasing of private sector capital 

is being considered (REC survey 2008; and UNDP, 2004). 

In Croatia, the overall responsibility for managing water is centralised under the 

governmental institution Croatian Waters. The water utilities are publicly owned in the

form of communal company, communal institution, or individual facility owned by 

the local government. Croatia has a long tradition of communal companies in the water 

sector, and any future reform should strive towards lowering their number and increasing 

their efficiency. No systematic reform of the water utilities has yet taken place. 

However, the consolidation of water utilities is envisaged in the Water Management 

Strategy in the period until 2015. In many cases the price of services does not reflect the 

real operational costs. However, full recovery of operating costs is achieved in most 

medium-sized and large towns. However, in most cases depreciation cannot be covered 

from tariff revenues. Water and wastewater services in many municipal companies, 

especially smaller ones, are cross-financed by other activities (REC survey 2008). 

To date, there have been reforms only at individual utility level. Inadequate tariff 

setting leads to a situation in which systems are not well maintained; facilities are 

old and depreciated, with some not functioning; interventions take place only at 

critical points; and big water losses exist. However, in the authors’ opinion the technical 

performance of the utilities in Croatia is better than average in the region 

(REC survey, 2008). 

According to the Law on Local Self-Government, municipalities in Kosovo 

(as defined under UNSCR 1244) are responsible for providing water (and/or 

waste) services. This responsibility is to be implemented through a service agreement 

signed by the municipality and the relevant regional water (or waste) company 

that provides services in the municipality. 

The water and waste sectors recently underwent a process of consolidation (restructuring) 

under the supervision of the Kosovo Trust Agency (KTA), whereby 

municipal water and waste enterprises have been merged into seven regional water 

and wastewater companies and seven regional waste collection companies. Municipal 

enterprises located in areas with Serbian majorities did not participate in 

this process and remain unconsolidated. 

Another aspect of the reform was the establishment of a legal framework for the 

economic regulation of the water and solid waste service providers in November 

2004 (under UNMIK Regulation 2004/49). As a result, the Water and Waste Regulatory 

Office of Kosovo (WWRO) was established in 2004. 

A third step of the reform was the incorporation of the public water and waste 

companies. This phase was finalised in 2007 by transforming water and waste regionalised 

companies into joint stock companies with a clearly defined legal and financial 

identity, governed according to the principles of corporate governance. The 

ownership of these enterprises is regulated by the Law on Publicly Owned Enterprises 

(adopted on June 13, 2008). The privatisation was undertaken via spin-off 

and liquidation, and investors were invited to buy through open competitive tenders 

(WWRO, 2009). 

The KTA, which previously administrated the regional water companies, 

ceased operations in June 2008, since which time the ownership of the public utility 

companies has not been defined. The Privatisation Agency of Kosovo (PAK) 

has been established as the successor to the KTA. 

According to the Water Supply Tariff Policy, the WWRO is responsible for tariff 

setting and “collects performance data from the water companies, computes in- 




128 




dicators using these data”, and sets “targets, the fulfilment of which is annually monitored” 

(WWRO, 2009). Thus far, the WWRO has carried out two tariff-setting 

processes for one-year tariffs (2006/2007 and 2007/2008), although there are plans 

to set tariffs for a period of three years. 

During 2008, a positive trend could be observed in the performance of the 

seven regional water companies (WWRO, 2009). However, two critical problems 

stand out: the low rate of payment collection, at 57 percent 12 (World Bank, 2006); 

and the lack of cost recovery for operations. Operating costs are barely covered by 

revenues, which makes the budget situation in the water utilities very tight. The 

new tariffs designed by the WWRO and the above-mentioned WWRO project 

for the performance monitoring of water companies are improving the situation. 

However, for capital investments, grants and affordable loans are needed. Estimated 

Uf W is 59 percent; the bill collection rate is estimated at 43 percent; and there are 

on average seven staff per 1,000 connections. 

Service providers are only just meeting their direct operation costs and there is 

no capacity for the financing of capital investments, including capital maintenance. 

In order to achieve compliance with EU standards and to satisfy the current supply 

and demand imbalance, cash revenue has to increase considerably, either by increasing 

collection efficiency or by raising tariffs, or by a combination of the two 

(REC survey, 2008). 

Currently most water PUCs in the former Yugoslav Republic of Macedonia 

are poorly organised and suffer from poor operational capacities. Tariffs are generally 

too low, resulting in insufficient resources for capital maintenance let alone infrastructure 

investment. Low tariffs, combined with the lack of will to reform PUCs, 

result in insufficient capacity to implement EU-compliant wastewater treatment. 

According to the 2008 REC survey, the national average Uf W is up to 60 percent. 

A survey by the World Bank (2006) estimates the national average payment 

collection rate at between 50 and 60 percent, while in urban areas it averages 75 

percent. Households seem better at bill payment than industrial customers. The 

collection of payments has improved recently, due to more stringent efforts such as 

warnings to non-paying customers, court procedures, and, in some cases, disconnection 

from the network. 

According to the current rules, the municipality nominates two-thirds of the 

members of the PUC management board, as well as the director. Such a structure 

can lead to heavy political interference in the day-to-day management of the municipal 

enterprise. Tariff setting is guided more by political ambition than financial 

rationale and the desire for financial sustainability. Operating costs are therefore 

rarely covered by tariff revenues. 

Several projects supported by IFIs and bilateral donors are preparing the country 

for reforms in the water sector. The government strategies outline specific tasks 

for the water service. A minimum service standard will be established for calculating 

the costs of services, raising the level of grants and developing an effective fiscal 

equalisation. As mentioned above, Kf W introduced a benchmarking approach 

before funding water supply projects in utilities. Within this programme, Kf W 

also introduced a quality management approach with help from an institutional

strengthening consultant who will assist these municipalities in meeting the benchmarks 

in the first phase. The programme covers the municipalities of Gostivar, 

Tetovo, Kavadarci, Negotino, Bitola, Kocani, Gevgelija and Radovis. 

In Montenegro, local governments form water supply and wastewater public 

utility companies, while the assets remain in the hands of the central government. 

The municipalities are responsible for the provision of services, and the government 

is responsible for capital investments. Public enterprises are legally independent entities: 

in practice they have limited autonomy and no control over crucial aspects of 

their business, such as tariffs, staff hiring and firing, and investments. The PUCs are 

controlled by (in order of importance): 1) a board of directors; 2) the corresponding 

department of the municipality; 3) the deputy mayor; and 4) the tax department of 

the Ministry of Finance (normal annual financial control). 

The proportion of illegal connections is estimated at about 6.5 percent in Montenegro, 

and the estimated national average level of payment collection is between 

60 and 75 percent. The water utilities in Montenegro have between eight and 12 

employees per 1,000 water supply connections. Operating costs are not usually covered 

by revenues from tariffs, thus government and municipal subsidies make up the 

balance. The tariffs are set by municipalities, which means that tariff setting is influenced 

by local political issues. In general, tariffs cover only operation and basic 

maintenance. There is only one example of public-private partnership, in the water 

PUC of the municipality of Budva (REC survey, 2008). 

The Government of Montenegro regards water supply and sewerage services 

as essential to economic growth, especially in relation to the country’s tourism industry. 

It is recognised that the water sector should improve its efficiency, cost-effectiveness 

and performance. The government therefore intends to decentralise 

infrastructure ownership and then to support municipal utilities to merge into regional 

utilities (WURP WG, 2007). 

According to the water utility reform plan adopted in July 2007, assets and 

ownership should be transferred to the local government, which will be fully responsible 

for compliance with all laws and regulations related to service standards, 

tariff rates and pricing, and the collection, treatment and disposal of municipal 

sewage. The Ministry of Spatial Planning and Environmental Protection is identifying 

interested donor organisations to support the further implementation of the 

water utility reform plan. 

Current institutional and financing efforts are focused on the coastal region, 

where municipal water supply and sewerage infrastructure is being upgraded. The 

joint service and coordination company VODACOM has been established for the 

Tivat region. The government’s water utility reform plan proposes the introduction 

of grants that would be available to fund part of the costs associated with the merger 

of utilities, including legal costs and costs related to labour restructuring. A condition 

for obtaining these funds is that utilities prepare substantial strategic reform 

plans (REC survey, 2008). 

In Serbia, PUCs are owned by the municipalities and each town and municipality 

has its own water utility. Most PUCs are not separated by sector(waste/water/ 

green spaces) and the accounting lacks transparency. It is therefore hard to separate 




130 




revenues from different sectors and different services, let alone relate costs to tariffs. 

The level of bill collection is 60 percent. Disconnection due to non-payment of 

bills is allowed by law but it is almost never applied in the case of households. 

Service revenues are not sufficient to cover operational costs. Cross-financing 

between these sectors and subsidising from the municipality are commonplace (Dax, 

2008). Tariffs are set at municipality level, usually by a political decision that is sensitive 

to popular voting. It is recognised that tariffs in municipal PUCs are too low 

and that this is a major problem. At present there are no utilities in private ownership 

and, according to the applicable laws, the assets of PUCs cannot be privatised. 

Public-private partnerships are possible according to the legislation, but as yet 

there is no practice in place, nor is it expected in the near future. The Serbian Government 

is considering future privatisation in the water sector, although it is not yet 

defined in any strategy, policy or plan. Government preparations for a reform of the 

PUCs are at an early stage. A reform strategy that may include privatisation options 

is currently being drafted within the Ministry of Finance (REC survey, 2008). 

Status of utilities and status 

of reforms in the waste sector 

In some SEE countries, where a waste utility, either public or private, serves several 

settlements (e.g. a town and the surrounding settlements, or sometimes a whole region), 

a uniform tariff is set for the whole service area even though the cost of serving 

the individual settlements differs. Such practices inevitably translate into cross-financing 

between service users. Several countries have started the reform process, which 

includes sector separation and geographical regionalisation, but only Croatia has made 

actual progress. In terms of current waste tariffs, charges are not based on the weight 

or volume of waste produced but on household surface area. This, combined with a 

lack of enforcement of rules against illegal dumping, does not encourage waste prevention, 

reuse or recycling as mandated by EU legislation. Also, there is a marked difference 

between the charges levied on commercial enterprises and industry compared 

to household charges: the higher charges for enterprises represent another form of 

cross-subsidisation. The justification often given by municipal authorities in response 

to both these issues, but especially with respect to cross-financing, is that this approach 

to setting tariffs has been inherited from the earlier system. Nevertheless, the true reasons 

are partly social and partly political: policy makers are more willing to charge enterprises, 

as they are perceived as being able to afford higher prices than households and 

as being less able to effect change in terms of voting numbers. 

From an institutional point of view, municipal solid waste (MSW) management 

is even more demanding than water and wastewater management: based on good international 

practice it has been shown that it is more economically viable to organise 

waste management systems over larger territories covering a bigger number of inhabitants. 

This is because modern landfills are expensive facilities and a minimum volume 

of waste is needed to justify their construction. At the same time, in the SEE 

region there is no tradition of municipalities jointly solving their MSW problems by

TABLE 15: Tariffs for municipal solid waste in SEE 

establishing inter-municipal bodies. This is and will remain a big challenge to MSW 

management in the near future, since sound and responsible financial management 

that meets recognised international standards will be a prerequisite for any technical 

improvements in infrastructure. Instruments and mechanisms will have to be put in 

place that allow for lasting cooperation between municipalities, since EU-compliant 

landfills are only viable for regional systems that apply economies of scale. 

In the SEE region as a whole, current tariffs and fee collection efficiency often 

fall short of full cost recovery for the service provided, especially in regions with 

very low income levels. It is common practice for the missing amount to be covered 

by general municipal budgetary allocations. 

The availability of waste monitoring data in Albania is low and there is a lack of 

appropriate waste statistics. Waste management services, although incomplete, exist 

in urban areas (covering 80 to 90 percent), while only 10 to 20 percent of rural areas 

are covered by waste management schemes. There is no systematic approach in the 

waste sector, and each municipal waste management scheme is organised in a different 

way, ranging from purely public enterprises to different PPP arrangements. 



COUNTRY HOUSEHOLDS OTHER USERS REMARKS 

Albania Flat annual rate: Flat annual rate: Rates set by 

EUR 13 to 33/year EUR 45 to 1,350/year local authorities 

Bosnia and Mostly monthly rates based on Varies significantly based on Rates set by local authorities; 

Herzegovina surface area of residential region/municipality and type collected by service providers 

premises: EUR 0.05 to 0.4/m2 of industry 

Croatia Monthly rate based on surface Monthly rate based on surface Rates set by local authorities; 

area of residential premises: area of commercial premises: collected by service providers 

EUR 0.05 to 0.11/m2 EUR 0.14 to 0.2/m2 Kosovo (under Flat monthly rate: EUR 3.5 Flat monthly rate based on 

UNSCR 1244) /household source of waste 

FYR Macedonia Monthly rate based on (1) Monthly rate based on (1) Rates set by local authorities; 

surface area of premises: surface area of premises: collected by service providers 

EUR 0.01 to 0.05/m2 ; or (2) EUR 0.02 to 0.08/m2 ; or 

flat rate: EUR 1.5 to 5.0/house (2) flat rate: EUR 1.7 to 7.5/user 

Montenegro* Mostly monthly rates based on Mostly monthly rates based on Rates set by local authorities; 

surface area of premises: surface area of premises, but collected by service providers 

EUR 0.03/m2 adjusted according to amount 

of waste generated 

Serbia† Mostly monthly rates based Mostly monthly rates based Rates set by local authorities; 

on surface area of premises: on surface area of premises: collected by service providers 

EUR 0.04/m2 EUR 0.12/m2 Source: REC survey, 2009 

* Household tariffs in Podgorica are given for indicative purposes 

† MSW management tariffs for Belgrade are given for indicative purposes 


132 



FIGURE 13: Waste tariff collection rates in SEE countries (percentages) 

% 

100 

90 

80 

70 

60 

50 

40 

30 

20 

10 

0 

Albania 

(businesses) 


Montenegro 

(businesses) 



Herzegovina 

(overall) 

Albania 

(household) 

Montenegro 

(household) 

Kosovo (under 

UNSCR 1244) 

(overall) 

FYR Macedonia 

(rural) 

FYR Macedonia 

(urban) 

no data no data 

In urban areas the municipalities determine the waste management fees, which 

currently vary between EUR 8 and 18 per household per year. Such fees can only 

cover collection and transportation, but not the proper treatment and final disposal 

of waste. In most cities and towns, waste collection and transportation services 

are subcontracted by the municipality to private companies. 

The responsibility for environmental policy at the national level belongs to the 

Ministry of Environment, Forestry and Water Administration (MoEFWA) and 

the Ministry of Public Works, Transport and Telecommunications (MoPWTT). 

Both ministries are in charge of developing strategies, drafting laws and setting 

basic tariffs in the waste sector. Some progress has been achieved in updating waste 

management legislation, which defines the basic responsibilities at national and 

local level, but the relevant strategies, policies and plans are not yet in place. However, 

there are several regional plans related to internationally funded regional landfill 

projects, as described below. 

According to the existing legislation, the municipalities and regions are responsible 

for municipal waste management (collection, transportation, treatment 

Croatia 

Serbia

and final disposal). They are also responsible for preparing local and regional 

plans on waste management; suggesting the appropriate location for landfills in 

their territory; and defining fees. 

The EU CARDS 2006 project “Implementation of the national plan for the approximation 

of environmental legislation” is expected to improve legislation and 

enable the effective control of solid waste management. A main component of the 

project is to develop the institutional capacity of the MoEFWA. The National 

Waste Management Plan and Strategy will be drafted approximately by the end of 

2010 after the Law on Waste Management has been adopted (planned by the end 

of 2009). There is a development project for Korca region, supported by Kf W in 

cooperation with Sida and the Albanian Government, to construct a regional sanitary 

landfill in the city of Maliq to serve the Korca region. The institutional framework 

for the project is also under development. Another example is the landfill 

being constructed in Bushat, where the landfill management body and collection 

system have already been established. 

Approximately 36 percent of Bosnia and Herzegovina is covered by municipal 

solid waste management services. The municipalities are responsible for organising 

waste management services in the form of municipal public utility companies. 

Bosnia and Herzegovina still lacks adequate legislation for solving the issue of waste 

management at state and entity level. Municipalities have attempted to compensate 

for this deficiency by enforcing local regulations on waste management. 

The 2003 National Environmental Action Plan (NEAP) proposes two options 

for an intermediate solution: regional landfills at 16 (entity option) or 14 (interentity 

option) locations, which would ultimately result in the long-term solution 

comprising six major regional landfills in Bosnia and Herzegovina, located in Banja 

Luka, Tuzla, Mostar, Bijeljina, Bihac and Livno. Since 2003, two sanitary regional 

landfills have been built in Banja Luka and Sarajevo. The 2008 IPA project 

“Strengthening of Bosnia and Herzegovina’s Environmental Institutions, Preparation 

for Pre-accession Funds and Support to Environmental Infrastructure Development” 

is providing technical assistance to environmental infrastructure 

investment project preparation (feasibility studies) for the regional landfills envisaged 

in Gorazde, Srednje Bosanski canton, Visoko, Ljubuski region, Prijedor, Derventa 

and Trebinje. This has been complemented by World Bank (IDA) loans for 

Sarajevo, Zenica, Tuzla, Bihac, Banja Luka and Bijeljina. Also, during the implementation 

of this project, 145 illegal dumpsites have been closed and remediated, 

and another 40 are due for closure. 

There are at present in Croatia mostly municipal public utility companies 

dealing with waste management, and three regional companies in the process of 

establishment. According to the National Waste Management Plan (NWMP) 

for the period 2007 to 2015, the 21 Croatian counties are obliged to prepare 

draft regional waste management plans. Counties are allowed to draft joint waste 

management plans and form joint regional waste management companies to operate 

the regional waste management centres (RWMCs). The final number of 

RWMCs will therefore be 21 or fewer. 




134 




At the local level, the current charges for the collection, transportation and disposal 

of municipal waste from households are based on living or commercial surface 

calculation (KN/sqm). The tariffs differ for households and commercial 

spaces. The higher tariffs for commercial spaces are intended to subsidise the low 

tariffs for households. However, revenues are insufficient and local authorities are 

often co-financing waste management operational costs from their budgets. The 

Waste Law prescribes the introduction of a charge calculation system based on 

quantities of produced waste (number of households, tonnes) in order to compute 

realistic charges for households and producers of municipal waste. The future 

RWMCs will be obliged to introduce such tariff calculation systems. 

Around 39 percent of municipal waste is collected in Kosovo (as defined 

under UNSCR 1244) (90 percent in urban areas, and less than 10 percent in rural 

areas) (WWRO, 2009). Hazardous waste, chemicals, industrial waste and medical 

waste streams are not properly managed. 

Similar to the situation in the water sector, the municipal waste companies have 

undergone a process of consolidation. Waste collection and transportation services 

are operated by seven regional public companies. The number and size of the 

regional waste companies mirrors the regions established for water and wastewater 

companies, without being based on the size of the population or similar criteria. 

During 2008, the trend showed that service performance by the regional waste 

companies declined compared to 2007. The negative changes were brought about 

by lower bill collection rates and lower revenues. 

The National Waste Management Strategy for 2010 to 2020 will be elaborated 

during 2009. One of the following two options is likely: (i) waste collection 

and transportation provided by regional companies owned by 

municipalities, and waste disposal services provided by a central company; or 

(ii) waste collection as well as waste disposal services provided by regional companies. 

To date, waste collection and transportation services are operated by 

seven regional public companies. The publicly owned Kosovo Landfill Management 

Company (KLMC) manages solid waste disposal. The Water and 

Waste Regulatory Office (WWRO) is the independent economic regulator for 

solid waste services, as well as for water. Its responsibilities include licensing 

public enterprises; setting and approving tariffs for regulated services; monitoring 

and enforcing compliance with service standards on the part of licensed 

service providers; and supporting customers in each of the seven service area regions. 

The municipal waste fee is EUR 3.5 per household, and the invoice collection 

rate is only around 30 percent. 

In the former Yugoslav Republic of Macedonia, there are only municipal 

waste management PUCs. A small proportion of waste collectors are private companies, 

typically those dealing with waste in rural areas. Regular waste collection 

services are mainly limited to urban areas. In total, around 70 percent of the total 

Macedonian population benefit from regular waste collection services (in rural 

settlements the proportion is around 10 percent). Waste disposal practices do not 

comply with any technical and/or environmental standards.

The National Solid Waste Management Strategy (2008), as well as the National 

Waste Management Plan (2005) and the revised version of this document 

contain specifications for the establishment of a regional solid waste management 

system (a maximum of eight regions, corresponding to the country’s statistical 

regions). Inter-municipal public enterprises will be established for the 

purposes of regionalising waste management in order to apply economies of scale 

and implement EU standards. Regional companies owning facilities that include 

landfills will be established, while individual communal enterprises will be responsible 

for fee collection and will pay the respective regional waste management 

centre a fee per tonne of landfilled waste. 

In Montenegro, municipal publicly owned waste management public utilities 

carry out the collection, transportation and disposal of waste. The National Waste 

Management Policy, the Strategic Waste Management Master Plan (SWMMP) for 

the regional level (2005 to 2014), and the National Waste Management Plan (2008 

to 2012) provide a basis for the necessary reform of the waste sector. 

According to the 2005 SWMMP, Montenegro is divided into eight waste collection 

areas. The future landfill network and transfer stations are based on suggested 

groupings and estimated amounts of waste. Each area in which waste is 

collected will be using one inter-municipal landfill constructed according to the 

requirements of the EU Waste Landfill Directive. 

Within the newly established Ministry of Spatial Planning and Environmental 

Protection (MSPEP, formerly the Ministry of Tourism and Environment) a project 

implementation unit was established in 2008. Its main goal is to provide support 

to local self-governments in the preparation of project documentation, and 

to assist in securing financing from international organisations and IFIs. It will also 

assist in the formation of eight regional waste management public utility companies. 

According to the Strategic Waste Management Master Plan, the territory of 

Montenegro is divided into eight waste management regions: Bar, Berane, Kotor, 

Herceg Novi, Mojkovac, Niksic, Pljevlja and Podgorica. 

Currently in Serbia there are municipal publicly owned waste management utility 

companies that have been trying to attract private sector participation. In smaller 

municipalities, a single PUC covers the water and waste sectors and other communal 

services, often cross-subsidising between sectors. As mentioned in Chapter 2, 

the 2003 National Waste Management Strategy envisages 29 regional sanitary landfills, 

44 transfer stations, 17 recycling centres, seven composting facilities, and four 

incinerators. The updated Waste Management Strategy, currently being drafted, 

will probably increase the number of composting facilities required, in line with the 

waste management hierarchy set out in the EU Waste Framework Directive. 

Waste management regions will include three to nine municipalities with between 

90,000 and 550,000 inhabitants. There are two ongoing regional projects in 

which several municipalities will use the same landfill — in Duboko (Uzice region) 

and Muntina Padina (Pirot region). For these two locations there are ongoing 

negotiations and procedures for establishing a regional PUC/waste 

management centre, but neither of the two RWMCs has yet been established. 




136 




Other considerations 

in water and waste utility reform 

Affordability 

The affordability of water and waste tariffs (that is, the upper limit that can 

be charged for services) refers mainly to affordability on the part of households, 

enterprises and public institutions. Affordability thus implies that the amount 

spent by households for services should not be a major part of the household income 

— that is, it should by no means lead to households having to cut down 

on basic necessities such as food or heating. The World Bank envisages the establishment 

of an upper limit for household charges for water and waste management 

services at 4 percent and between 0.7 and 1.5 percent of household 

disposable income respectively. When designing a tariff policy, it is therefore 

essential to carry out an analysis in order to obtain an overview of the average 

household income, as well as the composition and distribution of that income, 

based on which a decision can be made as to whether there is a problem of affordability 

that needs to be addressed. 

It is also important for project developers to recognise when affordability limits 

will constrain the scale of a proposed capital investment. If adequate tariffs cannot 

be imposed on the users of infrastructure, to cover at least the cost of operation 

and maintenance, then project proponents (and the experts who prepare the investments) 

may need to consider alternative solutions. This is a complex issue for 

local governments and often leads to delays. 

Willingness to pay 

Willingness to pay refers to the “expected” charge that service users are ready to 

pay for a given service, or for a given change in service level. The term describes 

beneficiaries’ perceptions and preferences correlated to the level, quality and price 

of the service, or changes to them. In assessing the potential effect of a tariff increase 

subsequent to investments and service improvements, willingness to pay by 

and large reflects the likely level of increase in payments that will not cause concern 

to users or affect their readiness to pay for the improved service. 

Willingness to pay for waste management services is influenced by a considerable 

number of factors: 

• current service level (scope) and quality; 

• history of changes, in particular to service quality, and past tariff increases; 

• fairness of charges; 

• affordability of tariffs; 

• transparency in tariff setting (i.e. public involvement in the decision-making 

process); 

• confidence in the service provider (public or private);

• importance of public health and other environmental issues; and 

• past experience with private sector involvement in the provision of public services, 

if the planned tariff increase is related to service improvement that involves 

a public-private partnership. 

Willingness to pay is commonly assessed and quantified by carrying out special 

surveys focusing on identifying service consumers’ behaviour. The recommended 

approach to determining willingness to pay for changes in water and waste 

management service levels is to use methods based on hypothetical behaviour, such 

as contingent valuation or stated preference technique (conjoint analysis). It is particularly 

important to disclose to service users the tariff-setting methods and the 

benefits of extending the service area, improving service efficiency (e.g. reducing 

losses in water supply networks by their rehabilitation), and counteracting health 

risks (e.g. by constructing wastewater treatment plants and/or sanitary landfills). 

Campaigns can therefore be a catalyst towards increasing willingness to pay for improved 

services. Assessments of willingness to pay can be an important tool for 

those preparing investments in order to demonstrate the credibility of investments 

where current bill collection rates are low (as in most SEE countries) but where 

service providers wish to upgrade the entire system. 

Regionalisation 

Maximising the efficiency of environmental investments generally requires cooperation 

between small and medium-sized municipalities in the sharing of infrastructure 

and service systems. This is particularly necessary in the waste management sector 

and can enable municipalities greatly to improve the affordability of their planned investment 

projects. Regional water management facilities, and central wastewater treatment 

plants in particular, require less investment capital and have lower operation and 

maintenance costs. Such cooperation is also a requirement for accessing certain grant 

funds, particularly those from the EU. This is an obstacle for many local governments, 

which tend to be highly politicised and wary of cooperation with outside institutions. 

It also requires sophisticated planning and cooperation experience and skills, which 

local governments lack. Failure to cooperate and/or surrender competencies to regional 

institutions is a major bottleneck to proper investment planning. 

In order to overcome insufficient funding and inadequate logistics in the 

process of planning and implementing waste management projects in smaller municipalities, 

regionalisation allows for the pooling of resources and the application 

of economies of scale. 

Regionalisation requires an appropriate institutional form in order to bring 

those who intend to use the regional facilities under one umbrella. Within a region, 

it is vital to establish an organisational structure that will facilitate cooperation 

and the development of regional infrastructure. In particular, 

mechanisms must be identified that will enable the necessary shared capital expenditure 

and the shared recovery of capital and operating costs. The main challenge 

is to bring tariffs, operational costs, available waste collection equipment 




138 




and the daily routine of enterprises within a sound integrated system functioning 

under universal conditions over the entire area. Institutional models of regionalisation 

may take the following forms: 

• Municipalities retain their own service company. 

• One company is responsible for the entire collection system. 

• Municipalities remain responsible for internal collection systems within settlements, 

while haulage between settlements and the landfill is carried out by a 

different service company (linked to the central landfill). 

• A combination of the above. 

Associations of municipalities 

One way to ensure economy of scale is to create associations of municipalities 

developing regional solutions. Such efforts are severely hindered by issues of joint 

property ownership, expense sharing, and other costs that are unrecoverable from 

co-owners. Regional experience suggests that joint service associations require specialised, 

complex legislation, since municipalities give up fundamental rights, such 

as tariff setting and property ownership. 

Lack of proper incentives for necessary inter-municipal cooperation 

Achieving economies of scale is a burning issue, especially in the area of solid 

waste management. The setting up of a municipal solid waste management system 

in compliance with EU directives and standards — including the construction 

of new, modern facilities as well as the organisation of the service itself — 

is prohibitively expensive for most SEE municipalities. The environmental standards 

that modern landfills are obliged to meet, including the provision of plastic 

linings, drainage networks, monitoring wells, leachate treatment facilities and 

landfill gas management systems, as well as other indivisible elements such as 

compactor vehicles, fencing, weighing stations, permanent guards etc., make 

small, local landfills unfeasible. The costs can only be commercially justified and 

borne by a large number of users. It is therefore the environmental standards and 

technology costs that trigger economies of scale and the regionalisation of SWM 

systems, unless one municipality is large enough to economically justify a solid 

waste management system with individual state-of-the-art disposal, which is usually 

the case in capital cities. Apart from technical improvements to the MSW 

management system, there are certain policy, legislative, economic, financial and 

institutional prerequisites (REC, 2009b). 

Private sector participation 

The present publication does not have an ideological basis and does not advocate 

stronger or weaker private sector participation (PSP). Private sector participation 

is only one of the options for providing greater financing and better 

management for the utilities and it is inevitably accompanied by certain risks that

must be taken into consideration. Below we provide a brief overview of the situation 

with respect to PSP in the region, and of the main forms of PSP. 

Water 

In SEE the private sector has not traditionally been involved in providing water 

supply and wastewater treatment services. In a context in which water utility efficiency 

is low and the quality of service unsatisfactory, there will be stronger pressure 

on governments and municipalities to undertake serious reforms. Attracting 

private sector participation in running the utilities is only one of the possible solutions 

for increasing efficiency and improving cost recovery. Other benefits come 

in the form of improved management, better value for consumers and easier access 

to capital. Private sector participation in the region is almost absent, with a few 

rare exceptions. 

In Albania there have been several cases of private sector participation in water 

utilities: 

• Management contract financed through World Bank credit for four cities: Durres, 

Lezhe, Fier and Saranda. This contract expired in July 2008. 

• Management contract financed through Kf W for Kavaja. This contract expired 

in May 2008. 

• Concession contract financed through Kf W for Elbasan. This contract was 

suspended in December 2006. 

In Bosnia and Herzegovina, Montenegro and Serbia there has not yet been any 

involvement of the private sector in the water utilities. 

Main forms of private sector participation 

As shown in Table 16, there are six main forms of private sector participation 

in water utilities, with varying degrees of private participation in the ownership of 

the physical assets (e.g. pipes); participation in operation and maintenance; capital 

investments such as pipe replacement; the distribution of commercial risk; and 

the duration of the contract. 

Pros and cons of involving the private sector in the water utilities 

Involving private-sector participation in water utilities may not be a solution 

in itself. Benefits and drawbacks have to be carefully considered. Table 17 presents 

some generic arguments for and against the private sector, which must be taken 

into consideration when planning reforms. 

The advantages of PSP are potentially greater in SEE, since there is a bigger discrepancy 

between the experience of international water utility operators and that 

of local operators. Better access to capital is another strong argument for PSP in developing 

countries. However, municipal and state decision makers are more reluctant 

to embrace PSP, mainly due to concerns about affordability and the desire to 

harvest some of the efficiency gains locally. 




140 



BOX 18: Build-operate-transfer agreement for Zagreb wastewater treatment plant 

In Croatia, the city of Zagreb has a build-operate-transfer (BOT) contract for its wastewater treatment plant. The BOT 

contract is for 28 years. The project also includes the construction of supporting infrastructure. 

A special-purpose company — Zagrebacke Otpadne Vode d.o.o. — was set up for the project. The company is owned 

by a sponsor consortium comprising RWE AQUA GmbH (owned indirectly by RWE AG) and SHWHolter- 

Wassertechnik GmbH (a fully owned subsidiary of Berlinwasser Holding Aktiengesellschaft). 

The EBRD provided around EUR 55 million out of the total cost of EUR 270 million. 

Co-financing of EUR 115 million was provided by the German bank Kreditanstalt fur Wiederaufbau (KfW). By lending 

directly to the concessionaire, the EBRD is allowing the city to use its own credit capacity for other important projects. 

The city will control the private company through a long-term concession contract, which sets out the discharge standards 

with which wastewater must comply. The project is an example of how public-private partnerships work. 

The private consortium agreed to build the plant in line with EU environmental standards, to operate it, and to transfer 

it at the end of the concession period to the city of Zagreb. The city assumes risk in terms of the volume of water 

used and risk regarding the collection of the wastewater tariff. 

This allocation of risk ensures that the private operator constructs the plant and operates it efficiently in order to comply 

with EU environmental standards, while the city has the incentive to collect tariffs to pay a fee to the operator. 

(EBRD website). 


Implementation of PSP options 

Private sector involvement in water utilities is dependent on several conditions. 

The higher the level of PSP, the greater its dependency on each of these conditions. 

Waste 

Although, as in the water sector, there are a number of alternatives for PSP in the 

waste sector, based on international experience only contracting and concession are 

suitable in the field of solid waste management services. Contracting is usually suitable 

for collection activities and will usually have a duration of between three and five 

years. Under certain circumstances — for example if big investments are required — 

this may be extended to seven years. A concession is appropriate if investments in 

buildings (i.e. transfer stations) or facilities (i.e. a landfill) are envisaged. The relatively 

long depreciation period for these investments requires a longer-term agreement 

(15 years or longer). In addition, attention must be paid to conditions for the 

handing over of assets after the concession ends. There are several examples in SEE 

of private companies providing collection and transportation services. 

Potential risks of PSP 

There are a number of potential benefits when introducing PSP, including better 

access to capital, greater efficiency etc. Nevertheless, potential risks are also present. 

When considering PSP, a municipality should assess both benefits and risks 

before making a final decision.

TABLE 16: Main options for private sector participation and the allocation of responsibilities 



OPTIONS SERVICE MANAGEMENT LEASE BOT CONCESSION DIVESTITURE 

CONTRACT CONTRACT 

Asset Public Public Public Public and Public Public or 

ownership private private and 

public 

Operations and Public and Private Private Private Private Private 

maintenance private 

Capital 

investment 

Private Public Public Public Private Private 

Commercial 

risk 

Tariff collection 

Public Public Shared Private Private Private 

risk Public/private Public/private Private Public Private Private 

Construction 

risk 

None None None/low High Low Very low 

Duration 1-2 years 3-5 years 8-15 years 20-30 years 25-30 years Indefinite 

(may be limited 

by licence) 

Source: A combination of tables from World Bank Toolkit for Private Participation in Water and Sanitation (adjusted). 

TABLE 17: Pros and cons of PSP in water utilities 

PROS CONS 

Increased technical, operational and managerial 

performance 

Profit orientation outweighs efficiency gains 

• Possibility for (full) cost recovery Negative impact on tariffs and affordability 

• Improved access to capital 

Increased operating efficiency Staff reduction negatively affects employees, their families and 

the community 

Reduced political influence Government/municipal concerns about loss of control and 

power 

The presence of independent, profit-motivated private Water management should be a public service per se, as water 

providers influences government policy towards water 

services and the way it is enforced 

is a basic human need 

Source: REC, 2009a 


142 



TABLE 18: Conditions for the successful implementation of private sector options 

CONDITION SERVICE MANAGEMENT LEASE BOT CONCESSION DIVESTITURE 

CONTRACT CONTRACT (BULK) (RETAIL) 

Stakeholder Unimportant Low to moderate Moderate to high Moderate to high High levels High levels 

support and 

political 

commitment 

levels needed levels needed levels needed needed needed 

Cost-recovering Not necessary Preferred but Necessary Preferred Necessary Necessary 

tariffs in the short not necessary 

term in the short term 

Autonomy of 

the utility 

Unimportant Important Very important Unimportant Very important Very important 

Good system Possible to Sufficient Good Good Good Good 

information proceed with information information information information information 

only limited required to required required required required 

information set incentives 

Developed Minimal Minimal Strong capacity Strong capacity Strong Strong 

regulatory monitoring monitoring for regulation for regulation regulatory regulatory 

framework capacity needed capacity needed and coordination and coordination capacity capacity 

needed needed needed 

Good country Not necessary Not necessary Not necessary Higher rating Higher rating Higher rating 

credit rating (limited will reduce will reduce will reduce 

relevance) costs costs costs 

Source: Toolkit for Private Participation in Water and Sanitation, World Bank, 2000 (adjusted) 


Risks: 

• The lack of an adequate waste fee collection structure may result in insufficient 

financial means to conclude a contract. 

• Local politicians should accept a certain level of independence on the part of 

solid waste management services: ongoing influence over collection activities is 

no longer possible. 

• If an insufficient number of private companies are interested, the competition 

may not be optimal, resulting in a less than optimum price/quality ratio. 

• If the municipal organisation is not developed — due, for example, to various 

changes in the number of municipalities in the past — the control function of 

the municipality may be insufficient. 

• Poor-quality tender documentation may result in the need for additional 

arrangements. The private company that already has a contract may misuse its 

position and impose unfavourable conditions for the additional services.


• As a result of the decentralisation process, responsibility for water services, solid 

waste services and sewage treatment falls on the lowest self-governing municipal 

level. 

• Water and waste utilities in SEE suffer from various inherited problems, including 

low tariffs and bill payment rates; overstaffing; and the absence of 

sound organisation and management. These problems make full cost recovery 

difficult to achieve. In addition, there is a high level of fragmentation among 

utilities throughout the region. 

• No significant efforts have been made to reorganise public utilities into more 

efficient organisations working according to sound economic principles. The 

political independence of the utilities, their adequate human resources capacity, 

efficient organisational set-up and financial health are preconditions for 

successful investments. 

• European practice has shown that in order to optimise the efficiency of municipal 

solid waste management, cooperation among municipalities and the 

sharing of infrastructure and service systems are essential. 




144 


Chapter 7 

Financing environmental 

infrastructure investments 


146 


Introduction 

The financing of environmental infrastructure investments in SEE comes from 

several clearly identifiable sources: 

• the state budget; 

• municipal budgets; 

• extra-budgetary funds; 

• grants from the European Union; 

• grants from bilateral donors; 

• loans from IFIs; 

• loans from other commercial banks; and 

• own funds of a municipal, county or publicly owned company or utility. 

The authors are of the opinion that there is a place for all these sources of financing 

and that national governments should have a clear strategy regarding which 

sources to use for which types of projects and investments. 

It should be emphasised that there are difficulties and obstacles in relation 

to the different sources of financing, which can be overcome by employing 

a differentiated approach. 

Domestic sources of finance 

Public (state, county, municipal etc.) budgets play an essential role in financing the 

rehabilitation of and capital investments in environmental infrastructure. Although 

in most cases they are insufficient to meet environmental investment needs they reflect 

two important things: the nominal size of the national and municipal budgets; 

and, more importantly, the priority (in terms of the percentage of the total budget) 

that the country attaches to environmental investment. While GDP and consequent 

budget growth are a slow process dependent on many factors, budgetary allocations 

for the environment are entirely an issue of priority and can be influenced. 

National budgetary funds are also of huge importance for providing national 

co-financing for projects in which a large share is financed from EU or bilateral 

grants and/or IFIs. Other sources of co-financing are loans to government; local 

budgetary funds; loans to municipalities; loans to utility companies; the private sector 

(as part of a public-private partnership arrangement); and carbon financing. 

In principle, local government activity is financed through the income collected 

from local taxes, fees, other sources of local income (e.g. rent or sale of local properties, 

interest, fines, subsidies, and grants/donations), and funds transferred from the 

central budget, as well as their own share of national taxes. Municipalities can also borrow 

funds for local public purposes, according to the criteria set by special laws. 

The coordination of environmental financing flows at national level is of primary 

importance to ensure complementarity in the financing of environmental in- 


148 


F I N A N C I N G E N V I R O N M E N TA L I N F R A S T R U C T U R E I N V E S T M E N T S 

FIGURE 14: Proportion of environmental expenditure as percentage of GDP (2004–2005) 

% 

1.2 

1.0 

0.8 

0.6 

0.4 

0.2 

0 

FYR 

Macedonia 

Albania 



Herzegovina 

2004 2005 

Serbia 

Source: Eurostat, government budgets 

Kosovo (under 

UNSCR 1244) 

Croatia 

Latvia 

Estonia 

Romania 

Slovakia 

Bulgaria 

frastructure and to stimulate cooperation among the relevant ministries. Such coordination 

is required in relation to the generation of revenue for environmental 

improvements and the creation of effective disbursement mechanisms for the financial 

resources accumulated. These mechanisms are required to have clearly defined 

long-term objectives, transparent project selection procedures, and developed 

project implementation and monitoring schemes (EC COM [2001] 304). 

Most countries are not able to coordinate their respective donors, as coordination 

depends to a large extent on the donors themselves and, in most cases, is not 

carried out on a regular basis. 

In 2001, it was estimated that, on average, candidate countries needed to increase 

their environmental expenditure by 2 to 3 percent of their GDP in order to 

achieve compliance with the requirements of the EU environmental acquis. It can 

be assumed that the figure would be the same for the current candidate countries 

and potential candidates (EC COM [2001] 304). 

As can be seen from Figure 14, the majority of SEE countries are slowly increasing 

the proportion of their environment-related expenditures and approach- 

Poland 

Austria 

Hungary 

Italy 

Slovenia 

Denmark

ing the levels of expenditure in the new member states. However, old member states 

still allocate a far bigger share for the environment. Even Serbia, Kosovo (as defined 

under UNSCR 1244) and Croatia — the biggest investors in environmental 

protection in the region — directed less than 0.04 percent of their national 

GDP for this purpose in 2004–2005. 

Domestic financing of environmental 

infrastructure projects in SEE 

There is a funding gap in Albania with respect to environmental projects 

due to the low level of domestic funds. Legislation passed in 2002 introduced 

the possibility of generating income through environmental taxes, tariffs and 

charges. Environmental investment projects are almost fully financed with assistance 

from bilateral donors and IFIs. However, the Ministry of Public Works, 

Transport and Telecommunications (MoPWTT) has elaborated a mid-term financial 

plan for investments in the area of water and waste infrastructure, and 

manages a capital investment programme that contributes to the development 

of communal environmental infrastructure (ADA, 2008a). The programme envisages, 

for the year 2011, the construction of four regional landfills and the closure 

of five existing dumpsites in five regions. State budget allocations for the 

waste sector for 2009 are EUR 2.3 million; for 2010 EUR 5.2 million; and for 

2011 a predicted EUR 13 million. 

Only projects included in the Public Investment Programme (PIP) of Bosnia 

and Herzegovina are considered a national priority and eligible for financing. The 

PIP comprises projects for which financing has been secured, or will be secured in 

the future period, including environmental infrastructure. Investments in the waste 

and water sectors are financed mainly by the EU or IFIs. However, the federal government 

also provides financing for water and waste projects from the federal 

budget, even though current financing conditions are not favourable (REC, PEIP 

Analytical Reports 2007–2009). 

In Croatia, the Environmental Protection Operational Programme, co-financed 

by the IPA, provides the basis for the financing of environmental infrastructure 

projects. A large proportion of projects receive funding through the 

recently established Environmental Protection and Energy Efficiency Fund 

(EPEEF), the Croatian Bank for Reconstruction and Development (HBOR), and 

previous EU programmes (Phare and ISPA). One of the priority objectives of the 

HBOR includes environmental protection, the sustainable use of natural resources, 

and the financing of infrastructure, including environmental infrastructure (ADA, 

2008b). The bank has elaborated specific loan programmes: an infrastructure loan 

programme and an environmental protection loan programme dealing with the 

upgrading and reconstruction of municipal infrastructure. Loans are given for up 

to 15 years with an annual interest rate of 4 percent for projects investing in specially 

protected areas and 6 percent for all others. In 2007, loans to the amount of 

EUR 66 million were approved by HBOR to further promote investments in environmental 

protection and energy projects. 




150 




Future environmental improvements in Kosovo (as defined under UNSCR 

1244) depend on the budget allocated to the Ministry of Environment and Spatial 

Planning (MoESP) and on donor support. The priority project is the Air Quality 

Monitoring Network, for which 30 percent of the costs (EUR 965,000 for the period 

2008–2010) will be covered from the consolidated budget of Kosovo (as defined 

under UNSCR 1244). 

Foreseen expenditures in the field of environment for the years 2010 to 2012 in the 

form of capital investments for approved projects total EUR 3.4 million, whereas investments 

in new projects will total EUR 9.8 million. Currently projects worth EUR 

24 million are being implemented with IPA co-financing for the closure of dumpsites 

and for investment in water utilities (REC, PEIP Analytical Reports 2007–2009). 

The Kosovo Environmental Action Plan (KEAP), listing all environment-related 

priority goals for 2006 to 2010, is the main framework for all activities undertaken 

for the purposes of environmental improvement and protection. The 

KEAP stipulates a clear division of responsibilities between all stakeholders involved 

in environmental decision making and provides guidelines for international 

funding mechanisms and donor coordination. The KEAP is based on funding 

from a variety of donors and participation from the government budget of between 

5 and 20 percent. However, the share of funds currently dedicated to projects in the 

field of environment from the government budget under the KEAP is not sufficient 

to bring about significant environmental improvements (KEAP, 2006). 

The Government of the former Yugoslav Republic of Macedonia commits the 

biggest share of public resources for the environment — at least 88 percent of the 

available funds — to the water and waste sectors through the competent line ministries. 

Each year, environmental expenditures are allocated through its Environmental 

Investment Programme (EIP) in the form of grants. Between 2004 and 2007, 

the EIP approved financial support to 254 environmental projects, the majority of 

which were in the areas of water and waste. The Ministry of Transport and Communications 

(MTC) is responsible for communal infrastructure improvement and 

continuously invests in water supply and sanitation projects co-financed by grants, 

loans or the national budget with support from IFIs and bilateral donors (ADA, 

2008c). Additionally, each line ministry has elaborated an annual investment programme 

allocating funds for the preparation of environmental project documentation 

and the construction of water supply and sanitation facilities. Water 

management-related projects are also supported. The total environmental expenditures 

of the EIP and the Ministry of Environment and Physical Planning amounted 

to EUR 2.12 million in 2006; and to EUR 1.97 million in 2007. Total environmental 

expenditures from the Ministry of Transport and Communications’ own 

budgetary sources in relation to water supply and sanitation purposes amounted to 

EUR 3.028 million in 2006, and EUR 3.725 million in 2007 (ADA, 2008d). 

The National Environmental Investment Strategy (NEIS) was adopted recently for 

the period 2009–2013 and is designed to set up a comprehensive system streamlining 

the available national funds and leveraging the international financing sources towards 

solving environmental problems in the fields of water, waste, air quality, energy and na-

ture protection (NEIS, 2009). A key objective of the strategy is to establish a pipeline 

of bankable projects and provide the basis for the selection and prioritisation of projects 

financed by budgetary funds, IFIs and bilateral donors. For the period 2009– 

2013, the plan is to spend some 56 percent of the funds available on water supply and 

sanitation; and around 32 percent on waste management issues. 

Between 2002 and 2006, a large proportion of expenditure at national level in 

Montenegro was in the area of solid waste management. Currently, the Ministry 

of Finance is responsible for infrastructure construction and maintenance investments 

(ADA, 2008d). One of the strategic objectives of the national fiscal policy 

is to introduce capital budget and increase allocations for capital investments to 

undertake significant infrastructure investments. 

In the period 2003–2008, a positive trend has been recorded in environmental 

investment, especially in terms of infrastructure projects in the field of wastewater 

treatment, water supply and waste management. From 2003 to 2005, the percentage 

of projects funded from donations was significantly higher compared to domestic 

funding and loans; while from 2005 to 2008 the trend changed — 

donations decreased while financing from own funds and loans significantly increased. 

In 2008, funding from internal resources represents the largest proportion, 

followed by credits and grants (REC survey, 2009). 

In 2008, funds from the state capital budget provided for environmental projects 

within the communal sector totalled EUR 2,345 million: EUR 1,545 million 

for sanitary landfills and EUR 0.8 million for wastewater treatment facilities. In 

2007, the budget for the environment was about EUR 1.8 million; in 2008 it was 

about EUR 5 million; and the budget for 2009 is about EUR 5.2 million (REC, 

PEIP Analytical Reports, 2007–2009). 

National financial resources for environmental investments in Serbia are still 

very limited. They are currently being disbursed only for technical assistance for 

project preparation, and in rare cases for the construction of infrastructure. Domestic 

financial resources are supplemented by foreign assistance, which is channelled 

mainly through the Ministry for the National Investment Plan (NIP), as 

well as two units of the Ministry of Finance (MoF): the Development Aid Coordination 

Unit (DACU) and the National IPA Office (NIPAC). The principal 

sources for water quality improvement investment programmes are budgetary 

funds allocated by the Water Directorate of the Ministry of Agriculture, Forestry 

and Water Management (MoAFWM), received from charges for water consumption, 

abstraction and pollution; the state budget; donations; and loans from IFIs 

(ADA, 2008g). The Water Directorate and the Srbijavode public water management 

company are responsible for directing accumulated funds towards the construction 

and maintenance of the water supply and sanitation infrastructure. 

The Ministry for the National Investment Plan promotes investments into 

strategic infrastructure and recently launched a programme to finance infrastructure 

improvement, including environmental infrastructure, in the poorest 40 municipalities 

in Serbia, with grants covering 100 percent of eligible costs (ADA, 

2008f ). The project “Clean up Serbia” was launched in 2009 by the Ministry of En- 




152 




vironment and Spatial Planning and is aimed at the remediation of illegal dumpsites 

in more than 10 locations, the cleaning of riverbeds, as well as the capacity building 

of eco-industry. A total of EUR 6.5 million has been allocated for this purpose. 

In 2006–2007, EUR 20 million (1.2 percent of the total state budget allocations) 

were directed to environmental protection measures. The main emphasis was on the 

underdeveloped waste management sector (EUR 11.4 million), followed by water 

supply and wastewater treatment (EUR 4.9 million) and air pollution (EUR 3.7 million). 

In 2008, the Ministry for the National Investment Plan approved around EUR 

4.2 million for water sector infrastructure and disbursed around EUR 1.1 million in 

11 Serbian municipalities (REC, PEIP Analytical Reports, 2007–2009). 

Between November 2008 and June 2009, the effects of the global financial crisis 

could be observed on environmental investment projects financed from the national 

budget. The Ministry for the National Investment Plan had to cut down the 

amount of funding previously agreed, and most municipalities (especially the 

smaller and poorer ones) are finding it increasingly difficult to secure funds for 

projects. Many projects that had seen progress in the previous period came to a 

halt, while only some of the richer and more proactive municipalities made progress 

in this period. For the next period, important and increasing challenges will probably 

be felt in the smaller, less-developed municipalities (REC survey, 2009). 

The establishment of environmental protection funds in SEE 

The establishment of an environmental fund is one of the available institutional 

solutions with respect to environmental investments. In CEE countries, experiences 

with environmental funds have been mixed and there are examples of both 

well-functioning funds and funds that have failed to perform and have been dissolved. 

This suggests that environmental funds are an institutional form that has no 

guarantee of success per se. Some of the prerequisites for success are clear responsibilities, 

a fixed time horizon, and clear sources of capitalisation. Setting up a fund 

also requires significant investments in terms of human resources. 

In Albania, preparatory work began in the mid-1990s to establish an environmental 

fund, but the Ministry of Finance stopped the initiative. Both the 

governmental programme and the Intersectoral Strategy for the Environment 

call for the establishment of a national environmental fund (REC, PEIP Analytical 

Reports, 2007–2009). 

Environmental funds have been established in both entities of Bosnia and 

Herzegovina. The Environmental Fund of the Federation of Bosnia and Herzegovina 

(EFFBiH) and the Environmental Fund of Republika Srpska (EFRS) were 

founded by the governments of the two entities under their respective Law on the 

Environmental Fund (in 2006 in FBiH; and in 2002 in RS) defining all the necessary 

conditions and scope of activities of the funds. The funds were established 

for the purpose of collecting and allocating funding for the development of water 

management infrastructure; waste minimisation and the adoption of integrated 

waste management; and the construction of other municipal infrastructure facilities 

necessary to meet EU accession standards.

The EFRS is largely funded via the state budget, but it can also obtain funds 

from foreign and international sources, such as IFI loan and soft loan schemes. 

Starting from 2008, fund revenues are secured through fees for the use of natural 

resources and for environmental impacts; the RS budget; fees levied on polluters; 

and grants (ADA, 2008j). Funds are allocated through loans, subsidies, financial 

help and donations. Since money is allocated to the EFRS from water fees (15 percent 

of total revenues), the Ministry of Water Management, Forestry and Agriculture 

requires the EFRS to dedicate those funds to water protection activities. 

At the time of writing there are no employees under the EFFBiH; the documents 

regulating the work of the EFFBiH still remain at draft level, and their adoption is 

not expected in the near future. Initial funding was received for the establishment of 

the EFFBiH and additional revenues (water charges) were allocated from 2006. Unspent 

finances are expected to be accumulated under the EFFBiH and directed to 

environmental projects after the fund becomes operational (ADA, 2008i). There 

have been no environmental expenditures to date. Various IFIs have a keen interest 

in the actual establishment and stable functioning of the EFFBiH according to the 

best available practice, helping both entity funds to apply jointly for IPA and bilateral 

donor funding. At present, the status of the fund appears complex and the decision 

to start operation could depend on strong external technical assistance to build up the 

foundation for a solid environmental institution in FBiH. 

Croatia’s Environmental Protection and Energy Efficiency Fund (EPEEF), 

which is an extra-budgetary fund, became operational in 2004. A tool for implementing 

environmental policy and financing environmental programmes, at present 

it focuses primarily on co-financing municipal projects in waste. The fund’s 

resources come from earmarked charges levied on environmental polluters and 

users; charges for industrial waste and motor vehicle charges; budget transfers; and 

revenues from international bilateral and multilateral cooperation in the field of 

environment (ADA, 2008k). Fund resources are allocated through grants, soft 

loans, subsidised interest rates and loans from commercial banks, and are used primarily 

to finance programmes and projects in accordance with the National Environmental 

Protection Strategy and National Environmental Action Plan, strategic 

energy documents, and other related strategies and regulations. Financing is directed 

to general environmental protection, the sustainable use of natural resources, 

waste management (65 percent of overall expenditures in 2005–2008), and support 

for energy efficiency and renewable energy sources. 

The EPEEF is responsible for the promotion and establishment of cooperation 

with international and domestic financial institutions. Jointly with the Croatian 

Bank for Reconstruction and Development (HBOR), the fund supports the Loan 

Programme for the Financing of Environmental Protection, Energy Efficiency and 

Renewable Energy Sources. The fund is also involved in managing EU assistance 

to Croatia and is currently implementing a project for developing waste management 

infrastructure under the IPA 2007–2009 Environmental Protection Operational 

Programme (EPOP). In 2006, the EPEEF disbursed a total of EUR 102 

million, of which EUR 100 million was allocated for environmental projects, and 




154 




EUR 2.35 million for energy efficiency projects (REC, PEIP Analytical Reports, 

2007–2009). Croatian Waters is responsible for providing assistance in project 

preparation and IPA applications in the water sector. 

Between 2007 and 2009, EUR 21.5 million were disbursed for the remediation 

of official landfills; EUR 14.3 million were allocated for the remediation and 

closure of illegal dumpsites; and EUR 53.4 million for the remediation of hotspots. 

Between 2009 and 2011, the EPEEF will give EUR 51.5 million to support investments 

for the establishment and construction of RWMCs (REC, PEIP Analytical 

Reports, 2007–2009). 

The authorities in Kosovo (as defined under UNSCR 1244) are investigating 

the possibility of establishing an environmental fund and the government is in the 

process of developing the first draft of the law on establishing the fund, which 

would probably be managed initially by the Ministry of Environment and Spatial 

Planning and later transformed into an independent body. The EC CARDS project 

assisted in developing an appropriate frame for the structure of the fund (REC, 

PEIP Analytical Reports, 2007–2009). No investments are planned utilising this 

fund. Anther reason for the slow progress in terms of establishing the fund is the 

pending permission of the IMF. The budget allocated for environment in 2010 by 

the Ministry of Environment and Spatial Planning has not yet been approved because 

the government is experiencing difficulties in assessing capital investments 

in the environmental sector (REC survey, 2009). 

The Fund for Environmental and Nature Protection and Promotion of the former 

Yugoslav Republic of Macedonia was established in 1998. Between 1998 

and 2001, USAID technical assistance was provided to the fund with the aim of developing 

an effective, transparent financing institution capable of providing grant 

and loan finance to local administrations and industry in order to facilitate pollution 

prevention and environmental protection. From its creation, the fund was exposed 

to highly variable political and economic conditions, resulting in frequent 

changes of leadership and the lack of a long-term strategy for its operations. The 

general perception of the fund by other stakeholders was that it lacked clearly defined 

priorities and transparent financing strategies and procedures, and that it was 

exposed to political influences affecting project selection procedures. As a consequence, 

based on the recommendations of the IMF, the fund ceased operations 

under the new Law on Environment. Environmental investments are now administered 

through an environmental investment programme integrated within the 

structure of the Ministry of Environment and Physical Planning as the Department 

for Sustainable Development and Investments (ADA, 2008d). The ministry 

continues to collect charges and to provide limited financial assistance in the form 

of grants to NGOs, public enterprises and local authorities. The Macedonian environmental 

fund thus became a political hostage and can serve as an example of 

how not to manage an environmental fund. 

For more than five years the Ministry of Tourism and Environment of Montenegro 

has been considering the possibility of introducing an eco-revolving fund 

for financing environmental investment projects by public utilities at the municipal

level (ADA, 2008l). The purpose of the revolving fund would be to provide funds 

for water supply and wastewater treatment, waste management, the construction of 

roads and other infrastructure projects. The environmental fund is expected to become 

operational in 2009, pending the adoption of a corresponding law by the Parliament. 

The fund will be set up as an independent legal entity, but its overall human 

and financial resource endowments remain to be decided. The fund’s activities are 

expected to cover all the main environmental sectors, including capital investments 

in infrastructure, the promotion of environmental education and research, and the 

use of renewable energy sources. Financial resources will be provided by the fund in 

the form of grants, subsidies and soft loans. The fund is intended to mediate the use 

of resources provided by the government, and possibly by international organisations 

and IFIs (REC, PEIP Analytical Reports, 2007–2009). 

One of the main domestic sources of financing for environmental protection in 

Serbia is the Environmental Protection Fund (EPF). The fund covers the development 

and implementation of programmes and projects in the field of environmental 

protection, the sustainable use of natural resources, environmental 

infrastructure, energy efficiency and renewable energy (ADA, 2008h). In practice, 

the EPF mostly finances projects in the waste sector (and some in the air sector), 

while water sector projects are funded by the Water Directorate belonging to the 

Ministry of Agriculture, Forestry and Water Management (MoAFWM). Since 

2006, the EPF has been allocating grants for the preparation of project documentation 

in relation to the clean-up, remediation and closure of existing landfills. Since 

2007, financing has been allocated for the actual construction of regional landfills. 

None of these projects has yet been completed, although significant progress has 

been made in the regional landfills in Uzice and Prokuplje: most of the funds have 

been secured and the construction is under way. 

In 2007, the EPF disbursed a total of EUR 2 million entirely for the waste sector, 

directed to the preparation of project documentation for, and the actual construction 

of, the first phase of the regional waste landfill in Prokuplje, and to the 

upgrading of seven municipal landfills. 

In 2008, the EPF disbursed EUR 17.4 million in total, of which EUR 9.4 million 

(54 percent) was dedicated to the waste sector; and EUR 0.77 million (13.5 

percent) to the air protection sector. In 2009, the EPF secured a total of EUR 15 

million, entirely for the waste sector (REC, PEIP Analytical Reports, 2007–2009). 

The water sector is financed from the Directorate for Waters. 

Fund revenues include charges for nature and resource use; pollution charges; 

a proportion of funds from privatisation; funds from multilateral and bilateral programmes, 

projects and other activities in the field of environmental protection and 

energy efficiency; reinvested income; and contributions, donations and grants. 

Fund assets are granted through loans, guarantees, direct grants and interest rate 

subsidies on commercial loans (ADA, 2008h). Currently, between 70 and 80 percent 

of resources are allocated through grants, although in the future it is planned 

to increase the share of loans. In 2006, the amount directed to the EPF from charges 

was about 0.02 percent of GDP, thus it is clear that, with the current low revenues 




156 



BOX 19: Case study — Environmental Fund of the Republic of Slovenia 

The Environmental Fund of the Republic of Slovenia was established in 1993 in order to manage assets earmarked 

for environmental protection. It is the only specialised institution in Slovenia that provides financial assistance to environmental 

projects. The fund supports environmental investments in compliance with the priorities defined by the 

legislation in force and directs funding to industry, municipalities, local infrastructure companies and households. 

The fund is the biggest specialised financial institution granting soft loans; issuing guarantees; providing financial, economic 

and technical consulting services; and acting as a financial intermediary. The total capital and liabilities of the 

fund were EUR 120 million on December 31, 2007. The largest proportion of funding (70 percent) comes from the 

Earmarked Asset Fund, loans from IFIs, and grants from international funds. Earmarked funds come mainly from environmental 

taxes, non-refundable funds from the budget of the Ministry of the Environment and Spatial Planning for 

environmental investments, and EU funds. The fund has a legal obligation to maintain the real value of its assets and 

to cover operating costs from loan interest rates. 

For legal entities, funding is directed to support investments in environmental infrastructure, environmentally sound 

technologies and products, energy efficiency, energy saving and the use of renewable energy. For households, funding 

covers investments assisting conversion from fossil fuels to renewable energy sources and energy-saving technologies, 

water consumption reduction, and connections to sewerage systems and small wastewater treatment plants. 

Loans to households have significantly increased — from 9 percent in 2002 to 36 percent in 2006. 

Opportunities for loans are made public through tenders and public calls for applications. The fund also co-finances 

projects with the aim of informing and raising the awareness of potential borrowers about the purposes of the fund’s 

favourable loans (Slovenian Environmental Fund Annual Report, 2007). The project evaluation procedure includes assessing 

success in meeting the key priorities set in national strategic documents and EU legislation; assessing the adequacy 

of technological solutions; and general environmental criteria. Between 1995 and 2006, some 10,031 loans 

were granted, worth a total of EUR 239.3 million. 


from charges, the EPF is not able to provide a significant amount of money or support 

to projects eligible for financing, such as those on environmental protection, 

energy efficiency and renewable energy. 


• Public (state, county, municipal etc.) budgets, although insufficient in most 

cases, have an essential role in financing the rehabilitation of, and capital investments 

in, environmental infrastructure. They indicate priorities and provide 

co-financing for loans and grants from the EU, IFIs and bilateral donors. 

• The coordination of environmental financing flows at national level is of primary 

importance in ensuring complementarities in the financing of environmental 

infrastructure and in stimulating cooperation between the relevant ministries. 

• SEE countries are slowly increasing the proportion of their environment-related 

expenditures and are approaching the levels of new member states. However, 

funds are not sufficient to cover all the required expenditures.

International financial assistance 

This section contains an overview of donor activities in SEE and donor involvement 

in financing environmental infrastructure projects. The European 

Union is the main international donor in SEE. The overall objective of its assistance 

in SEE is to bring the countries closer to EU principles and standards. In the 

area of infrastructure, projects are selected on the basis of their contribution to laying 

the foundations for sustainable economic development and growth, and in particular 

to meeting basic infrastructure needs in the least-developed countries. 

However, in the candidate countries additional emphasis is placed on core investment, 

especially in the fields of environment, transport and energy. 

Sources of grant support — Instrument 

for Pre-accession Assistance (IPA) 

Financial assistance from the European Union to SEE countries is provided 

through the Instrument for Pre-accession Assistance (IPA). Initiated in 2007, the 

IPA represents the main instrument of financial support channelled from the EU 

and replaces previous pre-accession mechanisms such as Phare, ISPA and CARDS. 

The main objective of the IPA is to help beneficiary countries to implement the reforms 

needed to fulfil EU membership requirements and to make progress in the 

Stabilisation and Association Process (EC, DG Regio, IPA website). The instrument 

is designed to simplify all pre-accession assistance into a single framework 

both for candidate countries (Croatia and the former Yugoslav Republic of Macedonia) 

and for the potential candidates, and to facilitate the transformation from 

one status to another. Under IPA assistance, special emphasis is given to institution 

building; strengthening the capacities and structures needed for the management 

of pre-structural funds; and financing infrastructure investments. The average 

annual allocation for SEE under the IPA for the period 2007 to 2011 is about EUR 

800 million (EC, 2008). This represents the highest per capita amount provided 

by the EC to any other region in the world (approximately EUR 30 annually). Allocations 

to the environment under Component I for 2007 and 2008 totalled EUR 

63 million and EUR 59 million respectively. Multi-beneficiary environmental programmes 

allocated a total of EUR 3.7 million (EC SEC [2009] 1309). 

The IPA is an important source of funding for projects focusing on the institutional 

strengthening and capacity building of national authorities in the field of 

environment, sustainable resources management, environmental policy, environmental 

infrastructure upgrading and reconstruction, water supply and sanitation facilities, 

municipal waste management, air quality improvement, and environmental 

impact assessment. The IPA is also regarded as a potential source of funding for 

urban wastewater management projects, under the condition that a reform of the 

public utilities is carried out addressing cost-recovery issues. 

Three of the IPA components are directly related to the financing of environmental 

projects — Component I: Transition Assistance and Institution Building; 

Component II: Cross-Border Cooperation (with EU member states and other 




158 



FIGURE 15: IPA allocations to SEE countries (2007–2012) 

EUR 

million 

250 

200 

150 

100 

50 

0 

Albania 



Herzegovina 

Croatia Kosovo (under FYR 

UNSCR 1244) Macedonia 

2007 2008 2009 2010 2011 2012 

Source: EC, DG Enlargement 

Montenegro 

Serbia 

countries eligible for IPA funding; and Component III: Regional Development 

(environment, transport and economic development). Financial support through 

the IPA is delivered via annual national and multi-beneficiary programmes based 

on country-specific multi-annual indicative programming documents (MIPDs) and 

multi-annual indicative financial frameworks (MIFFs), which are strategic documents 

that indicatively allocate funds per beneficiary country and per component. 

In the potential candidate countries, infrastructure investments are supported 

through Component I, while candidate countries implement pre-structural policies 

and receive financial support through access to Component III. Under IPA Component 

II, environment projects in eligible cross-border areas receive financing through 

cross-border cooperation programmes. Annual national programmes define precisely 

the projects to be provided with grants during the forthcoming financial year under 

Component I for both sets of countries, while three-year rolling operational programmes 

in energy, transport and environment allow more flexibility in the financing 

of multi-annual projects under Components I and II (EC, DG Regio, IPA website). 

In 2007 and 2008, under Component I national programmes, approximately 

EUR 63 million and EUR 59 million respectively were allocated to environment-

FIGURE 16: IPA allocations to SEE countries per capita (2007–2012) 

EUR 

70 

60 

50 

40 

30 

20 

10 

0 


Herzegovina 

related projects, while multi-beneficiary programmes directed funding totalling 

EUR 3.7 million to a number of environment-related projects. Under IPA Component 

III, approximately EUR 280 million were allocated to the environment in 

2007 to 2009 (EC, 2009). 

Component III of the IPA, open to candidate countries, also focuses on the environment 

via operational programmes (OPs), which define the area of involvement 

(technical assistance, water management or solid waste management) and 

indicate the investment projects to be supported. An operational programme constitutes 

the overarching document defining a number of short-term and mid-term 

national environmental priorities and objectives that need to be addressed in the 

current programming period. It draws on existing EU and national environmental 

policies and strategies and is designed to prepare national institutions to meet the 

environmental requirements of the EU accession process. One of the specific objectives 

of the Environment Protection OP (EPOP) is to support investments in 

the environmental infrastructure sector. 

Technical assistance for reinforcing administrative capacity for the implementation 

of assistance delivered under the EPOP constitutes an additional priority. 



Croatia Kosovo (under FYR 

UNSCR 1244) Macedonia 

2007 2008 2009 2010 2011 2012 

Source: EC, DG Enlargement 

Montenegro 

Serbia 


160 



FIGURE 17: IPA allocations to SEE countries per component (2007–2012) 

EUR 

million 

800 

700 

600 

500 

400 

300 

200 

100 

0 


Croatia FYR Macedonia Albania Bosnia and Kosovo (under 

Herzegovina UNSCR 1244) 

I – Transition Assistance 

and Institution Building 

IV – Human Resources 

Development 

Montenegro 

II – Cross-border cooperation III – Regional development 

V – Rural Development 

Serbia 

Source: Multi-annual Indicative Planning Documents 2007–2009 and Multi-annual Indicative Planning Documents 2009–2011: Albania, Bosnia and 

Herzegovina, Croatia, Kosovo (as defined under UNCSR 1244), the former Yugoslav Republic of Macedonia, Montenegro and Serbia 

To achieve these priorities, the EPOP anticipates investments in a series of “flagship” 

projects that have significant environmental benefits. These can be either 

large-scale projects (above EUR 10 million) or smaller projects. 

In the IPA national programme for all SEE countries under Component I, it is 

planned to channel EUR 1 million to Albania, EUR 1.5 million to Bosnia and 

Herzegovina, EUR 5 million to Serbia, and EUR 1.225 million to Montenegro to 

establish project preparation facilities (PPFs); and EUR 3 million to the former 

Yugoslav Republic of Macedonia to establish a project preparation and support facility 

(PPSF) with the overall objective of improving the planning, programming 

and implementation of the IPA and to ensure that the national authorities submit 

good-quality project proposals to the European Commission (IPA 2008c). 

A total of EUR 25 million will be invested in the creation of the Infrastructure 

Preparation Facility in Kosovo (as defined under UNSCR 1244) to support the

TABLE 19: EC projects (allocations in million EUR) according to sector and country (2007–2009) 

preparation and implementation of infrastructure investments in the social sector, 

as well as in the fields of transport and environment. Investments are intended to 

help municipalities and public and private companies running utilities to identify 

and prepare priority infrastructure projects for financing through IFI loans, 

EC grants, and/or the government budget, and to provide financial support to 

the upgrading of infrastructure by providing grant co-financing using loans extended 

by IFIs (IPA 2008d). 

A total of EUR 3.393 million will be spent on the establishment of the Facility 

for Project Preparation and Reinforcement of Administrative Capacity in Croatia. 

It will provide flexible technical support (twinning, twinning light and 

technical assistance) to Croatian authorities; address specific needs identified for 

the country; and help to prepare a pipeline of projects for further funding with 

a view to reinforcing the institutional and administrative capacity for the management 

of IPA funds (IPA 2007a). 

Lessons learned after the first phase of IPA implementation 

A key challenge for the countries in relation to the implementation of the IPA 

is their capacity to absorb funds. This is dependent on national capacities to set up 

the necessary institutions; to prepare the required project documentation, including 

feasibility studies; and to provide co-financing. IPA funds for investment in 

environmental infrastructure require substantial co-financing of approximately 30 

percent of total project costs. To address the co-financing requirements, countries 



ENERGY TRANSPORT WATER AND MUNICIPAL SOCIAL ALL 

ENVIRONMENT INFRA- 

STRUCTURE 

SECTORS SECTORS 

Albania 0 (0) 4 (15) 3 (27) 0 (0) 3 (23) 10 (64) 


Herzegovina 

2 (4) 2 (2) 3 (7) 1 (1) 4 (8) 12 (21) 

Croatia 2 (2) 7 (206) 28 (48) 0 (0) 0 (0) 37 (257) 

Kosovo (as 

defined under 

UNSCR 1244) 

2 (13) 2 (9) 1 (18) 1 (14) 4 (43) 10 (96) 

FYR 

Macedonia 

1 (2) 3 (30) 4 (17) 1 (7) 6 (9) 15 (65) 

Montenegro 1 (2) 1 (6) 2 (5) 0 (0) 2 (3) 6 (15) 

Serbia 1 (6) 7 (27) 7 (33) 2 (67) 12 (76) 29 (209) 

Western 

Balkans 

9 (28) 26 (295) 48 (154) 5 (89) 31 (160) 119 (726) 

Source: WCIBP database 


162 



BOX 19: Example from Croatia — IPA EPOP 2007–2009 as a tool to streamline IPA III regional development funds 

In Croatia, IPA funds are implemented through three multi-annual operational programmes (OPs). In the environmental 

sector, the Environmental Protection Operational Programme (EPOP 2007–2009) was devised in 

order to define priorities and implementation means and mechanisms. The expected impacts of the EPOP are 

the achievement of compliance with the EU acquis and improved institutional capacity in the management of 

future structural funds (IPA EPOP Croatia 2007). 

One of the specific objectives of the EPOP was to support investment in the environmental infrastructure sector. 

The current EPOP under IPA 2007–2009 relates to the waste management and water quality protection sectors. The 

EPOP defines three priority axes and two lists of priority projects for the water and waste sectors. 

The priority axes are: 1) the development of waste management infrastructure for establishing an integrated waste management 

system in Croatia (EC contribution: EUR 26.3 million); 2) the protection of Croatia’s water resources through 

improved water supply and wastewater integrated management systems (EC contribution: EUR 26.5 million); and 3) 

technical assistance (EC contribution: EUR 699,750). 

The 14 water sector projects on the EPOP list are related to water supply and/or water treatment facilities (including 

sewerage networks where relevant). Of the 12 waste sector projects, 11 are related to the construction of regional 

waste management centres, and one to the remediation and closure of an abandoned hazardous waste landfill. 

During consultations between the REC and the Croatian Ministry of Environmental Protection, Physical Planning and 

Construction it was decided to harmonise the PEIP lists with the EPOP list. As a result, the PEIP lists contain all the projects 

in the EPOP list, plus an additional three projects related to the remediation of hazardous waste sites. 

The project applications approved for IPA funding in the current programming period are the water supply, sewerage 

and wastewater treatment plant in Slavonski Brod; the regional waste management centre for Zadar county; the 

Kastijun county waste management centre for Istria; and the Mariscina regional waste management centre. 


need to allocate funds from the national budget and/or loans, private sector participation 

or other financial mechanisms such as carbon financing. The IPA can 

be seen as a learning exercise that will prepare future member states for the challenges 

and opportunities of the EU Structural and Cohesion Funds. 

As the first result of IPA operation, a set of national and regional programmes, as 

well as horizontal (multi-beneficiary) programmes, covering the environmental sector 

were elaborated under IPA Component I. Projects receiving support from IPA 2007 

and 2008 are approved and under implementation, and approval of the next set of IPA 

projects is currently taking place. However, due to the financial crisis, IPA funds for 

2009 are slightly smaller (Presentation: Fiedler, 2008a). Current funding continuously 

helps countries to strengthen national capacities for environmental management; and 

to upgrade municipal environmental infrastructure, including the establishment of integrated 

waste management systems and the modernisation of water supply and wastewater 

treatment facilities. Several regional programmes for environment were 

established under IPA 2007, 2008 and 2009 to improve integrated water management 

in the region, to facilitate approximation to the EU acquis in the field of water, and to 

create a sustainable pipeline of projects dealing with water protection. 

Current practice shows that the majority of countries were able to prepare lists 

of environmental investment projects eligible for financing. However, many of the

projects were at different stages of development: some of them were launched more 

than 10 years ago and quality requirements have changed significantly, along with 

the operating legal framework and the bodies responsible for issuing permits at national 

and local level (Presentation: Glavocevic, 2008). The staffing and administrative 

capacities of project proponents were not sufficient; and the level of 

expertise and number of employees involved in project preparation was in some 

cases underestimated. Many project beneficiaries demonstrated weak implementation 

and operation capacity. In some cases, ownership of the utility or land was 

an issue, while in other cases the determination of the location and the approval 

process were delaying factors (Presentation: Unterwurzacher, 2008). 

Other challenges outlined in the IPA III process in candidate countries include 

delays and difficulties in the accreditation/compliance assessment process, which 

is seen as long and complex and as creating a significant bottleneck in project implementation 

(Presentation: Ozdemir, 2009). 

Bilateral donor assistance 

Bilateral donors are important sources of finance for SEE countries. Assistance 

from donors plays an important role in know-how transfer, capacity building and 

the co-financing of infrastructure projects. Donors channel significant amounts to 

support the reconstruction and stabilisation processes of the region. Bilateral donor 

institutions are primarily political institutions. This implies that they have diverse 

strategies, priority areas and budget envelopes that are subject to the changing goals 

of foreign policy support and that can alter abruptly. External aid is provided 

mainly in the form of grants via development agencies or selected ministries; in 

some cases loans are provided. Grant support is primarily directed towards institutional 

strengthening and capacity building, project preparation, and in rare cases 

to direct investments. Bilateral donors are mainly involved in financing capital investment 

for small-scale infrastructure. However, they play a vital role in providing 

grants for large infrastructure investments as well. In SEE countries, where local 

governments are often unable to secure co-financing for investment loans, bilateral 

grants can make it possible to receive the loan in the first place. 

Trends in bilateral donors commitments 

This section presents an overview of bilateral environmental support in order 

to show how environmental commitments are shared by environmental sectors, 

beneficiaries and donor countries. The calculations are based on the database maintained 

by OECD on official development assistance (ODA). 

Even the total ODA bilateral assistance to SEE countries in recent years shows 

a decreasing tendency due to a coordinated shift of assistance to other regions. This 

is a result of the significant progress in economic development and political stabilisation 

in the SEE region, and the recent introduction of the EU IPA, which 

was designed to finance the urgent development needs of the SEE countries. However, 

assistance from bilateral donors to environmental infrastructure projects 

shows an increasing trend. The total allocation for the improvement of water sup- 




164 



FIGURE 18: Bilateral ODA environmental infrastructure allocations to SEE countries (2005–2007) 

USD 

million 

70 

60 

50 

40 

30 

20 

10 

0 

Source: Authors’ calculation based on OECD data 


2005 2006 2007 

ply and sanitation and waste management investments grew from USD 49 million 

in 2004 to almost USD 63 million in 2007, an increase of 22 percent in two years. 

The following countries provide bilateral ODA grant support to SEE countries 

for environmental infrastructure projects (listed in order of importance): Germany, 

Austria, Japan, Norway, Sweden, Switzerland, the Netherlands, Italy, Luxembourg, 

Spain, the United Kingdom, the United States and Greece. Around half of the assistance 

to environmental infrastructure was provided by Germany. 

The majority of donor institutions are assisting in water-related issues and contributing 

to waste sector projects. Technical assistance for project preparation is provided 

by most countries. Financing is channelled in the form of grants, except for Kf W, 

which also offers loans. A maximum size of eligible project is set by only a few donor 

organisations: in general project size is flexible. A co-financing requirement in the 

form of own contribution was highlighted by Austria and Germany; however, most 

donor institutions require some form of financial commitment by project proponents. 

IFI financing 

In the context of this publication, international financing institutions are international 

banks providing financial assistance to countries with economies in 

transition. The financial support is provided in the form of soft loans with pay-

FIGURE 19: Environmental infrastructure commitments by recipient (2005–2007) 

USD 

million 

30 

25 

20 

15 

10 

5 

0 


Herzegovina 

2005 2006 2007 

Source: OECD ODA database 

back conditions more favourable than those of other commercial loans. IFIs also 

provide technical assistance for project preparation. These financial institutions 

are therefore one of the major sources of financial and technical support for the 

development of environmental investment infrastructure in SEE. The most important 

IFIs and the distribution of financing assistance for the SEE region are presented 

in Figure 22. Each IFI channelled around EUR 700 million to the region, 

with the exception of the CEB with a contribution of EUR 200 million. The total 

amount of EUR 3 billion represents a major contribution to the financing of infrastructure 

in the countries concerned. The average funding provided per project 

ranges from EUR 20 million for the CEB to EUR 90 million for the EIB. The difference 

reflects the nature of the projects financed, which include small technical 

cooperation schemes and massive transport projects (EC, 2009). 

Table 20 illustrates the extent of IFI financial support between 2007 and 2009 

and its distribution by sector and country. According to the UN Development Activity 

Database DAC Codification, the municipal infrastructure sector comprises 

the following activities: multi-sectoral aid; urban development and management; 



Croatia FYR 


Macedonia 


166 



FIGURE 20: Environmental infrastructure commitments by recipient per capita (2005–2007) 

USD 

8 

7 

6 

5 

4 

3 

2 

1 

0 



Herzegovina 

2005 2006 2007 


Croatia FYR Montenegro Serbia 

Macedonia 

rural development; non-agricultural alternative development; multi-sectoral education/training 

and research/scientific institutions. 

The largest share of funding was concentrated in the transport and municipal 

infrastructure sectors, and to a lesser extent in the water and environment sectors. 

Three countries — Serbia, Croatia and Bosnia and Herzegovina — together received 

approximately 70 percent of the total IFI financial assistance over the period, 

with the former Yugoslav Republic of Macedonia and Albania lagging significantly 

behind. Montenegro and Kosovo (as defined under UNSCR 1244) benefited from 

smaller amounts. 

In terms of the distribution of investments for water and environment, Croatia received 

the largest share of investments, followed by Serbia, Albania and Bosnia and 

Herzegovina. Montenegro, Kosovo (as defined under UNSCR 1244) and the former 

Yugoslav Republic of Macedonia benefited from far smaller amounts of investment directed 

to the environment and water protection. However, in per capita terms Figure 

24 shows that Croatia received most allocations from IFIs for water and environment, 

followed by Montenegro and Albania. Bosnia and Herzegovina, Kosovo (as defined 

under UNSCR 1244), the former Yugoslav Republic of Macedonia and Serbia re-

FIGURE 21: Share of environmental infrastructure investments by bilateral donors (2005–2007) 

Netherlands 

1% 

Luxembourg 

2% 

Japan 

10% 

Switzerland 

6% 

Sweden 

1% 

Spain 

1% 

Norway 

10% 

Italy 

6% 


Others 

1% 

Austria 

10% 

ceived the least financing per capita. This is probably due to the fact that Croatia had 

the most advanced projects, in terms of bankability and maturity for financing. 

The European Bank for Reconstruction and Development (EBRD) provides 

funds to build market economies, as well as project co-financing for banks, 

industries and businesses. Loans and equity finance, financial guarantees and technical 

assistance for project preparation are major instruments for the direction of 

funding. The EBRD provides long-term loans (up to 15 years) with a grace period 

and interest rates based on the credit risk of the borrower. Loans of between EUR 

5 and 250 million (up to 35 percent of total project costs) are provided to projects 

demonstrating clear creditworthiness and profitability, positive environmental effects 

(an EIA is necessary) and a positive influence on the local economy. Co-financing 

from foreign and domestic partners is necessary. The bank promotes 

co-financing and foreign direct investments; helps to mobilise domestic capital; 

and provides grants and technical assistance for project preparation. The bank has 

a set of country-specific and sector-specific strategies related to municipal and environmental 

infrastructure and natural resources management. 

In 2006, the EBRD, with partner IFIs and donors, launched the multi-donor 

Western Balkans Fund to mobilise additional grant funding for the countries of 

the region and to strengthen the coordination of EBRD donor assistance. 



Germany 

52% 


168 



FIGURE 22: IFI assistance to the municipal infrastructure sector in SEE countries (2007–2009) 

EUR 

million 

900 

800 

700 

600 

500 

400 

300 

200 

100 

0 

Source: WBICP database 

TABLE 20: Distribution by sector and country of IFI allocations (2007–2009) (number of projects, allocations in million EUR) 

ENERGY TRANSPORT WATER AND MUNICIPAL SOCIAL ALL 

ENVIRONMENT INFRA- 

STRUCTURE 

SECTORS SECTORS 

Albania 1 (28) 9 (165) 6 (78) 1 (10) 4 (29) 21 (309) 


Herzegovina 

3 (74) 6 (352) 9 (74) 5 (165) 5 (12) 28 (676) 

Croatia 2 (2) 9 (325) 32 (278) 2 (109) 1 (22) 46 (736) 

Kosovo (as 

defined under 

UNSCR 1244) 

4 (19) 2 (9) 1 (18) 1 (14) 6 (52) 14 (111) 

FYR 

Macedonia 

2 (37) 6 (166) 4 (17) 2 (27) 7 (22) 21 (267) 

Montenegro 3 (16) 2 (21) 3 (22) 0 (0) 2 (3) 10 (62) 

Serbia 3 (53) 9 (146) 10 (110) 8 (470) 13 (86) 43 (865) 

Western 

Balkans 

18 (229) 43 (1,184) 65 (597) 19 (794) 38 (224) 183 (3,027) 

Source: WCIBP database 


CEB EBRD EIB 

WB

FIGURE 23: IFI allocations for water and environment in SEE countries (2007–September 2009) 

EUR 

million 

300 

250 

200 

150 

100 

50 

0 


Herzegovina 

Croatia FYR 

Macedonia 



Kosovo (under 

UNSCR 1244) 

Montenegro 

FIGURE 24: IFI allocations for water and environment in SEE countries per capita (2007–September 2009) 

EUR 

70 

60 

50 

40 

30 

20 

10 

0 


Herzegovina 

Croatia FYR 

Macedonia 

Kosovo (under 

UNSCR 1244) Montenegro 

Serbia 

Serbia 


170 




The Western Balkans Fund has already established itself as the main instrument 

for funding technical assistance assignments across SEE, covering a wide range 

of sectors with allocations of more than EUR 25 million, about EUR 17 million 

of which have been approved as grant support for more than 40 projects over the 

whole region. The fund focuses on municipal infrastructure improvement, transport, 

communications, tourism, and financial and private sector development. In 

the area of environment and municipal infrastructure, the fund focuses on providing 

support to projects for water supply, wastewater collection and treatment, 

solid waste management, district heating, natural gas distribution and urban public 

transport. During the period 1991 to 2008, the EBRD signed agreements on 18 

environmental infrastructure projects for loan support in SEE (EBRD, 2008). The 

majority of projects were for water supply and sewage collection and treatment. 

The global financial crisis has placed severe demands on financial institutions, 

businesses, utilities and government agencies, thus the EBRD has indicated as a priority 

the reinforcement of financial institutions investing in improvements in environmental 

infrastructure and business development (EBRD, 2009). 

The EBRD has been active in SEE countries for several years and is progressively 

increasing its long-term lending to the region. It plays a crucial role in supporting 

environmental infrastructure projects, with particular emphasis on road 

rehabilitation, solid waste management and water supply and wastewater treatment. 

The focus of the EBRD’s activities is the continuous implementation of municipal 

infrastructure projects under a sovereign guarantee by the institutional 

strengthening of entities and improving the efficiency of operating companies. In 

candidate countries, the EBRD concentrates on working with a number of large 

and medium-sized municipalities to develop environmental infrastructure projects 

for prospective IPA co-financing. Additional priorities for the EBRD in the region 

are the promotion of policy dialogue; support to the development of viable 

schemes for the privatisation and commercialisation of state-owned utilities; and 

the adaptation of the fiscal decentralisation process (EBRD, 2009). 

The Council of Europe Development Bank (CEB) is a multilateral development 

bank with a mission to contribute to strengthening social cohesion in Europe 

and to achieving sustainable and equitable growth. It grants medium- to 

long-term loans and provides guarantees and technical assistance to social infrastructure 

projects in close collaboration with other IFIs. The CEB channels financial 

assistance to the region through long-term loans with low interest rates and 

specific repayment schedules adapted to meet national borrower requirements. Its 

current activities cover environmental protection, public services infrastructure 

and the financing of projects in response to emergency situations in the event of 

natural or ecological disasters (CEB, 2007a). At present, between 17 and 20 percent 

of the total approved amount relates to environmental projects and the prevention 

of natural disasters. 

Faced with the impact of the crisis in CEE and SEE, the CEB recently significantly 

intensified its role in the financing of public social infrastructure, with particular 

focus on municipal infrastructure and enhanced coordination with the 

Neighbourhood Investment Fund (NIF) and the Infrastructure Project Facility

BOX 20: Case study — Environmental infrastructure project in SEE supported by the EBRD 

Doboko Solid Waste Project, Serbia 

(IPF), and with other multilateral development banks within the Western Balkans 

Investment Framework (CEB, 2009). 

The CEB finances projects related to the clean-up and protection of surface 

waters and groundwater; the decontamination of soils and aquifers; the reduction 

and treatment of solid and liquid waste; renewable energy production and energysaving 

measures; air and noise pollution reduction; and cleaner means of transport 

and transportation networks. 

In Albania and Bosnia and Herzegovina, financial resources have been allocated 

for projects related to the basic municipal infrastructure and environmental 

protection, and to improving the performance of private and public companies 

and utilities. In Croatia, the CEB allocated resources for the improvement of quality 

of life on the islands through investments in the construction of municipal and 

social infrastructure facilities and environmental protection. In Serbia, projects 

were supported for the rehabilitation of local infrastructure damaged by a series of 

landslides in 2005 and 2006 (CEB, 2006). 

The European Investment Bank (EIB) is the financing institution of the European 

Union, supporting viable capital investment projects fostering the policy 

objectives of the EU. The EIB has been active in SEE countries for several years 

and is progressively increasing its long-term lending in the region. Financing from 

the EIB assists these countries in the EU integration process and helps them to 

meet EU accession criteria. It also provides incentives for political and economic 

reform. In 2008, the EIB concluded loan contracts in SEE countries reaching an annual 

record level of EUR 577 million, bringing total EIB lending in the region to 

EUR 3.1 billion since 1995. The EIB operates in SEE under a specific pre-accession 



The proposed project involves the construction of the first regional solid waste landfill that will serve nine municipalities 

in Serbia. The project will include two lines for the separation of recyclable materials, all the required 

subsidiary facilities, infrastructure and a protected zone. The intended project includes three transfer stations, 

transportation, and the closure and remediation of existing dumpsites financed through EAR funding and the 

Serbian Government’s Eko fund. 

The project will result in the first regional landfill fully compliant with the EU and the National Solid Waste Management 

Strategy. It will provide a model to be replicated for the financing of other regional waste management 

companies in Serbia and will promote the implementation of a nationwide solid waste management programme 

creating new legal and institutional structures to support economies of scale, employ new technology and establish 

best practice management techniques. 

This is the first regional waste management project in Serbia focusing on tariffs for waste management services 

that are based on cost-recovery principles. The project will introduce market-based structures and establish 

a clear contractual basis among stakeholders for the provision of waste management services. A loan of up to 

EUR 5 million from the total of EUR 11.9 million planned for the Doboko project has been secured through a municipal 

support agreement between the cities of Cacak and Uzice and the EBRD. 


172 




mandate covering the period 2007 to 2013, established for the modernisation of infrastructure 

facilities in the energy, transport and environmental sectors (EIB 2008). 

After an initial focus on the urgent reconstruction and rehabilitation of basic 

infrastructure, EIB activity in SEE has been concentrated on the upgrading and 

modernisation of the municipal infrastructure facilities, either with direct loans or 

through dedicated lines of credit to local banks (global loans). The bank works 

closely with the EC in order to support project preparation and co-finance projects 

within the IPA. The EIB also co-finances operations with other IFIs, particularly 

the EBRD, WB and CEB. 

The bank’s lending priorities include environmental protection and improvement, 

sustainable energy production and the improvement of trans-European 

transport and telecommunications networks. Major projects financed in this 

framework were the rehabilitation of hydropower plants and electric power distribution 

systems in Bosnia and Herzegovina; the construction of the Belgrade bypass 

and the rehabilitation of Gazela Bridge in Serbia; a road rehabilitation programme 

in Bosnia and Herzegovina; and the construction of a motorway in Albania. In all 

SEE countries the bank is providing financing to small and medium-scale projects 

in municipal infrastructure, including the rehabilitation and construction of water 

supply and sewerage treatment facilities. 

The World Bank (WB), as an international financing institution, provides low-interest 

loans, interest-free credit, and grants to developing countries for a wide array of 

purposes, including investments in municipal infrastructure, environmental protection 

and natural resources management. The WB is one of the implementing agencies 

for the Global Environment Facility (GEF). The GEF has been used in Bosnia and 

Herzegovina, Croatia and Serbia in the context of the Black Sea and Danube Basin 

GEF Partnership, and in other SEE countries for environment projects 

along with WB loans (EC, 2009). The International Finance Corporation, as a part 

of the World Bank Group, together with USAID and a number of European and 

Nordic donors, has established the Balkans Infrastructure Development Facility (BID- 

Facility) to provide technical assistance and to help public sector entities in SEE to attract 

private sector participation and investments in infrastructure development. 

The World Bank has been extensively engaged in providing financial support, 

technical assistance, policy advice and analytical services in support of environmental 

projects in SEE. One of the priorities in the region is to guarantee the improved 

management of municipal infrastructure and the delivery of services. The WB’s specific 

objectives in the environmental field are water reform and rehabilitation, solid 

waste management and district heating; access to clean water supply and sanitation 

in rural areas; private sector and business growth with an emphasis on environmental 

protection incentives; and support for a transparent legal and regulatory environmental 

framework. In the SEE region, the largest shares have been channelled to 

pollution abatement, water and land resources management projects. 

In each of the Stabilisation and Association Process countries, loans are provided 

in the form of specific investment loans with a long-term focus (five to 15 years) supporting 

infrastructure development projects; short-term and development policy loans 

enhancing policy and institutional reforms. The WB Group also offers special

BOX 21: Case study — Environmental project in SEE supported by the EIB in 2008 

The rehabilitation and construction of water and sanitation facilities 

grants to facilitate development projects. In order to be financed, all project applications 

are required to have defined financial and environmental goals in line with country 

strategic documents and recognised as a priority by the national government. 

At the end of 2008, the WB launched a number of initiatives to help weaker developing 

countries to deal with the consequences of the financial crisis. The Infrastructure 

Crisis Facility (ICF), established by several IFIs, will help to ensure that 

viable, privately funded infrastructure projects facing temporary liquidity problems 

due to limited private participation will get access to funding regardless of the 

financial crisis. This facility will comprise a loan funding trust, an equity facility and 

an advisory facility (EC, 2009). The ICF will provide USD 300 million to the 

fund and additional funding is expected from other IFIs and national governments. 

In SEE, WB lending focuses on urban infrastructure improvements with a specific 

emphasis on water supply and wastewater treatment, solid waste management, 

district heating, transportation, and increased public sector energy efficiency. Funding 

is also directed towards general environmental protection and natural resources 

management in environmentally sensitive areas and coastal zones. 


• Under EU IPA assistance, which replaces previous pre-accession mechanisms, 

special emphasis is given to institution building, strengthening the capacities 

and structures needed for the management of pre-structural funds, and the financing 

of infrastructure investments. 



The EIB is lending EUR 60 million for the implementation of water and sanitation projects in the municipalities 

and cantons of the Federation of Bosnia and Herzegovina. The main objective of the project is to improve the 

quality of life of the country’s citizens and to meet Bosnia and Herzegovina’s needs regarding future compliance 

with EU environmental legislation. 

The EIB loan will finance an investment programme for water management in 15 towns, which will result in the 

improvement and expansion of water supply and sanitation systems and the construction of wastewater treatment 

facilities. 

The EIB loan will cover up to 50 percent of the total costs of the planned projects, which will be co-financed by 

the budget of the Federation of Bosnia and Herzegovina, the country’s municipalities and cantons, and the IPA. 

The remaining funds will be provided by the EBRD and the World Bank, representing another example of the 

good coordination and cooperation among all three IFIs in SEE. 

Project preparation in a number of towns is already in progress, assisted by grants provided by the EU under the 

Environmental Project Preparation Facility. Some of the required feasibility studies have already been completed 

in cooperation with the municipal authorities and internationally experienced consultants — for example in Velika 

Kladusa, Orasje and Bosanski Petrovac. 


174 



BOX 22: Case study — Project in SEE financed by the WB 

Inland Waters, Croatia 

The project will help to increase the service coverage of water supply and wastewater collection and treatment 

in inland Croatia. It is in line with the country’s goal to achieve compliance with EU directives and to provide goodquality 

water and wastewater treatment. 

Technical assistance (EUR 5 million) — (i) EU accession support will include: the institutional strengthening of 

Croatian Waters and the Ministry of Agriculture, Forestry and Water Management, and the preparation of engineering 

studies and designs to be financed by the EU and other sources; (ii) project implementation support will 

include consultancy services and training necessary for project implementation; and (iii) the institutional strengthening 

of utilities will be used by the project beneficiary utilities and provide consultancy services and training for 

utilities to increase efficiency and improve services. 

Investments (EUR 100 million) — Three sets of proposed utility investments will increase water supply coverage and 

improve water supply services; increase sewerage coverage and improve wastewater collection services; improve the 

treatment of collected wastewater in accordance with international standards; and enhance flood protection measures 

in the central Posavina area, which includes the Lonjsko Polje flood protection area (a Ramsar wetland site). 


• A key challenge in the implementation of the IPA is capacity to absorb funds 

— that is, to set up the necessary institutions; to prepare the required project 

documentation, including feasibility studies; and to provide co-financing. The 

staffing and administrative capacities of project proponents are often inadequate, 

and in some cases the number of employees involved in project preparation, 

and their expertise, has been underestimated. 

• Assistance from international bilateral donors plays an important role in the 

transfer of know-how, institution strengthening, capacity building and the cofinancing 

of infrastructure projects. 

• The largest share of IFI funding has been concentrated in transport and municipal 

infrastructure, and to a lesser extent in water and the environment. 

Project preparation facilities 

Project preparation facilities (PPFs) are instruments used by the EC and IFIs to 

provide support to infrastructure improvements. Usually, these facilities fund technical 

assistance for the preparation of sound infrastructure projects over a defined 

period of time (two to three years in general). The PPFs are designed to support the 

development of an appropriate pipeline of bankable projects and to promote cofinancing 

opportunities between local governments, the EC, and bilateral and multilateral 

donors. The specific objectives of PPFs include supporting the achievement 

of national priority development goals; elaborating effective strategic plans in different 

sectors, often followed by more detailed investment strategies; and increasing 

the effectiveness of development assistance channelled to beneficiary countries. 

Technical assistance is given for making an assessment of urgent country needs in

the field of infrastructure; identifying projects available and eligible for future funding; 

and carrying out preparatory studies for specific projects, including institutional 

framework studies, demand and tariff studies, project feasibility studies and 

beneficiary assessments. The facilitation and structuring of project financing, the 

groundwork for project implementation and the identification of additional technical 

assistance are also provided. These facilities are established in countries where 

project preparation capacities are the weakest. The links between the facilities described 

below is continuous. Project preparation undertaken by the Environmental 

Project Preparation Facility (EPPF) is continued by the Infrastructure Project 

Facility (IPF) in 2008. The IPF is to become part of a broader Western Balkan Investment 

Framework with closer cooperation with IFIs in 2010. 

The Environmental Project Preparation Facility (EPPF) was launched by 

the EC in 2006 to run for 24 months, with an overall budget of EUR 1.8 million. 

All SEE countries were beneficiaries, with special emphasis on the former Yugoslav 

Republic of Macedonia and Albania. The specific objective of the EPPF was to 

provide support in project preparation, to speed up IFI financing of priority pollution 

abatement projects, and to help overcome the constraints facing the environmental 

sector. All environmental sectors were eligible to receive financing from 

the EPPF. Other objectives included enhanced collaboration with IFIs in the identification 

of priority environmental investment projects and the transfer of knowhow 

in project development to SEE (IPF, 2008). 

During the implementation period, a total of 11 project preparation studies 

were completed, representing potential investments of around EUR 160 million. 

These project preparation studies included an assessment of the technical, environmental, 

social, financial, economic and institutional viability and sustainability 

of the projects, including consumer affordability and tariff strategies that would 

contribute to cost recovery from service beneficiaries without imposing undue financial 

burdens on them. The recommended proposed projects are therefore considered 

to be both sustainable and bankable. The final EPPF project pipeline is 

presented in Table 21. 

A large number of projects prepared by the EPPF are currently co-financed and 

undergoing implementation. The high success rate for funded projects is due to 

close collaboration with IFIs from the beginning of the process. Coordination with 

IFIs during the preparatory stages facilitates financing once project preparation has 

been completed. A positive example is the project “Small and Medium-Sized 

Towns Water and Wastewater Development” in Bosnia and Herzegovina, which 

has been taken up by the IPF Municipal Window. The following municipalities 

will receive grant funding for project implementation, thus project preparation will 

translate into project implementation co-financed by a grant from the EC and a 

loan from the EIB generating some EUR 121 million in total project investment 

in Bosnia and Herzegovina between 2010 and 2014: Bosanski Petrovac Water and 

Wastewater Development Project; Velika Kladusa Water and Wastewater Development 

Project; Orasje Water and Wastewater Development Project; Soroki Brijeg 

Water and Wastewater Development Project; Posusje Water and Wastewater 




176 



TABLE 21: EPPF project pipeline 

PROPOSED PROJECT TYPE/ PROJECT COMMENTS BUDGET EXPECTED 

BY INVESTMENT PREPARATION FOR FOLLOW-UP 

COUNTRY 

EBRD 

STATUS FEASIBILITY 

STUDY 

Serbia Belgrade Wastewater Completed A new mayor was elected in May EUR EUR 

Development Project – December 2008 and key personnel were 343,000 48 million 

Batajnica Wastewater 2007 appointed to the city administration. 

Development Discussions regarding loan 

commitment for the proposed 

project are under way. 

Croatia Pula Wastewater Completed The study made clear EUR EUR 35 

Treatment Plant October recommendations for a sewerage 90,000 to 40 million 

Location Feasibility 2008 and sewage treatment strategy for 

EIB 

Study the town, which were accepted by 

the beneficiary. Loan negotiations 

with EBRD are under way. 

Republika Banja Luka Hot Water Completed Loan approved by EIB Board. EUR EUR 

Srpska, Bos- Leakage Prevention August Loan negotiations under way 198,000 22.8 million 

nia and and Environmental 2007 with beneficiaries. 

Herzegovina Enhancement Project 

Three Small and Medium-Sized Completed Loan agreement for EUR 60 million EUR EUR 

projects Towns Water and Waste- April signed by the EIB and the govern- 265,000 28 million 

for the Fede- water Development 2008 ment, and final on-lending agreeration 

of Project (Cluster 1 Bo- ments with municipalities under way. 

Bosnia and sanski Petrovac, Velika 

Herzegovina Kladusa and Orasje) 

Montenegro Review of Solid Waste Completed Study submitted and ToR out to EUR N/A 

Strategic Master Plan June tender for follow-on studies. 11,000 

and Preparation of ToR 2008 

Four projects Small and Medium Completed All project preparation reports EUR EUR 

for the Fede- Towns Water and Waste- December completed, and accepted 245,000 20–25 

ation of water Development 2008 by beneficiaries. million 

Bosnia and Project (Cluster 2 Soroki 

Herzegovina Birjeg, Posusje, Bosanski 

Krupa and Tomislavgrad) 

Source: EPPF, 2009 


Development Project; Bosanska Krupa Wastewater Development Project; and 

Tomislavgrad Water and Wastewater Development Project. 

A large number of the projects that could not be implemented in the framework 

of the EPPF have been transferred to other frameworks, such as the IPF. 

The activities carried out by the EPPF during its two-year existence were evaluated 

highly by all stakeholders (beneficiary countries, EC and IFIs), as it man-

aged to provide significant benefits for project proponents, good-quality pre-feasibility 

and feasibility studies, and, as a result, a strong project pipeline for future 

funding. Factors assessed in project preparation studies included strategic longterm 

development needs and priority investments; cost effectiveness and the efficiency 

of investments; pollution reduction objectives; environmental impacts; 

consumer affordability; the financial capacity of recipients; and the long-term sustainability 

of operations (Presentation: Davies, 2008). 

In 2008, the European Commission launched the Infrastructure Project Facility 

(IPF) with the main aim of providing direct support to the development and 

upgrading of infrastructure in the energy, transportation, environment and social 

sectors, thus contributing to sustainable development in the region. The facility 

ensures continuity with the EPPF and carries on the preparatory work initiated. 

The IPF comprises two windows: a) the Technical Assistance Window, in 

which grants are used to help prepare infrastructure investment projects to be financed 

by IFI loans; and b) the Municipal Window, implementation support once 

the project is formulated, in which grants are used to co-finance infrastructure investments 

at municipal level, together with IFI loans (DABLAS, 2008). 

The core result of the facility will include the achievement of high-quality investment 

proposals for projects related to infrastructure remediation and upgrading 

through the preparation of pre-feasibility studies, feasibility studies and financial 

affordability analyses, completed designs, budget and financial plans, preparation 

work for the tender process and supervision of implementation work. The transfer 

of know-how and capacity building at national and local levels along with enhanced 

collaboration with IFIs are also emphasised as intended results (IPF, 2008). 

All IPA beneficiaries are, in principle, eligible for IPF financing. However, priority 

will be given to potential candidate countries, as they are in greatest need of 

support and are not eligible for Component III of the IPA. For potential candidate 

countries, the IPF will help to enhance the complementarity between IPA grants 

and IFI loans (IPF, 2007). The facility is designed on a multi-annual basis in line 

with IPA programming and provides grants and loans for infrastructure investments 

in the region, particularly in the environmental sector, for water supply, wastewater 

treatment facilities, sewerage systems, solid waste management, hazardous waste 

treatment facilities and emission control. All projects submitted to the facility 

should be in accordance with national sector strategies and the EU environmental 

acquis and included in the regional pipelines (Presentation: Gofas, 2008). The average 

budget per project will be approximately EUR 500,000. Projects and project 

budgets are reviewed on a case-by-case basis, and higher or lower levels of support 

will be approved under specific circumstances. 

Initially, EUR 16.2 million available from the CARDS programme were allocated 

through the facility in 2008 and EUR 24 million through the Municipal 

Window. In 2009, an additional EUR 16.2 million were channelled to the IPF. 

The Specific Kosovo IPF Window received financing of EUR 25 million for municipal 

infrastructure. In summary, up to 2009 the IPF instrument received funding 

of EUR 83 million. In June 2008, the steering committee of the IPF approved 




178 



TABLE 22: Environmental projects supported by the IPF in 2008 

TITLE COUNTRY SUBSECTOR ESTIMATED ESTIMATED LEAD IFI CO-FINANCING TYPE 

IPF TOTAL INVESTORS OF TA 

BUDGET INVESTMENT 

(MEUR) (MEUR) 

Feasibility study Serbia Water 0.5 19.561 IPA, FS 

for collection, 

transport and 

treatment of wastewaters 

in the 

municipality of 

Vranje and Uzice 

protection state budget 

Plava Voda Bosnia and Water 0.6 28 EBRD CEB FS 

Regional Water 

Supply Project 

Herzegovina supply 

Regional Kosovo Water 0.3 10 KfW, EAR, TMA, FS 

Water (as defined supply Governments of 

Company under UNSCR Norway and 

Pristina 1244) Switzerland 

Podgorica Water 

Infrastructure 

Project 

Montenegro Water 0.3 10 EBRD EIB, WB FS 

Podgorica waste- Montenegro Wastewater 35 EIB, EBRD WB, IPA, FS 

water project Dexia CCB 

Source: EC, DG ENLARG 


over EUR 10 million of technical assistance support for 18 infrastructure projects, 

leading to more than EUR 800 million of investments to be co-financed by three 

European banks (EBRD, EIB and CEB) in six SEE countries (EU IPF TA 2009). 

Five of these projects were in the environment sector, and were mainly related to 

water, as presented in Table 22. There are currently 19 environmental projects on 

the reserve list, covering the areas of water supply and wastewater treatment, waste 

management, and solid and hazardous waste treatment (Presentation: Gianfranchi, 

2008). In 2009, four environmental projects were selected for support under the 

IPF TA (EC SEC [2009] 1309). 

In 2008, the EC and partner IFIs initiated the Western Balkans Investment 

Framework (WBIF), to be launched by 2010. The WBIF will widen the scope of 

the existing IPF. In addition to infrastructure it will provide support to investments 

in other sectors, such as the private sector (including SMEs) and energy efficiency, 

in order to promote the general socio-economic development of SEE countries. 

The aim is to enhance coordination between European financiers and donors in 

order better to meet the needs of beneficiaries by pooling existing grant resources 

from the EC, partner IFIs, member states and other donors, and by linking these 

grant resources with loans from IFIs.

TABLE 23: Environmental projects supported by the IPF in 2009 

It is intended to be coherent with the IPA planning documents and with national 

and multi-beneficiary programmes. The Western Balkans Infrastructure Initiative, 

the intermediate step towards the creation of the WBIF, will be based on the 

following components: a) the IPF; b) a joint grant facility receiving grant resources 

allocated from the EC IPA through the IPF, grant contributions from the EIB, the 

EBRD and the CEB, and bilateral grant contributions from member states and 

other donors through the European Western Balkans Joint Fund (EWBJF); and 

c) a joint lending facility coordinated by the partner IFIs. 

The framework will be consistent with the IPA and will enhance the ownership 

of the beneficiaries (EC SEC [2009] 1309). 

The Western Balkans Investment Coordination Platform (WBICP) was 

launched by the EC and partner IFIs (CEB, EBRD, EIB) with the aim of preparing 

the ground for the WBIF (EC, 2009). The WBICP website currently provides 

information and tools to support infrastructure investment coordination among all 

regional donors. The coordination platform is based on a comprehensive review of 

ongoing and planned programmes and activities implemented by the EC, IFIs and 

bilateral donors in the region in the field of infrastructure (WBICP website). The 

general objective is to provide country beneficiaries with a global overview of existing 

facilities and instruments applied for financial assistance both at national 

and regional levels. The sectors covered will include transport, energy, environment 

and social. Other programmes, funds and initiatives funded from national 

sources will also be included. A mapping exercise will address all forms of delivery 

methods such as non-reimbursable grants, different types of lending programmes 

and loans, grant co-financing, soft technical assistance and capacity-building measures 

associated with the provision of investments. 



TITLE COUNTRY/IES SUBSECTOR PROJECT SCOPE 

Detailed Designs for Lezha Albania Water A wastewater treatment plant is under construction. 

City and Shengjin protection Scoping mission planned to define design specifications 

Sewerage Network and implement the detailed design project. 

Kamza Water Supply and Albania Water Scoping mission planned to complete ToR and implement 

Sewerage Project Feasibility supply the feasibility study to determine long-term investment needs 

Study and priority investment programme. 

Detailed Designs for the Albania Water There is an urgent need to expand the capacity of the existing 

Extension of Kavaja protection WWTP in Kavaja to treat sewerage from Golemi beach. 

Wastewater Treatment Plant Scoping mission planned to determine design parameters 

and for Golemi Sewerage 

Network 

and implement the detailed design project. 

Berane Wastewater Montenegro Water Currently water losses are high and the wastewater collection 

Treatment Plant Feasibility protection and treatment infrastructure is inadequate. 

Study Feasibility study planned to prepare long-term strategic 

investment plans and a bankable priority investment project 

in relation to water and wastewater. 


180 





• PPFs are used by the EC and IFIs to fund technical assistance for the preparation 

of a pipeline of sound infrastructure projects and to promote them to financiers. 

• The activities of the Environmental Project Preparation Facility resulted in significant 

beneficial impacts for project proponents, good-quality pre-feasibility and 

feasibility studies, and subsequently a strong project pipeline for future funding. 

• The Infrastructure Project Facility supports infrastructure project preparation and 

builds project pipelines in the energy, transport, environment and social sectors. 

• In 2008, the EC and partner IFIs initiated the Western Balkans Investment 

Framework, to be launched by 2010. In addition to infrastructure, the WBIF 

will provide support to investments in other sectors such as the private sector 

(including SMEs) and energy efficiency. 

Regional cooperation frameworks 

Regional cooperation is vital in SEE for a number of reasons. Firstly, it is essential 

to ensure peace and stability and to create good relations between neighbours 

following the recent history of conflict. Established regional relations are both a tool 

and a prerequisite for moving towards EU integration. Secondly, tackling transboundary 

issues such as the mitigation of environmental pollution and the development 

of infrastructure, as well as the strengthening of disaster preparedness and 

prevention, should inevitably be addressed on a regional level. Thirdly, regional cooperation 

is essential in order to create a fruitful climate for investments in SEE. 

Donors and IFIs often follow a regional approach in programming, which expands 

the investment market and makes it more interesting for investors. In conclusion, cooperation 

across the SEE region is an essential element of a successful reform process, 

allowing SEE regional actors, such as the Regional Cooperation Council (RCC), to 

play an important role in creating local ownership of the process. Although regional 

cooperation in SEE has improved, the efficiency of regional structures and initiatives 

also needs improvement (EC COM [2009] 533). Moreover, by facilitating the exchange 

of experience and best practices and by introducing new methodologies, regional 

initiatives can promote effective financing for the environment. 

Some of the major IFIs have developed cooperation frameworks in order to coordinate 

activities in project financing as well as to provide technical assistance for project 

preparation. Key initiatives relevant to the SEE region are presented below. This 

section also contains an overview of donor coordination initiatives in the region. 

The IFI Advisory Group (IFI-AG) has emerged from the experiences of the Infrastructure 

Steering Group (ISG) that was set up in 2007 under the auspices of the 

Stability Pact. The AG supports the overall cooperation between IFIs and the EC 

in the candidate and potential candidate countries, including cooperation under 

the IPA. In particular, the objectives are to enhance strategic views aligned with 

the EU integration objectives of the IPA countries; to address the development of 

national infrastructure; and to extend participation to include actors present in the

countries. In addition, it aims to identify possibilities for improving regional financial 

cooperation between the EC and IFIs based on the comparative advantages 

of each institution in the region 13 . The IFI-AG has four priority areas — 

energy; transport; environment and human development; and employment and 

social protection — and working groups have been set up for each of them. 

The IFI-AG also addresses horizontal issues in relation to fiscal sustainability 

and the right financing mix; the coherence of IFI support with national public expenditure 

programmes; preventive measures against the crowding out of social expenditures; 

public private partnerships; transparency in bidding procedures; and 

overall public investment prioritisation. 

The organisations making up the IFI-AG are the EC, the EIB, the EBRD, 

the IBRD, the International Finance Corporation (IFC), the Nordic Investment 

Bank (NIB), the Nordic Environment Finance Corporation, the Council of Europe 

Development Bank, the Black Sea Trade and Development Bank, Kreditanstalt 

fur Wiederaufbau (Kf W) and the Regional Cooperation Council (EC, 

DG Enlargement website). 

Commercial banks willing to support environmental investment and incorporate 

environmental considerations into financing practices are gathered under the 

United Nations Environment Programme Finance Initiative (UNEP-FI). The 

UNEP-FI is a partnership between UNEP and the private financial sector. It was 

established with the objective of promoting the integration of environmental considerations 

into all aspects of the financial sector’s operations and services. The initiative 

has over 170 signatory institutions. 

Regional activities in SEE are structured under the Central and Eastern European 

Regional Task Force set up in 2004. The activities of the UNEP-FI strive to raise 

awareness of sustainable finance in the region. The majority of activities are currently 

directed towards the development of internal risk management procedures to accommodate 

risks deriving from environmental projects. After recent changes in September 

2009, CEE is now a sub-group under the European Task Force (ETF). This 

will not have a significant effect on the way that the CEE Task Force operates, in the 

sense that the group will continue to have its own strategy, activities and overall 

independence. However, it provides the CEE group with an opportunity to be present 

and influential in the wider European and global context, both via the ETF and the 

EC. The REC plays an advisory role. Major financial members include Bank Austria 

Creditanstalt; Emporiki Bank; the EBRD; HVB Group; Komercni Banka; and Raiffeisen 

Zentralbank Austria AG (UNEP FI website). 

The Danube–Black Sea Task Force (DABLAS) was established with the aim 

of stimulating water-related investments in the Danube and Black Sea regions. It 

provides a platform for cooperation between IFIs, donors and beneficiaries with the 

objective of protecting the water and water-related ecosystems of the Danube and 

the Black Sea. The task force comprises representatives of the Black Sea Commission, 

the International Commission for the Protection of the River Danube 

(ICPDR), IFIs, interested EU member states, other bilateral donors, and regional 

and international organisations with relevant functions. 




182 




The priority aims of the task force are to coordinate investment activities by 

identifying priority objectives common to the region; and to develop concrete approaches 

for financing shortlisted priority projects. The task force is also responsible 

for project screening and prioritisation processes. There are currently 24 projects 

in the pipeline, at various stages of preparation identified through the Danube Investment 

Support Facility (DISF), the Black Sea Project Broker, the PEIP and the 

Environmental Project Preparation Facility (EPPF) (DABLAS, 2008). 

From 2009, the European Commission supports a number of DABLAS priority 

water investment projects through the DABLAS Phare Facility active in Croatia; 

and through the DABLAS Balkan Facility, which is planned to operate for two 

years in Bosnia and Herzegovina, the former Yugoslav Republic of Macedonia, 

Montenegro and Serbia. The primary objectives of the facilities are to identify and 

prepare new water projects and to further develop projects already identified; and 

to increase local capacity in the project preparation process. The scope of the work 

is to prepare a minimum of two pilot water sector projects in each of the beneficiary 

countries, with one of the projects focusing on basin management. At least two 

bankable investment projects should be fully prepared in one or two of the beneficiary 

countries as well (DABLAS, 2008). 

The Regional Cooperation Council (RCC) was launched in February 2008, 

as the successor to the Stability Pact for South Eastern Europe 14 . The RCC is a regionally 

led cooperation facility intended to sustain focused regional cooperation 

in South East Europe. A main difference from the Stability Pact is the level of regional 

ownership entrusted to the RCC. It is an attempt to encourage the SEE 

countries gradually to take greater ownership of the process — politically and financially 

— in order to ensure the sustainability of the process. The RCC also supports 

European and Euro-Atlantic integration. The RCC partnership comprises 45 

countries, organisations and IFIs. 

The work of the RCC focuses on six priority areas: economic and social development; 

energy and infrastructure; justice and home affairs; security cooperation; building 

human capital; and parliamentary cooperation as an overarching theme. Close 

relations are maintained with all relevant actors in these areas, such as governments, international 

organisations, IFIs, civil society and the private sector.The RCC also provides 

political guidance to initiatives in specific thematic areas of regional cooperation. 

Environmental issues are mainly addressed in the energy and infrastructure priority 

area, where one of the activities is the transfer of knowledge about sustainable energy 

and sustainable transport. Links were established with the Regional Environmental 

Reconstruction Programme for SEE (REReP) (RCC website). 

The Regional Environmental Network for Accession (RENA) will replace 

the REReP and will be launched by the EC at the end of 2009. The RENA will 

strategically enhance the pre-accession element in regional cooperation among the 

potential candidate countries, including Turkey. The objectives are to improve the 

environmental situation in the region and to reestablish and facilitate environmental 

dialogue among SEE countries. Activities will focus on strategic planning, 

public participation, climate change, cross-border cooperation and environmental

BOX 23: DABLAS — Criteria for project prioritisation 

investment project preparation. The RENA will build on the achievements of the 

REReP (EC SEC [2009] 1309). 

The EU Water Initiative (EUWI) is an international political initiative creating 

partnerships with national governments, donors, the water industry, NGOs and 

other stakeholders. It was launched to contribute to the Millennium Development 

Goals in relation to drinking water and sanitation. The Mediterranean regional 

component comprises partners in SEE and Mediterranean countries that are willing 

to commit to the objectives, targets and guiding principles, and that have a genuine 

willingness to work with others in finding practical solutions (EUWI website). 

The Horizon 2020 Initiative (H2020) was launched by Euro-Mediterranean 

partners with the objective of reducing levels of pollution in the Mediterranean 

Sea. Among the issues tackled are municipal waste, urban wastewater and industrial 

emissions, which are responsible for up to 80 percent of the pollution in the 

Mediterranean Sea. The initiative focuses on facilitating the implementation of infrastructure 

projects, capacity building, monitoring, research and the exchange of 

experiences (H2020 website). 

The Union for the Mediterranean, launched by France in 2008, replaces the Euro- 

Mediterranean partnership (Barcelona Process) and focuses on regional cooperation 

and on increasing the potential for regional integration and cohesion. The union has 

the depollution of the Mediterranean Sea as core objective. The Mediterranean Water 

Strategy will be adopted in 2010. The union comprises all EU states and the 21 

Mediterranean basin countries, including all SEE countries (EC SEC [2009] 1309). 



• Level of reduction of pollution per investment cost 

• Environmental impact on water-related ecosystems/sensitivity of area 

• Compliance obligations of the country: timing issues 

• Ability to pay back loans/affordability/financial sustainability 

• Ability of recipient to co-finance 

• Readiness to guarantee loans (may differ between government and municipality) 

• Commitment of local authority/investor 

• National priorities have to fit with regional priorities (health and drinking water issues are covered by national 

priorities as well as regional priorities) 

Projects that have partial financing ensured have a high priority. The list is based on hotspot databases. Projects 

on hazardous substances and diffuse sources are exempt from the first screening of projects. The pipeline divides 

projects into four different categories, from pre-feasibility stage to nearly approved or approved financing for investments 

contributing to improvements in wastewater. In line with the new Water Framework Directive, emphasis 

is given to river basin management projects. 

Source: DABLAS website 


184 




Donor coordination frameworks 

Donor coordination can broadly be defined as joint support by donors to improve 

aid effectiveness and to foster capacity building in the candidate and potential 

candidate countries with a view to helping them to align to EU standards and 

to prepare for future accession (EC, DG Enlargement). Donor coordination is key 

to improving the effectiveness of aid. Maintaining well-organised coordination 

helps to ensure adequate and targeted financial assistance and prevents the overlapping 

of activities. This section provides an overview of existing donor coordination 

efforts, both regional and in country systems. 

Donor coordination conferences are organised by the European Commission, 

DG Enlargement Regional Programmes Unit in order to increase the visibility of 

donor coordination in SEE countries and Turkey. Two conferences on SEE and 

Turkey have been organised to date, in 2008 and 2009. 

A separate donor conference on Kosovo (as defined under UNSCR 1244) was 

held in July 2008. It brought together representatives from 37 countries and 16 international 

organisations. The meeting was called by the EC and the aim was to 

support socio-economic development in Kosovo (as defined under UNSCR 

1244). During the conference, participants pledged EUR 1.2 billion, of which the 

EU contributed EUR 508 million. Several projects on the PEIP lists were presented 

(DG Enlargement website; EC, 2008). 


• Regional cooperation is important for a number of reasons, including peace 

and stability. It is also a tool, and a prerequisite, for moving towards EU integration; 

tackling transboundary environmental pollution and infrastructure 

development; and creating a fruitful climate for investments in SEE. 

• Regional cooperation provides an opportunity for the cross-border sharing of 

knowledge and good practice. 

• IFIs and donors often take a regional approach in programming, which expands 

the investment market making it more interesting for investments.

TABLE 24: Tools and instruments available for donor coordination in SEE countries 



COUNTRY TOOLS AND INSTRUMENTS FOR COORDINATION COMMENTS 

Albania Integrated Planning System (IPS) All donors concerned. Ongoing 

National Strategy for Development and Integration (NSDI) system accessible online 

http://www.aidharmonisation.org.al (DFID-funded initiative). 

Bosnia and Donor mapping report and database All donors concerned. Updated 

Herzegovina http://www.donormapping.ba annually. 

Croatia Competencies are spread between several ministries. The EC, An appropriate source of 

jointly with the World Bank, still plays an active and important 

role in the field of donor coordination. 

information is the EC Delegation. 

Kosovo (as defined A new agency for donor coordination and European integration The EC liaison office is a major 

under UNSCR 1244) is to be created following the donor conferences 

in 2008 and 2009. 

source of information. 

The former Yugoslav Central donor database — software application for the All donors concerned, minor 

Republic of registration of projects aimed at reducing the overlapping problems in updating and format. 

Macedonia of assistance; analytical reports from the Central Donor 

Assistance Database. 

http://www.sea.gov.mk/Default.aspx 

http://cdad.sep.gov.mk/EN/search.aspx 

Montenegro Secretariat for European Integration Database containing 

information about donors (under development). 

Operation expected after 2009. 

Serbia Ministry of Finance ISDACON (database of donor projects) Difficulties when sorting 

http://www.evropa.sr.gov.yu/Evropa/PublicSite/index.Aspx information in the database due to 

the size of the database. 

Source: Adapted from the Western Balkans Investment Cooperation Platform, 

http://balkan-prototyp.test.yellow-lab.pl/Chapter+VI+-+Donor+coordination/VI_2_+In+Country+Systems+of+Coordination 


186 


Chapter 8 

Prioritisation of infrastructure projects — 

The PEIP lists 


188 


Dynamics of the PEIP lists of priority projects 

From its launch in late 2001, the core of the PEIP was the set of lists of priority 

environmental investment projects for each country. The first national PEIP 

lists were created in 2002, based on consultations with PEIP focal points from national 

ministries responsible for environmental protection. In each PEIP period 

(2001–2003, 2003–2005, and 2007–2009) the lists have been updated biannually, 

based on information provided by project proponents and national PEIP focal 

points. New priority projects have been added and some of the existing projects 

were removed from the lists — because of successful financing and/or implementation, 

because no progress was made, and/or because high-priority status was lost 

in the context of overall national environmentally related policies. 

Creating lists of projects that present a harmonised approach to investment 

planning is an important task for SEE countries. The absence of such an approach 

was one of the key barriers keeping the donor community from delivering 

assistance targeted to real environmental priorities, rather than randomly 

proposed project ideas. This harmonised approach provides SEE countries with 

guidelines on developing national lists of projects for compliance with the key 

investment-heavy directives. 

Drawing up and efficiently managing the project lists in order to obtain financing 

for priority projects is a complex process requiring high levels of skill and 

expertise among the national authorities. The exercise of developing a regional 

list of environmental priority projects was seen as an important step towards starting 

this process. The PEIP lists of priority environmental infrastructure investment 

projects are the response of SEE countries to the need to comply with the 

EU key investment-heavy directives. The role of the PEIP project lists is also to 

stimulate the process of implementing more infrastructure projects in the region. 

One practical result of the project lists is that priority project concepts can be 

shown to the donor community; on the other hand, the process launched and implemented 

by the PEIP, through the active participation of the SEE stakeholders, 

allowed for the transfer of expertise on developing and managing lists of projects 

for compliance. 

Officials from SEE ministries of environment were actively involved in all stages 

of developing the methodology and are responsible for the updating of the lists, in 

cooperation with the project team. The active involvement of SEE officials, and 

their approval of the lists, are indicative of their commitment to the process. 

The lists contain project concepts that: 

• have a regional impact on the environment in SEE; 

• are directly linked to the implementation of the EU environmental acquis; and 

• are sufficiently mature (there is adequate information available about the project) 

to be assessed for bankability and/or grant assistance. 

The total costs of projects should be regarded with a certain degree of caution, 

as there is no unified method for calculating investment costs in the region. 


190 


P R I O R I T I S AT I O N O F I N F R A S T R U C T U R E P R O J E C T S — T H E P E I P L I S T S 

FIGURE 25: Number of priority projects per country in 2007 and in 2009 

30 

25 

20 

15 

10 

5 

0 



Herzegovina 

2007 2009 

Source: REC national PEIP lists 

Croatia FYR 

Macedonia 

Kosovo (under 

UNSCR 1244) 

Montenegro 

Serbia 

This chapter presents the dynamics and trends of the national PEIP lists in the 

period 2007 to 2009 and explains the status of the lists and the reasons for projects 

being added or removed. The priority lists can be found in Annex 5. 

Project list dynamics 

Projects have been classified according to three sectors: waste, water and air. 

During the first two programme periods, there was a general decline in the number 

of air sector projects. This can be explained by the general assumption that such 

investment projects are primarily the responsibility of the industrial sector, where 

ownership issues have not been resolved due to the as yet incomplete privatisation 

process in the region; and also by the fact that national legislation in relation to 

IPPC and air quality has not yet been fully implemented. In most SEE countries, 

the relevant ministries and/or funds have project implementation units that usually 

specialise in either the waste or water sector, rather than air projects. Moreover, 

EU support is significantly stronger in the waste and water sectors, which 

belong to the public domain. In rare cases of fully privatised companies, in the form 

of multinational company takeovers, new owners implement air quality measures

FIGURE 26: Number of projects on the PEIP lists in 2007 and 2009 by sector 

80 

70 

60 

50 

40 

30 

20 

10 

0 

2007 2009 


at their own expense and do not therefore require assistance from national or international 

environmental institutions and funds. In the waste sector, the number 

of projects on the priority lists related to the remediation of hotspots also declined. 

These projects had a high level of national importance and, in many cases, have already 

been successfully implemented. 

Croatia moved forward in terms of both the number of projects with significant 

progress and the total funds secured for these projects. As an EU candidate country, 

most of the funds for project preparation came from the IPA. Funds for actual 

implementation came from the earlier Phare and CARDS programmes. These were 

supplemented mostly by earmarked state funds. The IPA accreditation process was 

challenging but provided experience that enhanced capacities for project preparation 

at national, regional and local level. 

Other countries relied mainly on bilateral donors and IFI funding, as national 

funds available for environmental investments are generally scarce. Among the IFIs, 

Kf W applied the practical and stimulative approach of the benchmarking and selfassessment 

of PUCs as a precondition for loans, which proved beneficial for project 

preparation and for increasing reform capacities, especially at the local level. 

Figure 25 shows that the biggest decrease in the net number of projects took 

place in Albania in the 2007 to 2009 period. During this period, six projects were 



Waste Water Air 


192 



FIGURE 27: Projects added to and removed from the national PEIP lists between 2007 and 2009 

35 

30 

25 

20 

15 

10 

5 

0 



Herzegovina 

Removed Added 


Croatia FYR 

Macedonia 

Kosovo (under 

UNSCR 1244) 

Montenegro 

Serbia 

merged due to new regional concepts; and a relatively high number of projects were 

removed as not feasible. Two projects secured funding for implementation and 

were therefore removed from the list. Bosnia and Herzegovina and Serbia show 

the highest net increase in the number of projects on the lists due to the fact that, 

in this period, the respective governmental units increased their activities in the 

area of technical assistance for the preparation of project documentation and prefeasibility 

studies for water sector projects. In the case of Croatia, the number of 

projects remained constant. A large number of projects were added, while an 

equally large number of projects were removed due to the streamlining of projects 

according to the Croatian Environmental Protection Operational Programme 

(EPOP 2007–2009). In Serbia, many projects were added but very few were removed 

in the 2007–2009 period. 

Figure 26 illustrates how the air sector, which was already less significant in and 

prior to 2007, had almost completely disappeared from the priority lists by 2009. 

The role of air sector projects is discussed above. 

The highest net increase in the number of projects between 2007 and 2009 is 

in the water sector. However, this does not imply that water has a higher priority 

than waste. All countries in the region are striving to achieve compliance in both

FIGURE 28: Number of projects showing major and minor progress between 2007 and 2009 

14 

12 

10 

8 

6 

4 

2 

0 


Herzegovina 

sectors equally. The reason lies in the fact that a high number of hotspot remediation 

projects (belonging to the waste sector) were removed in this period, and many 

municipal landfill projects were replaced by a smaller number of regional landfill 

projects, while the water sector is lagging behind in terms of regionalisation. 

Figure 27 illustrates that the highest “turnover” of projects was in Croatia. This 

is due to the fact that the EPOP for the 2007–2009 period was adopted in 2007 

and included two lists, one with 14 water sector projects and the second with 12 

waste sector projects. In consultation with the Croatian Ministry of Environmental 

Protection, Physical Planning and Construction it was decided to consolidate 

the PEIP lists with the EPOP list. As a result, the PEIP lists now contain all the 

projects on the EPOP list, as well as three additional projects on hazardous waste 

remediation. 

The highest number of additions was made in Serbia, followed by Bosnia and 

Herzegovina and Croatia. Bosnia and Herzegovina added almost exclusively water 

sector projects to the lists, while the additions were relatively balanced in Croatia 

and Serbia. There were slightly more additions in the water sector, due to the 

progress made in the waste sector in terms of regionalisation resulting in mergers 

of a number of waste projects. 



Some progress Significant funding secured therefore removed from lists 


Croatia FYR 

Macedonia 

Kosovo (under 

UNSCR 1244) 

Montenegro 

Serbia 


194 



FIGURE 29: Complete or significant funds secured by PEIP projects between 2007 and 2009 

EUR 

million 

250 

200 

150 

100 

50 

0 


Herzegovina 



Croatia FYR 

Macedonia 

Kosovo (under 

UNSCR 1244) 

Montenegro 

Serbia 

Project progress 

Figure 28 shows the number of successful projects that secured complete funding 

or funding sufficient to start project implementation and that were consequently 

removed from the lists. Projects that saw some progress in terms of the 

development of project documentation and/or that secured some additional funding, 

are also shown. In Croatia, the priority environmental infrastructure projects 

made the biggest progress in terms of securing full or significant financing, followed 

by Montenegro, Serbia and Albania. 

All projects that successfully secured complete funding were removed from the 

PEIP lists. Of the projects that received sufficient (in some cases conditional) funding, 

some were removed from the lists while others remained. Sufficient funding 

refers to adequate funds to start the construction/implementation of the project, 

or at least to start/complete one of the main phases of a project. Some countries applied 

the principle that a project should stay on the PEIP lists until 100 percent 

funds were secured. Other countries decided to remove projects that had secured 

suffient funding for a particular phase. 

Figures 28 and 29 show that Croatia made the biggest progress in completing 

project documentation and securing funds for priority environmental infrastructure 

projects. In terms of total funds secured per country, Montenegro and Bosnia

FIGURE 30: Number of projects removed from priority lists due to lack of development 

14 

12 

10 

8 

6 

4 

2 

0 


Herzegovina 


Croatia FYR 

Macedonia 

and Herzegovina follow after Croatia. However, in Bosnia and Herzegovina none 

of the projects secured total or sufficient funds. Instead, a large number of projects 

(seven) saw small increases in funding. In Montenegro, there were three projects 

that secured sufficient funding, and a relatively high number of projects (nine) that 

secured minor additional funding. 

In Bosnia and Herzegovina and the former Yugoslav Republic of Macedonia, 

none of the priority projects received complete funds for implementation and none 

made sufficient progress to be removed from the list. However, these two countries 

secured significant funds — Bosnia and Herzegovina EUR 78.1 million, and 

the former Yugoslav Republic of Macedonia EUR 53 million. In terms of total secured 

funds, the figures for Albania and Kosovo (as defined under UNSCR 1244) 

are EUR 25.8 million and EUR 18.6 million respectively. Figure 29 indicates actual 

progress in project maturity, which is directly reflected by the funds approved 

by donors and IFIs (and, to a lesser extent, by national governments). 

Figure 30 illustrates the number of projects excluded from the lists due to longterm 

lack of progress or as a result of losing their relative strategic importance from 

the government’s point of view. The largest number of projects removed from the 

priority lists as non-feasible or as no longer a priority can be observed for the former 

Yugoslav Republic of Macedonia and Croatia. In the case of Croatia, this was 

due to the consolidation of the PEIP lists with the EPOP list, where the idea was 



Kosovo (under 

UNSCR 1244) 

Montenegro 

Serbia 


196 



FIGURE 31: Relative PEIP project dynamics (percentage of total PEIP projects in each country, 2007–2009) 

% 

100 

80 

60 

40 

20 

0 



Herzegovina 

Setback Neutral Progress 


Croatia FYR 

Macedonia 

Kosovo (under 

UNSCR 1244) 

Montenegro 

Serbia 

to focus on a smaller number of top-priority projects rather than a large number of 

relatively important projects. 

While Figures 28, 29 and 30 show absolute numbers, Figure 31 shows the relative 

number of projects that saw some (minor or major) advancement, projects 

that saw no change (except occasional merges between projects) and projects that 

experienced setbacks, expressed in percentages. 15 Judging from the absolute numbers 

and relative dynamics, Croatia and Montenegro recorded the biggest net 

progress, while Kosovo (as defined under UNSCR 1244) and the former Yugoslav 

Republic of Macedonia made the least progress in the preparation and financing of 

priority environmental infrastructure projects. The former Yugoslav Republic of 

Macedonia also had the biggest absolute and relative number of projects with setbacks 

during the 2007–2009 period. Project setbacks in different countries included 

the removal of previously allocated national funds due to financial 

difficulties; the pending completion of negotiations between municipalities in the 

case of regional waste management centres; and unresolved location disputes, hence 

the need to find new locations and rework parts of project documentation. 

Figure 32 shows total funds only for projects that secured complete funding in 

the 2007–2009 period.

Geographical breakdown 

The successful PEIP projects are described in greater detail in this section. 

In Albania, the project “Management Plan for Urban Solid Waste of Shkodra 

City and the Construction of a Sanitary Landfill” received funds of EUR 4 million 

from the state budget in 2008. For the construction of the sanitary landfills in five 

municipalities, funds have been allocated from the national budget. Budget funds 

have also been directed to the construction of two wastewater treatments plants, in 

Tirana and Shkodra. For the Shkodra project, the development of a drinking water 

supply is included in the project fiche. The JICA financed the initial phase of the 

project, up to the detailed design phase. The Italian Cooperation Investment Fund 

is supporting the rehabilitation work for the Tirana network between 2001 and 

2010 with a soft loan of EUR 44.3 million. The Austrian Development Agency 

(ADA), Kf W and the Swiss State Secretariat for Economic Affairs (SECO) are financing 

for the first component, the development of a wastewater treatment plant 

in Shkodra, to the amount of EUR 15 million. Funding has not yet been received 

for the second phase that includes the wastewater treatment plant in Shkodra and 

the Shkodra-Zogaj area (EUR 25 million). 



FIGURE 32: Total value of projects removed from the PEIP lists in 2007–2009 due to securing complete financing 

EUR 

million 

180 

150 

120 

90 

60 

30 

0 

Albania Bosnia Croatia FYR Kosovo (under 

and 

Macedonia UNSCR 1244) 

Herzegovina 


Montenegro 

Serbia 


198 



TABLE 25: Summary of PEIP projects that secured complete financing in the 2007–2009 period 

COUNTRY PROJECT VALUE PROJECT SUMMARY 

(MILLION EUR) 

Albania 

Croatia 


4.0 Waste management plan and landfill construction for the city of Shkodra 

51.1 Mariscina county waste management centre (near Rijeka) 

57.8 Kastijun regional waste management centre (near Pula) 

13.5 Remediation of the red sludge lagoon of the former alumina factory (near Obrovac) 

5.2 Remediation and expansion of the Sagulje-Ivik municipal waste landfill 

(near Nova Gradiska) 

4.0 Establishment of the national network for permanent air quality monitoring 

in the Republic of Croatia 

31.1 Wastewater treatment plant in Slavonski Brod 


1.5 Wastewater treatment of Trepca Arana lead zinc mine 

3.5 Rehabilitation of the ash landfills of the Kosova A and B power plants: Transportation 

of ashes from existing landfills to the Mirash and Bardh mining sites 

1.5 Rehabilitation of the ash landfills of the Kosova A and B power plants: 

Complete recultivation of existing ash landfills 

1.5 Rehabilitation of the ash landfills of the Kosova A and B power plants: 

Hydroseeding method 

Montenegro 

7.5 Remediation measures for Mojkovac mining waste disposal site 

11.8 Closure and remediation of the existing waste disposal site and construction 

of a new Podgorica landfill, along with a recycling centre 

Serbia 

18.6 Upgrade and extension of wastewater treatment plant in Subotica 

2.0 Equipment supply for the recultivation and preservation of the ash 

and slag deposit in Kolubara 

In Bosnia and Herzegovina, four projects received significant amounts of 

funding, although not sufficient to begin the construction phase, thus they are still 

included on the PEIP lists. However, the overall amounts committed to projects on 

the PEIP lists in the 2007–2009 period are significant (at around EUR 78 million). 

For the water supply and wastewater treatment project of the city of Mostar 

and surrounding settlements, the conceptual design and feasibility study were completed. 

The preparation of the design for the main collector of the sewerage system 

was contracted thanks to a World Bank (GEF) grant of USD 2.8 million. Subject 

to the finalisation of the detailed design, the EIB will provide a loan to the amount

BOX 24: Upgrade and extension of the wastewater treatment plant in Subotica, Serbia 

of EUR 7.6 million. Three other projects advanced significantly. Technical assistance 

for water sector projects in 13 FBiH municipalities and technical assistance 

for water sector projects in 16 RS municipalities both secured conditional EIB 

loans (i.e. for those municipalities that can secure 50 percent from own funds). 

The project “Protection of the Drinking Water Reservoir for Tuzla Canton” secured 

an IPA grant and an EIB loan subject to 50 percent secured from own funds. 

In Croatia, total funds of EUR 164 million were secured for 12 projects, six of 

which secured sufficient funds to complete detailed project designs and/or commence 

with the construction phase (EUR 162.7 million). These six projects were 

therefore removed from the list. Four of the projects were from the waste sector 

and two from the water sector. At the same time, another six projects were removed 

from the PEIP lists as they were no longer considered as high-priority projects (following 

consolidation with the EPOP list discussed at the beginning of this chapter). 

The project for the waste management centre for Eastern Slavonia was 

dropped from the list as negotiations about forming a regional utility company 

failed and the project came to a standstill. The projects secured funding from different 

sources. Projects previously on the list secured the remainder of funding in 

the form of grants from Phare and CARDS, as well as various national and own 

funds (e.g. through Croatian Waters, the EPEEF, municipal budgets, and publicprivate 

partnerships) supplemented by loans (mainly from the EBRD). Six projects 

entered the IPA pipeline in the 2007–2009 period, three of which were approved 

(by September 2009) for regional/county waste management centres for Zadar 

county, for the Istria region, and for Sisacko-Moslovacka county. 



The upgrading and extension of the wastewater treatment plant will have significant regional benefits. Project implementation 

will significantly improve the ecological status of Lake Palic and that of Lake Ludos and the Tisa River, 

which receive waters from Lake Palic. The project will contribute to the prevention of groundwater pollution and 

to the improvement of cleaning technology with de-nitrification and de-phosphorisation. 

Financial setup: 

The total cost of the project is EUR 18.6 million. The project secured total funding through the following financial 

setup: 

• Own sources: EUR 3.9 million provided by the municipality of Subotica 

• Grants: EUR 5,670,159 provided by the European Agency for Reconstruction and the EBRD 

• Loans: EUR 9 million provided by the EBRD with subsidised interest 

Success factors: 

Good project documentation was provided, including financial and management plans. The PUC was managed 

properly and its project preparation capability was developed. A tariff policy and plan was developed, envisaging 

a gradual increase in tariffs. 


200 




In Kosovo (as defined under UNSCR 1244), four projects were removed as 

a result of securing sufficient funds to complete their respective feasibility studies 

(EUR 8 million in total) and additional funds to start implementation (EUR 10.6 

million in total). Three of the projects were from the waste sector and one from the 

water sector, although a common denominator in all four projects was hazardous 

waste (ash landfills and mine waters). The three projects from the waste sector are 

components of one larger project for the rehabilitation of the ash landfills of the 

Kosovo A and B power plants. The project was added to the PEIP lists in 2005 as 

a set of three projects that included the transportation of ashes from the existing 

landfills to the Mirash and Bardh mining sites; the complete recultivation of the existing 

ash landfills; and the installation of an ash wetting system (hydroseeding). 

Since the pre-feasibility studies for the whole set of projects were completed and 

adopted (at a total cost of EUR 5.5 million), the World Bank allocated an additional 

EUR 9 million and the projects are now in the implementation phase and 

have therefore been removed from the PEIP lists. A total of 700,000 inhabitants 

will benefit from the project. The water sector project on wastewater treatment at 

the Trepca Artana lead and zinc mine was introduced to the PEIP lists in 2005. 

Polluted wastewater from the mine is being discharged directly into the river Marec 

(and consequently into the rivers Sitnica, Ibar and Danube and the Black Sea). 

After the completion of the feasibility study (EUR 1.5 million), UNEP allocated 

an additional EUR 1.6 million for this project, which is now in the implementation 

phase and has thus been removed from the PEIP lists. A total of around 

100,000 inhabitants will benefit directly from project implementation. 

In the former Yugoslav Republic of Macedonia, as in Bosnia and Herzegovina, 

even though none of the projects are deemed to have made sufficient progress 

to be removed from the PEIP lists, significant funds have been committed for PEIP 

projects in the 2007–2009 period overall (around EUR 53 million), although none 

of the projects have been fully financed. For the project for the construction of a 

wastewater treatment plant for the town of Prilep, EUR 6 million were committed 

by the IPA and EUR 4.5 million from the state budget. The remaining EUR 11 

million should be secured from loans. The feasibility study for the project was completed 

in the 2007–2009 period. A full tendering procedure (second step) is currently 

in place for developing the detailed project design. The project for a sewerage 

network and wastewater treatment plant in Skopje has also progressed significantly 

in terms of project documentation and the securing of funds, as has the project for 

the modernisation of the municipal landfill through degasification and the utilisation 

of landfill gas in the Skopje (Drisla) landfill. 

In Montenegro, two waste projects successfully secured complete funding. The 

first phase of the project for remediation measures for Mojkovac mining waste disposal 

site has been completed, and the EUR 7.5 million second phase has secured 

sufficient funds from the state budget and assistance from the Government of the 

Netherlands. The remaining EUR 5.55 million are expected to be financed from 

the 2009 state budget. The first two phases of the EUR 11.78 million project for 

the closure and remediation of the existing waste disposal site and the construc-

tion of a new Podgorica landfill and recycling centre have been completed and the 

third phase (recycling centre) has secured significant financing from local and state 

funds and from the Spanish Government. The remaining EUR 4.3 million are expected 

to be financed from the state budget. For the project for the construction of 

a hazardous waste landfill in Montenegro (EUR 9.17 million), an application for IPA 

financing has been completed and submitted, thus it is highly likely to receive sufficient 

financing. Many projects that are still on the list also recorded progress between 

2007 and 2009. Four of these projects are from the waste sector and 10 from the 

water sector. These projects have secured a total of EUR 64.55 million to date. 

In Serbia, a total of EUR 22.7 million was secured for PEIP projects in the period 

2007–2009. In total, four projects saw progress, two of which were removed 

from the lists having successfully secured funding (EUR 20.6 million in total). The 

project for equipment supply for the recultivation and preservation of the ash and slag 

deposit at Kolubara (EUR 2 million from own funds) is a relatively small but environmentally 

important waste project. The other project removed from the lists was 

a major project in the water sector: the project for the upgrade and extension of the 

wastewater treatment plant in Subotica. A total of EUR 17.7 million was secured 

from EAR, the EBRD and municipal funds, and construction started in June 2009. 

The remaining EUR 0.9 million will be secured through PUC tariff collection. The 

project included the design of a new tariff system. The other two projects that saw improvements 

but remained on the lists are both from the waste sector: a project for the 

remediation of the Nis landfill, where additional funds were secured from the city 

budget; and a relatively new project on the PEIP lists, for a hazardous waste management 

facility (phase 1), for which EUR 3 million of the EUR 14 million required 

in total have been secured through the IPA to prepare a feasibility study. 


• Developing and updating the PEIP priority lists of projects has been a major 

learning exercise for the SEE countries. However, for many of the projects it is 

still difficult to obtain adequate data. 

• Those projects that made more rapid progress had good-quality project documentation 

from the outset, and PUC staff had actively participated in the 

preparation of the documents. 

• At national level, strong project preparation units are a driving force, as demonstrated 

in Croatia, Montenegro and Serbia. 

• The benchmarking and self-assessment of PUCs in order to improve their operational 

efficiency has proved to have a beneficial effect on project preparation 

and reform capacities. 

• The IPA application process provided project preparation capacity building at 

both local and national level. The proper inclusion of stakeholders from the 

beginning of the process ensured that any potential problems in relation to location 

or similar issues were resolved in time. 




202 


Chapter 9 

The way forward 


204 


Introduction 

The aim of this chapter is to summarise some of the main issues addressed in the 

report and to outline possible ways forward. The recommendations provide suggestions 

for possible directions. The precise modalities of actions and interventions 

are to be developed by the countries. 

Overall challenges for national governments 

Political 

The insufficient level of political support potentially jeopardises or delays the 

timely and efficient implementation of environmental infrastructure investments. 

In a context of competing priorities, the importance of environmental investments 

and their impact on quality of life may be overlooked. 

Way forward 

• There is a need for strong and persistent political will to reform the government 

systems and institutions responsible for environmental financing. Persistent 

efforts are needed for the whole spectrum of reforms, from institutional 

to legal and financial. 

• It is vital that governments realise, and capitalise on, the political and financial 

opportunities presented during the pre-accession period. During this period 

political will for accession is strong and there are many resources available for 

financial and technical assistance. 

Economic and financial 

The countries of SEE have relatively low levels of GDP per capita, and the proportion 

of GDP directed to environmental infastructure investments is far lower 

than the respective amounts spent in new member states. As a result, the overall 

available funds for environmental investments are insufficient and fall significantly 

below the amounts needed. In addition, the global economic crisis has affected investments 

in environmental infrastructure, and some infrastructure projects have 

been suspended. Low income levels also explain the high rates of bill non-payment 

and the low level of affordability of major infrastructure investments. The serious 

structural reforms needed to increase national income are not feasible. 


• The capacity of society to afford environmental investments and the priority 

given to quality-of-life needs must be clearly analysed, and environmental investments 

must be structured accordingly. 

• A higher proportion of the budget could appropriately be earmarked for environmental 

infrastructure investments in order to reach the levels of new member 

states, which have secured tangible flows of domestic financial resources. 


206 


T H E WAY F O R WA R D 


• Domestic budgetary funds are also of huge importance for providing national 

co-financing for projects, for which a big share is financed from EU or bilateral 

grants and/or IFIs. 

• Planning for approximation, including accompanying investments, should become 

even more important. 

• In a situation in which budgets are tight and needs are big, there is a need to 

streamline available resources in order to avoid overlapping and wasting resources 

between institutions and on low-priority projects. 

• Advantage should also be taken of the subsidies available, particularly from EU 

programmes and bilateral donors, which can ease affordability problems. 

Legal 

Although progress has been made during the last four years there is still a relatively 

low level of transposition of many of the key investment-heavy directives, 

and the level of transposition varies significantly between the candidate countries 

and the others. Some of the countries still lack approximation strategies. 


• Rushing transposition may lead to low-quality national legislation without 

proper planning of the necessary human and financial resources. The availability 

of approximation strategies is of great importance. These should define 

feasible transposition and implementation dates that are linked to the real legal 

and political situation. 

• It is important to adopt high-quality, functional legislation that will not require 

too much modification in the future. 

• The EU environmental acquis has significant financial, institutional and enforcement 

implications that must be planned for in advance in order to guarantee 

enforcement. 

• It is beneficial for countries to use existing guidance documents, such as the EC 

guidance document and the EC Handbook on the Implementation of EU Environmental 

Legislation. 

Enforcement 

The level of enforcement of environmental legislation in the region is low due to the 

weak capacity of the inspectorates and long years of a legal vacuum in the field of environment. 

Enforcement is no less important than transposition, as some of the new water 

or waste management systems would not function properly without a sufficient level of 

enforcement of the legislation. The links between different inspectorates and between 

the inspectorates, police and prosecution are weak. There is little awareness on the part 

of companies and citizens of the importance of compliance with environmental legislation, 

which makes the inspectors’ obligations even more difficult to implement.


• Inspectorates should be strengthened in terms of numbers, knowledge and 

equipment. Increased human resources capacity should be accompanied by increased 

financial resources and the provision of targeted training. 

• To increase efficiency, the reform of the inspectorates should be linked with 

overall judiciary reform, including improved cooperation with police, prosecution 

and the courts and improved knowledge of environmental issues on the 

part of these institutions. 

• Establishing a policy for strengthening the monitoring and reporting of enterprises 

(e.g. wastewater treatment plants and landfills) will facilitate the enforcement 

of and compliance with regulations. 

• Increased awareness on the part of citizens and businesses of the importance 

and benefits of enforcement would reduce resistance to change and increase 

overall compliance. 

Institutional development and capacity 

Environmental institutions in the region suffer from a number of weaknesses, 

including shortage of human capacity; lack of operational transparency and accountability; 

poor inter-institutional cooperation etc. One of the main weaknesses 

of SEE institutions is their relative fragmentation, which leads to scattered, and 

very often overlapping, responsibilities. Communication and coordination between 

institutions are also issues of concern, as are the relationships between central 

and local levels of governance. 


• The EU environmental acquis will require the overall strengthening of institutions. 

Human resources and expertise planning need to be improved and 

aligned to the newly acquired environmental obligations. 

• There is a need to streamline institutions and reduce their fragmentation in 

order to improve synergies and avoid overlapping. Simultaneously, it would be 

beneficial to improve mechanisms for coordination and communication between 

institutions at central level, and also between different administrative 

levels of government. 

• It would be beneficial to the countries to introduce a clear separation between 

policy and regulatory functions where it is missing, and to improve the transparency 

and accountability of institutions at national and local levels. 

• Countries may choose the option to establish environmental funds, if needed, 

but it should be clear that this should be done following the principles of transparency, 

autonomy and accountability. 




208 




Strategic planning and investment planning 

Although significant progress has been made in SEE countries in terms of drafting 

strategies and plans, in some countries approximation strategies, including investment 

planning, national environmental investment strategies and sectoral 

investment strategies are still missing, even though they are key to the absorption 

of IPA funding. A strategic and priority-based approach is essential in a context of 

limited available funding and competing priorities. 


• Creating a full strategic framework is of the utmost importance as it reflects 

the vision of the government, its approach and its priorities. 

• During the drafting of the framework it is essential to engage in wide stakeholder 

dialogue to ensure that the views of the different stakeholders are taken 

into consideration and balanced. 

• Project identification capacities have improved significantly, partly due to programmes 

and initiatives such as PEIP and DABLAS. Approaches to project 

identification need to be defined for any given sector. 

• Adopting lists of priority projects based on wide stakeholder consultation and 

transparent prioritisation, and thus creating a pipeline of projects, should be an 

integral part of planning, mainly because it limits opportunities for political 

interference and gives financers a clear signal as to the country’s priorities, allowing 

for optimal use of their funds. 

• Planning should also include an overview of the status of existing infrastructure 

and environmental investment needs; an overview of available and forecast 

national spending, IPA spending, and bilateral donor and IFI spending; 

an analysis of the institutional capacity for carrying out environmental investments; 

and a list of improvement measures. All relevant stakeholders should be 

involved in the process. The prioritisation of projects constitutes one part of 

the process. 

Coordination and communication 

The Infrastructure Project Facility provides technical assistance to the preparation 

of projects and directly supports municipal infrastructure investments 

through the grants channelled by the Municipal Window of the IPF. The 

DABLAS Task Force also provides support to project preparation and financing by 

managing a pipeline of water projects. 


• Regional cooperation is essential for a successful reform process and developing 

environmental infrastructure in the region. Transboundary issues need regional 

responses.

• Countries should take full advantage of the available regional cooperation 

frameworks and make full use of the opportunities presented through them. 

They offer a unique chance to improve project preparation capacities and to 

tackle transboundary environmental pollution. 

• Regional cooperation should not to be underestimated, since IFIs and donors 

often have a regional approach to programming. In addition, by adopting a regional 

approach the investment market expands and becomes more interesting 

for investments. 

Overall challenges at local and regional level 

Institutional setup and functioning 

Utilities in SEE are usually fragmented, overstaffed and underfinanced, as well as 

being highly dependent on the political context. The utilities in the region are caught 

up in a vicious circle of poor operational efficiency and service performance problems, 

which lead to inadequate cost recovery and a lack of own funds for infrastructure 

and service modernisation. Public utility companies are subsidised by the 

municipalities, and cross-subsidisation between different sectors is also common. 


• Institutional reforms of utilities are necessary in order to improve their efficiency 

by clarifying ownership and management responsibilities. In addition, 

increasing the autonomy of utilities would allow for more efficient operation, 

improved performance and access to market capital. 

• Corporatisation and more advanced types of reform such as public-private partnerships 

and partial or full privatisation could bring in the necessary expertise 

and capital to achieve the desired service quality and economic sustainability. 

• Utilities’ chances of success increase the more flexible they are and the more 

open they are to cooperating with other utilities through regionalisation and cooperation 

with the private sector. This is valid for both the public and private 

sectors. Regionalisation requires an appropriate institutional form to bring 

those who intend to use the regional facilities under one umbrella. It represents 

a serious challenge to municipalities that are traditionally used to solving their 

problems on their own. They should be assisted in this process and active mediation 

should be offered by national authorities. 

Investment planning and preparation 

As a result of decentralisation, local governments have legal obligations with 

respect to water and waste management that far exceed their financial capacities. 

The weak financial capacity of local governments is also due to the poor financial 

performance of water and waste utilities, which are far from achieving cost recov- 




210 




ery. Municipalities are also debt averse, as there are strict limitations on the amount 

of debt they can incur. Issues of affordability and willingness to pay also arise, as a 

result of relatively low income levels in some cases. Weak capacities for project 

preparation and a lack of local consultants also delay and hinder environmental infrastructure 

investments. 


• Local governments should focus on providing a clear, effective analysis of their 

needs; and on obtaining support, through available grants and soft loans, for 

what they (and the state) cannot afford. 

• There is a need to improve understanding of the principles behind marketbased 

economically efficient environmental investment projects. 

• Local authorities should embark on the fundamental reform of water and waste 

utilities to make them and their investment projects more attractive to sources 

of financing, particularly IFIs and other lenders. 

• There should be an ongoing effort to increase capacities for project preparation. 

This should be done by informing and training project proponents 

(mainly local governments, utilities and regional institutions) on key aspects of 

presenting environmental projects as affordable, credible investment projects. 

• It would be beneficial to local governments to take advantage of external project 

preparation assistance. All key stakeholders (local governments and utilities 

as well as non-governmental organisations and citizens) need to be involved 

to the appropriate extent in project planning.

Annexes 


212 


Annex 1 

Environmental institutions in SEE 

and their responsibilities 

Albania 

INSTITUTION RESPONSIBILITY 

National authorities 

Ministry of Environment, Forestry Develops strategies, drafts laws, sets basic tariffs in the waste, 

and Water Administration water and air sectors. 

(MoEFWA) 

Ministry of Public Works, Transport Manages a waste infrastructure investment programme. Defines the sites for 

and Telecommunications collection and treatment of waste. Collects statistics on the generation of urban and 

(MoPWTT) inert waste. Serves as competent authority for the implementation and enforcement 

of the Urban Waste Water Treatment Directive in collaboration with MoEFWA. 

Ministry of Economy, Trade and Drafts industrial waste management policy and collects statistics on generation, 

Energy (MoETE) recycling and disposal of industrial waste. 

Ministry of Health Enforces water-related directives and ensures drinking water quality in 

accordance with standards applied. Also provides information to the public. 

Institutes and agencies 

Institute of Public Health (IPH) and Monitors and controls quality of drinking water and air quality. 

State Sanitary Inspectorate (SSI) 

Institute of Environment and Fo- Provides technical support, services and consultation to the MoEFWA. 

restry National Council Secretariat Collects monitoring data. 

Regional and local institutions 

Municipalities Municipal waste management (collection, transport, treatment and final disposal) 

and water services. Prepare local and regional plans on waste management, suggest 

the appropriate location for landfills and define waste collection and landfill fees. 

Water supply enterprises Delivery and treatment of drinking water. 




Ministry of Foreign Trade and Coordination of waste and water management activities and enforcement 

Economic Relations (MoFTER) of investment-heavy waste directives of both entities and of Brcko District. 

Federal Ministry of Physical River basin management. 

Planning and Environment 

Federal Ministry of Agriculture, River basin management. 

Water Management and Forestry 

Ministry of Environment and Waste management at entity level, including hazardous waste. 

Tourism, FBIH and cantonal 

environment ministries 


214 

A N N E X E S 

A N N E X 1 

Bosnia and Herzegovina (continued) 


Ministry of Physical Planning, Civil Waste management at entity level, including hazardous waste. 

Engineering and Ecology of 

Republika Srpska and Utility 

Department within the 

Government of Brcko District 

Ministry of Agriculture, Forestry River basin management. 

and Water Management of Republika 

Srpska, Directorate for Water 


Institute for Public Health Enforcement and implementation of Drinking Water Directive, including monitoring 

(Ministry of Health) and control of drinking water quality. 

Hydro-meteorological Institute in Air quality monitoring in BiH 

FBiH and Republika Srpska 

Statistical agencies Collect and manage waste-related statistics, including waste indicators. 

Water agencies River basin management, in cooperation with the ministries. 

Environmental inspectorates Waste management, collection, recycling and landfill inspection. 


Municipalities Organise waste management services, particularly through the departments 

of communal affairs/utilities. 

Municipalities’ PUCs or cantons’ Meeting requirements of Drinking Water Directive as well as provision of drinking 

PUCs and local health institutions water supply and control of drinking water quality. 

Croatia 



Ministry for Environmental River basin management and waste management at national level, including 

Protection, Physical Planning and hazardous waste. Collects waste management and collection data, prepares waste 

Construction (MoEPPC) management reports, develops waste-related indicators. Responsible authority for 

assessing air quality at the state level and LCP. Assistance to project preparation 

and IPA applications. 

Ministry of Regional Development, River basin management. Issues concessions for water intake and use. 

Forestry and Water Management, 

State Water Directorate 

(MoRDFWM) 

Ministry of Agriculture, Fisheries Plans for Nitrates Directive. 

and Rural Development 


Croatia (continued) 



Environmental Protection Agency Assists the waste sector in the preparation of technical documentation and IPA 

applications. Responsible for inventory of landfills and dumpsites with names, 

location, type of landfill, priority for closing and planned date. Responsible authority 

for assessing air quality at the state level and LCP. 

Environmental Inspectorate Inspection and control of waste management practices. 

Croatian Waters (CW) State agency responsible for water management and assisting water sector 

in project preparation and IPA applications. 

Ministry of Health and Social Monitoring drinking water quality. 

Welfare (MHSW) through CNIPH 

(licensed laboratories) 

Environmental Protection and Encouragement of waste prevention and reduction, waste treatment and use of 

Energy Efficiency Fund valuable properties of waste. Assistance to project preparation and IPA applications. 


Municipalities Organise waste and water management services at local level. Assess air quality. 

Public water utilities Drinking water supply, sewerage and water treatment and control of drinking 

water quality. 




Ministry of Environment and Development of sectoral policies and strategies. Monitoring of landfills. Deals with 

Spatial Planning (MESP), issues related to IPPC permits. 

Department of Environment, 

Division of Waste 

Ministry of Health Drinking water quality. 

Ministry of Economy and Finance Monitors publicly owned enterprises in order to ensure accountability and trans 

parency in their operations. 


Kosovo Environmental Protection Creation and maintenance of database and information system on environment. 

Agency 

Water and Waste Regulatory Serves as independent economic regulator for water and solid waste services, 

Office including setting and approving service tariffs. 

Environmental Inspectorate (MESP) Enforcement of environmental and waste-related legislation. 

National Institute of Public Health Drinking water quality and implementation of the Drinking Water Directive. 

of Kosovo 


Municipalities Provide waste and water services. Responsibility is to be implemented through 

service agreements. 

SHUKOS, association of regional SHUKOS unites its member companies, promotes their joint interests and provides 

companies responsible for water member companies with advice relating to their work. 

supply and sewage in Kosovo 

A N N E X E S 

A N N E X 1 


216 

A N N E X E S 

A N N E X 1 




Ministry of Environment and Overall process of environmental approximation. In particular, it develops strategies, 

Physical Planning drafts laws, sets basic tariffs and controls enforcement of investment-heavy directives. 

From 2010, it will be responsible for water protection issues and water inspection 

services in line with the new Water Act. Holds overall competence regarding air quality 

policy and measures. 

Ministry for Agriculture, Forestry River basin management. 

and Water Management 

Ministry of Economy Hazardous waste management and utilisation. 

Ministry of Health Health aspects associated with air quality. 

Ministry of Transport and Overall responsibility for the maintenance and rehabilitation of water delivery 

Communication infrastructure. 


Municipalities Environmental services management and inspection activities. Municipalities are 

entitled to establish public enterprises to provide these services. 

Local self-government units Deal with implementation of certain parts of the law, such as developing annual programmes 

for air quality management at local level in most polluted agglomerations. 

Regional public water supply Responsibility for managing regional systems for extraction, delivery and treatment 

enterprises (RPWSE) of drinking water. 

Montenegro 



Ministry of Environmental Protec- Main institution responsible for waste management activities in Montenegro. 

tion and Spatial Planning (MoSPESP) Communal infrastructure and provision of public funding for water infrastructure 

improvement. Has overall responsibility for air policy. 

Ministry of Agriculture, Forestry River basin management. 

and Water Management and State 

Hydro-meteorological Service 

Ministry of Health and Social Drinking water quality and compliance with the requirements of investment-heavy 

Welfare water directives. 

Project Implementation Unit Established in 2008 with the goal of providing support to local self-governments for 

the preparation of project documentation, and to assist in securing financing from 

international organisations and financial institutions. 


Environmental Protection Agency In 2008, took over from the MoSPESP the functions related to permit issuing, 

inspection supervision, monitoring and reporting. 

Regional or local institutions 

Municipalities and public utility Local self-governments are in charge of developing and applying the waste 

companies management policy at local level. Waste collection, transportation and disposal 

activities are organised within municipal public utility companies. 

Vodacom Regional joint service company established by the municipalities of Herceg Novi, 

Kotor, Tivat, Budva, Cetinje and Bar in cooperation with the former Ministry 

of Tourism and Environmental Protection. 


Serbia 



Ministry of Environmental and Policy making in the field of waste management. 

Spatial Planning (MoESP) 

Ministry of Agriculture, Forestry Overall responsibility for the water sector. 

and Water Management 

(MoAFWM) 

Water Directorate (WD, Assists the water sector in project preparation and IPA applications. Finances technical 

within MoAFWM) assistance for project preparation and (partly) actual construction of infrastructure. 

Project Implementation Unit Designed to assist the waste sector in project preparation and IPA applications. 

(PIU, within MoESP) 

Directorate for Protection of Overall responsibility for air quality and for the enforcement and implementation of 

Resources, Unit for Air certain parts of the law. 

Protection (MoESP) 

Ministry of Health Ensures quality of drinking water consistent with water standards applied and takes 

overall responsibility for drinking water quality control and monitoring. 


Environmental Protection Agency Development of the Environmental Information System. 

(SEPA) 

Recycling Agency Currently in transformation process (will become part of different units of the MoESP). 

Jaroslav Cerni Institute for the Assists the WD by preparing baseline studies. 

Development of Water Resources 

Environment Protection Fund Assists the waste sector in project preparation and IPA applications. Finances technical 

assistance for project preparation and (partly) actual construction of infrastructure. 

Regional or local institutions 

Municipalities Environmental management and inspection responsibilities. 

Secretariat for Environmental Bears the same responsibilities as MoESP but for the province of Vojvodina. 

Protection and Sustainable 

Development of Vojvodina Province 

Public utility companies Waste and water management at municipal level. 

Srbija Vode public company Maintenance of regional water infrastructure (flood management etc., not municipal 

infrastructure). 

Vojvodina Vode public company Maintenance of regional water infrastructure (flood management etc., not municipal 

infrastructure) for the Vojvodina region. 

A N N E X E S 

A N N E X 1 


218 

A N N E X E S 

A N N E X 2 

Annex 2 

Key government functions 

under the water acquis 

POLICY WATER ACQUIS 

Develop laws, regulations Harmonise national laws, regulations 

and policy instruments and policies with the Water Framework Directive 

Develop environment-related Prepare National Water Strategy and 

plans and strategies municipal finance strategies 

Consolidate environmental Report on water utility coverage, treatment quality; costs; performance; competing 

information and data for 

government decisions 

uses in water basin; and aggregated water basin monitoring data. 

Lead environmental coordination Establish water basin committee membership; convene stakeholders to consider new 

across other government functions laws and policies 

Lead coordination of government Represent the government on international river basin commissions; ensure fulfilment 

actions under international 

environment treaties 

of cooperative agreements. 

Develop programmes to promote Publish water quality data and water permit violations; initiate beach blue flag 

environmental awareness programmes. 

Regulatory (as decentralised as possible) 

Assess environmental impacts 

(administrative level determined 

through scoping and legal 

provisions) 

Assess impacts on waters within EIA process 

Issue environment-related permits E.g. water aspects of IPPC permit; water use/abstraction permits; 

water discharge permits. 

Monitor (ambient environment Monitor (regular and spot checks) surface water and groundwater quality, biological 

and facilities) stress indicators, and water levels. 

Carry out inspections (administ- Conduct site visits to verify construction permit compliance in waterways and facility 

rative level typically corresponds 

to the same level of issued permit) 

discharges; water extraction. Respond to complaints/spot check permits. 

Environmental enforcement Prosecute or pursue corrective action 

(administrative level determined for toxic waste discharge to waters; excessive sediments from work in waterways; 

according to classification of the 

facility involved and severity of 

the issue) 

un-permitted extraction or discharge. 

Consolidate environmental 

information/reporting 

Aggregate and report water data to meet EU reporting and information policies 



Albania 

Annex 3 

Strategic documents providing guidance 

for infrastructure investment in the water 

and waste sectors in SEE countries 

General 

Environment Sector and Cross-Cutting Strategy (2007) 

National Strategy for Development and Integration 

Waste Sector 

National Waste Management Plan (1996) 

In process: 

Amendment of National Waste Management Plan (EU CARDS support) 

Water Sector 

National Water Strategy (1997) 

Water Supply and Wastewater Sector Strategy (2003) 

Rural Water Supply and Sewage Strategy (2004) 

Code for Drinking Water Supply and Sewage (regulates legal relations between consumers and service providers) 


General 

Federal Strategy for Environment Protection 

National Environmental Action Plan (2003) 

Priority Action Plan with project abstracts (2004) 

Public Investment Programme (PIP) 

Poverty Reduction Strategy Paper (PRSP) 2004–2007 (2004) 

Waste Sector 

Solid Waste Management Strategy (2000) 

In process: 

Strategy for Water Management (FBiH and RS) expected in 2010 

Water Sector 

Water Protection Plan, strategic plan for the implementation of the EU UWWT Directive 

In process: 

Water Management Plan 

A N N E X E S 

A N N E X 3 


220 

A N N E X E S 

A N N E X 3 

Croatia 

General 

National Environmental Strategy and National Environmental Action Plan (2002) 

National Strategy for Sustainable Development (2009) 

National Programme for the Adoption of the Acquis (2006) 

Plan for Setting up Necessary Administrative Capacities at Regional and Local Level for Implementing the Environmental 

Acquis (2008) 

Environmental Protection Operational Programme (IPA) 2007–2009 

Waste Sector 

National Waste Management Strategy (2005) 

National Waste Management Plan for the period 2007–2015 (2007) 

County waste management plans 

In process: 

Waste Management Implementation Plan 

Water Sector 

National Water Management Strategy (2008) 

Air Sector 

Air Quality Protection and Improvement Plan for the period 2008–2011 


General 

National Environmental Action Plan (2006) 

National Strategy on Environmental Investments (2009) 

National Environmental Approximation Strategy (2008) 

National Programme for the Adoption of the Acquis (2005) 

National Strategy for Regional Development (2009) 

Public Investment Programme (annually updated) 

Plan for Institutional Development for Strengthening Capacities of Environmental Institutions (2009) 

In process: 

National Strategy for Sustainable Development (expected to be adopted by the end of June 2009) 

Strategic Coherence Framework (2007–2009) approved by the EC 

Operational Plan for the Environment as part of the IPA (2009–2013) under negotiation with the EC 

Waste Sector 

National Waste Management Strategy (2008) 

National Waste Management Plan (2008–2014) 

Water Sector 

In process: 

Water Master Strategy 


Montenegro 

General 

National Environmental Policy (defines framework policy for overall aims in the field of environment) (2008) 

National Programme for the Integration of Montenegro into the EU for 2008–2012 

Waste Sector 

Waste Management National Policy (2004) 

Strategic Master Plan for Waste Management (2005) 

Waste Management Plan for 2008–2012 period (2007) 

Water Sector 

Strategic Master Plan for Sewerage and Wastewater in Central and Northern Region (2005) 

Strategic Master Plan for Wastewater Collection and Treatment in Coastal Regions and the Municipality of Cetinje (2005) 

Coastal Region Wastewater Management Study 

National Sustainable Development Strategy and Action Plan (2006) 

Serbia 

General 

National Environmental Strategy (2004) 

National Sustainable Development Strategy (2008) and sectoral policies 

National Investment Programme (2006) 

In process: 

National Environment Protection Programme 

National Strategy on the Sustainable Use of Natural Resources and Goods (starting phase) 

Waste Sector 

Waste Management National Policy (2004) 

Strategic Master Plan for Waste Management (2005) 

Waste Management Plan for 2008–2012 period (2007) 


General 

Environmental and Sustainable Development Strategy (2004) 

Environmental Action Plan 2006–2010 (2006) 

Environmental Action Plan for Approximation with EU Standards (2007) 

In process: 

New National Waste Management Strategy (revision phase) is being drafted and will be submitted for adoption procedure 

in 2009 

Strategy and Action Plan for Nature Protection (2006–2010) 

Waste Sector 

In process: 

National Waste Management Strategy (to be finalised in 2009) 

Action Plan for Waste Management 

Water Sector 

Wastewater Treatment Strategy (2004) 

A N N E X E S 

A N N E X 3 


222 

A N N E X E S 

A N N E X 4 


Annex 4 

Selected REC publications in the field 

of environmental infrastructure investments 

and financing 

• Municipal investments in water and waste infrastructure in South Eastern Europe 

(2007) 

The report analyses the progress achieved by SEE countries in the process of 

municipal infrastructure development for the period 2001 to 2005. It outlines 

the key issues faced by the local and national actors and proposes recommendations 

for overcoming these obstacles. 

• Investing in the Environment as a Way to Stimulate Economic Growth and Employment. 

How Environmental Projects Contribute to Achieving Lisbon Agenda 

Goals (2007) 

The report collects, analyses and discusses existing evidence of the contribution 

made by environmental projects to the two objectives of the Lisbon Strategy: 

economic growth and employment. It is also intended to help member 

states in designing Cohesion Policy–funded projects that achieve the Lisbon 

Strategy objectives and, at the same time, ensure environmental sustainability. 

• Environmental Financing Trends in South Eastern Europe: 2001–2005 (2007) 

The report presents trends in environmental financing in SEE between 2001 

and 2005 and proposes recommendations for decision makers in the region for 

improving the effectiveness of environmental financing from domestic and external 

financing sources. 

• Financial mechanisms providing co- and pre-financing for EU funded environmental 

projects (2007) 

The publication provides an overview of co- and pre-financing sources for EUfunded 

environmental projects in EU-27 countries. It gives an overview of public 

pre- and co-financing schemes; the role of international financing 

institutions (IFIs) in providing co-financing and bridging funds; and includes 

a review of the involvement of the commercial banking sector in financing environmental 

projects. 

• Environmental Infrastructure Investment Project Preparation in the Water Sector. 

Available Sources of Finance for Water Infrastructure Projects in the former Yugoslav 

Republic of Macedonia (2006) 

The publication is based on the specific needs and experience of the former Yugoslav 

Republic of Macedonia in preparing wastewater-related environmental 

investment projects. It covers issues such as the strategic planning of investments, 

feasibility studies, project development and funding. 

• Establishing an Environmental Fund, Practical Aspects for Decision Makers and 

Fund Managers (2006)

The publication is based on key themes discussed at a training on the establishment 

of an environmental fund in Montenegro. The report reviews all the 

key aspects of environmental fund operations that should be taken into account 

when establishing an environmental fund or any other environmental expenditure 

programme. 

• Environmental Projects Financed by EU Funds. Selected Experiences and Challenges 

(2006) 

The aim of this report is to provide environmental authorities with an overview 

of best practices from old member states on preparing environmental projects 

financed by EU funds and to provide an overview of the first experiences and 

challenges of the new EU member states in programming and implementing 

EU-funded projects. 

• Investing in the Local Environment: Assisting Municipalities in South Eastern 

Europe to Access Environmental Financing (2003) 

This report is the final outcome of a two-year pilot project undertaken to support 

capacity in South Eastern Europe (SEE) to prepare environmental investment 

projects. The project was a unique effort, as it targeted simultaneously 

local governments and local consulting firms, who must cooperate if environmental 

investments are to succeed. 

A N N E X E S 

A N N E X 4 


224 

A N N E X E S 

A N N E X 5 

Annex 5 

PEIP priority project lists 

Albania 

PROJECT TITLE PROJECT DESCRIPTION TOTAL COST OF 

PROJECT (EUR) 

Waste projects 

Management plan and construction of landfill Reduction of pollution of river Shkumbini and Adriatic 2.5 million 

for urban solid waste in Elbasan Sea. Decrease of transboundary air pollution. 

Population benefiting directly from project 

implementation: 102,265. 

Urban waste management and construction of Reduction of pollution of groundwater and surface 2.5 million 

sanitary landfill in the city of Fier waters and of the Adriatic Sea. 



Works for the construction of the sanitary Reduction of water pollution of the Adriatic Sea. 6 million 

landfill for Vlora Population benefiting directly from project 


Feasibility study and environmental rehabilitation 1.1 million 

of the historic hotspot of the former Rubik 

Metallurgical Plant 

Urban waste management and construction Reduction of water pollution of Ohrid Lake 5 million 

of sanitary landfill in Korca Region and Devolli River. 

Urban waste management and construction Reduction of pollution of River Osumi. 2.5 million 

of sanitary landfill in city of Berat 

Urban waste management and construction Reduction of pollution of River Drino. 2.5 million 

of sanitary landfill in city of Gjirokastra 

Management plan and the closure of the Protection of the soil, surface waters and groundwater, 2.5 million 

existing landfill for urban solid waste in Durres landscape restoration in the area of Durres. 

Population benefiting from project 



FUNDING PROJECT PROGRESS 

NEEDS (EUR) 

0.3 million Detailed engineering design completed. 

Feasibility study financed by the state budget to a cost of EUR 0.52 million. To be started in 2009. 

The project is included in the Mid-term Budget Plan 2009–2011 and planned to start in 2011. 

EUR 2.2 million is secured from the state budget. 

0.3 million Detailed engineering design completed. 

Feasibility study financed in 2009 by the state budget (EUR 0.5 million) 

The project is included in the Mid-term Budget Plan 2009–2011 and planned to start in 2011. 

EUR 2.2 million secured from the state budget. 

5.83 million Project is listed in the priorities of the Mid-Term Budget Plan 2009–2011 

and is part of the 2008 IPA/EU investment funds. 

EUR 0.164 million secured from state budget for feasibility study. 

Another EUR 1.5 million budget support is under discussion. 

The MPTWW is in discussions with the Regional Council of Vlora about the location of the landfill. 

N/A Listed as a high-priority project of the Ministry of Environment. 

Project is funded by CARDS 2005. 

Feasibility study is completed. 

Implementation works were started. 

Project deadline is November 2009. 

3.6 million Negotiations under way with KfW for the design of the project. 

Project is included in the Mid-Term Budget Plan 2009–2011. 

EUR 1.4 million secured from state budget for the first phase 

Waste management project implemented in Korca region with SIDA support. 

0.3 million Project is part of the Mid-Term Budget Plan 2009–2011. 

Feasibility study planned in 2009. 

EUR 2.2 million for the first phase secured from the state budget. 

0.3 million Project is part of the Mid-Term Budget Plan 2009–2011. 

Feasibility study planned in 2009. 

EUR 2.2. million for the first phase secured from the state budget. 

0.3 million The project is included in the Cross-Cutting Strategy on Environment (2007). 

The project is planned to enter into the implementation phase by 2011 and to be completed by 2013. 

EUR 2.2 million secured from the state budget. 

A N N E X E S 

A N N E X 5 


226 

A N N E X E S 

A N N E X 5 

Albania (continued) 


PROJECT (EUR) 

Water projects 

Construction of a common sewerage water Reduction of pollution of Tirana River and the 246 million 

treatment plant for Tirana and surroundings Adriatic Sea. Currently sewage is directly discharged 

into the Tirana River. 

Drinking water and wastewater for Shkodra The project will solve/mitigate the pollution of Lake 

Shkodra, the Buna River and the Adriatic Sea; protect 

biodiversity in the area; and develop tourism. 

40 million 

Improvement of the wastewater system and 

construction of a WWTP in Vlora (phase II) 

Reduction of pollution in the Adriatic Sea. 7 million 


PROJECT TITLE 


PROJECT DESCRIPTION TOTAL COST OF 

PROJECT (EUR) 

Construction of landfill site for a group of Reduction of pollution of water systems through 5 million 

municipalities in Zvornik elimination of illegal dumpsites. 


Water supply and sewerage system in FBiH Reduction of pollution of the Adriatic Sea and USD 10.5 million 

(city of Mostar) transboundary pollution of the River Neretva. 



Construction of wastewater treatment system Reduction of transboundary pollution of the river 3.6 million 

for the city of Bileca Trebisnica, the source of drinking water for parts 

of BiH, Croatia and Montenegro. 

(2.5 million secured) 

Protection of Modrac water reservoir as the main Decreased pollution of the lake and improvement of 43.1 million 

source of water for the population and industry its recreation and tourism characteristics. (10.5 million 

of Tuzla Canton Population directly benefiting from the project: 150,000. secured) 

Construction of sewerage system and wastewater Reduction of downstream pollution and improvement 1 million 

treatment plant for Kljuc municipality of water quality. (0.38 million 

Estimated population covered: 6,000. secured) 



NEEDS (EUR) 

85.8 million The detailed design for the project is completed. 

In October 2009, the MoPWWT signed a contract for a EUR 115.9 million investment 

from the Japanese investment fund of JICA. The project design 

and feasibility study (app. EUR 9.9 million) will be implemented in 12 months. 

The remaining EUR 106 million will allocated for the construction of the wastewater collection system 

for the whole city of Tirana. 

EUR 44.3 million is given for the rehabilitation works and support to the Tirana network 2001–2010 

through the Italian Cooperation Investment Fund in the form of a soft loan by the Italian Government. 

25 million The project is progressing and financial support for the WWTP is a high priority. 

The feasibility study has been completed. 

Based on the FS, the project is being supported by KfW, ADA and SECO Swiss with EUR 15 million. 

7 million The project was submitted to IPA 2009. 


NEEDS EUR) 

0.937 million Project design and feasibility study completed. 

Currently seeking international assistance (loans) for planned EIA study. A combination of grant 

and loan is foreseen. 

Main project for the location of Crni Vrh has been prepared, financed by the Municipality of Zvornik. 

7.6 million Feasibility study, detailed design and tender procedure for construction activities were finalised in 2008. 

+ USD 2.8 million Contracted preparation of the main design for the main collector of the sewerage system 

from the GEF grant. 

The EIB will provide EUR 7.6 million. The WB provides USD 2.8 million through the GEF funds. 

0.3 million Feasibility study is prepared. It envisages upgrading and extension of water supply network 

and strengthening of utility company. 

GEF financing secured for the WWTP. The expected GEF grant is EUR 0.84 million. 

32.6 million A combination of grant and loan is foreseen. Negotiation on EIB loan 

and financing is ongoing. 50 percent will be secured through local contribution. 

Financing of the main collector for the city of Zivinice is ensured through IPA 2008. Remaining funding 

needs will be provided by EIB. 

Funds are secured from EIB for consulting services for the preparation of a programme of measures 

for integrated water resources management around Modrac reservoir. 

0.62 million The feasibility study has been completed. 

A N N E X E S 

A N N E X 5 


228 

A N N E X E S 

A N N E X 5 

Bosnia and Herzegovina (continued) 


PROJECT (EUR) 

Water projects (continued) 

Water and sanitation FBiH (includes 16 Reduction of water pollution, improvement in water 2.75 million 

municipalities). IPF technical assistance. quality in 16 municipalities. 

Water and sanitation FiBH Reduction of water pollution, improvement of water 121 million 

(includes 16 municipalities) quality in 16 municipalities 

Collection, treatment and disposal of Protection of the water resources in municipalities of 60 million 

wastewaters in Banja Luka Laktasi, Gradiska and Srbac, and reduction of pollution 

of the river Sava. Treatment facility will serve 

200,000 inhabitants. 

Collection, treatment and disposal of waste Protection of the water resources of the municipality 5 million 

waters in Bjeljina. Phase II – Collector and 

treatment facility 

of Bjeljina and reduction of pollution of the river Sava. 

Collection, treatment and disposal of waste Protection of water resources of the municipality of 9 million 

waters in Prijedor Prijedor and of Novi Grad and pollution reduction 

of the rivers Sana, Una and Sava. Treatment facility will 

serve 70,000 inhabitants. 

Protection of the Bocac reservoir and the source Protection of the water supply source of Banja Luka 12 million 

of Banja Luka water supply system and municipalities of Laktasi and Celinac. 



Collection, treatment and disposal of wastewaters Protection of the water supply source in the coastal 3 million 

in Trebinje area of Dubrovnik and settlements in lower Neretva. 

Extension and enlargement of capacity 

of the existing WWTP. 

Collection, treatment and disposal of waste Intermediate pollution reduction in the Visegrad 4 million 

waters in Sokolac reservoir. WWTP will serve app. 10,000 inhabitants. 

Collection, treatment and disposal of waste Treatment facility and collector will serve 5 million 

waters in Rogatica app. 10,000 inhabitants. 

Plava voda water supply project Water supply for cities of Travnik, Novi Travnik, 35 million 

Vitez, Busovaca and Zenica (5 million from IPF 

Municipal Window) 

Sarajevo sewerage network and WWTP Reduction of water pollution, improvement of the 64.26 million 

reconstruction and upgrading water quality in Bosna River. 

Konjic municipality WWTP construction Reduction of water pollution and improvement of the 1.2 million 

(within the GEF project “Neretva and Trebisnjica 

Water Management Project”) 

water quality in Neretva River. 

Ljubuski municipality WWTP reconstruction Reduction of water pollution and improvement 0.56 million 

(within GEF project “Neretva and Trebisnjica 

Water Management Project”) 

Air projects 

of the water quality in Neretva River. 

National air quality monitoring Recognition of air quality problems and improved 

monitoring of air pollution sources. 

1.244 million 



NEEDS (EUR) 

EIB finance contract signed in August 2008, implementation is ready to start. 

The EIB loan also represents TA support for implementation for the 16 municipalities. 

60 million Some municipalities from the list have secured funds, others will try to find support from other IFIs. 

When funds are provided for an individual municipality the project implementation will start. 

50 percent of financing will be EIB loan and 50 percent local contribution. 

60 million Financing is not secured. 






5 million Financing not secured. 

5 million Special-purpose company established as a public company by the municipalities of Travnik and Zenica. 

EUR 5 million has been allocated from the IPF Municipal Window 

50 million This project is listed on the water quality management (WQM) project list (EC CARDS). 

20 percent of financing will be provided through the long-term local contribution. 

0.6 million 50 percent will be provided through the GEF funds (WB) and 50 percent will be local contribution. 

0.25million 50 percent will be provided through GEF funds (WB) and 50 percent will be local contribution. 

1.174 million Combination of grant and loan is foreseen. 

Involvement of private sector is foreseen. 

A N N E X E S 

A N N E X 5 


230 

A N N E X E S 

A N N E X 5 

Croatia 


PROJECT (EUR) 


Regional waste management centre for county Population benefiting directly from project 31.4 million 

of Zadar implementation: 160,000. (19.4 million secured) 

Waste management centre Population benefiting directly from project 30 million 

for Sisak-Moslavina county implementation: 185,000. (18 million secured) 

Remediation and closure of the Sovjak pit, Population benefiting directly from project 25 million 

Primorje-Gorski Kotar county implementation: 200.000. (5 million secured) 

Remediation of the asbestos-polluted Population benefiting directly from project 2,526 million 

Mravinacka kava site implementation: 80,000. (2.5 million secured) 

Waste management centre for the county of Population directly benefiting from project 28 million 

Dubrovnik-Neretva implementation: 123.000. (16 million secured) 

Waste management centre for North West The project integrates municipalities in four counties. 73.3 million 

Croatia Population benefiting from project (49.8 million secured) 


Regional waste management centre for the Population benefiting from project 58.7 million 

county of Split, Dalmatia implementation: 465,000. (31.5 million secured) 

Remediation of Botovo hazardous waste 8.5 million 

disposal site (7.4 million secured) 

Remediation of Kastelanski zaljev hazardous 10 million 

waste disposal site 

Development of regional waste management Population benefiting directly from project 26 million 

centre for Karlovacka county implementation: 141,000. (14 million) 

Development of regional waste management Population benefiting directly from project 28 million 

centre for Brodsko-Posavska county implementation: 276,000. (16 million secured) 

Development of regional waste management Population benefiting directly from project 23.9 million 

centre for Viroviticko-Podravska county implementation: 93,000. (11.9 million secured) 



NEEDS (EUR) 

12 million Project is co-financed by local budget, Environmental Protection and Energy Efficiency Fund and Phare 2006. 

Construction is envisaged through IPA 2010–2011. 

12 million Project was added to this list in November 2007. 

Location of the WMC has not yet been defined. 

20 million Included in EPOP 2007–2009. 

Priority of the National Action Plan (NAP) for the Protection of the Mediterranean Sea 

against Pollution from Land-Based Sources. 

Remediation and closure plan is completed. 

EPEEF co-financed project with EUR 2.4 million. 

Funds for project preparation planned to be secured through IPA OP 2007–2009 

and IPA OP 2010–2011. Funds for co-financing of remediation will be secured through SF OP 2011–2013. 

0,026 million Preparation of project documentation and permits is tendered out and all permits were due to 

be issued by September 2009. 

Additional co-financing is foreseen from EPEEF. Funds secured for preparation of project documentation. 

12 million Included in EPOP 2007–2009. 

Project is awaiting necessary permits. 

Location of WMC has not yet been defined. 

Investment value was re-estimated. 

24 million (loan) Included in EPOP 2007–2009 and IPA project pipeline. Construction is envisaged 

through IPA 2010–2011. 

Feasibility study completed. Building permit issued. Other project documentation is in preparation. 

Project is co-financed by Phare 2006, local budget and EPEEF. 

Investment value approximated. 

27.2 million Included in EPOP 2007–2009. 

Project is co-financed by EPEEF and CARDS 2002 TA (FS). 

IPA application is submitted. 

Land acquisition process is ongoing. 

1.1 million The project is on the EPOP 2007–2009 list and in the IPA project pipeline. 

The project is co-financed by EPEEF (EUR 1.1 million). 

Preparation works are in progress. 

The project is on the EPOP 2007–2009 list and in the IPA project pipeline. 

12 million The project is on the EPOP 2007–2009 list and in the IPA project pipeline. Project preparation 

is envisaged through IPA 2010–2011, and construction through SF OP 2011–2013. 

Start-up of project technical documentation design. 






The project is co-financed by EPEEF for investigation works on WMC locations. 


A N N E X E S 

A N N E X 5 


232 

A N N E X E S 

A N N E X 5 

Croatia (continued) 


PROJECT (EUR) 

Waste projects (continued) 

County waste management centre for the Population benefiting directly from project 53.5 million 

county of Osijek-Baranja implementation: 330,000. (31.5 million secured) 


county of Bjelovar-Bilogora implementation: 133,000. (13.7 million secured) 


county of Vukovar-Srijem 


implementation: 204,000. (15.4 million secured) 

Wastewater treatment plant for Bjelovar city Upgrade of existing WWTP. Population benefiting 6.1 million 

directly from project implementation: 98,000. (all funds secured) 

Wastewater treatment plant for the city of Osijek Population benefiting directly from project 23 million 

implementation: 150,000. (all funds secured) 

Wastewater disposal system and treatment plant Population benefiting directly from project 31 million 

of the town of Sisak implementation: 52,000. (all funds secured) 

Wastewater disposal system and treatment plant Population benefiting from project directly: 16,000. 5.8 million 

of the town of Krapina (all funds secured) 

Wastewater disposal system and treatment plant Population benefiting from project 6 million 

of the town of Vrbovec implementation: 15,000. (5.6 million secured) 

Main collectors and WWTP 

in the town of Vukovar 

18.5 million 

Construction of the county of Bjelovar-Bilogora’s 

regional water supply system 

55 million 

Construction of the county of 

Koprivnica-Krizevci’s regional water supply system 

52 million 

Wastewater disposal system and treatment plant 

of the town of Nova Gradiska 

Wastewater treatment for 31,000 people. 10 million 

Wastewater disposal system and treatment plant 16.5 million 

of the town of Djakovo 

Wastewater treatment plant of the town 16 million 

of Velika Gorica 

Wastewater infrastructure improvement in the 10 million 

town of Samobor 

Wastewater treatment plant of the town 14.8 million 

of Dugo Selo 



NEEDS (EUR) 







12 million The project is on the EPOP 2007–2009 list. 

Project preparation and construction are envisaged through PPP. 

- Project co-financed by Futureprofit and Croatian Waters. 

- The project is on the EPOP 2007–2009 list and in the IPA project pipeline. TA 

for completing IPA application is assured. 

DABLAS/DIF is supporting the feasibility study, including cost benefit analysis. 

Project pre-appraisal from EC done in June 2005. 

- The project is on the EPOP 2007–2009 list and in the IPA project pipeline. TA for preparing IPA 

application assured (EBRD). 

Pre-feasibility study is completed. 

Co-financing is coming from project’s own sources. 

- The project is on the EPOP 2007–2009 list and in the IPA project pipeline. 

0.4 million The project is on the EPOP 2007-2009 list and in the IPA project pipeline. 

The project is on the EPOP 2007–2009 list and in the IPA project pipeline. 

The project is on the EPOP 2007–2009 list and in the IPA project pipeline. IPA application 

and feasibility study will be developed through IPA technical assistance pipeline. 


and feasibility study will be developed through IPA TA pipeline. 


and feasibility study will be developed through IPA TA pipeline, 

There is no funding for the project available yet, but IPA TA is expected. 


and feasibility study will be developed through IPA TA pipeline. 

The project is included on the EPOP 2007–2009 list and in the IPA project pipeline. 


Location permit issued, the technical documentation for the first phase 

will be co-financed 50 percent from Croatian Waters and 50 percent from the town of Samobor. 


Conceptual design and EIA developed. Part of collector obtained location 

and part of collector obtained building permit. 

A N N E X E S 

A N N E X 5 


234 

A N N E X E S 

A N N E X 5 



PROJECT (EUR) 


Rehabilitation and closure of tailing area Reduction of cross-border water pollution 4.5 million 

in MIP-Trepca (rivers Sitnica, Ibar, Danube and the Black Sea). 

Expansion of the infrastructure for rural Reduction of waste pollution, developed system 10 million 

household waste collection for collection and waste transportation in rural areas. 

Rehabilitation of the bottom of the River Reduction and minimisation of cross-border pollution 2 million 

Lepenc/Lepenac for reduction of pollution from 

asbestos-contaminated waste 


caused from asbestos waste deposited in the past. 

Construction of a regional WWTP Reduction of cross-border pollution (Black Sea, 41.96 million 

in Ferizaj/Urosevac Aegean Sea). Population covered: 175,000. (10% co-financing) 

Construction of a regional WWTP Reduction of cross-border pollution of water (rivers 104.104 million 

in Mitrovica/Mitrvice Iber, Setnica, Danube and the Black Sea). (10% 

Population covered: 452,000. co-financing) 

Construction of a regional WWTP Population covered: 760,000. 142.1 million 

in Pristina/Prishtina (10% co-financing) 

Construction of a regional WWTP in Prizren Reduction of cross-border pollution of water bodies 82.697 million 

(river Drini i Bardh and the Adriatic Sea) Population covered: 381,000. (10% co-financing) 

Construction of a regional WWTP Reduction of cross-border pollution of water bodies 50.314 million 

in Gnjilan/Gjilan (rivers Kriva Reka Morava e Binces, Danube and 

Black Sea). Population covered: 204,000. 

(10% co-financing) 

Construction of a regional WWTP Reduction of cross-border pollution of water bodies 63.103 million 

in Djakovo/Gjakova (river Drini i Bardh/Drim and the Adriatic Sea). 

Population covered: 258,000. 


Construction of a regional WWTP Reduction of cross-border pollution of water (river 68.963 

in Peja/Pec Drini i Bardh/Drim and Adriatic Sea). Population 

covered: 323,000. 


Further support to water and environment sector Construction of treatment plant in Vucitrn/Vushtrri, 

Mitrovica. Network improvements in Pristina and 

closing of dumpsites and improvements in landfills. 

Population covered: 550,000. 

24 million 



NEEDS (EUR) 

4.5 million Included in NEAP. 

Project developed in collaboration with UNDP. 

The project is in the initial preparation of the project fiche/scope. 

Pre-feasibility study and EIA exist. 

10 million Included in NEAP. 

The Kosovo Environmental Action Plan 2006–2010 lists this project. 

2 million Included in NEAP. 

In collaboration with the municipality of Hani i Elezit and MESP the project proposal is in its initial preparation stage. 

The project is in the process of tendering and expression of interest. 

37.77 million Project is listed in the development strategy for Kosovo 2007–2013, the NEAP 

and the National Strategy for Wastewater. 

Project was presented to the donor conference for Kosovo (as defined under UNSCR) in July 2008. 


Project was presented to the donor conference for Kosovo (as defined under UNSCR 1244) in July 2008. 

Ownership issues are not settled. 

127.89 million Project included in the draft development strategy for Kosovo (as defined 

under UNSCR 1244) 2007–2013 and the NEAP. 




The feasibility study, financed by KfW, has been completed. 

45.283 million Included in draft development strategy for Kosovo (as defined under UNSCR 1244) 2007–2013 and NEAP. 

Pre-feasibility study is completed. 

The project was presented to the donor conference for Kosovo (as defined under UNSCR 1244) in July 2008. 

56.793 million Included in draft development strategy for Kosovo 2007-2013 and NEAP. 

Pre-feasibility study completed. 

The project was presented to the donor conference for Kosovo in July 2008. 

62.067 million Included in draft development strategy for Kosovo (as defined under UNSCR 1244) 2007–2013 and NEAP. 

The project was presented to the donor conference for Kosovo (as defined under UNSCR 1244) in July 2008. 

Implemented by the Pristina water company. 

Feasibility study completed in 2007. 

A N N E X E S 

A N N E X 5 


236 

A N N E X E S 

A N N E X 5 

Kosovo (as defined under UNSCR 1244) (continued) 


PROJECT (EUR) 

Air projects 

Improvement of air quality in Kosovo/Kosova A Reduction of cross-border air pollution. 47 million 

and B thermal power plants Population covered: 700,000. (6 million secured) 

Establishment of the national network for Improved air quality management influencing the 2.5 million 

permanent air quality monitoring whole region. Population covered: 2.5 million. 


PROJECT TITLE 



PROJECT (EUR) 

Treatment of HCH waste from former lindane Population benefiting from project 1.5 million 

production plant in organo-chemical industry, 

AD OHIS, Skopje 


Modernisation of municipal landfill through 

degasification and utilisation of landfill gas 

in Skopje (Drisla) 

Regional GHG emissions reduction. 1.8 million 

Remediation of MHK Zletovo plant Veles Remediation of industrial hotspot in an environmentally 22.6 million 

(lead and zinc smelter) and financially sustainable manner. 

Healthcare waste management 4.2 million 

Polog regional landfill Not estimated 

Remediation of illegal hazardous waste 4.3 million 

landfill Lojane in Kumarovo 


Wastewater management in Skopje and Decrease of pollution and improvement of water 100 million 

construction of WWTP quality of Vardar River and Thessaloniki Bay. 



NEEDS (EUR) 

41 million Included in the NEAP. 

In 2006 the budget of Kosovo (as defined under UNSCR 1244) allocated EUR 2 million for electro-filters 

for Kosovo B plant. Reparation of electro-filters in TC Kosovo B. 

Reparation undertaken in TC A3 and A4. 

A tender process has just been completed for repair works on unit A3 to the value 

of EUR 6 million. Works are expected to commence in 2009. 

2 million Included in NEAP 

Project is in tendering procedure. 

In total for three years (2008–2010) investments of EUR 965,000 are foreseen for the project in the draft budget 

of the Government of Kosovo (as defined under UNSCR 1244) (EUR 190,000 is foreseen in 2008 as the first part 

of investment in this project, for 2009. EUR 500,000 are planned and for 2010 EUR 275,000). 


NEEDS (EUR) 

1.5 million Ministry of Environment and Physical Planning provided financial support for “Research 

on hazardous waste — Lindane landfill at the organo-chemical industrial site, AD OHIS, Skopje” in 2007. 

Feasibility study of Ohis plant was finalised in 2007 with financial support from the European Agency for Re 

construction. 

1.8 million Pre-feasibility study available and a CDM project. 

Feasibility study is under preparation with financial support from the Ministry of Environment, 

Land and Sea of Italy and MoEPP. 

22.6 million Feasibility study was developed under EU CARDS 2006. 

MHK is taken as a priority at national level. 

Donor coordination meeting was held in 2008 and bilateral donors expressed great interest due 

to demonstrated revenue return. 

Plant has recently been sold to foreign investor. 

4.2 million Feasibility study on healthcare waste management was prepared under EU CARDS 2006. 

Some financial allocations for establishing a healthcare waste management system are envisaged 

in the NEI Strategy. Funding will be used for the preparation of detailed project technical documentation. 

Feasibility study is prepared. 

75 percent of the initial investment to be covered by IPA donation and the residual investment 

by revenues generated on the basis of the initial waste tariff. 

Feasibility study and technical documentation for remediation prepared. 

UNDP Project Implementation Unit established in January 2008. 

EUR 200,000 is secured from UNDP budget and EUR 100,000 is co-financed by MoEPP. 

The process of remediation started in 2009. 

100 million A number of stakeholder meetings were held to disseminate the approach and the preliminary EIA for the WWTP. 

Feasibility study and EIA of the WWTP were finalised in May 2009 using USD 2 million grant from JICA. 

Bank loan is required to secure the funds. 

A N N E X E S 

A N N E X 5 


238 

A N N E X E S 

A N N E X 5 

The former Yugoslav Republic of Macedonia (continued) 


PROJECT (EUR) 


Wastewater management in Skopje and Decrease of pollution and improvement of water 100 million 

construction of WWTP quality of river Vardar and Thessaloniki Bay. 

Rehabilitation of the WWTP at organo-chemical 

industry, AD OHIS, Skopje 

Reduction of pollution of river Vardar. 11.4 million 

WWTP for the city of Veles Population benefiting from project 


13.8 million 

WWTP for the town of Prilep Population benefiting from project 21.5 million 

implementation: 77,000. (17 million secured) 

WWTP for the city of Bitola Population benefiting from project 


7.32 million 

Tetovo drinking water supply, urban wastewater 

collection and treatment project 

Air projects 

75 million 

Monitoring of air quality 16 monitoring stations will be created 7.9 million 

Montenegro 

PROJECT TITLE 



PROJECT (EUR) 

Construction of regional landfill in Bar Population directly benefiting from project 


11.367 million 

Construction of regional landfill in Berane Population benefiting from project 6.943 million 


Construction of regional landifll in Niksic Reduction of transboundary pollution. Population 12.604 million 

benefiting from project implementation: 83,000. 

Construction of regional landfill in Pljevlja Population benefiting from project 9.8 million 

implementation: 40,000. (4.9 million secured 

from EIB loan) 



NEEDS (EUR) 

100 million A number of stakeholder meetings were held to disseminate the approach and the preliminary EIA for the WWTP. 

Feasibility study and EIA of the WWTP were finalised in May 2009 using USD 2 million grant from JICA. 

Bank loan is required to secure the funds. 

11.4 million 

13.8 million Pre-feasibility study and feasibility study exist but need to be updated. 

4.5 million Master plan, FS including EIA, financial and technical documentation completed. 

National co-financing has been secured through central budget. 

IPA application is accepted. On-going preparation of necessary technical documentation is in process. 

Tendering procedure for subcontractor is finished. Construction work is planned to start in the near future. 

7.32 million Feasibility study is from 1999 and needs to be updated. 

75 million Project is stated as a priority according to the NEIS. 

Feasibility study is from 2004 and needs to be updated. 

7.9 million The main prerequisite for the implementation of the project (determination of the exact locations 

of monitoring stations) is the development of the National Plan for Air Quality Management. Funding 

is foreseen under the IPA Components I and IV. 


NEEDS (EUR) 

2.277 million Negotiations are ongoing for establishment of joint company responsible for waste collection and landfill 

for the municipalities of Bar and Ulcinj. 

FS and EIA are under preparation. 

Some funds have been secured from WB and EIB. 

4.76 million Negotiations are ongoing for establishment of joint company responsible for waste collection 

and landfill for the municipalities of Berane, Plav, Andrijevica and Rozaje. 

EIA and FS were completed in 2008. Technical documentation planned to be finalised in 2009. 

Financing comes from own sources of the municipality and expected IEB loan. 

5.622 million Negotiations are ongoing for establishment of joint company responsible for waste collection and landfill 

for the municipalities of Niksic, Pluzine and Savnik. 

Technical documentation is expected to be finalised in 2009. FS and EIA were finalised in 2008. 

Financing will come from own municipality sources (EUR 2 million [Phase II] and credit 

(EIB – EUR 3,75 million [Phase I], EBRD – EUR 334.040 [Phase I] and EUR 934.040 [Phase II]. 

4.9 million Negotiations are ongoing for establishment of a joint company dealing with waste collection 

and landfill for Pljevlja and Zabljak municipalities. 

FS is under finalisation. Preparation of EIA started in 2008. 

A N N E X E S 

A N N E X 5 


240 

A N N E X E S 

A N N E X 5 

Montenegro (continued) 


PROJECT (EUR) 


Emergency rehabilitation of the Podgorica Reduction of water pollution to the Moraca River and 40 million 

WWTP and construction of a new plant Skadar Lake. Population benefiting from project 


Construction of sewerage system in the town Reduction of Adriatic Sea pollution. Population 16 million 

of Tivat, and expansion and reconstruction 

of sewerage system in the town of Kotor 

benefiting from project implementation: 70,000. 

Construction of new wastewater facility and Project activities focus on the construction of the 12.8 million 

reconstruction of the existing sewerage system WWTP and network reconstruction. Improved quality 

in Niksic of Zeta River and positive effects on Lake Skadar. 

Construction of WWTP in the municipality of The project has a regional character as it reduces the 17.6 million 

Berane and part of town communal system pollution of the river Lim, part of the Danube 

catchment area. Population benefiting from project 


Construction of WWTP and part of the sewarage Reduction of Adriatic Sea pollution. Population 24.6 million 

system in the municipality of Herceg Novi benefiting from project implementation: 71,000. 

Construction of WWTP and part of the sewarage Reduction of pollution of the river Tara, part of the 4.01 million 

system in the municipality of Kolasin Danube River Basin. Population benefiting from 

project implementation: 10,000. 

Construction of WWTP and part of the sewerage Reduction of Adriatic Sea pollution. Population 9 million 

system in the municipalities of Kotor and Tivat benefiting from project implementation: 25 000 

permanent residents plus tourists in the summer. 

Construction of WWTP and part of the sewarage Reduction of pollution of the river Cehotina, part of 7.35 million 

system in the municipality of Pljevlja the Danube River Basin. Population benefiting from 


Construction of sewerage system of the Reduction of Adriatic Sea pollution. Population 29 million 

municipality of Ulcinj benefiting from project implementation: 23,000 plus 

tourists in the summer. 

Serbia 

PROJECT TITLE 



PROJECT (EUR) 

Hazardous waste management facility: Phase 1 Will deal with hazardous waste on national level 14 million 

Waste management system for Kragujevac Population benefiting directly from project 5 million 

(component B: Construction of waste recycling implementation: 180,000. 

centre) 

Sustainable integrated solid waste management Population benefiting directly from project 5.34 million 

in Krusevac implementation: 80,000. 



NEEDS (EUR) 

39.3 million First phase of the project, including reconstruction of existing WWTP, is completed. 

Phase II, development of new feasibility study and construction of new WWTP, is in the preparation stage. 

The project was approved for financing the project documentation by IPF. 

3.1 million Both municipalities signed a contract with KfW in Dec 2007. EUR 2.5 million is secured for Kotor 

(Kotor: 1.3 and and 1.2 million is secured for Tivat. 

Tivat: 1.8 Phase I is in the final stage. 

(5,9 million The preparatory stage of Phase II is completed and will be followed by developing project 

for Phase III) and tender documentation. 

For Phase III, an additional 10 million will be needed 

3.1 million Municipality of Niksic signed a contract with the Niksic brewery, which will be obliged 

to build a pre-treatment WW facility. 

The preparation of tender documentation is currently in progress. 

EUR 7 million secured from EIB and EUR 2.7 million municipal co-financing) 

Application for IPA financing was made. 

4.8 million EUR 11.3 million is expected as EIB loan. 

11.37 million Project implementation is envisaged in three phases, with an overall duration of five years (Phase I: 

preparation of FS (ongoing); Phase II: technical documentation and tender; Phase III: construction). 

EUR 9.1 million secured from KfW bank; EUR 4.2 million from Government of Montenegro 

FS was prepared. 

2 million EUR 1.5 million secured from EIB and EUR 0.5 million local contribution. 

5 million Project implementation is envisaged in three phases with an overall duration of five years (Phase I: 


2 million FS and EIA are prepared. 

EUR 1.84 million secured from Municipal Window and EUR 3.67 million from EIB 

24 million Project implementation is envisaged in three phases with an overall duration of five years (Phase I: 


FS was finalised in 2009. 


NEEDS (EUR) 

11 million EUR 3 million secured from IPA 2009, for all necessary documentation (land-use plans, location 

and hydrogeological studies, conceptual and detailed design, FS, EIA study and all necessary permits). 

After Phase 1, the remaining EUR 11 million for construction will be submitted for IPA 2011. 

4.4 million Pre-feasibility study, urban plan and strategic assessment of financial resources were completed in 2008. 

EUR 0.585 million were secured from the NIP and an application made for additional IPA funds 

of EUR 0.585 million for the feasibility study. 

Negotiations started between the municipality and private sector about the recycling technology used. 

3.57 million Feasibility study is available. 

A N N E X E S 

A N N E X 5 


242 

A N N E X E S 

A N N E X 5 

Serbia (continued) 


PROJECT (EUR) 

Waste projects (continued) 

Investment into technical systems for environmen- Improvement of environmental conditions in the 6 million 

tal protection from the existing trash dump in Nis region. Population benefiting from project (0.236 million secured 

implementation: 257,341. from city budget) 

Recultivation and upgrading of the existing Badra Improvement of environmental conditions in the 0.994 million 

landfill in Svilajnac region. Population benefiting directly from project 


Plant for briquette production in Kolubara Population benefiting from project 6 million 


Regional landfill — Valjevo Up to 30 percent of regional waste will be recycled 19.5 million 

Regional landfill — Zajecar Development of regional waste management for 

seven municipalities. Population benefiting from 


15 million 

Smederevo sanitary landfill 9.7 million 

Regional landfill — Nova Varos 5 million 

Protection of the Raska River — Sanitation of 

exis ting landfills and feasibility study 

for the regional landfill 


6.12 million 

Upgrade and extension of the “Kolubara-Prerada” Improvement of water quality of the Kolubara and 4.76 million 

industrial facility WWTP Sava Rivers. Population benefiting directly from project 


Rejuvenation of Lake Ludas Improved water resources management for the region. 3.861 million 

Population benefiting directly from project: 150,000. 

Improving the sewerage system of the oil Reducing pollution of river Danube. Population directly 3.7 million 

refinery in Novi Sad benefiting from project implementation: 350,000. 

Collection and treatment of wastewater in Reduced transboundary water pollution. Population 5.54 million 

Vladicin Han municipality directly benefiting from project implementation: 24,000. (0.55 million secured) 

Water utilities in technological park zone in Vrsac 2.3 million 

Reconstruction of the water source of “Setonje” 

and transport pipeline — Petrovac(Branicevo district) 

3.2 million 

Feasibility study for collection, transportation and 

treatment of wastewater in 10 municipalities 

Reduction of transboundary water pollution 1.6 million 



NEEDS (EUR) 

5.674 million Feasibility study developed. 

0.828 million Feasibility study developed. 

GTZ provided technical assistance and secured additional funding in cooperation with Svilajnac 

municipality for waste selection and the recultivation of the existing landfill (total costs EUR 0.1656 million). 

Inclusion of future investment costs into the tariff policy is expected to cover Svilajnac municipality contribution. 

5.7 million Feasibility study, conceptual project and justification study have been developed. 

Public research on project relevance was conducted in 2008. 

Development of tender documentation and securing of financing was started in 2008. 

18.9 million Project applied for NIP but, due to rebalance of the budget, funding is not going to be realised. 

The Ministry of Environment and Spatial Planning plans to propose the project for donation 

from the Japanese Government. 

Construction is planned to start in 2009. 

14.71 million Smaller grant for feasibility study was provided from NIP than initially negotiated (EUR 0.29 million instead 

of EUR 0.60 million). 

The project is stopped at the moment due to delay in funding from NIP. 

6 million EUR 1.2 million will be provided from Serbian EKO fund and EUR 2.5 million will be received 

from municipality of Smederevo for co-financing for preparatory documents and Phase I. 

3.27 million IPPC permit requirements made necessary modification of the project documentation: 1 metre protective layer 

instead of 30 centimetres. As the result, a new tender for construction needs to be made. At the moment, 

work is temporarily stopped. 

5.88 million Project supported by UNDP PRO programme 

4.76 million General plan, feasibility study and EIA completed in 2008. 

Technical documentation and economic and financial analysis are in the stage of finalisation. 

Phase I requires investment of EUR 1.8 million; Phase 2 of EUR 2.96 million. 

3.861 million 

3.7 million Feasibility study completed 

Due to changes in ownership status, it is unclear what is going to happen 

with current Serbian Oil Industry (NIS) projects. Internal prioritisation of the projects is in progress. 

4.99 million Municipality has applied for NIP with this project, now final decision regarding financing is expected. 

2.3 million Funding is expected from municipality of Vrsac (EUR 0.2 million), NIP (EUR 0.3 million) and EAR (EUR 1.8 million). 

3.2 million 

1.6 million 

A N N E X E S 

A N N E X 5 


244 

A N N E X E S 

A N N E X 5 

Serbia (continued) 


PROJECT (EUR) 


Feasibility studies for collection, transportation 

and treatment of wastewaters in the 

municipalities of Vranje and Uzice 

Reduction of transboundary water pollution. 365,000 

Protection of the Lim River: Wastewater 

collection and treatment in Prijepolje, Priboj, 

Nova Varos and Sjenica municipalities 

22.5 million 

Construction of WWTP(s) for the Ibar River 9.5 million 

Protection of the Raska River – Wastewater 

collection and treatment in Novi Pazar 

and Raska municipalities 

12 million 

Protection of the Raska River (flood protection) 1.124 million 

Air Projects 

Decreasing of air pollution from “Energetika” Reduction of transboundary air pollution. Population 0.235 million 

(installation of electro-filter), Kragujevac benefiting directly from project 




NEEDS (EUR) 

365,000 Pre-feasibility study completed. 

IPA funding is expected for Uzice part. 

22.14 million 

9.325 million 

11.66 million Project supported by UNDP PRO programme 

1.059 million The project is linked with the project for the regional landfill for Nova Varos. 

Financing of EUR 65,000 for Batnjik sanitary landfill design is secured from UNDP PRO programme. 

0.235 million 

A N N E X E S 

A N N E X 5 


246 

A N N E X E S 


Notes 

1 http://www.rec.org/REC/Programs/REREP/PEIP/documents.html 

2. http://www.rec.org/REC/Programs/REREP/PEIP/donor_contacts.html 

3 http://ec.europa.eu/enlargement/enlargement_process/ 

accession_process/how_does_a_country_join_the_eu/sap/index_en.htm 

4 http://ec.europa.eu/enlargement/enlargement_process/ 

accession_process/how_does_a_country_join_the_eu/sap/index_en.htm 

5 Council Regulation 1085/2006, adopted on July 17, 2006. More detailed implementing rules 

are laid down in Commission Regulation 718/2007 

6 The Hazardous Waste Directive (94/31/EC) will be repealed by the WFD on December 

12, 2010 

7 Framework Directive 96/62/EC, daughter directives 1999/30/EC, 2000/69/EC, 2002/3/EC, 

and Decision on Exchange of Information 97/101/EC 

8 Directive 2008/1/EC of the European Parliament and of the Council of January 15, 2008, 

concerning integrated pollution prevention and control. Replaces Council Directive 

96/61/EC of September 24, 1996 on the same subject 

9 The EC 2008 progress reports for candidate and potential candidate countires, accompanying 

the EC Communication “Enlargement Strategy and Main Challenges 2009-2010” are 

available on the EC, DG Enlargement website http://ec.europa.eu/enlargement 

10 For further insights on environmental funds, see the REC publication Establishing an Environmental 

Fund: Practical Aspects for Decision Makers and Fund Managers. REC working paper, 

June 2006 

11 Albania and Montenegro in the water sector, and Kosovo (as defined under UNSCR 1244) 

in both sectors 

12 The average payment collection figure was 57 percent in 2006, but lower for households 

(at around 48 percent) and higher for industry. The collection rate of individual utilities 

ranges between 45 percent and 67 percent. 

13 http://www.stabilitypact.org/wt2/energy/IFIADVISORYGROUP.asp and 

http://ec.europa.eu/enlargement/projects-in-focus/cooperation_with_the_international_ 

financial_institutions/index_en.htm 

14 The Stability Pact for South Eastern Europe was an institution aimed at strengthening peace, 

democracy, human rights and economy in the countries of SEE in the period 1999 to 2008. 

Over the years, the focus of the Stability Pact shifted from confidence building among the 

countries and infrastructure reconstruction to a framework for regional cooperation in SEE. 

The Stability Pact also took on the role of supporting the integration of SEE countries into 

European and Euro-Atlantic structures by helping the countries of the region to meet EU and 

NATO membership criteria. 

15 Please note that, in the case of projects for which progress was made in funding between 

2007 and 2009, the total amount of committed/secured funds was taken into account — that 

is, where funds were already committed/secured prior to 2007, these are included. In some 

cases, the newly secured funds are conditional. 

16 This graph takes into account both large and small improvements and setbacks, and takes into 

account all projects that were present on the lists at any point in time from 2007 to 2009.

References 

Publications 

Albanian Business and Investment Agency (Albinvest). “Basic Economic Indicators”, factsheet no. 

2, March 2008. 

Arcadis Ecolas NV and IEEP, 2007. Benefits for the former Yugoslav Republic of Macedonia and 

other countries of SEE of compliance with the environmental acquis, 06/11347/AL, Belgium. 

Austrian Development Agency (ADA), 2008. Institutional profiles prepared on behalf of AEquilibrium 

Consulting GmbH and the Austrian Development Agency: 

• 2008a. The Ministry of Public Works, Transport and Telecommunications, Albania: 

http://www.eco-finance.org/images/ALB_MPWTT_profile.pdf 

• 2008b. Hrvatska banka za obnovu i razvitak (HBOR), Republic of Croatia: http://www.ecofinance.org/images/CRO_HBOR_profile.pdf 

• 2008c. The Ministry of Transport and Communincations, the former Yugoslav Republic 

of Macedonia: http://www.eco-finance.org/images/MAC_MTC_profile.pdf 

• 2008d. The MOEPP Environmental Investment Programme, the former Yugoslav Republic 

of Macedonia: http://www.eco-finance.org/images/MAC_MOEPP_profile.pdf 

• 2008e. The Ministry of Finance, Montenegro: http://www.ecofinance.org/images/MON_MF_profile.pdf 

• 2008f. The National Investment Plan, Serbia: http://www.ecofinance.org/images/SER_NIP_profile.pdf 

• 2008g. The Ministry of Agriculture, Forestry and Water Management, Water Directorate, 

Serbia: http://www.eco-finance.org/images/SER_MAFWM_profile.pdf 

• 2008h. The Environment Protection Fund, Serbia: http://www.ecofinance.org/images/SER_EPF_profile.pdf 

• 2008i. The Environment Protection Fund of the Federation of Bosnia and Herzegovina: 

http://www.eco-finance.org/images/BiH_EFFBiH_profile.pdf 

• 2008j. The Environment Protection Fund of Republika Srpska, Bosnia and Herzegovina: 

http://www.eco-finance.org/images/BiH_EFRS_profile.pdf 

• 2008k. The Environmental Protection and Energy Efficiency Fund, Croatia: http://www.ecofinance.org/images/CRO_EPEEF_profile.pdf 

• 2008l. The proposed Eco-Revolving Fund, Montenegro: http://www.eco-finance.org/ 

images/MON_EcoFUND_profile.pdf 

Central Bank of the Republic of Kosovo, 2009. Annual report 2008, Pristina. 

CEB, 2009. Press release, “Increased CEB support for public social infrastructure in Central 

and South Eastern European countries”, March 3, Paris. 

CEB, 2007a. The CEB and the Management of the Environment, http://www.coebank.org/ 

Upload/infocentre/brochure/en/managementenvironment.pdf. 

CEB, 2005, 2006, 2007b and 2008. Report of the Governor. 

DABLAS 2008. Terms of Reference of the Dablas Phare Facility. 

Dax, Paul, 2008. “Draft Position Paper on Public Utility Company Tariffs in Serbia.” 

EBRD, 2006, 2007, 2008 and 2009. Donor Report. 

EBRD, “Doboko Solid Waste, Project Summary Document”, 

http://www.ebrd.com/projects/psd/psd2006/37033.htm. 

EC, 2007. DG Enlargement. “Infrastructure Preparation Facility for the Western Balkans”, 

Concept Paper, Brussels. 

A N N E X E S 


248 

A N N E X E S 


EC, 2008a. Press release IP/08/1134. “The international community pledges EUR 1.2 billion 

to Kosovo”, July 11, 2008, Brussels. 

EC, 2008b. Progress reports and staff working documents of candidate countries and potential 

candidate countries, 2008, accompanying COM(2008) 674 “Enlargement Strategy and Main 

Challenges 2008–2009”, November 5. 

• SEC (2008) 2692, Albania. 

• SEC (2008) 2693, Bosnia and Herzegovina. 

• SEC (2008) 2694, Croatia. 

• SEC (2008) 2695, the former Yugoslav Republic of Macedonia. 

• SEC (2008) 2696, Montenegro. 

• SEC (2008) 2697, Kosovo (under UNSCR 1244). 

• SEC (2008) 2698, Serbia. 

EC, 2009. Progress reports accompanying the communication from the Commission to the European 

Parliament and the Council COM (2009) 533 final “Enlargement Strategy and Main Challenges 

2009–2010”, Brussels, October 14: 

• SEC (2009) 1333, Croatia. 

• SEC (2009) 1335, the former Yugoslav Republic of Macedonia. 

• SEC (2009) 1336, Montenegro. 

• SEC (2009) 1337, Albania. 

• SEC (2009) 1338, Bosnia and Herzegovina. 

• SEC (2009) 1339, Serbia. 

EC, 2008c. Rapid press release, MEMO/08/144, “Financial Assistance to the Western Balkans – 

Donor Cooperation”, March 5, 2008 http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/08/144&format=HTML&aged=1&language=EN&guiLanguage=en 

- fn1 

EC, 2008d. Rapid press release, IP/09/204, “Western Balkans: Enhancing the European Perspective”, 

Brussels, March 5. 

EC, 2009. “Stocktaking of Commission and IFI Activities and Programmes in Support to Investments 

in the Western Balkans.” Draft report, June (preparation of September workshop). Request 

N 2008/162297. 

EC, COM (2001) 304, “The Challenge of Environmental Financing in the Candidate Countries”, 

June 8, 2001, Brussels. 

EC, COM (2006) 27 final, “The Western Balkans on the Road to the EU: Consolidating Stability 

and Raising Prosperity”, January 27, 2008, Brussels, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2006:0027:FIN:EN:PDF. 

EC, COM (2008) 127 final, “Western Balkans: Enhancing the European Perspective”, Brussels, 

March 5, 2008, 

http://ec.europa.eu/enlargement/pdf/balkans_communication/western_balkans_communication_050308_en.pdf 

EC, COM (2008) 705 final, “Instrument for Pre-accession Assistance (IPA), Multi-annual Indicative 

Financial Framework for 2010–2012”, November 5, 2008, Brussels. 

EC, COM (2009) 533, “Enlargement Strategy and Main Challenges 2009–2010.” Brussels, October 

14, 2009. 

EC, SEC (2009) 1309 final, Promoting effective financing for the environment in regions covered 

by the enlargement process and the European Neighbourhood Policy. Brussels, September 30, 

2009. 

EIB, 2008. “EIB Financing in the Western Balkans 1995–2007”, http://www.eib.org/projects/publications/eib-financing-in-western-balkans.htm

EIB, “The Western Balkans”, http://www.eib.org/projects/regions/enlargement/the-westernbalkans/index.htm 

EIB, 2008. “EIB supports water supply and wastewater treatment in Bosnia and Herzegovina”, 

August 2, http://www.eib.org/projects/press/2008/2008-072-eib-supports-water-supply-andwastewater-treatment-in-bosnia-and-herzegovina.htm 

EPPC 2009. Final Report, February. 

European Parliament, Recommendation 2001/331/EC of the European Parliament and of the 

Council of April 4, 2001 providing for minimum criteria for environmental inspections in the 

member states 

Gjinali, Enkelejda and Sokol Olldashi, 2008. “Reform of the Water Supply and Sewage Sector 

after the Transfer Process of Water Supply and Sewerage Companies to Local Government Authorities.” 

Two-Year Plan, Albania. 

IPA Centralised Programme 2008, Project Fiche Kosovo, Infrastructure Projects Facility – Kosovo 

Window. 

IPA, Centralised Programme for Serbia, Standard Summary Project Fiche – Project number 14: 

Project Preparation Facility. 

IPA, Centralised, National and CBC Programmes for Montenegro, Standard Summary Project 

Fiche – Technical Assistance and Project Preparation Facility and Programme Reserve 

IPA, 2007a. Environmental Operational Programme 2007–2009 in Croatia, September: 

http://ec.europa.eu/regional_policy/funds/ipa/croatia_environment_en.htm 

IPA, Multi-annual Indicative Planning Documents 2007–2009 for Albania, Bosnia and Herzegovina, 

Croatia, Kosovo (as defined under UNSCR 1244), the former Yugoslav Republic of Macedonia, 

Montenegro and Serbia. 

IPA, Multi-annual Indicative Planning Documents 2009–2011 for Albania, Bosnia and Herzegovina, 

Croatia, Kosovo (as defined under UNSCR 1244), the former Yugoslav Republic of Macedonia, 

Montenegro and Serbia. 

IPA, 2008a. National Programme 2008, Albania, Project Preparation Facility. 

IPA 2008b. National Programme 2008, Part I – Bosnia and Herzegovina, Project Fiche 4: Project 

Preparation Facility 

IPA, 2008c. National Programme 2008 for the former Yugoslav Republic of Macedonia, Project 

Fiche 4.1: Project Preparation and Support Facility 

IPA, “Standard Summary Project Fiche – IPA centralised programmes”, Project number 13: 

Municipal Infrastructure Support Programme — MISP. 

IPF, 2007. “IPF for the Western Balkans.” Concept paper. 

IPF, 2008. Infrastructure Preparation Facility, Terms of Reference. 

Kosovo Environmental Action Plan 2006-2010, Pristina 2009. 

National Environmental Investment Strategy, 2009, the former Yugoslav Republic of Macedonia. 

National Strategy for Environmental Approximation, 2007, the former Yugoslav Republic of 

Macedonia. 

National and federal statistical offices, WB, NCB, EIU, ministries of finance. 

OECD, ODA database on environmental infrastructure allocations between 2005 and 2007. 

Official Gazette of the former Yugoslav Republic of Macedonia (OGRM) No. 146/2007. “Regulation 

on the Manner of Handling HCW, Labelling and Forms for Handling HCW and on Types of 

HCW for which Processing is Prohibited”. 

REC, 2003. Developing a Priority Environmental Investment Programme for SEE. 

REC, 2005. Targeting the Investment Challenge in South Eastern Europe. 

REC, 2006. “Establishing an Environmental Fund: Practical Aspects for Decision Makers and Fund 

Managers”, Working paper, June. 

A N N E X E S 


250 

A N N E X E S 


REC, 2007. Final report for the project “Cross-Border Cooperation through Environmental Planning 

and Investments”. 

REC. PEIP Analytical Reports 2007–2009. Available at: 

http://www.rec.org/REC/Programs/REREP/PEIP/peip2007.html 

REC. PEIP surveys, 2008 and 2009. 

REC. PEIP Updated Priority Project Lists 2007–2009. Available at: http://www.rec.org/REC/Programs/REREP/PEIP/peip2007.html 

REC, 2009a. Strategies for Reform: A Manual for Water Utilities in South Eastern Europe. 

REC, 2009b. Speeding up Investments in the Waste Sector: A Manual for Waste Utilities in South 

Eastern Europe. 

REC and Umweltbundesamt GmbH, 2008. Handbook on the implementation of EC Environmental 

Legislation, December. 

UNDP/GEF, 2004. Hungarian Environmental Economics Centre, Hydro-engineering Institute, 

Sarajevo, Danube Regional Project. Assessment and development of municipal water and wastewater 

tariffs and effluent charges in the Danube River basin, Volume 2: “Country-Specific Issues 

and Proposed Tariff and Charge Reforms: Bosnia i Herzegovina – National Profile”. 

Water Utility Reform Programme Working Group (WURP WG), 2007. Water Utility Reform Plan 

for the Government of the Republic of Montenegro. 

World Bank, 2007. Journey to a Cleaner Future. 

Water and Waste Regulatory Office (WWRO) of Kosovo, 2009. Annual Report 2008, “Performance 

of the water and waste companies in Kosovo.” July. 

Presentations: 

Davies, 2008. “Review of EC investment support facilities.” Craig Davies, PPC Executive Secretary. 

PEIP Regional Meeting, Brussels, November 28. 

Fiedler, 2008. “IPA 2008 — Support to environment.” Joanna Fiedler, Desk Officer, Unit for 

Enlargement and Neighbouring Countries, European Commission – DG Environment. PEIP 

Regional Meeting, Brussels, November 28. 

Fiedler, 2009a. “Update on financing environment and cooperation with IFIs.” Joanna Fiedler, 

Desk Officer, Unit for Enlargement and Neighbouring Countries, European Commission — DG 

Environment. PEIP Regional Meeting, Sarajevo, June 18–19. 

Fiedler, 2009b. “Update on environmental financing.” Joanna Fiedler, Desk Officer, Unit for Enlargement 

and Neighbouring Countries, European Commission, DG Environment. PEIP Regional 

Meeting, Sarajevo, June 18–19. 

Gianfranchi, 2008. “Infrastructure Projects Facility, Project Preparation in the Environmental 

Sector.” Rachele Gianfranchi, DG Enlargement. PEIP Regional Meeting, Brussels, November 28. 

Glavocevic, 2009. “Experience in the Implementation of IPA projects in Croatia.” Mladen Glavocevic, 

Head of Section for Control of Project Implementation, Ministry of Environmental Protection, 

Physical Planning and Construction. PEIP Regional Meeting, Sarajevo, June 18–19. 

Gofas, 2008. “Western Balkans Infrastructure Preparation Facility.” Christos Gofas, Team Leader, 

Infrastructure and International Financing Institutions, European Commission, DG Enlargement. 

National Workshop: “Developing Environmental Infrastructure Projects in the Water Sector in 

Albania”, Tirana, September 25. 

Ozdemir, 2009. “Experiences of financing priority environmental investment projects in Turkey.” 

Sermin Bozan Ozdemir, IPA Coordination and Implementation Center, Ministry of Environment 

and Forestry. PEIP Regional Meeting, Sarajevo, June 18–19. 

Sohail, 2008. “Infrastructure Projects Facility in the Western Balkans.” Hasan Sohail. PEIP 

Regional Meeting, Brussels, November 28. 

Unterwurzacher, 2008. “Update on IPA Component III — Environment.” Erich Unterwurzacher, 

REGIO.I4 – IPA/ISPA, EC, Regional Policy. PEIP Regional Meeting, Brussels, November 28.

Websites: 

Croatian Waters: http://www.voda.hr/ 

DABLAS Task Force: http://ec.europa.eu/environment/enlarg/dablas/index_en.htm 

EBRD: Albania overview: http://www.ebrd.com/country/country/albania/index.htm; Bosnia and 

Herzegovina economic overview: http://www.ebrd.com/country/country/bosnherz/econo.htm 

EC, Economic and Financial Affairs, http://ec.europa.eu/economy_finance/int_economic_issues/country_page9172_en.htm 

EC, DG Enlargement: http://ec.europa.eu/enlargement/index_en.htm 

EC, DG Environment: http://ec.europa.eu/environment/index_en.htm 

EC, DG Regional Policy: http://ec.europa.eu/regional_policy/index_en.htm 

EC, DG Enlargement, Instrument for Pre-Accession Assistance: http://ec.europa.eu/enlargement/how-does-it-work/financial-assistance/instrument-pre-accession_en.htm 

EC, Regional Policy, Instrument for Pre-Accession Assistance: http://ec.europa.eu/regional_policy/funds/ipa/index_en.htm 

ECENA: www.ecena.org 

Eurostat: http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/ 

EU Water Initiative: www.euwi.net 

Horizon 2020 initiative: http://ec.europa.eu/environment/enlarg/med/horizon_2020_en.htm 

International Economic Issues, Non-EU economies, Western Balkan countries: 

http://ec.europa.eu/economy_finance/int_economic_issues/country_page9161_en.htm 

PEIP website: http://www.rec.org/REC/Programs/REREP/PEIP/default.html 

Regional Cooperation Council: www.rcc.int/index.php 

Stability Pact for South Eastern Europe: www.stabilitypact.org/wt2/energy/IFIADVISORY- 

GROUP.asp 

UNEP-FI, http://www.unepfi.org/ 

World Bank: www.worldbank.org 

A N N E X E S 


THE REGIONAL ENVIRONMENTAL CENTER FOR CENTRAL AND EASTERN EUROPE (REC) is an 

international organisation with a mission to assist in solving environmental problems. The REC fulfils this 

mission by promoting cooperation among governments, non-governmental organisations, businesses and 

other environmental stakeholders, and by supporting the free exchange of information and public 

participation in environmental decision making. 

The REC was established in 1990 by the United States, the European Commission and Hungary. Today, the 

REC is legally based on a charter signed by the governments of 29 countries and the European 

Commission. The REC has its head office in Szentendre, Hungary, and country offices and field offices in 

17 beneficiary countries: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, 

Hungary, Latvia, Lithuania, the former Yugoslav Republic of Macedonia, Montenegro, Poland, Romania, 

Serbia, Slovakia, Slovenia and Turkey. 

The REC actively participates in key global, regional and local processes and contributes to environmental 

and sustainability solutions within and beyond its country office network, transferring transitional 

knowledge and experience to countries and regions. 

Recent donors are the European Commission and the governments of Albania, Austria, Belgium, Bosnia 

and Herzegovina, Bulgaria, Canada, Croatia, the Czech Republic, Estonia, Finland, Germany, Hungary, 

Italy, Japan, Latvia, Lithuania, Luxembourg, the former Yugoslav Republic of Macedonia, Montenegro, 

the Netherlands, Norway, Poland, Romania, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, 

the United Kingdom and the United States, as well as other intergovernmental and private institutions. 

This document has been produced with the financial assistance of the European Union. 

The views expressed herein can in no way be taken to reflect the official opinion of the European Union.

Strategic Moves - Regional Environmental Center for Central and ...

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?