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The Priority <strong>Environmental</strong> Investment Programme <strong>for</strong> South Eastern Europe (PEIP)<br />
<strong>Strategic</strong> <strong>Moves</strong><br />
Eight Years of <strong>Environmental</strong> Infrastructure<br />
Investment Planning in South Eastern Europe
The Priority <strong>Environmental</strong> Investment Programme <strong>for</strong> South Eastern Europe (PEIP)<br />
<strong>Strategic</strong> <strong>Moves</strong><br />
Eight Years of <strong>Environmental</strong><br />
Infrastructure Investment Planning<br />
in South Eastern Europe<br />
Contributors:<br />
Ellen Baltzar<br />
Raisa Gerasina<br />
Dusan Sevic<br />
Ruslan Zhechkov<br />
Szentendre, Hungary<br />
SEPTEMBER 2009
About the REC<br />
The <strong>Regional</strong> <strong>Environmental</strong> <strong>Center</strong> <strong>for</strong> <strong>Central</strong> <strong>and</strong> Eastern Europe (REC) is a non-partisan, non-advocacy,<br />
not-<strong>for</strong>-profit international organisation with a mission to assist in solving environmental problems in <strong>Central</strong><br />
<strong>and</strong> Eastern Europe (CEE). The REC fulfils this mission by promoting cooperation among non-governmental organisations,<br />
governments, businesses <strong>and</strong> other environmental stakeholders, <strong>and</strong> by supporting the free exchange of in<strong>for</strong>mation<br />
<strong>and</strong> public participation in environmental decision making.<br />
The REC was established in 1990 by the United States, the European Commission <strong>and</strong> Hungary. Today, the REC is legally<br />
based on a charter signed by the governments of 29 countries <strong>and</strong> the European Commission, <strong>and</strong> on an international<br />
agreement with the government of Hungary. The REC has its head office in Szentendre, Hungary, <strong>and</strong> country offices<br />
<strong>and</strong> field offices in 17 beneficiary countries: Albania, Bosnia <strong>and</strong> Herzegovina, Bulgaria, Croatia, the Czech Republic,<br />
Estonia, Hungary, Latvia, Lithuania, the <strong>for</strong>mer Yugoslav Republic of Macedonia, Montenegro, Pol<strong>and</strong>, Romania, Serbia,<br />
Slovakia, Slovenia <strong>and</strong> Turkey.<br />
Recent donors are the European Commission <strong>and</strong> the governments of Albania, Austria, Bosnia <strong>and</strong> Herzegovina, Canada,<br />
Croatia, the Czech Republic, Estonia, Finl<strong>and</strong>, Germany, Hungary, Italy, Japan, Latvia, Lithuania, Luxembourg, the <strong>for</strong>mer<br />
Yugoslav Republic of Macedonia, Montenegro, the Netherl<strong>and</strong>s, Norway, Pol<strong>and</strong>, Romania, Serbia, Slovakia, Slovenia, Spain,<br />
Sweden, Switzerl<strong>and</strong>, Turkey, United Kingdom <strong>and</strong> the United States, as well as other inter-governmental <strong>and</strong> private institutions.<br />
The document has been produced with the financial assistance of the European Union.<br />
The views expressed herein can in no way be taken to reflect the official opinion of the European Union.<br />
During the drafting of this publication it was referred to by the working title<br />
“<strong>Environmental</strong> Infrastructure Investments in South Eastern Europe”<br />
The entire contents of this publication are copyright<br />
©2009 The <strong>Regional</strong> <strong>Environmental</strong> <strong>Center</strong> <strong>for</strong> <strong>Central</strong> <strong>and</strong> Eastern Europe<br />
No part of this publication may be sold in any <strong>for</strong>m or reproduced <strong>for</strong> sale<br />
without prior written permission of the copyright holder<br />
ISBN: 978-963-9638-45-7<br />
Published by:<br />
The <strong>Regional</strong> <strong>Environmental</strong> <strong>Center</strong> <strong>for</strong> <strong>Central</strong> <strong>and</strong> Eastern Europe<br />
Ady Endre ut 9-11, 2000 Szentendre, Hungary<br />
Tel: (36-26) 311-199, Fax: (36-26) 311-294, E-mail: info@rec.org, Website: http://www.rec.org/<br />
Printed in Hungary by Typonova<br />
This <strong>and</strong> all REC publications are printed on recycled paper or paper produced<br />
without the use of chlorine or chlorine-based chemicals
C O N T E N T S<br />
Abbreviations 6<br />
Foreword by the European Commission 11<br />
Foreword by the Executive Director of the <strong>Regional</strong> <strong>Environmental</strong> <strong>Center</strong> 12<br />
Authors <strong>and</strong> acknowledgements 13<br />
Executive summary 19<br />
Introduction 31<br />
Objectives 31<br />
Target 32<br />
Scope 32<br />
Methodological approach 33<br />
Other considerations 35<br />
Chapter 1 The role of the Priority <strong>Environmental</strong> Investment Programme <strong>for</strong> SEE 37<br />
Introduction 39<br />
The nature of PEIP support 39<br />
Assistance provided by the PEIP team 40<br />
The role of the PEIP 42<br />
Chapter 2 The status of environmental infrastructure in the SEE region 45<br />
Introduction 47<br />
Infrastructure status in the water sector 47<br />
Infrastructure status in the waste sector 51<br />
S T R AT E G I C M O V E S 3
4<br />
C O N T E N T S<br />
Chapter 3 Challenges to environmental financing in SEE 55<br />
Introduction 57<br />
Obstacles to environmental infrastructure financing — national level 57<br />
Obstacles to environmental infrastructure financing — municipal level 63<br />
Chapter 4 Economic development <strong>and</strong> the EU accession process 71<br />
Economic development in SEE 71<br />
EU accession 75<br />
Infrastructure investment implications of the EU directives 79<br />
<strong>Environmental</strong> investment needs <strong>and</strong> benefits 89<br />
Chapter 5 National strategic <strong>and</strong> institutional framework 99<br />
Update on progress in national environmental legislation 101<br />
En<strong>for</strong>cement of environmental legislation in the water <strong>and</strong> waste sectors 107<br />
<strong>Environmental</strong> institutions 109<br />
Chapter 6 Water <strong>and</strong> waste utilities in SEE — Status <strong>and</strong> re<strong>for</strong>m 119<br />
Introduction 121<br />
Status of utilities <strong>and</strong> status of re<strong>for</strong>ms in the water sector 122<br />
Status of utilities <strong>and</strong> status of re<strong>for</strong>ms in the waste sector 130<br />
Other considerations in water <strong>and</strong> waste utility re<strong>for</strong>m 136<br />
Chapter 7 Financing environmental infrastructure investments 145<br />
Introduction 147<br />
Domestic sources of finance 147<br />
International financial assistance 157<br />
Project preparation facilities 174<br />
<strong>Regional</strong> cooperation frameworks 180<br />
Donor coordination frameworks 184<br />
Chapter 8 Prioritisiation of infrastructure projects: The PEIP lists 187<br />
Dynamics of the PEIP lists of priority projects 189<br />
S T R AT E G I C M O V E S
C O N T E N T S<br />
Chapter 9 The way <strong>for</strong>ward 203<br />
Introduction 205<br />
Overall challenges <strong>for</strong> national governments 205<br />
Overall challenges at local <strong>and</strong> regional level 209<br />
Annexes 213<br />
Annex 1 <strong>Environmental</strong> institutions <strong>and</strong> their responsibilities 215<br />
Annex 2 Key government functions under the water acquis 220<br />
Annex 3 <strong>Strategic</strong> documents providing guidance <strong>for</strong> infrastructure investment<br />
in the water <strong>and</strong> waste sectors in SEE countries 221<br />
Annex 4 Selected REC publications in the field of environmental infrastructure<br />
investments <strong>and</strong> financing 224<br />
Annex 5 PEIP priority project lists 226<br />
Notes 248<br />
References 249<br />
S T R AT E G I C M O V E S 5
6<br />
A B B R E V I AT I O N S<br />
S T R AT E G I C M O V E S<br />
BAT Best available techniques<br />
BERCEN Balkan <strong>Environmental</strong> Regulatory Compliance <strong>and</strong> En<strong>for</strong>cement<br />
Network<br />
BiH Bosnia <strong>and</strong> Herzegovina<br />
BMW Biodegradable municipal waste<br />
CARDS Community Assistance <strong>for</strong> Reconstruction, Development<br />
<strong>and</strong> Stabilisation<br />
CEB Council of Europe Development Bank<br />
CEE <strong>Central</strong> <strong>and</strong> Eastern Europe<br />
CW Croatian Waters<br />
CSE Communal service enterprises<br />
DABLAS Danube <strong>and</strong> Black Sea Initiative<br />
DG REGIO Directorate General <strong>for</strong> <strong>Regional</strong> Policy, European Commission<br />
DSIP Directive-specific implementation plan<br />
EAR European Agency <strong>for</strong> Reconstruction<br />
EBRD European Bank <strong>for</strong> Reconstruction <strong>and</strong> Development<br />
EC European Commission<br />
ECENA <strong>Environmental</strong> Compliance <strong>and</strong> En<strong>for</strong>cement Network <strong>for</strong> Accession<br />
EEC European Economic Community<br />
EFFBiH <strong>Environmental</strong> Fund of the Federation of Bosnia <strong>and</strong> Herzegovina<br />
EFRS <strong>Environmental</strong> Fund of Republika Srpska, Bosnia <strong>and</strong> Herzegovina<br />
EIA <strong>Environmental</strong> impact assessment<br />
EIB European Investment Bank<br />
EIP <strong>Environmental</strong> Investment Programme<br />
ENPI European Neighbourhood <strong>and</strong> Partnership Instrument<br />
EPA Environment Protection Agency<br />
EPEEF <strong>Environmental</strong> Protection <strong>and</strong> Energy Efficiency Fund, Croatia<br />
EPF <strong>Environmental</strong> Protection Fund, Serbia<br />
EPOP Environment Protection Operational Programme<br />
EPPF <strong>Environmental</strong> Project Preparation Facility<br />
ELV Emission limit value<br />
ESMP <strong>Environmental</strong> <strong>and</strong> social management plan<br />
ETF European Task Force<br />
EU European Union<br />
EU-10 10 new member states that entered the EU in 2004<br />
EU-15 15 member states that <strong>for</strong>med the EU prior to enlargement
EUR Euro<br />
EUWI EU Water Initiative<br />
EWBJF European Western Balkans Joint Fund<br />
FBiH Federation of Bosnia <strong>and</strong> Herzegovina<br />
FOPIP Financial <strong>and</strong> Operational Per<strong>for</strong>mance Improvement Programme<br />
FYROM The <strong>for</strong>mer Yugoslav Republic of Macedonia<br />
GDP Gross domestic product<br />
GEF Global Environment Facility<br />
H2020 Horizon 2020 Initiative<br />
HCW Healthcare waste<br />
HZWM Hazardous waste management<br />
IBRD International Bank <strong>for</strong> Reconstruction <strong>and</strong> Development<br />
IFC International Finance Corporation<br />
IFI International financial institution<br />
IFI AG International Financial Institutions Advisory Group<br />
IMF International Monetary Fund<br />
IPA Instrument <strong>for</strong> Pre-accession Assistance<br />
IPF Infrastructure Preparation Facility<br />
IPPC Integrated pollution prevention <strong>and</strong> control<br />
ISPA Instrument <strong>for</strong> Structural Policies <strong>for</strong> Pre-Accession<br />
IWMS Integrated waste management system<br />
JICA Japan International Cooperation Agency<br />
KEAP Kosovo <strong>Environmental</strong> Action Plan<br />
KEPA Kosovo Environment Protection Agency<br />
KfW Kreditanstalt fur Wiederaufbau (a German bank)<br />
KLMC Kosovo L<strong>and</strong>fill Management Company<br />
KM Convertible mark (Bosnia <strong>and</strong> Herzegovina)<br />
KTA Kosovo Trust Agency<br />
LCP Large Combustion Plants Directive<br />
LSGU Local self-government units<br />
MBT Mechanical biological treatment<br />
MIFF Multi-annual indicative financial framework<br />
MIPD Multi-annual indicative planning document<br />
MISP Municipal Infrastructure Support Programme, Serbia<br />
MSW Municipal solid waste<br />
MSWM Municipal solid waste management<br />
MW Municipal Window<br />
A B B R E V I AT I O N S<br />
S T R AT E G I C M O V E S 7
8<br />
A B B R E V I AT I O N S<br />
S T R AT E G I C M O V E S<br />
NGO Non-governmental organisation<br />
NEAP National environmental action plan<br />
NEIS National <strong>Environmental</strong> Investment Strategy (the <strong>for</strong>mer Yugoslav<br />
Republic of Macedonia)<br />
NIB Nordic Investment Bank<br />
NIMBY “Not in my backyard” syndrome<br />
NIP National investment plan<br />
NSDS National Sustainable Development Strategy, Serbia<br />
NSEA National strategy <strong>for</strong> environmental approximation<br />
NSSD National strategy <strong>for</strong> sustainable development<br />
NUTS Nomenclature of Territorial Units<br />
NWMP National waste management plan<br />
NWMS National waste management strategy<br />
ODA Official Development Assistance<br />
OECD Organization <strong>for</strong> Economic Cooperation <strong>and</strong> Development<br />
OP Operational Programme<br />
PEIP Priority <strong>Environmental</strong> Investment Programme <strong>for</strong> South Eastern<br />
Europe<br />
Phare Pol<strong>and</strong> <strong>and</strong> Hungary: Assistance <strong>for</strong> Restructuring their Economies<br />
PIP Public investment programme<br />
PIU Project implementation unit<br />
PMU Project management unit<br />
PPF Project Preparation Facility<br />
PPIAF Public-Private Infrastructure Advisory Facility<br />
PPP Public-private partnership<br />
PSP Private sector participation<br />
PUC Public utility company<br />
PWSE Public water supply enterprises<br />
RCC <strong>Regional</strong> Cooperation Council<br />
REC <strong>Regional</strong> <strong>Environmental</strong> <strong>Center</strong> <strong>for</strong> <strong>Central</strong> <strong>and</strong> Eastern Europe<br />
REReP <strong>Regional</strong> <strong>Environmental</strong> Reconstruction Programme <strong>for</strong> South<br />
Eastern Europe<br />
RS Republika Srpska (Bosnia <strong>and</strong> Herzegovina)<br />
RWMC <strong>Regional</strong> waste management centre<br />
SAA Stabilisation <strong>and</strong> association agreement<br />
SAP Stabilisation <strong>and</strong> Association Process<br />
SAPARD Special Accession Programme <strong>for</strong> Agriculture <strong>and</strong> Development
SAS Sector approximation strategy<br />
SEA <strong>Strategic</strong> environmental assessment<br />
SEE South Eastern Europe<br />
SEPA Serbian Environment Protection Agency<br />
SIDA Swedish International Development Cooperation Agency<br />
SME Small <strong>and</strong> medium-sized enterprises<br />
SPA <strong>Strategic</strong> Planning <strong>for</strong> Approximation<br />
SWM Solid waste management<br />
SWMMP <strong>Strategic</strong> waste management master plan<br />
SWMP Solid waste management project<br />
SWMS Solid waste management strategy<br />
ToR Terms of reference<br />
UfW Unaccounted-<strong>for</strong> water<br />
UK United Kingdom<br />
UNDP United Nations Development Programme<br />
UNEP United Nations Environment Programme<br />
UNEP-FI United Nations Environment Programme Finance Initiative<br />
UNSCR United Nations Security Council Resolution<br />
USAID United States Agency <strong>for</strong> International Development<br />
UWWTD Urban Waste Water Treatment Directive<br />
ViK Vodovod i Kanalizacija (water <strong>and</strong> sewerage company)<br />
WB World Bank<br />
WBICP Western Balkans Investment Coordination Plat<strong>for</strong>m<br />
WBIF Western Balkans Investment Framework<br />
WFD Waste Framework Directive<br />
WLD Waste L<strong>and</strong>fill Directive<br />
WM Waste management<br />
WMC Waste management centre<br />
WURP WG Water Utility Re<strong>for</strong>m Plan (WURP) working group<br />
WWTP Wastewater treatment plant<br />
A B B R E V I AT I O N S<br />
S T R AT E G I C M O V E S 9
10<br />
S T R AT E G I C M O V E S
The c<strong>and</strong>idate countries <strong>and</strong> potential c<strong>and</strong>idates are working to align their<br />
policies with EU environmental norms <strong>and</strong> st<strong>and</strong>ards in preparation <strong>for</strong> their future<br />
membership of the EU. Meeting EU environmental st<strong>and</strong>ards poses a major<br />
challenge <strong>for</strong> the countries including, inter alia, the need to conduct policy re<strong>for</strong>ms,<br />
develop appropriate environment infrastructure <strong>and</strong> build up administrative capacity.<br />
The preparation of environment infrastructure projects is especially challenging<br />
as it requires specialist skills, knowledge <strong>and</strong> experience, financial <strong>and</strong><br />
human resources <strong>and</strong> the effective coordination of many stakeholders. There<strong>for</strong>e<br />
I welcome this publication, as a very comprehensive analysis of the challenges <strong>and</strong><br />
progress achieved in financing environment infrastructure projects. The Priority<br />
<strong>Environmental</strong> Investment Programme provided strategic advice to the countries<br />
on how to plan <strong>and</strong> prepare environment investment projects. The lessons learnt<br />
from the implementation of the programme will be taken into account in the activities<br />
of the future <strong>Regional</strong> <strong>Environmental</strong> Network <strong>for</strong> Accession (RENA)<br />
which is the initiative being established to continue, along with other elements,<br />
the collaboration initiated under this programme.<br />
Foreword from<br />
the European Commission<br />
Timo Makela<br />
Director International Affairs <strong>and</strong> LIFE<br />
Environment Directorate-General<br />
European Commission<br />
S T R AT E G I C M O V E S 11
12<br />
Foreword from<br />
the <strong>Regional</strong> <strong>Environmental</strong> <strong>Center</strong><br />
S T R AT E G I C M O V E S<br />
The development <strong>and</strong> approval of the Priority <strong>Environmental</strong> Investment Programme<br />
<strong>for</strong> South Eastern Europe (PEIP) was one of the milestones in the process of<br />
environmental reconstruction <strong>and</strong> EU approximation in South Eastern Europe (SEE).<br />
In the period 2001 to 2009, the <strong>Regional</strong> <strong>Environmental</strong> <strong>Center</strong> <strong>for</strong> <strong>Central</strong> <strong>and</strong> Eastern<br />
Europe (REC) was deeply engaged in assisting the region to identify <strong>and</strong> prioritise<br />
environmental infrastructure projects; building capacity at local, national <strong>and</strong><br />
regional level; facilitating dialogue between project proponents <strong>and</strong> financing organisations;<br />
<strong>and</strong> transferring best practices from the new EU member states.<br />
This book presents national policy development, national environmental institutions,<br />
environmental infrastructure investments, water <strong>and</strong> waste utility companies,<br />
lists of priority projects <strong>and</strong> their development dynamics, key constraints<br />
<strong>and</strong> challenges to investments <strong>and</strong> possible actions to address them, <strong>and</strong> other investment-related<br />
issues in SEE.<br />
The publication targets both REC’s beneficiaries in SEE within the national<br />
<strong>and</strong> regional administration, as well as donors, international financial institutions<br />
(IFIs) <strong>and</strong> international organisations active in the region.<br />
Building on the 2005 REC publication Targeting the <strong>Environmental</strong> Investment<br />
Challenge in SEE, the present publication attempts to capture the many positive<br />
changes that have taken place in the region since 2005. At the same time, it<br />
contains analysis of the obstacles <strong>and</strong> blockages to more active investments in quality<br />
environmental infrastructure.<br />
I would like to extend my gratitude to the European Commission <strong>for</strong> the valuable<br />
guidance provided in the implementation of the PEIP <strong>and</strong> <strong>for</strong> making possible<br />
this publication. I would also like to express my thanks to the ministries of<br />
environment in SEE, municipalities in the region, local consultants, international<br />
peer reviewers, <strong>and</strong> staff from the REC’s head office <strong>and</strong> country offices — thank<br />
you to everyone who contributed to the success of the PEIP.<br />
Marta Szigeti Bonifert<br />
Executive Director<br />
<strong>Regional</strong> <strong>Environmental</strong> <strong>Center</strong> <strong>for</strong> <strong>Central</strong> <strong>and</strong> Eastern Europe
Authors <strong>and</strong> acknowledgements<br />
This publication has been drafted by Ruslan Zhechkov, Ellen Baltzar, Dusan<br />
Sevic <strong>and</strong> Raisa Gerasina, members of the <strong>Environmental</strong> Financing Topic Area<br />
(EFTA) at the REC. Detailed comments have been provided by Oreola Ivanova-<br />
Nacheva, Venelina Varbova, Miriam Markus-Johansson, Ana Petrovska (REC <strong>for</strong>mer<br />
Yugoslav Republic of Macedonia), Joanna Fiedler (European Commission)<br />
<strong>and</strong> Jennifer McGuinn (consultant).<br />
Ruslan Zhechkov has 10 years’ experience in SEE working in the field of environment<br />
<strong>and</strong> environmental financing. He has worked full-time <strong>for</strong> the REC <strong>for</strong> eight<br />
years <strong>and</strong> is currently a leader of the REC’s <strong>Environmental</strong> Financing Topic Area.<br />
Ruslan has extensive experience <strong>and</strong> knowledge of SEE countries <strong>and</strong> has worked<br />
in all of them on a variety of assignments linked to environmental financing. Ruslan<br />
was a grants manager in the environmental project financing facility EcoLinks<br />
between 2001 <strong>and</strong> 2003, covering several areas including water supply <strong>and</strong> water<br />
management in companies. For the past two years Ruslan has been managing the<br />
EU-funded Priority <strong>Environmental</strong> Investment Programme <strong>for</strong> South Eastern Europe<br />
(PEIP), working closely with the European Commission (EC), IFIs <strong>and</strong> the<br />
Infrastructure Preparation Facility (IPF) etc. He was part of the team that drafted<br />
the National <strong>Environmental</strong> Investment Strategy of the <strong>for</strong>mer Yugoslav Republic<br />
of Macedonia, which was adopted by the government in 2009. He has been project<br />
director of several pre-feasibility studies in water supply <strong>and</strong> waste management<br />
in Bosnia <strong>and</strong> Herzegovina, Croatia <strong>and</strong> the <strong>for</strong>mer Yugoslav Republic of Macedonia.<br />
He was also part of the team reviewing the Macedonian <strong>Environmental</strong><br />
Fund <strong>and</strong> participated in trainings <strong>for</strong> the establishment of an environmental fund<br />
in Montenegro.<br />
Ellen Baltzar has worked <strong>for</strong> the REC since 2007 as a junior expert in the field of<br />
environmental financing. Ellen was part of the PEIP team between 2007 <strong>and</strong> 2009.<br />
In the course of several years’ work on regional projects, Ellen has gained broad experience<br />
of working with environmental policy issues in <strong>Central</strong> <strong>and</strong> Eastern Europe<br />
(CEE) <strong>and</strong> SEE. She holds a master’s degree in environmental social science<br />
with a specialisation in human ecology from the University of Gothenburg, Sweden.<br />
Dusan Sevic is an environmental assessment expert with more than 13 years’ experience<br />
in CEE <strong>and</strong> SEE in the fields of environmental impact assessment (EIA),<br />
S T R AT E G I C M O V E S 13
14<br />
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<br />
S T R AT E G I C M O V E S<br />
strategic environmental assessment (SEA) <strong>and</strong> environmental financing. He has<br />
been working <strong>for</strong> the REC <strong>for</strong> four years <strong>and</strong> is a leader of the REC’s <strong>Environmental</strong><br />
Assessment Topic Area. Dusan has broad experience in quality reviews of<br />
EIA <strong>and</strong> SEA projects <strong>and</strong> the provision of training on EIA <strong>and</strong> SEA; environmental<br />
project management; institutional strengthening; <strong>and</strong> capacity-building<br />
activities at national <strong>and</strong> international level in all SEE countries.<br />
Raisa Gerasina is a specialist in environmental engineering. She works as a junior<br />
expert in environmental financing <strong>and</strong> her areas of expertise include environmental<br />
financing, environmental in<strong>for</strong>mation <strong>and</strong> environmental education projects<br />
implemented in the SEE <strong>and</strong> CEE regions <strong>and</strong> Commonwealth of Independent<br />
States (CIS) countries. Raisa holds a master’s degree in environmental sciences <strong>and</strong><br />
policy from the <strong>Central</strong> European University, Budapest, Hungary.<br />
Oreola Ivanova-Nacheva has been working <strong>for</strong> the REC <strong>for</strong> more than 13 years.<br />
In 2000, she became head of the <strong>Environmental</strong> Policy Programme, <strong>and</strong> in parallel,<br />
between 2003 <strong>and</strong> 2008, she was the REC’s deputy executive director <strong>for</strong> strategy<br />
<strong>and</strong> development. Oreola contributed to the development of the <strong>Regional</strong><br />
<strong>Environmental</strong> Reconstruction Programme <strong>for</strong> South Eastern Europe (REReP)<br />
<strong>and</strong> the Priority <strong>Environmental</strong> Investment Programme <strong>for</strong> South Eastern Europe<br />
(PEIP). As project director, she provided continuous strategic leadership <strong>and</strong> guidance<br />
throughout the implementation period. Be<strong>for</strong>e joining the REC, Oreola<br />
worked <strong>for</strong> the Bulgarian Ministry of Environment. One of her major assignments<br />
was the preparation <strong>and</strong> organisation of the 1995 Ministerial Conference “Environment<br />
<strong>for</strong> Europe” in Sofia.<br />
REC Country Offices<br />
Experts from the REC’s country offices have been instrumental in implementing<br />
the PEIP. They have been in charge of project updates, the collection of in<strong>for</strong>mation<br />
<strong>and</strong> liaising with relevant policy makers.<br />
Albania<br />
Mihallaq Qirjo, Country Office Director; Eduart Cani, Senior Project Manager;<br />
Alken Myftiu, Senior Project Manager<br />
Bosnia <strong>and</strong> Herzegovina<br />
Jasna Draganic, Country Office Director; Sunita Selak, Project Manager<br />
Croatia<br />
Irena Brnada, Country Office Director; Zeljka Medven, Project Manager;<br />
Vjakoslav Radisic, Project Manager
Kosovo (as defined under UNSCR 1244)<br />
Zeqir Veselaj, Field Office Director; Shqipe Neziri, Project Manager<br />
The <strong>for</strong>mer Yugoslav Republic of Macedonia<br />
Katarina Stojkovska, Country Office Director; Kornelija Radovanovic, Project<br />
Manager; Ana Petrovska, Project Manager<br />
Montenegro<br />
Srna Sudar Vilotic, Country Office Director; Mira Puric, Project Manager<br />
Serbia<br />
Jovan Pavlovic, Country Office Director; Ivana Tomasevic, Project Officer<br />
Other contributors<br />
During the implementation of the PEIP, staff from the REC’s head office <strong>and</strong><br />
country offices have relied on a variety of sources to receive updates on policy matters.<br />
These experts have contributed to numerous PEIP events, <strong>and</strong> their input <strong>and</strong><br />
insights have been used in the writing of this book <strong>and</strong> other publications.<br />
Albania<br />
Daniela Godo, Specialist <strong>and</strong> PEIP Focal Point, Project Department, Ministry of<br />
Environment, Forestry <strong>and</strong> Water Administration; Enkelejda Gjinali, Advisor to<br />
the Prime Minister of Albania on water issues; Shpresa Mezini, Specialist, Project<br />
Department, Ministry of Environment, Forestry <strong>and</strong> Water Administration; Aspri<br />
Kapo, Specialist, Ministry of Environment, Forestry <strong>and</strong> Water Administration;<br />
Aida Seseri, Director of the Directorate <strong>for</strong> Community Service Policies, Ministry<br />
of Public Works, Transport <strong>and</strong> Telecommunication; Vladimir Bezhani, Specialist,<br />
Sector <strong>for</strong> Solid Waste, Ministry of Public Works, Transport <strong>and</strong><br />
Telecommunication; Roza Dedja, Specialist, Department <strong>for</strong> Institutional Support<br />
in the Integration Process, Ministry of European Integration; Anila Tola,<br />
General Directorate of Water Supply <strong>and</strong> Sewerage; Petrit Tare, Director, Korça<br />
Water Supply <strong>and</strong> Sewerage Utility<br />
Bosnia <strong>and</strong> Herzegovina<br />
Nermina Skejovic-Huric, PEIP Focal Point, Ministry of Foreign Trade <strong>and</strong> Economic<br />
Relations; Alma Imamovic, Federal Ministry of Agriculture, Water Management<br />
<strong>and</strong> Forestry; Almira Kapetanovic, Federal Ministry of Environment<br />
<strong>and</strong> Tourism; Branislav Blagojevic, Water Agency of Republika Srpska<br />
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<br />
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16<br />
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Croatia<br />
Vlatka Lucijanic Justic, PEIP Focal Point, Head of Department <strong>for</strong> EU Infrastructure<br />
Development Programmes, Ministry of <strong>Environmental</strong> Protection, Physical<br />
Planning <strong>and</strong> Construction; Mladen Glavocevic, Senior Expert Advisor,<br />
EU Division, Department <strong>for</strong> EU Infrastructure Development Programmes, Ministry<br />
of <strong>Environmental</strong> Protection, Physical Planning <strong>and</strong> Construction; Karmen<br />
Cerar, Head of Sector, Division of Water Policy <strong>and</strong> International Projects, Sector<br />
<strong>for</strong> International Projects, Ministry of <strong>Regional</strong> Development, Forestry <strong>and</strong> Water<br />
Management; Davor Hadjim, Expert Advisor, Division of Water Policy <strong>and</strong> International<br />
Projects, Sector <strong>for</strong> International Projects, Ministry of <strong>Regional</strong> Development,<br />
Forestry <strong>and</strong> Water Management; Predrag Culjak, Senior Expert<br />
Advisor, Department <strong>for</strong> Managing the EU Pre-Accession Funding Instruments,<br />
<strong>Environmental</strong> Protection <strong>and</strong> Energy Efficiency Fund; Davor Indjic, Principal<br />
Banker, Municipal <strong>and</strong> <strong>Environmental</strong> Infrastructure, European Bank <strong>for</strong><br />
Reconstruction <strong>and</strong> Development<br />
Kosovo (as defined under UNSCR 1244)<br />
Zymer Mrasori, PEIP Focal Point, Head of Division <strong>for</strong> Overall <strong>Environmental</strong><br />
Policies, Ministry of Environment <strong>and</strong> Spatial Planning; Muhamet Malsiu, PEIP<br />
Focal Point 2007–2008, Director of the Department <strong>for</strong> Environment, Ministry<br />
of Environment <strong>and</strong> Spatial Planning; Albana Hajrizi, Department of Environment,<br />
Ministry of Environment <strong>and</strong> Spatial Planning<br />
The <strong>for</strong>mer Yugoslav Republic of Macedonia<br />
Vesna Indova, PEIP Focal Point, Ministry of Environment <strong>and</strong> Physical Planning;<br />
Kaja Sukova, Head of the Sustainable Development <strong>and</strong> Investment Department,<br />
Ministry of Environment <strong>and</strong> Physical Planning; Kiril Kalkashliev, Advisor on Investments,<br />
Sector <strong>for</strong> Sustainable Development <strong>and</strong> Investments, Ministry of Environment<br />
<strong>and</strong> Physical Planning<br />
Montenegro<br />
Sinisa Stankovic, ex-Deputy Minister of Tourism <strong>and</strong> Environment; Ana Krunic,<br />
PEIP Focal Point, Ministry of Spatial Planning <strong>and</strong> <strong>Environmental</strong> Protection;<br />
Snezana Didanovic, Advisor, Ministry of Spatial Planning <strong>and</strong> <strong>Environmental</strong><br />
Protection; Igor Jovanovic, Advisor, Ministry of Spatial Planning <strong>and</strong> <strong>Environmental</strong><br />
Protection; Borko Raicevic, Advisor on energy efficiency, Ministry of<br />
Economy; Dragan Darmanovic, Head of Department <strong>for</strong> Debt <strong>and</strong> Cash Flow<br />
Management, Ministry of Finance; Dragana Dukic, Independent Advisor to the<br />
Ministry of Agriculture, Forestry <strong>and</strong> Water Management; Vera Vujosevic, Coordinator<br />
of the Unit <strong>for</strong> Communal Activities, Ministry <strong>for</strong> Spatial Planning <strong>and</strong><br />
<strong>Environmental</strong> Protection
Serbia<br />
Aleks<strong>and</strong>ar Vesic, PEIP Focal Point, Assistant Minister, Sector <strong>for</strong> Planning <strong>and</strong><br />
Management, Ministry of Environment <strong>and</strong> Spatial Planning; Nebojsa Pokimica,<br />
Head of Project Management Department, Sector <strong>for</strong> Planning <strong>and</strong> Management,<br />
Ministry of Environment <strong>and</strong> Spatial Planning; Sava Sladic, Advisor, Sector <strong>for</strong><br />
Planning <strong>and</strong> Management, Ministry of Environment <strong>and</strong> Spatial Planning; Tanja<br />
Petrovic, Advisor, Sector <strong>for</strong> Planning <strong>and</strong> Management, Ministry of Environment<br />
<strong>and</strong> Spatial Planning; Biljana Blazevic Zec, Advisor, Project Planning <strong>and</strong> Development<br />
Department, Environment Protection Fund; Dragana Milovanovic, Head<br />
of Department <strong>for</strong> <strong>Strategic</strong> Planning <strong>and</strong> Management <strong>and</strong> International Cooperation<br />
in the Water Sector, Water Directorate, Ministry of Agriculture, Forestry <strong>and</strong><br />
Water Management; Dmitar Zakula, Senior Advisor, Water Directorate, Ministry<br />
of Agriculture, Forestry <strong>and</strong> Water Management; Paul Dax, Public Administration/Institutional<br />
Expert, Municipal Infrastructure Support Programme<br />
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<br />
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The countries of South Eastern Europe (SEE) face a number of environmental<br />
problems, mainly in the area of water pollution due to the uncontrolled discharge of<br />
untreated communal <strong>and</strong> industrial wastewaters into rivers, lakes <strong>and</strong> seas, <strong>and</strong> uncontrolled<br />
waste disposal that often poses a threat to drinking water sources. Investing<br />
in environmental infrastructure is an important way to address the problem of<br />
pollution from point sources in order to improve environmental conditions in SEE.<br />
During the process of accession to the European Union (EU), extensive work will<br />
need to be done to adapt legal, institutional <strong>and</strong> financial systems to the requirements<br />
of the environmental acquis. <strong>Environmental</strong> infrastructure is an important area that<br />
needs improvement <strong>and</strong> significant capital investments. The institutions associated<br />
with environmental investments also require reorganisation <strong>and</strong> strengthening.<br />
The aim of the present publication is to provide an overview of developments<br />
in environmental infrastructure investments in the water <strong>and</strong> waste sectors in the<br />
SEE region in relation to the major investment-heavy directives. The book addresses<br />
economic, financial <strong>and</strong> legal issues but also covers other important aspects<br />
of environmental investments such as the en<strong>for</strong>cement of key EU directives, institutional<br />
capacity <strong>and</strong> international assistance.<br />
The publication draws on the experiences gathered through the Priority <strong>Environmental</strong><br />
Investment Programme <strong>for</strong> South Eastern Europe (PEIP), implemented<br />
between 2001 <strong>and</strong> 2009, <strong>and</strong> on the accumulated knowledge <strong>and</strong> lessons learned<br />
in the framework of this programme. Work carried out within the PEIP is thus the<br />
main source of in<strong>for</strong>mation, in addition to three regional surveys (one in 2008 <strong>and</strong><br />
two in 2009) on water <strong>and</strong> waste. Desk research was also carried out to complement<br />
this accumulated in<strong>for</strong>mation.<br />
The 2005 REC publication Targeting the <strong>Environmental</strong> Investment Challenge<br />
in South Eastern Europe covered the period 2001 to 2005. The present publication,<br />
which focuses mainly on developments since 2005, is the third in a series of<br />
publications released by the REC in 2009. The two preceding publications are<br />
Strategies <strong>for</strong> Re<strong>for</strong>m: A Manual <strong>for</strong> Water Utilities in SEE <strong>and</strong> Speeding up Investments<br />
in the Waste Sector: A Manual <strong>for</strong> Waste Utilities in SEE.<br />
Since 2005, significant <strong>and</strong> dynamic changes have taken place in SEE, including<br />
progress in the legislative <strong>and</strong> strategic framework, utility re<strong>for</strong>ms, <strong>and</strong> ef<strong>for</strong>ts towards<br />
EU accession. The authors have attempted to map <strong>and</strong> analyse such changes in areas<br />
that have a bearing on environmental financing. The publication also highlights positive<br />
results in the region, while not disregarding areas that need improvement.<br />
Executive summary<br />
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It is hoped that this publication will be of use in the future development of environmental<br />
investments in the SEE region through its analysis of key national <strong>and</strong> regional<br />
constraints to environmental investments. It proposes a strategic <strong>and</strong> coherent<br />
process <strong>for</strong> planning <strong>and</strong> developing environmental infrastructure projects; maps obstacles<br />
<strong>and</strong> bottlenecks to environmental infrastructure development; <strong>and</strong>, where possible,<br />
recommends ways to overcome them. The SEE region is to be understood here<br />
as covering Albania, Bosnia <strong>and</strong> Herzegovina, Croatia, Kosovo (as defined under<br />
UNSCR 1244), the <strong>for</strong>mer Yugoslav Republic of Macedonia, Montenegro <strong>and</strong> Serbia.<br />
An overview of each country’s economic situation <strong>and</strong> approximation status is<br />
provided, based on the premise that environmental investments do not happen in<br />
isolation but are part of a wider system. The status of environmental infrastructure<br />
in SEE is reviewed, as is the status of the utilities <strong>and</strong> of utility re<strong>for</strong>ms.<br />
The thematic focus of the book is water <strong>and</strong> waste, as the majority of public investments<br />
are concentrated in these sectors. Since air falls mainly under the Integrated<br />
Pollution Prevention <strong>and</strong> Control (IPPC) <strong>and</strong> Large Combustion Plants<br />
(LCP) Directives <strong>and</strong> is, to a large extent, the responsibility of the private sector or<br />
of individual state-owned companies, it is not examined extensively. However, the<br />
importance of investments in air is acknowledged, <strong>and</strong> many of the conclusions<br />
<strong>and</strong> recommendations are equally valid <strong>for</strong> the air sector.<br />
Although this publication focuses on the construction of environmental infrastructure,<br />
this should not be considered as a remedy <strong>for</strong> all environmental problems<br />
in the region. <strong>Environmental</strong> problems should be considered from the broader perspective<br />
of sustainable development, taking into account the economic <strong>and</strong> social situation<br />
of the countries of the region. In a context in which the polluter pays principle<br />
would burden citizens with additional financial contributions, it is essential to consider<br />
poverty levels <strong>and</strong> the social aspects of infrastructure development.<br />
The possibilities <strong>for</strong> minimising the need to develop environmental infrastructure<br />
by identifying alternative solutions also need to be discussed. For example,<br />
by cutting down on the use of resources (efficient water use, waste prevention,<br />
recycling <strong>and</strong> energy efficiency), improving inefficient systems (reducing leakages<br />
from water supply systems <strong>and</strong> improving maintenance) <strong>and</strong> improving industrial<br />
technologies, infrastructure needs can be optimised.<br />
The main findings in each chapter are presented below, including recommendations<br />
<strong>for</strong> the way <strong>for</strong>ward. Some conclusions present a level of generalisation<br />
that, in some cases, does not fully take into consideration national differences <strong>and</strong><br />
specificities. The authors have tried, as far as possible, to refrain from conclusions<br />
that are too general <strong>and</strong> to point out national differences where they exist.<br />
The role of the Priority <strong>Environmental</strong><br />
Investment Programme<br />
The PEIP has facilitated a process of strategic environmental investment planning<br />
by national environmental authorities through identifying <strong>and</strong> prioritising<br />
necessary <strong>and</strong> relevant projects. The programme has provided valuable in<strong>for</strong>ma-
tion to the donor community on environmental <strong>and</strong> institutional needs <strong>and</strong> priorities<br />
<strong>and</strong> on the status of environmental investment planning in the region.<br />
During the 2007–2009 period, the PEIP has maintained lists of priority projects;<br />
organised nine national workshops <strong>and</strong> four regional meetings; <strong>and</strong> drafted<br />
manuals on water re<strong>for</strong>m <strong>and</strong> waste sector investments. Managing a pipeline of<br />
projects was part of continuing ef<strong>for</strong>ts to make available the most up-to-date in<strong>for</strong>mation<br />
on projects selected as priorities by the governments. The regional meetings<br />
were intended to provide an overview of progress in the different countries in<br />
terms of environmental investments, but also to attract donors <strong>and</strong> IFIs <strong>and</strong> to draw<br />
their attention to the issue. The national workshops were an opportunity to have<br />
in-depth discussions on a selected topic (water or waste), to attract a wide range of<br />
stakeholders, <strong>and</strong> to initiate a productive debate <strong>and</strong> exchange of experience. The<br />
manuals are targeted at all water <strong>and</strong> waste utilities in the region but are also of interest<br />
to policy makers. They are intended to serve as a source of reference beyond<br />
the duration of the project.<br />
At the start of the PEIP in 2001, the SEE countries lacked experience in strategic<br />
planning <strong>and</strong> the prioritisation of environmental investments projects, as well<br />
as knowledge of available sources of funding. Through the activities outlined above,<br />
<strong>and</strong> by serving as an in<strong>for</strong>mation exchange plat<strong>for</strong>m, the PEIP has contributed to<br />
filling this gap <strong>and</strong> to raising awareness. While significant progress has been<br />
achieved in priority project identification <strong>and</strong> project preparation, there is still a<br />
need <strong>for</strong> improvement. These issues will continue to be addressed under the <strong>Regional</strong><br />
<strong>Environmental</strong> Network <strong>for</strong> Accession (RENA).<br />
Status of environmental infrastructure in SEE<br />
The condition of the physical environmental infrastructure varies among SEE<br />
countries, Croatia being ahead of the other countries in the region especially in relation<br />
to wastewater treatment infrastructure. However, there is a big margin <strong>for</strong> improvement<br />
in all countries <strong>and</strong> significant financial resources will be required <strong>for</strong><br />
many years to come.<br />
Water supply infrastructure in SEE is relatively developed in urban areas, while<br />
sewerage, wastewater treatment <strong>and</strong> waste management infrastructure are far less<br />
developed <strong>and</strong> in a poorer physical condition. The situation is worst in rural areas<br />
<strong>and</strong> ef<strong>for</strong>ts should be made to integrate the whole territory of each country in water<br />
supply systems. Proper waste management is a health <strong>and</strong> environment issue that<br />
should be tackled as a priority. Wastewater treatment is a huge challenge that needs<br />
to be addressed with careful planning <strong>and</strong> prioritisation.<br />
Common problems facing the water sector in SEE countries include the relatively<br />
low level of drinking water supply in rural areas; big water losses due to ageing<br />
infrastructure; <strong>and</strong> significant unaccounted-<strong>for</strong> water (Uf W). These problems<br />
need to be addressed as part of holistic national water re<strong>for</strong>ms, including the re<strong>for</strong>m<br />
of the water utilities comprising regionalisation, corporatisation <strong>and</strong> other suitable<br />
measures that will lead to them operating according to more market-based princi-<br />
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ples. Creating conditions <strong>for</strong> private sector participation is one of the ways to increase<br />
access to capital <strong>and</strong> to introduce much-needed know-how.<br />
Waste management infrastructure in SEE is inadequate <strong>and</strong> there are only a few<br />
l<strong>and</strong>fills in the region that comply with EU regulations. There are also a huge number<br />
of illegal dumpsites or l<strong>and</strong>fills with low st<strong>and</strong>ards. Urban areas in the SEE region<br />
are relatively well covered by waste collection <strong>and</strong> transportation services,<br />
unlike rural areas. At the same time, there is <strong>and</strong> will be pressure to change the situation<br />
fundamentally as a number of EU directives stipulate the establishment of<br />
integrated waste management systems, including separate collection, recycling, sanitary<br />
l<strong>and</strong>fills etc. All the SEE countries are on the right track in this respect as they<br />
have all adopted the more economically justifiable regional approach. However,<br />
the big challenge will be to implement it in practice in the coming years.<br />
Bosnia <strong>and</strong> Herzegovina, Croatia <strong>and</strong> Serbia have made the biggest progress in<br />
project preparation <strong>for</strong> regional sanitary l<strong>and</strong>fills, while Croatia <strong>and</strong> Kosovo (as<br />
defined under UNSCR 1244) have been successful in closing <strong>and</strong> remediating the<br />
biggest number of non-sanitary l<strong>and</strong>fills. Closing <strong>and</strong> remediating old illegal dumpsites<br />
is a precondition <strong>for</strong> establishing new waste management centres.<br />
Challenges to environmental financing<br />
in SEE on the national level<br />
Financing environmental infrastructure projects in compliance with the EU<br />
environmental acquis requires the establishment of a clear legal <strong>and</strong> strategic framework<br />
<strong>and</strong> the re<strong>for</strong>m of institutional <strong>and</strong> financial systems. The process necessitates<br />
strong <strong>and</strong> persistent political will. At the same time, it is of the utmost<br />
importance <strong>for</strong> governments to realise the political <strong>and</strong> financial opportunities presented<br />
to the countries during the pre-accession period <strong>and</strong> to capitalise on them.<br />
Political will <strong>for</strong> accession is currently relatively strong <strong>and</strong> many financial opportunities<br />
are available.<br />
The global economic recession has led to further constraints on the financial situation<br />
in the SEE region <strong>and</strong> has affected investments in environmental infrastructure,<br />
with some infrastructure projects having to be suspended. However, the<br />
crisis is also an opportunity to carry out re<strong>for</strong>ms that are less resource consuming.<br />
In relation to af<strong>for</strong>dability, in many cases large-scale infrastructure investments<br />
are not attractive due to the long payback periods <strong>and</strong> other constraints. It is there<strong>for</strong>e<br />
very important to make intelligent use of the resources available from the EC<br />
<strong>and</strong> other bilateral donors in order to address the af<strong>for</strong>dability issue.<br />
The full transposition of the investment-heavy directives is an important driver<br />
<strong>for</strong> environmental infrastructure projects as it will place a legal burden on national<br />
<strong>and</strong> local governments to create the necessary conditions <strong>for</strong> investments to take<br />
place. The lack of key sectoral <strong>and</strong> environmental investment strategies delays environmental<br />
investments, since strategies set the framework <strong>and</strong> direction <strong>for</strong> follow-up<br />
laws <strong>and</strong> regulations. This is also valid <strong>for</strong> local management plans. One of<br />
the benefits of drafting strategies <strong>and</strong> plans through wide stakeholder dialogue is
that different interests are taken into account at an early stage <strong>and</strong> support can be<br />
attracted <strong>for</strong> future actions. National strategic frameworks should there<strong>for</strong>e be finalised<br />
as early as possible.<br />
The insufficient level of en<strong>for</strong>cement of environmental legislation in SEE countries<br />
represents an obstacle to the proper functioning of environmental infrastructure<br />
investments. The capacity of the inspectorates is weak <strong>and</strong> there is no real<br />
culture of compliance; the link between the inspectorates <strong>and</strong> line ministries is not<br />
always strong, nor is the connection between the inspectorates <strong>and</strong> the prosecution.<br />
The current capacity of the environmental ministries may prove to be insufficient<br />
<strong>for</strong> the administration of all future environmental requirements. However,<br />
there is pressure from ministries of finance to minimise increases in staff numbers.<br />
Challenges to environmental financing<br />
in SEE at the local level<br />
Local governments struggle with a multitude of competing funding priorities,<br />
some of which are more visible <strong>and</strong> tangible than environmental priorities <strong>and</strong>, as<br />
such, more likely to be placed high on the political agenda. While legal pressure is<br />
there<strong>for</strong>e needed <strong>for</strong> the implementation of environmental obligations, at the same<br />
time local governments need assistance in project preparation, improved awareness,<br />
<strong>and</strong> better access to funding.<br />
There is an imbalance between the obligations devolved to the municipalities<br />
as a result of decentralisation, <strong>and</strong> their financial <strong>and</strong> human resource capacities to<br />
manage these obligations. Intensive ef<strong>for</strong>ts are there<strong>for</strong>e needed to assist local governments<br />
to underst<strong>and</strong> environmental infrastructure investments in the context<br />
of a market economy, including issues of social af<strong>for</strong>dability, cost recovery, depreciation,<br />
<strong>and</strong> the appropriate use of subsidies.<br />
Local governments <strong>and</strong> their associated bodies generally lack adequate skills to<br />
prepare investment projects <strong>and</strong> to oversee <strong>and</strong> cooperate with expert consultants<br />
in project preparation. They often have a limited knowledge of possible sources of<br />
financing <strong>and</strong> lack underst<strong>and</strong>ing of their specific rules <strong>and</strong> requirements.<br />
Water <strong>and</strong> waste utilities in SEE are highly fragmented <strong>and</strong> there is a low level<br />
of cooperation between municipalities. At the same time there are (<strong>and</strong> will be)<br />
economic pressures to achieve economies of scale. Targeted work is needed on a national<br />
level to improve the culture of cooperation <strong>and</strong> to assist local governments<br />
in establishing regional bodies legally, administratively <strong>and</strong> financially.<br />
Economic development in SEE<br />
The transition to a market-based economy began after 2000 <strong>and</strong> has been slow,<br />
which has had a profound impact on the region’s competitiveness <strong>and</strong> <strong>for</strong>eign investment<br />
flows. There has been strong economic growth in SEE countries, sustained<br />
at between 4 <strong>and</strong> 8 percent between 2004 <strong>and</strong> 2008. Levels of GDP (PPP)<br />
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range from USD 2,600 in Kosovo (as defined under UNSCR 1244) to USD<br />
16,500 in Croatia. However, due to the economic recession, economic activity in<br />
SEE contracted sharply in the second half of 2008 as a result of reduced <strong>for</strong>eign direct<br />
investment, lower dem<strong>and</strong> <strong>for</strong> exports, <strong>and</strong> less cross-border lending.<br />
In Albania, Croatia, Montenegro <strong>and</strong> Serbia, the unemployment rate in 2008<br />
ranged between 11 <strong>and</strong> 14 percent, while in the <strong>for</strong>mer Yugoslav Republic of Macedonia<br />
it was around 33 percent <strong>and</strong> in Kosovo (as defined under UNSCR 1244)<br />
<strong>and</strong> Bosnia <strong>and</strong> Herzegovina it was approximately 40 percent. Unemployment levels<br />
have a direct impact on af<strong>for</strong>dability <strong>and</strong> willingness to pay <strong>for</strong> environmental<br />
infrastructure services.<br />
The region’s mid-term macroeconomic outlook remains favourable but is dependent<br />
on the maintenance of internal <strong>and</strong> regional stability, the continuation of<br />
structural re<strong>for</strong>ms, market liberalisation, infrastructure restructuring <strong>and</strong> privatisation.<br />
EU accession<br />
The countries of SEE have moved closer to EU membership in recent years as<br />
the region has, to varying degrees, made progress in re<strong>for</strong>ms <strong>and</strong> in meeting the criteria<br />
<strong>and</strong> conditions established under the Stabilisation <strong>and</strong> Association Process.<br />
For SEE countries, future EU accession is the strongest driver <strong>for</strong> re<strong>for</strong>ms <strong>and</strong> is a<br />
high priority on national agendas. The pre-accession period provides a unique window<br />
of opportunity <strong>for</strong> re<strong>for</strong>ms. It is a chance to develop human capacities <strong>and</strong> to<br />
consolidate <strong>and</strong> strengthen institutions in order to increase their ability to implement<br />
the EU environmental acquis.<br />
Lessons learnt from CEE show that early emphasis should be given to institutional<br />
<strong>and</strong> administrative re<strong>for</strong>m, <strong>and</strong> that rushed <strong>and</strong> insufficiently coordinated transposition<br />
may lead to non-integrated, unclear, complicated <strong>and</strong> poor-quality legislation.<br />
Relevant EU policies <strong>and</strong> related investments<br />
The implementation of environmental legislation, <strong>and</strong> especially of certain investment-heavy<br />
directives, requires significant ef<strong>for</strong>ts <strong>for</strong> the upgrading <strong>and</strong> construction<br />
of new environmental facilities in the water <strong>and</strong> waste sectors, which will<br />
entail significant public <strong>and</strong> private costs representing more than 2 to 3 percent of<br />
the countries’ GDP. On the other h<strong>and</strong>, compliance will eventually lead to a range<br />
of benefits linked to improved health <strong>and</strong> better living environments.<br />
Experiences from the EU-10 have shown that certain environmental investments<br />
will be particularly costly to implement. In the waste sector, the following directives<br />
pose a significant financial challenge <strong>for</strong> the public sector:<br />
• Waste Framework Directive (2008/98/EC)<br />
• L<strong>and</strong>fill Directive (1999/31/EC)<br />
• Incineration Directive (2000/76/EC)
• Hazardous Waste Directive (91/689/EEC)<br />
• Sewage Sludge Directive (86/278/EEC)<br />
The EU waste policy is based on the waste hierarchy: the options range from<br />
prevention, as the most favourable, to the least favourable, l<strong>and</strong>filling. The new<br />
Waste Framework Directive (2008) completes the EU waste policy framework.<br />
The Waste Framework Directive is not associated with significant capital costs but<br />
rather with the provision of an adequate institutional structure, the establishment<br />
of competent authorities <strong>and</strong> the preparation of waste management plans. The<br />
highest costs are incurred in relation to the waste stream–related directives <strong>and</strong> the<br />
L<strong>and</strong>fill Directive.<br />
Among the water-related directives, the following require the heaviest investments:<br />
• Drinking Water Directive (98/83/EC)<br />
• Urban Waste Water Treatment Directive (91/271/EEC)<br />
• Dangerous Substances in Water Directive (2006/11/EC)<br />
• Nitrates Directive (91/676/EEC)<br />
• Bathing Water Directive (2006/7/EC)<br />
The biggest investment implications in water in SEE are associated with the<br />
Drinking Water <strong>and</strong> Urban Waste Water Treatment Directives.<br />
In the air sector, the new Directive on Ambient Air Quality <strong>and</strong> Cleaner Air <strong>for</strong> Europe<br />
(2008/50/EC) merges most of the existing legislation into a single directive with<br />
no change to existing air quality objectives. The main public investment in air is associated<br />
with establishing a network of monitoring equipment, while significant private<br />
investments will be needed <strong>for</strong> the implementation of the IPPC <strong>and</strong> LCP Directives.<br />
Development, transposition <strong>and</strong> en<strong>for</strong>cement<br />
of national environmental legislation<br />
The SEE countries have made significant progress in drafting <strong>and</strong> adopting<br />
new laws <strong>and</strong> strategies in accordance with the EU environmental acquis, but despite<br />
the progress achieved, considerable ef<strong>for</strong>ts are still needed to meet the requirements<br />
of the EU environmental acquis. Transposition <strong>and</strong> implementation<br />
of EU environmental legislation is a precondition <strong>for</strong> unblocking environmental<br />
investments in SEE countries.<br />
The en<strong>for</strong>cement of EU water <strong>and</strong> waste legislation is as important <strong>for</strong> unblocking<br />
environmental infrastructure investments as the adoption <strong>and</strong> transposition<br />
of targeted, quality laws <strong>and</strong> regulations.<br />
There is currently a low level of awareness among citizens <strong>and</strong> businesses of the<br />
importance of compliance with environmental legislation <strong>and</strong>, even more importantly,<br />
of its benefits. There should there<strong>for</strong>e be ongoing ef<strong>for</strong>ts to introduce a widespread culture<br />
of compliance <strong>and</strong> an underst<strong>and</strong>ing of its benefits <strong>for</strong> companies <strong>and</strong> citizens.<br />
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The inspection culture in SEE focuses predominantly on punishment <strong>for</strong> infringements<br />
rather than on prevention, education <strong>and</strong> dialogue. The re<strong>for</strong>m of the<br />
inspectorates should there<strong>for</strong>e introduce inspection practices that are based on<br />
greater dialogue <strong>and</strong> cooperation.<br />
The current capacity of the inspectorates in terms of numbers, knowledge <strong>and</strong><br />
equipment is relatively weak. The environmental expertise of the police, prosecution<br />
<strong>and</strong> courts is also weak. The re<strong>for</strong>m of environmental inspection is an integral<br />
part of a wider regulatory <strong>and</strong> judicial re<strong>for</strong>m. There is a need to strengthen all aspects<br />
of the functioning of the inspectorates <strong>and</strong> to separate the en<strong>for</strong>cement <strong>and</strong><br />
regulatory functions of the administration.<br />
Companies lack strong monitoring <strong>and</strong> reporting systems, which decreases the<br />
efficiency of inspectors’ work. Increased ef<strong>for</strong>ts in this direction will improve selfmonitoring<br />
practices <strong>and</strong> facilitate the work of the inspectorates.<br />
Institutions <strong>for</strong> the environment<br />
The current capacities of environmental institutions (ministries, agencies etc.)<br />
may prove to be insufficient <strong>for</strong> the administration of all the requirements of the<br />
acquis. The experience of the new member states (EU-10) has shown the importance<br />
of proper human resources planning <strong>for</strong> institutions at central <strong>and</strong> local government<br />
level in line with the newly acquired environmental obligations.<br />
<strong>Environmental</strong> institutions in SEE countries often suffer from a high level of<br />
fragmentation <strong>and</strong> lack good systems <strong>for</strong> horizontal <strong>and</strong> vertical communication.<br />
This leads to unclear competencies <strong>and</strong> responsibilities. There is a low level of transparency<br />
<strong>and</strong> accountability in institutions’ operations at national <strong>and</strong> local levels.<br />
As the environmental acquis requires increased levels of cooperation among institutions,<br />
communication <strong>and</strong> coordination systems need to be set up in a timely<br />
manner in order to optimise funds <strong>and</strong> improve institutional efficiency.<br />
<strong>Environmental</strong> funds are only one of the options <strong>for</strong> addressing institutional<br />
deficiencies. However, their success is dependent on the principles of transparency,<br />
autonomy <strong>and</strong> accountability, <strong>and</strong> governments must abide by these<br />
principles if they decide to go <strong>for</strong> this institutional option. The work of any<br />
body/department dealing with environmental investments should be based on<br />
similar principles in order to increase public trust in a context of limited funds<br />
<strong>and</strong> competing projects.<br />
Water <strong>and</strong> waste utilities in SEE:<br />
Status <strong>and</strong> re<strong>for</strong>m<br />
As a result of the decentralisation process, responsibility <strong>for</strong> water, solid waste<br />
<strong>and</strong> sewage treatment services now falls on the lowest self-governing municipal<br />
level. Local governments <strong>and</strong> the utilities that belong to them have found themselves<br />
unprepared <strong>for</strong> the new tasks <strong>and</strong> increased obligations.
Among the problems faced by water <strong>and</strong> waste utilities in SEE are low tariffs<br />
<strong>and</strong> bill payment rates; overstaffing; <strong>and</strong> the absence of sound organisational management<br />
inherited from the past. This creates a situation in which full cost recovery<br />
becomes difficult to achieve. In addition, there is a high level of fragmentation<br />
in utilities throughout the region. There have been no significant ef<strong>for</strong>ts to reorganise<br />
public utilities into more efficient organisations operating according to<br />
sound economic principles. The political independence of the utilities, their human<br />
resources capacity, organisational set-up <strong>and</strong> financial health are preconditions <strong>for</strong><br />
successful investments. Significant ef<strong>for</strong>ts should there<strong>for</strong>e be made to restructure<br />
utilities in line with modern organisational <strong>and</strong> management practices.<br />
The benchmarking <strong>and</strong> self-assessment of public utility companies (PUCs) in<br />
order to improve their operational efficiency has proved to be beneficial. However,<br />
these are only one source of pressure <strong>for</strong> change <strong>and</strong> re<strong>for</strong>m <strong>and</strong> need to be accompanied<br />
by a holistic national strategy.<br />
Domestic sources of financing<br />
environmental investments<br />
Public (state, county, municipal etc.) budgets, although insufficient in most cases,<br />
have an essential role in financing rehabilitation <strong>and</strong> capital investments in environmental<br />
infrastructure. They have an important role in indicating priorities <strong>and</strong> providing<br />
co-financing to EU, IFI <strong>and</strong> bilateral donors’ loans <strong>and</strong> grants. Governments<br />
should there<strong>for</strong>e aim to optimise the use of national funds in terms of constructing<br />
new high-priority environmental infrastructure <strong>and</strong> providing co-financing.<br />
The coordination of environmental financing flows at national level is of primary<br />
importance to ensure the complementarity of financing <strong>and</strong> to stimulate cooperation<br />
between the relevant ministries. Eventually, governments can make better<br />
use of funds by avoiding overlapping, by not funding low-priority projects <strong>and</strong> by<br />
not using funds <strong>for</strong> political purposes.<br />
The countries of SEE are slowly increasing the proportion of environment-related<br />
expenditure <strong>and</strong> are approaching the respective levels of the new member states.<br />
However, funds are insufficient to cover all the expenditures needed. Governments<br />
may set as benchmarks the levels of national spending on environment in the new<br />
member states <strong>and</strong> slowly increase their budgetary allocations to these levels.<br />
International financial assistance<br />
Financial assistance through the Instrument <strong>for</strong> Pre-accession Assistance<br />
(IPA) is given to support the countries to introduce the necessary political, economic<br />
<strong>and</strong> institutional re<strong>for</strong>ms in line with EU st<strong>and</strong>ards. Under the EU IPA,<br />
which replaces previous pre-accession mechanisms, special emphasis is given to<br />
institution building, strengthening capacities <strong>and</strong> structures <strong>for</strong> the management<br />
of pre-structural funds, <strong>and</strong> financing infrastructure investments. A key challenge<br />
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in the implementation of the IPA is the countries’ capacity to absorb funds —<br />
that is, to set up the necessary institutions; to prepare the required project documentation,<br />
including feasibility studies; <strong>and</strong> to provide co-financing. The<br />
staffing <strong>and</strong> administrative capacities of project proponents are often inadequate,<br />
<strong>and</strong> in some cases the number of employees involved in project preparation, <strong>and</strong><br />
their expertise, have been underestimated.<br />
Assistance from international bilateral donors plays an important role in knowhow<br />
transfer, institutional strengthening, capacity building <strong>and</strong> the co-financing of<br />
infrastructure projects. Funding from IFIs is also significant due to its favourable<br />
terms. Governments would benefit from having clear strategies on how to combine<br />
all the available sources of funding. One way to do this is by drafting national<br />
environmental investment strategies that are closely linked to, or that are an integral<br />
part of, their approximation strategies.<br />
Project preparation facilities<br />
Project preparation facilities are used by the EC <strong>and</strong> IFIs to fund technical assistance<br />
<strong>for</strong> the preparation of a pipeline of sound infrastructure projects <strong>and</strong> to<br />
promote them to financers. The activities of the <strong>Environmental</strong> Project Preparation<br />
Facility (EPPF) have had a significant beneficial impact on project proponents by<br />
ensuring high-quality pre-feasibility <strong>and</strong> feasibility studies, <strong>and</strong> subsequently a<br />
strong project pipeline <strong>for</strong> future funding. The Infrastructure Project Facility (IPF)<br />
supports infrastructure project preparation <strong>and</strong> builds project pipelines in the energy,<br />
transport, environment <strong>and</strong> social sectors.<br />
In 2008, the EC <strong>and</strong> partner IFIs initiated the Western Balkans Investment<br />
Framework (WBIF) to be launched by 2010. The WBIF will, in addition to infrastructure,<br />
provide support to investments in other sectors, such as the private<br />
sector (including SMEs) <strong>and</strong> energy efficiency.<br />
<strong>Regional</strong> cooperation frameworks<br />
<strong>Regional</strong> cooperation is essential <strong>for</strong> peace <strong>and</strong> stability in the SEE region. It is<br />
also a tool <strong>and</strong> a prerequisite <strong>for</strong> moving towards EU integration; tackling transboundary<br />
environmental pollution <strong>and</strong> infrastructure development; <strong>and</strong> creating<br />
a fruitful climate <strong>for</strong> investments in SEE. <strong>Regional</strong> cooperation creates an opportunity<br />
<strong>for</strong> the cross-border sharing of knowledge <strong>and</strong> good practice. Donors <strong>and</strong><br />
IFIs often have a regional approach to programming, which exp<strong>and</strong>s the investment<br />
market thus making it more interesting <strong>for</strong> investments.<br />
Prioritisation of infrastructure projects<br />
Building lists of projects that present a harmonised approach to investment<br />
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<br />
targeted environmental assistance. Developing <strong>and</strong> updating the PEIP lists<br />
of priority projects has been a major learning exercise <strong>for</strong> SEE countries. However,<br />
<strong>for</strong> many of the projects it is still difficult to obtain adequate data. Those projects<br />
that have made more rapid progress have had good-quality project documentation<br />
from the outset, prepared with the active participation of PUC staff.<br />
At the national level, strong project preparation units are a driving <strong>for</strong>ce, as<br />
demonstrated in Croatia, Montenegro <strong>and</strong> Serbia. This is an additional argument<br />
<strong>for</strong> strengthening project preparation capacities at national <strong>and</strong> local levels. The<br />
IPA application process provided capacity building <strong>for</strong> project preparation at both<br />
local <strong>and</strong> national level. The proper inclusion of stakeholders from the beginning<br />
of the process ensured that any potential problems in relation to location or similar<br />
issues were resolved in time.<br />
Looking at the status of environmental infrastructure in the region, the need <strong>for</strong><br />
improvement is evident. Bearing in mind the aim to improve environmental st<strong>and</strong>ards<br />
in SEE through the effective implementation of environmental infrastructure,<br />
the assistance provided under the PEIP has facilitated project preparation <strong>and</strong><br />
the financing of identified projects. The PEIP lists contain 121 projects — 48 in<br />
the waste sector <strong>and</strong> 68 in the water sector. Five air projects remain on the list. During<br />
the PEIP 2007–2009 period, 15 projects were fully financed <strong>and</strong> were thus removed<br />
from the list, totalling investments of approximately EUR 314 million. If<br />
projects that have received sufficient funding to enter the implementation phase are<br />
included, the investments allocated amount to EUR 435.5 million. Implementation<br />
of the projects on the lists will improve the environmental situation in the SEE<br />
region <strong>and</strong> will also lead to the implementation of the key EU investments.<br />
Conclusions<br />
For SEE countries, future EU accession is the strongest driver <strong>for</strong> re<strong>for</strong>m <strong>and</strong> is a<br />
high priority on national agendas. The pre-accession period provides a unique window<br />
of opportunity <strong>for</strong> establishing a framework fruitful <strong>for</strong> re<strong>for</strong>m, including the development<br />
of environmental investment projects. During this period, political will in the<br />
countries is relatively strong, <strong>and</strong> the available financial support <strong>and</strong> technical assistance<br />
present opportunities to develop human capacity <strong>and</strong> consolidate <strong>and</strong> strengthen<br />
institutions to increase their ability to implement the EU environmental acquis.<br />
In recent years, SEE countries have made progress in relation to the financing<br />
of environmental investment projects <strong>and</strong> in drafting <strong>and</strong> adopting new laws <strong>and</strong><br />
strategies in accordance with the EU environmental acquis. However, despite the<br />
progress achieved, considerable ef<strong>for</strong>ts are still needed to meet the requirements<br />
of the EU environmental acquis.<br />
The current capacities of environmental institutions at both national <strong>and</strong> local<br />
levels are generally low <strong>and</strong> often insufficient to fulfil the requirements of the EU<br />
acquis. Building the capacities of environmental institutions <strong>and</strong> of local consultants<br />
is critical <strong>for</strong> creating efficient processes <strong>and</strong> <strong>for</strong> successfully developing <strong>and</strong> fi-<br />
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nancing environmental investment projects. Capacities need to be built in the en<strong>for</strong>cement<br />
of legislation, project identification <strong>and</strong> preparation, <strong>and</strong> pre-feasibility<br />
<strong>and</strong> feasibility studies.<br />
In order to bridge the huge gap between the available funds <strong>and</strong> the funds required<br />
<strong>for</strong> the necessary investments, advantage must be taken of all the available<br />
sources of funding. In a context of limited budgets, it is critical to streamline available<br />
resources in order to achieve efficient financing. Prioritising projects <strong>and</strong> presenting<br />
a strategic <strong>and</strong> consolidated approach towards investment planning are key<br />
tasks <strong>for</strong> SEE countries. Developing environmental investment strategies will facilitate<br />
the efficient <strong>and</strong> coordinated financing of environmental projects.
Objectives<br />
Among the many pressures on the environment in South Eastern Europe (SEE)<br />
are the lack, or the inefficient operation, of environmental infrastructure in the water<br />
<strong>and</strong> waste sectors. The main purpose of this publication is there<strong>for</strong>e to provide an<br />
overview of environmental infrastructure investments in SEE that are linked to the<br />
implementation of the major heavy-investment EU water <strong>and</strong> waste directives.<br />
The publication relies extensively on the Priority <strong>Environmental</strong> Investment<br />
Programme <strong>for</strong> South Eastern Europe (PEIP), implemented over the period 2001<br />
to 2009, <strong>and</strong> draws on the accumulated knowledge <strong>and</strong> on lessons learned in the<br />
framework of the programme.<br />
Since the 2005 REC publication Targeting the <strong>Environmental</strong> Investment Challenge<br />
in SEE, there have been significant changes in the region resulting from<br />
progress in the legislative <strong>and</strong> strategic frameworks; utility re<strong>for</strong>ms; <strong>and</strong> ef<strong>for</strong>ts towards<br />
joining the European Union. Overall, there is sustained political commitment<br />
to the transposition <strong>and</strong> implementation of the environmental acquis.<br />
However, this is not always backed up by the necessary financial, administrative<br />
<strong>and</strong> institutional support. The present publication attempts to map <strong>and</strong> analyse<br />
changes in the legal <strong>and</strong> institutional environment that have a bearing on environmental<br />
financing. It also highlights positive examples in the region of the financing<br />
of environmental infrastructure.<br />
The ultimate objective of the publication is to contribute to the future development<br />
of environmental investments in the SEE region. It proposes a strategic<br />
<strong>and</strong> coherent approach to planning <strong>and</strong> developing environmental infrastructure<br />
projects, identifying obstacles <strong>and</strong> bottlenecks <strong>and</strong>, where possible, recommending<br />
ways to overcome them.<br />
This publication:<br />
• analyses the key national <strong>and</strong> regional constraints <strong>and</strong> challenges to environmental<br />
investments;<br />
• presents progress made in national environmental policy since the REC’s 2005<br />
publication;<br />
• highlights macroeconomic indicators <strong>for</strong> SEE in order to illustrate the region’s<br />
potential <strong>for</strong> creating favourable conditions <strong>for</strong> environmental infrastructure<br />
development <strong>and</strong> financing;<br />
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• emphasises the implications of the key EU directives related to infrastructure<br />
investments;<br />
• illustrates country funding needs in relation to compliance with EU directives;<br />
• briefly presents en<strong>for</strong>cement-related problems;<br />
• provides an overview of institutional challenges to the countries in connection<br />
with environmental investments;<br />
• reviews the status of environmental infrastructure in SEE, as well as the status<br />
of utility re<strong>for</strong>ms;<br />
• reviews levels of expenditure from national budgets, IFIs <strong>and</strong> bilateral donors; <strong>and</strong><br />
• presents the updated lists of priority environmental infrastructure investment<br />
projects.<br />
Target<br />
This publication will primarily be of interest to:<br />
• decision makers responsible <strong>for</strong> strategic environmental investment planning<br />
in SEE, as a supportive tool presenting the regional context of investment<br />
planning;<br />
• donors <strong>and</strong> IFIs, <strong>for</strong> whom it can be an important tool to support the design of<br />
their assistance programmes <strong>for</strong> the SEE region; <strong>and</strong><br />
• all other stakeholders interested in developing environmental infrastructure<br />
investment projects.<br />
Scope<br />
The present publication covers South Eastern Europe — that is, Albania,<br />
Bosnia <strong>and</strong> Herzegovina, Croatia, Kosovo (as defined under UNSCR 1244), the<br />
<strong>for</strong>mer Yugoslav Republic of Macedonia, Montenegro <strong>and</strong> Serbia. All references to<br />
Kosovo in the text are understood as the territory defined under UNSCR 1244.<br />
Any abbreviations of the names of these countries in the text <strong>and</strong> tables are used <strong>for</strong><br />
presentation purposes only <strong>and</strong> should always be understood as indicating the full<br />
names of the countries. Lessons learned from the new EU member states (EU-10),<br />
which joined in 2004, as well as from Bulgaria <strong>and</strong> Romania, which joined in 2007,<br />
are used in the text where relevant.<br />
The publication focuses on the period between 2005 <strong>and</strong> August 2009. The<br />
in<strong>for</strong>mation presented has been distributed <strong>for</strong> consultation to a wide group of<br />
stakeholders, including focal points of SEE ministries of environment, in order to<br />
ensure that the in<strong>for</strong>mation included is correct <strong>and</strong> up to date.<br />
The authors have concentrated on major public environmental infrastructure<br />
investments in the water <strong>and</strong> waste sectors, since this was the focus of the PEIP between<br />
2007 <strong>and</strong> 2009. The majority of air-related investments fall within the scope
of the Integrated Pollution Prevention <strong>and</strong> Control (IPPC) Directive <strong>and</strong> the<br />
Large Combustion Plants (LCP) Directive. They are primarily the responsibility<br />
of the private sector or of individual state-owned companies <strong>and</strong> are not there<strong>for</strong>e<br />
a priority within the PEIP. References to other sectors are included only in order<br />
to provide a broader context.<br />
In this context, environmental infrastructure investment projects are understood<br />
as projects that require significant financial resources <strong>and</strong> time to complete.<br />
Examples include infrastructure <strong>for</strong> the provision of systems <strong>and</strong> services such as<br />
drinking water supply, sewage treatment or waste management leading to compliance<br />
with EU environmental directives.<br />
The publication gives priority to describing projects that have a regional (SEE)<br />
impact on the environment. Wherever generic comments are made on infrastructure<br />
development, they are of relevance to both urban <strong>and</strong> rural infrastructure development.<br />
Nevertheless, the focus of the analyses is on urban infrastructure development.<br />
Targeting the environmental investment challenge means addressing all stages<br />
of project cycle management. However, the present publication focuses on the early<br />
stages of project cycle management, such as programming <strong>and</strong> project preparation.<br />
The experience of the new EU member states illustrates how mistakes during the<br />
early stages of project cycle management can significantly reduce the chances of<br />
completing a project successfully. With this in mind, particular emphasis is given<br />
here to project cycle management up to the point at which funds are secured <strong>for</strong><br />
project implementation. Later aspects of project cycle management are also mentioned<br />
but are not analysed in detail.<br />
Methodological approach<br />
Sources of in<strong>for</strong>mation<br />
In drafting the present publication, the following main sources of in<strong>for</strong>mation<br />
were used:<br />
• Related reports <strong>and</strong> publications on the situation in SEE <strong>and</strong> CEE.<br />
• Two regional surveys linked to the drafting of the PEIP water <strong>and</strong> waste manuals.<br />
The surveys were prepared by the PEIP team in summer 2008 (water) <strong>and</strong><br />
spring 2009 (waste) <strong>and</strong> circulated to relevant ministry officials <strong>and</strong> national authorities<br />
in the water <strong>and</strong> waste sectors. The in<strong>for</strong>mation was cross-checked<br />
against the available national strategic documents by the REC country offices<br />
in the SEE countries.<br />
• An additional survey carried out in all SEE countries in August 2009 <strong>for</strong> the<br />
present publication. Like the surveys carried out <strong>for</strong> the manuals, this survey<br />
was circulated to national authorities <strong>and</strong> the in<strong>for</strong>mation provided was<br />
checked against national strategic documents in the relevant sectors.<br />
• Desk research on the experiences of new EU member states <strong>and</strong> c<strong>and</strong>idate<br />
countries in relation to the preparation <strong>and</strong> implementation of infrastructure<br />
investment projects.<br />
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• Lessons learned from the REC’s work under the PEIP, including materials from<br />
analytical country reports, national workshops <strong>and</strong> regional meetings.<br />
• Lessons learned from the REC’s work on other key projects related to environmental<br />
investments <strong>and</strong> environmental institutions.<br />
Structure of the publication<br />
• In Chapter 1, the role played by the PEIP in the field of environmental infrastructure<br />
investments in SEE is described. During the past eight years, the PEIP<br />
has provided a framework <strong>for</strong> numerous activities in the region, <strong>and</strong> as such defines<br />
the structure of this publication.<br />
• The status of environmental infrastructure has a direct bearing on the size of the<br />
investment challenge. The analysis of this area in Chapter 2 indicates how far<br />
countries are from full implementation of respective directives.<br />
• The authors have identified key constraints <strong>and</strong> challenges to investments <strong>and</strong><br />
have linked them with potential responses in Chapter 3. Challenges are divided<br />
between national <strong>and</strong> municipal, as they are quite different in nature. Political,<br />
economic, financial, legal, institutional, planning <strong>and</strong> project preparation challenges<br />
are also discussed.<br />
• In Chapter 4, the economic situation is analysed in order to define the wider<br />
framework <strong>for</strong> environmental investments. The state of the economy <strong>and</strong> of<br />
the national budget have a direct implication <strong>for</strong> all investments, including environmental<br />
infrastructure investments. Some of the main obstacles <strong>and</strong> benefits<br />
in the countries’ progress towards EU integration are outlined <strong>and</strong> the status<br />
of each country with respect to EU accession is presented. Investment-heavy<br />
directives are explicitly mentioned as they represent the legal basis <strong>and</strong> the main<br />
pressure <strong>for</strong> investments in environmental infrastructure. National environmental<br />
investment needs are presented in order to obtain an idea of the scope<br />
of the problem <strong>and</strong> to be able to compare the needs against the available funding<br />
from different sources.<br />
• The legal <strong>and</strong> strategic framework of the SEE countries is explored in Chapter 5<br />
in order to gauge the speed of transposition <strong>and</strong> the completeness of the legal<br />
framework. This is an indication of the political will in the country as well as of<br />
the legal pressure to undertake re<strong>for</strong>ms. En<strong>for</strong>cement is a critical aspect that has<br />
very often been a stumbling block in countries that have made excellent progress<br />
in transposition. The legal pressure to carry out environmental infrastructure investments<br />
will be effective only if there is a high level of compliance through a<br />
robust en<strong>for</strong>cement system. National institutions are of key importance in carrying<br />
out environmental investments. An analysis of such institutions illustrates the<br />
extent to which one of the main bottlenecks to investments has been removed.<br />
• The status of utilities <strong>and</strong> of utility re<strong>for</strong>ms is directly correlated to their readiness<br />
to attract investments in water <strong>and</strong> waste. This is even more important in<br />
times of economic crisis, as explained in Chapter 6.
• As described in Chapter 7, domestic expenditure is one of the pillars of financing<br />
environmental infrastructure investment. The level of expenditure<br />
is an indication of national commitment <strong>and</strong> the relative priority that the<br />
government attaches to the issue. International financial assistance is the other<br />
major source of funding <strong>for</strong> environmental infrastructure. Investigating trends<br />
<strong>and</strong> major figures provides an indication of the relative importance of this<br />
source <strong>and</strong> of donors’ priorities. The European Commission has designed <strong>and</strong><br />
implemented several project preparation facilities that are making a significant<br />
contribution to meeting project preparation needs in SEE. <strong>Regional</strong> cooperation<br />
frameworks also play an important role in stimulating investments<br />
<strong>and</strong> sharing good practice.<br />
• One of the main deliverables of the PEIP are the lists of priority projects. The<br />
analysis of their dynamics in Chapter 8 provides an insight into the speed of financing<br />
<strong>and</strong> the changing of priorities.<br />
• This book has a practical character in that the challenges outlined are associated<br />
with potential responses. Chapter 9 presents the main findings of the PEIP<br />
<strong>and</strong> provides recommendations <strong>for</strong> developing the environmental investments<br />
needed in the SEE region.<br />
Other considerations<br />
Although this publication focuses on constructing environmental infrastructure,<br />
this cannot be considered a remedy <strong>for</strong> all environmental problems in the region.<br />
Viewed from the broader perspective of sustainable development, the<br />
economic <strong>and</strong> social situation of the countries of the region must be taken into account<br />
when addressing environmental problems. As the application of the polluter<br />
pays principle would burden citizens with additional financial contributions, it is<br />
important to take into consideration poverty levels <strong>and</strong> the social aspects of developing<br />
infrastructure.<br />
Although the conclusions <strong>and</strong> recommendations <strong>for</strong> the future presented in<br />
this publication focus on developing environmental infrastructure in the SEE region,<br />
minimising the need to develop such infrastructure by identifying alternative<br />
solutions should also be discussed. For example, by minimising the use of<br />
resources (efficient water use, waste prevention, recycling, <strong>and</strong> energy efficiency);<br />
improving inefficient systems (reducing leakages from water supply systems <strong>and</strong><br />
improving maintenance); or developing industrial technologies, the need <strong>for</strong> infrastructure<br />
can be optimised. Nevertheless, environmental infrastructure is sorely<br />
needed in the SEE region in order to improve environmental conditions.<br />
Public versus private financing<br />
The publication does not discriminate between different sources of financing<br />
<strong>and</strong> considers increased <strong>and</strong> targeted domestic spending to be as important<br />
as funding from the EC, loans from IFIs <strong>and</strong> other commercial banks, or bilat-<br />
I N T R O D U C T I O N<br />
S T R AT E G I C M O V E S 35
36<br />
I N T R O D U C T I O N<br />
S T R AT E G I C M O V E S<br />
eral donor support. These sources of funding are complementary <strong>and</strong> each has<br />
a niche. It is up to the national governments to adopt the right strategic approach<br />
<strong>and</strong> create the optimal financial mix.<br />
Limitations<br />
While developing the publication, the main limitation was the availability of reliable<br />
official data <strong>and</strong> reports. Relevant ministries in the SEE countries <strong>and</strong> other<br />
stakeholders were given the opportunity to review <strong>and</strong> approve the data presented.<br />
The authors have done their best to avoid factual mistakes, although in such a rapidly<br />
evolving situation minor errors may have been overlooked.<br />
Some of the conclusions present a level of generalisation that, in some cases,<br />
does not fully take into consideration national differences <strong>and</strong> specificities. The<br />
authors have tried, as far as possible, to refrain from conclusions that are too general<br />
<strong>and</strong> to point out national differences where they exist.
Chapter 1<br />
The role of the<br />
Priority <strong>Environmental</strong> Investment<br />
Programme <strong>for</strong> SEE<br />
S T R AT E G I C M O V E S 37
38<br />
S T R AT E G I C M O V E S
Introduction<br />
The PEIP was funded by the European Commission Community Assistance<br />
<strong>for</strong> Reconstruction, Development <strong>and</strong> Stabilisation (CARDS) regional programme.<br />
The PEIP was implemented in three periods: 2001 to 2002; 2003 to<br />
2005; <strong>and</strong> 2007 to 2009. The overall objective of the programme was to reduce<br />
pressure on the environment in the SEE region through assistance to national governments<br />
<strong>and</strong> municipal authorities in planning strategic environmental investments,<br />
preparing environmental investment projects, <strong>and</strong> identifying donors <strong>for</strong><br />
the realisation of projects in the air, water <strong>and</strong> waste sectors.<br />
Through the Stabilisation <strong>and</strong> Association Process (SAP), SEE countries are<br />
moving towards the harmonisation of national legislation with the EU environmental<br />
acquis, <strong>and</strong> are implementing new legislation according to prescribed schedules.<br />
In the environmental sector, this requires serious capital investment into<br />
infrastructure. This presents a particular challenge <strong>for</strong> SEE countries as they lack<br />
readily available investment capital <strong>and</strong> market-based financing mechanisms.<br />
The nature of PEIP support<br />
PEIP support to environmental investment planning<br />
The programme facilitates a process of strategic environmental investment planning<br />
by national environmental authorities through identifying <strong>and</strong> prioritising<br />
necessary <strong>and</strong> relevant projects <strong>and</strong> by providing institutional strengthening <strong>and</strong> capacity<br />
building. The programme covers the air, water <strong>and</strong> waste sectors, which represent<br />
the priority environmental investment needs in the region. The programme<br />
also provides valuable in<strong>for</strong>mation1 to the donor community2 , including:<br />
• background in<strong>for</strong>mation on environmental <strong>and</strong> institutional needs <strong>and</strong> priorities;<br />
• the status of environmental investment planning in the region; <strong>and</strong><br />
• a pipeline of priority environmental infrastructure projects in a strategic framework<br />
(see Annex 5).<br />
The PEIP approach<br />
The PEIP methodology included projects prioritised according to regionally<br />
agreed criteria <strong>for</strong> SEE. This has enabled a long-term process of compliance with<br />
the EU acquis <strong>and</strong> of environmental improvement in the region by providing a regional<br />
framework <strong>for</strong> investment planning <strong>and</strong> good practices. The programme introduced<br />
a multi-stakeholder approach to investment planning, involving all key<br />
players. This regional approach is particularly important when looking at the contributions<br />
of the SEE region to European environmental pressures <strong>and</strong>, more generally,<br />
to pressures on a global scale.<br />
S T R AT E G I C M O V E S 39
40<br />
C H A P T E R 1<br />
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<br />
S T R AT E G I C M O V E S<br />
Components of PEIP assistance<br />
The assistance provided within the PEIP from 2001 focused on the following<br />
objectives:<br />
• Identification <strong>and</strong> prioritisation of investment infrastructure projects, in line<br />
with EU requirements.<br />
• Development of environmental infrastructure project concepts.<br />
• Provision of assistance to <strong>for</strong>mulate environmental problems into bankable investment<br />
project proposals.<br />
• Facilitation of dialogue between project proponents <strong>and</strong> financing organisations.<br />
• Facilitation of exchanges of in<strong>for</strong>mation <strong>and</strong> experiences between environmental<br />
financing experts from SEE <strong>and</strong> other European countries.<br />
• Drafting of manuals on investments in the water <strong>and</strong> waste sectors.<br />
Assistance provided by the PEIP team<br />
Assistance provided in the period 2001 to 2002<br />
Assistance provided to the ministries focused on:<br />
• identifying regional priority environmental sectors — agreed as the reduction<br />
of sulphur-dioxide emissions; municipal waste generation <strong>and</strong> treatment, <strong>and</strong><br />
sewage treatment;<br />
• compiling a set of hotspots, comprising 143 locations with multiple, priority environmental<br />
problems; <strong>and</strong><br />
• analysing national environmental priorities, providing an overview of SEE<br />
countries’ policy responses <strong>and</strong> their relation to the regional environmental priority<br />
sectors <strong>and</strong> hotspots.<br />
Development of the PEIP methodology<br />
During this period the team developed a methodology <strong>for</strong> compiling lists of<br />
priority environmental investment projects. The methodology included a system<br />
of criteria, a project identification <strong>for</strong>m, <strong>and</strong> a prioritisation exercise. As a result, 79<br />
high-priority projects were identified.<br />
Assistance provided in the period 2003 to 2005<br />
The PEIP team targeted investment challenges while assisting the countries’<br />
capacity-building ef<strong>for</strong>ts to:<br />
• identify investment projects in line with EU requirements;<br />
• <strong>for</strong>mulate project concepts to be presented to interested financial institutions; <strong>and</strong><br />
• identify appropriate institutions willing to finance investment projects.
C H A P T E R 1<br />
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<br />
Technical assistance provided in relation to institutional strengthening included:<br />
• analysing options <strong>for</strong> financing environmental investment projects in SEE <strong>and</strong> developing<br />
donor profiles to assist project proponents to identify financing sources;<br />
• analysing the status of environmental investment planning, thus providing decision<br />
makers in the SEE region <strong>and</strong> donors with an overview of progress<br />
achieved in transposing key investment-heavy EU directives;<br />
• developing a database of sites (hotspots) screened against the requirements of<br />
selected key investment-heavy EU directives;<br />
• <strong>for</strong>mulating 33 project concepts in the water, air <strong>and</strong> waste sectors in line with<br />
key investment-heavy EU directives in order to assist project proponents in the<br />
33 pilot hotspots to obtain donor financing;<br />
• analysing critical conditions <strong>for</strong> developing bankable projects in the region; <strong>and</strong><br />
• updating the lists of priority environmental investment projects.<br />
Focus on capacity-building workshops<br />
Within the capacity-building activities of the PEIP between 2003 <strong>and</strong> 2005, six<br />
regional workshops were held with the participation of project proponents from<br />
the selected 33 pilot hotspots in the air, water <strong>and</strong> waste sectors; sector experts<br />
from the ministries of environment; <strong>and</strong> representatives of international financing<br />
institutions <strong>and</strong> the donor community.<br />
The first series of workshops took place during 2004 <strong>and</strong> focused on the development<br />
of environmental investment projects. The rationale of the workshops<br />
was the increase in dem<strong>and</strong> from SEE countries <strong>for</strong> environmental infrastructure<br />
investments that are in line with EU requirements. The workshops targeted the<br />
environmental investment challenge at both the national level (the need to ensure<br />
that environmental investment planning complies with EU directives), <strong>and</strong> the<br />
local level (the challenge of <strong>for</strong>mulating <strong>and</strong> developing individual investment projects).<br />
The second series of workshops was held in 2005 <strong>and</strong> took the <strong>for</strong>m of separate<br />
workshops <strong>for</strong> the air, waste <strong>and</strong> water sectors. These attempted to address the<br />
needs <strong>for</strong>mulated by participants by placing special emphasis on the setting of tariffs<br />
<strong>and</strong> on developing financially viable environmental investment projects.<br />
Assistance provided in the period 2007 to 2009<br />
Between 2007 <strong>and</strong> 2009, activities from the previous periods were continued.<br />
Further emphasis was given to capacity building <strong>and</strong> to updating the lists of priority<br />
projects.<br />
Seven national capacity-building workshops were held in 2008 <strong>and</strong> 2009. The<br />
workshops focused on the water <strong>and</strong> waste sectors in each beneficiary country <strong>and</strong><br />
were designed to strengthen the capacities of national <strong>and</strong> local authorities to realise<br />
proposed investments; to provide in<strong>for</strong>mation to donors <strong>and</strong> other relevant financial<br />
institutions about proposed environmental investment projects within the PEIP lists;<br />
S T R AT E G I C M O V E S 41
42<br />
C H A P T E R 1<br />
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<br />
S T R AT E G I C M O V E S<br />
<strong>and</strong> to provide opportunity <strong>for</strong> direct dialogue <strong>and</strong> the exchange of in<strong>for</strong>mation between<br />
project proponents, donors, financial institutions <strong>and</strong> relevant authorities.<br />
The updating of the lists of priority environmental investment projects was intensified<br />
during this period, being carried out twice annually in order to create a living,<br />
up-to-date document <strong>for</strong> the benefit of the countries <strong>and</strong> of the regional<br />
cooperation framework using the lists.<br />
The PEIP team continued their mission to SEE countries to promote the PEIP<br />
lists <strong>and</strong> to identify synergies between IFIs, regional cooperation facilities <strong>and</strong> donors.<br />
Two manuals were produced, targeted at waste <strong>and</strong> water utility companies in<br />
the SEE region.<br />
Publications within the PEIP<br />
The present book follows a number of other publications produced within the<br />
framework of the PEIP:<br />
Developing a Priority <strong>Environmental</strong> Investment Programme <strong>for</strong> South Eastern<br />
Europe (2003) — This report introduced the PEIP methodology <strong>and</strong> presented the<br />
results of PEIP development up to 2003, including SEE regional environmental<br />
priorities <strong>and</strong> a list of priority environmental projects <strong>for</strong> the SEE region. The report<br />
lists conclusions <strong>and</strong> future actions needed to implement the PEIP.<br />
Targeting the <strong>Environmental</strong> Investment Challenge in South Eastern Europe<br />
(2005) — This publication comprises a comprehensive analysis of the situation in<br />
terms of environmental infrastructure in the SEE region up to December 2005. It<br />
explores the developments in environmental infrastructure investment projects in<br />
the air, water <strong>and</strong> waste sectors <strong>and</strong> provides recommendations <strong>for</strong> the way <strong>for</strong>ward.<br />
In 2009, two manuals were developed targeted at water <strong>and</strong> waste service utilities<br />
in SEE countries: Strategies <strong>for</strong> Re<strong>for</strong>m: A Manual <strong>for</strong> Water Utilities in South<br />
Eastern Europe (April 2009); <strong>and</strong> Speeding up Investments in the Waste Sector: A<br />
Manual <strong>for</strong> Waste Utilities in South Eastern Europe (August 2009). The manuals are<br />
based on the premise that the capacity of the utilities is the main bottleneck to investments<br />
in water <strong>and</strong> waste infrastructure, rather than the availability of funding.<br />
The manuals cover the institutional re<strong>for</strong>m of the water <strong>and</strong> waste utilities as well<br />
as organisational re<strong>for</strong>m, starting with better strategic planning <strong>and</strong> focusing on<br />
the topics of human resources management <strong>and</strong> options <strong>for</strong> cost savings. The other<br />
side of the equation is also tackled through a discussion of methods <strong>for</strong> enhancing<br />
revenues through suitable tariff designs.<br />
A list of other relevant REC publications in the area of environmental infrastructure<br />
investments <strong>and</strong> financing is provided in Annex 4.<br />
The role of the PEIP<br />
During the implementation of the programme there have been significant developments<br />
in the area of environmental investments in SEE countries. At the start<br />
of the programme, countries lacked experience in strategic planning <strong>and</strong> in priori-
C H A P T E R 1<br />
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<br />
tising investment projects. There was no comprehensive, coherent way of tackling<br />
the issue, <strong>and</strong> knowledge of available sources of funding was insufficient. Eight<br />
years later, at the time of writing, countries have developed a far greater underst<strong>and</strong>ing<br />
of the issue at all levels <strong>and</strong> the capacity of national authorities has substantially<br />
increased. In the light of this development, the role of the PEIP can be<br />
described as that of a catalyst.<br />
Within the PEIP, the set of regional environmental priorities <strong>and</strong> the lists of<br />
priority projects were compiled at regional (SEE) level <strong>for</strong> the first time, based on<br />
a unified methodology <strong>and</strong> with the active participation of stakeholders. This unified<br />
methodology, which was approved by the SEE countries, introduced a systematic<br />
approach to investment planning that stressed the regional aspect of<br />
environmental protection over political <strong>and</strong> historical divisions. It provided a sound<br />
basis <strong>for</strong> long-term investment planning, especially in relation to the challenges<br />
arising from the Stabilisation <strong>and</strong> Association Process <strong>and</strong> the implementation of<br />
EU requirements. The features of this approach are replicable <strong>and</strong> can be applied<br />
in other regions or countries.<br />
The PEIP has served as a vehicle <strong>for</strong> networking activities aimed at developing<br />
effective mechanisms <strong>for</strong> identifying <strong>and</strong> implementing environmental initiatives.<br />
This process has been important <strong>for</strong> stimulating in<strong>for</strong>mation exchange <strong>and</strong> cooperation<br />
between SEE countries. The active involvement of stakeholders (SEE ministries<br />
of environment, the donor community, IFIs <strong>and</strong> NGOs) enabled dialogue<br />
that facilitated the development <strong>and</strong> later implementation of projects, <strong>and</strong> provided<br />
an opportunity to gather up-to-date in<strong>for</strong>mation. Cooperation <strong>and</strong> synergies<br />
were established with regional cooperation facilities such as the <strong>Regional</strong> Cooperation<br />
Council (RCC) <strong>and</strong> the newly launched Western Balkans Investment Coordination<br />
Plat<strong>for</strong>m (WBICP). The PEIP also provided a basis <strong>for</strong> the strategic<br />
planning <strong>and</strong> investments component of the <strong>Regional</strong> <strong>Environmental</strong> Network <strong>for</strong><br />
Accession (RENA), to be launched in 2009. The PEIP lists have been taken up<br />
<strong>and</strong> used by several regional cooperation facilities <strong>and</strong> regional project preparation<br />
facilities. They have been used as a mechanism <strong>for</strong> project identification by the Infrastructure<br />
Preparation Facility (IPF), <strong>and</strong> in the water sector they have provided<br />
input to the Danube <strong>and</strong> Black Sea (DABLAS) priority list.<br />
The programme has helped to build the capacity of stakeholders, especially<br />
ministries of the environment. Training was provided on project cycle management,<br />
investment planning, priority setting, prioritising investment projects <strong>and</strong><br />
identifying investment programmes.<br />
The workshops provided an opportunity <strong>for</strong> local project proponents, national<br />
decision makers at the ministerial level <strong>and</strong> the donor community to clarify differing<br />
requirements <strong>and</strong> expectations, as well as to exchange experiences in preparing<br />
<strong>and</strong> financing investment projects. The workshops covered the requirements<br />
<strong>and</strong> implications of the relevant EU environmental directives <strong>and</strong> provided in<strong>for</strong>mation<br />
about available technical assistance <strong>and</strong> cooperation facilities. They also<br />
identified further needs <strong>for</strong> the capacity building of project proponents, <strong>and</strong> of national<br />
decision makers in particular, in relation to the preparation of bankable <strong>and</strong><br />
financially viable projects.<br />
S T R AT E G I C M O V E S 43
44<br />
C H A P T E R 1<br />
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<br />
S T R AT E G I C M O V E S<br />
In summary, the knowledge <strong>and</strong> capacities of national authorities improved significantly<br />
during the implementation of the PEIP. The success of the PEIP has<br />
been linked to the determination on the part of the countries to achieve practical<br />
results. However, many gaps still remain <strong>and</strong> capacity is still lacking compared<br />
to the challenges they face. Further ef<strong>for</strong>ts are there<strong>for</strong>e needed in this field, <strong>for</strong><br />
example to build capacities <strong>for</strong> the development <strong>and</strong> en<strong>for</strong>cement of economic<br />
instruments, <strong>and</strong> to prepare bankable environmental investment projects. Experiences<br />
gathered in the course of programme implementation will be of great benefit<br />
to further work in this area.<br />
General observations<br />
• The PEIP has facilitated a process of strategic environmental investment planning<br />
by national environmental authorities by identifying <strong>and</strong> prioritising necessary<br />
<strong>and</strong> relevant projects. The programme has provided valuable in<strong>for</strong>mation<br />
to the donor community on environmental <strong>and</strong> institutional needs <strong>and</strong> priorities,<br />
<strong>and</strong> on the status of environmental investment planning in the region.<br />
• Between 2007 <strong>and</strong> 2009, the PEIP maintained the lists of priority projects; organised<br />
nine national workshops <strong>and</strong> four regional meetings; <strong>and</strong> drafted manuals<br />
on water re<strong>for</strong>m <strong>and</strong> waste investments.<br />
• When the PEIP was launched in 2001, SEE countries lacked experience in strategic<br />
planning <strong>and</strong> the prioritisation of environmental investment projects, <strong>and</strong><br />
had insufficient knowledge of available sources of funding. The PEIP has contributed<br />
to filling this gap <strong>and</strong> to raising awareness by providing capacity building;<br />
drafting publications; <strong>and</strong> serving as a plat<strong>for</strong>m <strong>for</strong> in<strong>for</strong>mation exchange.
Chapter 2<br />
The status of environmental<br />
infrastructure in the SEE region<br />
S T R AT E G I C M O V E S 45
46<br />
S T R AT E G I C M O V E S
Introduction<br />
The differences among individual countries are huge in terms of physical environmental<br />
infrastructure. In general, the water supply infrastructure is at a relatively<br />
satisfactory level, while the sewerage, wastewater treatment <strong>and</strong> waste<br />
management infrastructure show deficiencies. Croatia is far ahead of other countries<br />
in the region regarding physical infrastructure, especially wastewater treatment<br />
infrastructure. In Kosovo (as defined under UNSCR 1244) <strong>and</strong> the <strong>for</strong>mer<br />
Yugoslav Republic of Macedonia, there is a huge margin <strong>for</strong> improvement. Serbia,<br />
Bosnia <strong>and</strong> Herzegovina <strong>and</strong> Croatia have made the biggest progress in project<br />
preparation <strong>for</strong> regional sanitary l<strong>and</strong>fills, while Croatia has been successful in closing<br />
<strong>and</strong> remediating non-sanitary l<strong>and</strong>fills.<br />
The status of the water <strong>and</strong> waste infrastructure in the region is directly correlated<br />
to the investments that need to be made in order to reach full compliance<br />
with EU legislation. The poorer the quality of the infrastructure, the higher the<br />
investment required to bring the infrastructure first to an acceptable level, <strong>and</strong> later<br />
to full compliance. This chapter provides an overview of the situation with respect<br />
to water <strong>and</strong> waste infrastructure, summarising some of the key parameters. It draws<br />
to a large extent on the PEIP manuals on water <strong>and</strong> waste produced earlier this<br />
year (REC, 2009a <strong>and</strong> b).<br />
Infrastructure status in the water sector<br />
Investments are urgently needed in the water infrastructure in SEE in order to<br />
provide all members of the population with drinking water, to improve the quality<br />
of drinking water, <strong>and</strong> to reduce pressure on the environment through the treatment<br />
of wastewater.<br />
Some of the common problems facing the water sector in SEE countries are:<br />
• the relatively low level of drinking water supply <strong>for</strong> the population in rural areas;<br />
• big water losses due to ageing water supply infrastructure;<br />
• significant unaccounted-<strong>for</strong> water (Uf W), at between 60 <strong>and</strong> 70 percent; <strong>and</strong><br />
• the poor operating efficiency of the utilities.<br />
Figure 1 shows that Croatia <strong>and</strong> Montenegro have the most developed water<br />
supply infrastructure in the region, while in Kosovo (as defined under UNSCR<br />
1244) the connection rate is almost half that of the best per<strong>for</strong>mers. Where separate<br />
data are available, it can be seen that rural areas have a far less developed water<br />
supply infrastructure than urban areas.<br />
As shown in Figure 2, Croatia, the <strong>for</strong>mer Yugoslav Republic of Macedonia (urban<br />
areas) <strong>and</strong> Bosnia <strong>and</strong> Herzegovina (urban areas) have a connection rate to sewerage<br />
networks of around 70 percent of the population, while in Kosovo (as defined under<br />
UNSCR 1244) the connection rate is only 28 percent of the population.<br />
The greatest disparity in the region can be seen in the number of wastewater<br />
treatment plants (WWTPs). With 89 plants, Croatia has the highest number, cov-<br />
S T R AT E G I C M O V E S 47
48<br />
C H A P T E R 2<br />
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<br />
FIGURE 1: Percentage of the population connected to water supply<br />
%<br />
100<br />
90<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Albania<br />
(rural)<br />
Bosnia <strong>and</strong><br />
Herzegovina<br />
(urban)<br />
Source: REC survey, 2008<br />
S T R AT E G I C M O V E S<br />
Serbia (urban)<br />
Albania (rural)<br />
Bosnia <strong>and</strong><br />
Herzegovina<br />
(rural)<br />
Serbia (rural)<br />
Kosovo (under<br />
UNSCR 1244)<br />
(overall)<br />
Bosnia <strong>and</strong><br />
Herzegovina<br />
(overall)<br />
FYR Macedonia<br />
(overall)<br />
Montenegro<br />
(Overall)<br />
Croatia<br />
(Overall)<br />
ering 28 percent of the population, mainly in urban areas. Kosovo (as defined under<br />
UNSCR 1244) has no WWTPs in operation, while Albania <strong>and</strong> Montenegro each<br />
have two WWTPs (REC survey, 2008). Specific features <strong>and</strong> problems related to<br />
water infrastructure in each country are presented below.<br />
In Albania, the estimated proportion of the population supplied with water is<br />
85 percent in urban settlements <strong>and</strong> 65 percent in rural areas. The estimated proportion<br />
of the population connected to sewerage networks is 40 percent. Water<br />
losses are high <strong>and</strong> the estimated Uf W reaches 67 percent. Two wastewater treatment<br />
plants are in operation in Kavaja <strong>and</strong> Pogradec; work on another has been<br />
completed <strong>and</strong> three more are under construction. However, surface waters are still<br />
affected by uncontrolled leakages from the illegal dumping of solid waste (EC<br />
SEC[2009] 1339). According to the Albanian Implementation Plan <strong>for</strong> the Re<strong>for</strong>m<br />
of the Water Supply <strong>and</strong> Sewerage Sector, 2007–2009 (Gjinali <strong>and</strong> Olldashi,<br />
2008), another 10 wastewater treatment plants should be built by the end of 2011.<br />
These projects are included in the national PEIP lists.
FIGURE 2: Percentage of the population connected to sewerage networks<br />
%<br />
100<br />
90<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Croatia Serbia Albania Montenegro Kosovo<br />
(under<br />
FYR<br />
Macedonia<br />
Source: REC survey, 2008<br />
UNSCR 1244) (rural)<br />
The water supply <strong>and</strong> sewerage sector in the country has shown important improvements<br />
in the last two years from both a technical <strong>and</strong> a financial point of view.<br />
Although improvements have been made, many deficiencies still exist, especially<br />
in rural areas.<br />
In Bosnia <strong>and</strong> Herzegovina, some 56 percent of the population has access to<br />
water through a public water supply system (91 percent in urban areas, <strong>and</strong> 48 percent<br />
in rural areas). Overall water losses are estimated at 50 percent. In urban areas,<br />
73 percent of the population is connected to sewerage networks, while in rural<br />
areas the proportion is extremely low. Overall, 4 percent of the population is connected<br />
to wastewater treatment plants. Untreated discharges of wastewater remain<br />
a key environmental challenge, <strong>and</strong> both access to drinking water <strong>and</strong> wastewater<br />
treatment infrastructure require additional investments (EC SEC[2009] 1338).<br />
Croatia has the most developed water infrastructure in the region, <strong>and</strong> 80 percent<br />
of its population is connected to a municipal water supply. Up to 75 percent<br />
of the urban population is connected to sewerage networks, while 28 percent of the<br />
overall population is connected to 89 wastewater treatment plants. Many plants<br />
constructed in the 1980s are too big since they were designed according to the existing<br />
development <strong>and</strong> spatial plans, <strong>for</strong> the intake of a considerable amount of industrial<br />
wastewater, <strong>and</strong> <strong>for</strong> a higher percentage of the population connected to<br />
C H A P T E R 2<br />
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<br />
FYR<br />
Macedonia<br />
(urban)<br />
Bosnia <strong>and</strong><br />
Herzegovina<br />
(urban)<br />
S T R AT E G I C M O V E S 49
50<br />
C H A P T E R 2<br />
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<br />
FIGURE 3: Number of wastewater treatment plants in SEE countries<br />
100<br />
90<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
S T R AT E G I C M O V E S<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
Source: REC survey, 2008<br />
Croatia FYR<br />
Macedonia<br />
Kosovo (under<br />
UNSCR 1244)<br />
Montenegro Serbia<br />
the sewerage system than has been achieved. At present, about 25 percent of the<br />
total municipal wastewater in Croatia is treated; approximately 76 percent of this<br />
is mechanically treated. Around 18 percent undergoes secondary treatment, which<br />
represents only around 4.4 percent of the total amount of municipal wastewater<br />
(website of Croatian Waters). Estimated national average physical water losses are<br />
40 percent, <strong>and</strong> Uf W 67 percent. The relatively high water losses indicate that<br />
huge investments are needed <strong>for</strong> the reconstruction of water supply networks. According<br />
to the EC progress report, significant ef<strong>for</strong>ts have to be made to increase<br />
investments in this sector (EC SEC [2009] 1333).<br />
In Kosovo (as defined under UNSCR 1244) the water infrastructure is relatively<br />
underdeveloped. One of the most severe problems is water shortage: water<br />
cuts affect the general population as well as the industrial <strong>and</strong> agricultural sectors.<br />
Although accurate statistics are not readily available, it is estimated that 44 percent<br />
of the population is connected to water supply services. The rate of Uf W is 59 percent,<br />
<strong>and</strong> the technical condition of the water <strong>and</strong> wastewater systems is rather<br />
poor (REC survey, 2008).<br />
Only 28 percent of the population is connected to a sewerage network. There<br />
are no wastewater treatment plants in operation. A WWTP was recently built in the<br />
municipality of Skenderaj/Srbica, but due to unsettled ownership issues in relation<br />
to the expropriated l<strong>and</strong>, the necessary connections are not yet in place <strong>and</strong> the plant
is not in operation. The construction of seven WWTPs is <strong>for</strong>eseen in the draft development<br />
strategy <strong>and</strong> the Kosovo <strong>Environmental</strong> Action Plan (REC survey, 2008).<br />
In the <strong>for</strong>mer Yugoslav Republic of Macedonia, the communal service enterprises<br />
(CSEs) are public enterprises founded <strong>and</strong> owned by local governments.<br />
The water supply system reaches 72 percent of the population of the country, albeit<br />
with persistent problems such as a high level of Uf W. The wastewater sector<br />
is far less developed, with seven small <strong>and</strong> outdated urban wastewater treatment<br />
plants to which 12 percent of the population is connected. The existing infrastructure<br />
is outdated, resulting in high water <strong>and</strong> energy losses. Of the existing 68<br />
water supply networks, 58 need upgrading; of the existing 68 sewerage networks<br />
59 need upgrading; <strong>and</strong> of the seven existing wastewater treatment plants, two<br />
need reconstruction <strong>and</strong> 59 new (smaller <strong>and</strong> larger) plants are needed in order to<br />
comply with the relevant EU directives.<br />
Montenegro has a relatively well developed water supply system, connecting<br />
80 percent of the population. However, the sewerage system is less well developed,<br />
connecting only 38 percent of the population. Two obsolete WWTPs exist in Podgorica<br />
<strong>and</strong> Niksic. Water shortages are common <strong>and</strong> the level of Uf W is high, at<br />
between 50 <strong>and</strong> 75 percent. The Waste Water Feasibility Study <strong>for</strong> the Coastal Region<br />
of Montenegro <strong>and</strong> the Municipality of Cetinje, <strong>and</strong> the Sewerage <strong>and</strong> Wastewater<br />
<strong>Strategic</strong> Master Plan <strong>for</strong> <strong>Central</strong> <strong>and</strong> Northern Montenegro envisage, by<br />
the end of 2015, the rehabilitation of existing pumping stations, the construction<br />
of new WWTPs <strong>and</strong> pumping stations, <strong>and</strong> the reconstruction <strong>and</strong> expansion of<br />
existing infrastructure throughout the republic.<br />
Serbia has 150 water utilities with obsolete <strong>and</strong> deteriorating water infrastructure.<br />
Poor technical per<strong>for</strong>mance results in water losses at an average level of 35<br />
percent, while in some municipalities losses are as high as 50 percent. The proportion<br />
of the population connected to water supply in urban areas is 83 percent, while<br />
in rural areas it is 49 percent. Some 60 percent of the overall population is connected<br />
to sewerage networks <strong>and</strong> there are 28 WWTPs. The wastewater treatment<br />
infrastructure throughout the country needs upgrading.<br />
Infrastructure status in the waste sector<br />
The level of waste collection, transportation, treatment <strong>and</strong> disposal in SEE<br />
countries is below that required <strong>for</strong> compliance with EU st<strong>and</strong>ards. The available<br />
facilities <strong>and</strong> capacities <strong>for</strong> the treatment <strong>and</strong> disposal of waste are inadequate; legislation<br />
<strong>and</strong> st<strong>and</strong>ards are not effectively en<strong>for</strong>ced; <strong>and</strong> current waste management<br />
practices are contributing to the pollution of air, water resources <strong>and</strong> l<strong>and</strong>.<br />
Investments in the municipal solid waste infrastructure in South Eastern Europe<br />
(SEE) are urgently needed in order to reduce the pressure on the environment resulting<br />
from indiscriminate dumping <strong>and</strong> from the depositing of waste in l<strong>and</strong>fills<br />
with low or no st<strong>and</strong>ards. This pressure is exacerbated by the increased generation<br />
of municipal solid waste associated with GDP growth during the years be<strong>for</strong>e the<br />
economic crisis, <strong>and</strong> with the accompanying growth in private consumption.<br />
C H A P T E R 2<br />
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<br />
S T R AT E G I C M O V E S 51
52<br />
C H A P T E R 2<br />
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<br />
S T R AT E G I C M O V E S<br />
Across Albania there are 65 legal — albeit unmanaged <strong>and</strong> uncontrolled —<br />
l<strong>and</strong>fills <strong>for</strong> urban settlements, as well as an unknown number of illegal waste dumps<br />
in rural areas. There is no separation of household waste from industrial, construction<br />
or hazardous waste. Some medical waste is incinerated in four obsolete incinerators<br />
causing air pollution hazardous to human health. No waste stream is sorted<br />
<strong>for</strong>mally into recyclable components, although there is a small-scale in<strong>for</strong>mal market<br />
among individual collectors <strong>and</strong> small companies. None of the existing l<strong>and</strong>fills<br />
meet international construction <strong>and</strong> health st<strong>and</strong>ards (location, protective lining,<br />
drainage system, leachate treatment, gas collection etc.). L<strong>and</strong>fills <strong>and</strong> illegal waste<br />
dumps often catch fire, releasing dioxins <strong>and</strong> furans. The Ministry of Environment,<br />
Forestry <strong>and</strong> Water Administration envisages the construction of four l<strong>and</strong>fills in Elbasan,<br />
Fier, Gjirokaster <strong>and</strong> Berat, <strong>and</strong> the closure of five existing dumpsites in Elbasan,<br />
Durres, Berat, Lezhe <strong>and</strong> Pogradec. Over the last three years, rehabilitation<br />
<strong>and</strong> restructuring work has been undertaken at the Sharra l<strong>and</strong>fill in Tirana.<br />
Bosnia <strong>and</strong> Herzegovina is at an early stage of investment in solid waste management.<br />
Approximately 36 percent of the country is covered by municipal solid<br />
waste management services. There are 75 legal but non-sanitary l<strong>and</strong>fills, as well as<br />
around 1,200 illegal ones. It is estimated that Republika Srpska has 25 municipal<br />
l<strong>and</strong>fills <strong>and</strong> a large number of illegal dumpsites; while in the Federation of Bosnia<br />
<strong>and</strong> Herzegovina there are 50 municipal dumpsites <strong>and</strong> a large number of illegal<br />
disposal sites. Up to eight regional l<strong>and</strong>fills are needed in order to achieve compliance<br />
with relevant EU directives.<br />
The 2003 National <strong>Environmental</strong> Action Plan (NEAP) proposes two options<br />
<strong>for</strong> an intermediate solution: regional l<strong>and</strong>fills at 16 (entity option) or 14 (interentity<br />
option) locations, which would ultimately result in a long-term solution<br />
comprising six major regional l<strong>and</strong>fills in Bosnia <strong>and</strong> Herzegovina, located in Banja<br />
Luka, Tuzla, Mostar, Bijeljina, Bihac <strong>and</strong> Livno. Since 2003, two sanitary regional<br />
depots have been built in Banja Luka <strong>and</strong> Sarajevo. The 2008 Instrument <strong>for</strong> Preaccession<br />
Assistance (IPA) project “Strengthening Bosnia <strong>and</strong> Herzegovina’s <strong>Environmental</strong><br />
Institutions: Preparation <strong>for</strong> Pre-accession Funds <strong>and</strong> Support to<br />
<strong>Environmental</strong> Infrastructure Development” is providing technical assistance <strong>for</strong><br />
the preparation of environmental infrastructure investment projects (feasibility<br />
studies) <strong>for</strong> the regional l<strong>and</strong>fills in Sarajevo <strong>and</strong> Banja Luka, as well as those envisaged<br />
in Gorazde, Srednje Bosanski canton,Visoko, Ljubuski region, Prijedor,<br />
Derventa <strong>and</strong> Trebinje. This has been complemented by World Bank International<br />
Development Association (IDA) loans <strong>for</strong> Sarajevo, Zenica, Tuzla, Bihac, Banja<br />
Luka <strong>and</strong> Bijeljina. During the implementation of this project, 145 illegal dumpsites<br />
have been closed <strong>and</strong> remediated, <strong>and</strong> another 40 are due to be closed.<br />
According to the Croatian National Waste Management Plan (NWMP), all existing<br />
299 registered local l<strong>and</strong>fill sites should be remediated or closed, or trans<strong>for</strong>med<br />
into transfer stations <strong>for</strong> future regional management centres by the end<br />
of 2011, with a transition period to 2015 (EU Waste L<strong>and</strong>fill Directive). The closing<br />
of old dumpsites is a precondition <strong>for</strong> establishing new waste management centres.<br />
Closure <strong>and</strong> remediation work has been completed at 63 l<strong>and</strong>fills.
The National Waste Management Strategy (NWMS) envisages the construction<br />
of up to 21 regional l<strong>and</strong>fills, depending on the results of the regionalisation<br />
process <strong>for</strong> waste utilities. As of February 2009, the Croatian <strong>Environmental</strong> Protection<br />
<strong>and</strong> Energy Efficiency Fund (EPEEF) is assisting nine regional waste management<br />
centre (RWMC) projects in preparing project documentation. Three out<br />
of these nine projects have applied <strong>for</strong> IPA funds — Mariscina (Primorsko-goranska<br />
county), Kastijun (Istria county) <strong>and</strong> Lecevica (Split-Dalmatia county) — while<br />
the fourth (Bikarac in Sibenik-Knin county) has already received funding through<br />
the Instrument <strong>for</strong> Structural Policies <strong>for</strong> Pre-Accession (ISPA). The phase one<br />
costs <strong>for</strong> these RWMCs vary from around EUR 20 to 60 million, depending on the<br />
size of the region. Despite progress, continuous ef<strong>for</strong>ts are needed <strong>for</strong> the remediation<br />
of existing l<strong>and</strong>fills <strong>and</strong> hotspots <strong>and</strong> the further establishment of systems <strong>for</strong><br />
the collection <strong>and</strong> management of waste streams. According to the EC, preparations<br />
in this area are progressing well (EC SEC [2009] 1333).<br />
In Kosovo (as defined under UNSCR 1244) an estimated 70 percent of all<br />
waste is illegally dumped (on the streets, around rivers, lakes <strong>and</strong> mountains, <strong>and</strong><br />
in rural areas). Waste collection services cover approximately 39 percent of the population<br />
(WWRO, 2009), <strong>and</strong> services are provided mainly in urban areas. There is<br />
no separation of waste streams.<br />
Kosovo (as defined under UNSCR 1244) has inherited 30 legal but non-sanitary<br />
municipal l<strong>and</strong>fills. Of these, 26 have been rehabilitated <strong>and</strong> closed with the<br />
support of the European Agency <strong>for</strong> Reconstruction (EAR). Five new l<strong>and</strong>fills<br />
have been built (also funded by EAR), which are now used regularly <strong>for</strong> waste disposal.<br />
Projects are currently being implemented on the rehabilitation of old l<strong>and</strong>fills<br />
in Prizren, Gjakova, Kacanik, Ferizaj, Gjilan <strong>and</strong> Lipjan. Another two projects<br />
<strong>for</strong> non-municipal waste (medical <strong>and</strong> hazardous waste) are under preparation.<br />
In the <strong>for</strong>mer Yugoslav Republic of Macedonia, regular waste collection services<br />
are mainly limited to urban areas. In total, around 70 percent of the Macedonian<br />
population benefit from regular waste collection services. (In rural<br />
settlements the proportion is around 10 percent.) Municipal l<strong>and</strong>fills do not comply<br />
with sanitation st<strong>and</strong>ards, <strong>and</strong> waste disposal practices do not comply with any<br />
technical <strong>and</strong>/or environmental st<strong>and</strong>ards. The NWMS envisages up to eight regional<br />
l<strong>and</strong>fills.<br />
The 2008 National <strong>Environmental</strong> Investment Strategy (NEIS) includes a provision<br />
<strong>for</strong> a call <strong>for</strong> proposals <strong>for</strong> the construction of eight regional sanitary waste<br />
l<strong>and</strong>fills <strong>and</strong> <strong>for</strong> the closure <strong>and</strong> reclamation of the existing 54 non-compliant municipal<br />
l<strong>and</strong>fills. According to the EC, investments in this area need to be increased<br />
(EC SEC [2009] 1335).<br />
Since 2008 there has been only one sanitary l<strong>and</strong>fill functioning in Montenegro,<br />
a (de facto) regional l<strong>and</strong>fill serving the city of Podgorica <strong>and</strong> the town of<br />
Danilovgrad <strong>and</strong> the surrounding settlements. The other existing l<strong>and</strong>fills are legal<br />
<strong>and</strong> illegal municipal non-sanitary l<strong>and</strong>fills. According to the national plan <strong>for</strong><br />
waste management <strong>and</strong> one regional plan, the seven regional sanitary l<strong>and</strong>fills still<br />
required are due to be constructed, as well as an envisaged nine transfer stations,<br />
C H A P T E R 2<br />
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<br />
S T R AT E G I C M O V E S 53
54<br />
C H A P T E R 2<br />
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<br />
S T R AT E G I C M O V E S<br />
eight recycling centres <strong>and</strong> 26 smaller recycling units, <strong>and</strong> up to five composting facilities.<br />
The construction of a regional recycling centre at the location of the existing<br />
l<strong>and</strong>fill in Podgorica is under way, with a capacity of 90,000 tonnes of mixed<br />
municipal waste per year. Feasibility studies <strong>and</strong> environmental impact assessments<br />
on six regional sanitary l<strong>and</strong>fill locations were finalised <strong>and</strong> projects are being designed.<br />
According to the EC, alignment with European st<strong>and</strong>ards needs to be<br />
strengthened <strong>and</strong> accelerated, in particular concerning the L<strong>and</strong>fill Directive <strong>and</strong><br />
the Waste Shipments Regulation (EC SEC [2009] 1336).<br />
Currently there is only one sanitary l<strong>and</strong>fill in Serbia. According to the 2003 Waste<br />
Management Strategy, Serbia needs 29 regional sanitary l<strong>and</strong>fills, 44 transfer stations,<br />
17 recycling centres, seven or more composting facilities, <strong>and</strong> four incinerators. There<br />
are five ongoing regional projects in which several municipalities will use the same<br />
l<strong>and</strong>fill: Duboko l<strong>and</strong>fill serving Cacak, Uzice <strong>and</strong> seven minor towns; <strong>and</strong> Muntina<br />
Padina l<strong>and</strong>fill serving four municipalities in the Pirot region. These two publicly<br />
owned regional l<strong>and</strong>fills are expected to be commissioned by the end of 2009.<br />
General observations<br />
• The condition of the physical environmental infrastructure varies among the<br />
SEE countries. Croatia is ahead of other countries in the region, especially in<br />
terms of wastewater treatment infrastructure. However, there is a big margin<br />
<strong>for</strong> improvement in all countries.<br />
• Water supply infrastructure in SEE is at a relatively satisfactory level, especially<br />
in urban areas, while sewerage, wastewater treatment <strong>and</strong> waste management infrastructure<br />
are far less developed <strong>and</strong> in a worse physical condition.<br />
• Common problems facing the water sector in SEE countries include a relatively<br />
low level of drinking water supply in rural areas; big water losses due to ageing<br />
infrastructure; <strong>and</strong> significant levels of unaccounted-<strong>for</strong> water (Uf W).<br />
• Waste management infrastructure in SEE is inadequate. There are only a few<br />
l<strong>and</strong>fills in the region that comply with EU regulations <strong>and</strong> there are a huge<br />
number of low-st<strong>and</strong>ard illegal dumpsites or l<strong>and</strong>fills.<br />
• Urban areas in the SEE region are relatively well covered by waste collection<br />
<strong>and</strong> transportation services, in contrast to rural areas.<br />
• Bosnia <strong>and</strong> Herzegovina, Croatia <strong>and</strong> Serbia have made the biggest progress in<br />
terms of project preparation <strong>for</strong> regional sanitary l<strong>and</strong>fills, while Croatia <strong>and</strong><br />
Kosovo (as defined under UNSCR 1244) have been successful in closing <strong>and</strong><br />
remediating the biggest number of non-sanitary l<strong>and</strong>fills. Closing <strong>and</strong> remediating<br />
old illegal dumpsites is a precondition <strong>for</strong> establishing new waste management<br />
centres.
Chapter 3<br />
Challenges to environmental<br />
financing in SEE<br />
S T R AT E G I C M O V E S 55
56<br />
S T R AT E G I C M O V E S
Introduction<br />
This chapter gives an overview of the main challenges in relation to developing<br />
environmental investment projects in SEE countries. The challenges outlined here<br />
are then explored in greater depth in subsequent chapters.<br />
Financing environmental infrastructure projects in compliance with the EU<br />
environmental acquis is a serious legal, financial <strong>and</strong> institutional challenge <strong>for</strong> any<br />
country. It requires the establishment of a clear legal <strong>and</strong> strategic framework —<br />
through the transposition of the EU water <strong>and</strong> waste acquis — that creates sufficient<br />
incentives <strong>and</strong> pressure on both the state administration <strong>and</strong> municipal project<br />
proponents to result in concrete actions <strong>for</strong> the re<strong>for</strong>m of all relevant systems,<br />
both institutional <strong>and</strong> financial. The process necessitates significant financial allocations<br />
as well as the political will to re<strong>for</strong>m the main institutions — the water<br />
<strong>and</strong> waste utilities — so as to make them capable of implementing the investments.<br />
“Constraints” <strong>and</strong> “challenges” are used here interchangeably, since all the factors<br />
discussed below hamper <strong>and</strong> slow down environmental infrastructure investments<br />
<strong>and</strong> thus need to be overcome.<br />
The authors use two criteria to classify the constraints/challenges to environmental<br />
infrastructure financing. The first criterion is administrative level: that is,<br />
national or municipal.<br />
This classification allows us to look at environmental infrastructure investment<br />
from the point of view of national governments <strong>and</strong> ministries, but also from the<br />
point of view of the municipalities that are responsible <strong>for</strong> the practical implementation<br />
of the relevant water <strong>and</strong> waste acquis.<br />
The main policy <strong>and</strong> planning work is carried out on the national level through the<br />
transposition of EU legislation <strong>and</strong> through the drafting of strategic documents that<br />
set out priorities <strong>and</strong> timeframes. On the other h<strong>and</strong>, local governments have the difficult<br />
task of implementing obligations that have been devolved to them following the<br />
process of decentralisation. They are faced with the obligation to implement investments<br />
that far exceed their budgetary means. In addition, they have to balance these<br />
investments with other, competing priorities linked to social <strong>and</strong> regional development.<br />
It is also the local governments that have to embark on a programme to re<strong>for</strong>m<br />
the utilities that will be responsible <strong>for</strong> the investments in water <strong>and</strong> waste.<br />
The second criterion is the nature of the challenge/constraint, that is, political,<br />
economic, financial, legal, institutional, planning, or project preparation.<br />
Obstacles to environmental<br />
infrastructure financing — national level<br />
Political<br />
Low level of political will<br />
One of the main constraints to environmental infrastructure investments in<br />
SEE is the insufficient political drive <strong>for</strong> re<strong>for</strong>m in connection with environmental<br />
financing. The level of political will is generally in direct correlation with the sta-<br />
S T R AT E G I C M O V E S 57
58<br />
C H A P T E R 3<br />
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<br />
TABLE 1: Key challenges <strong>and</strong> constraints at national level<br />
TYPE CONSTRAINTS DESCRIPTION ADDRESSED IN<br />
GREATER DETAIL IN<br />
Political Low level of political will This is in direct correlation with<br />
the status of the country<br />
regarding EU accession<br />
Chapter 2<br />
Economic Low levels of GDP Leads to relatively low nominal<br />
amounts <strong>for</strong> environmental<br />
infrastructure investment from<br />
the national budget<br />
Chapter 2<br />
Budgetary deficit in Leads to suspension of Chapter 2<br />
times of economic crisis infrastructure projects<br />
Financial High level of investments Due to poor-quality water <strong>and</strong> Chapter 2<br />
needed <strong>for</strong> full compliance waste infrastructure; long years<br />
of under-funding; <strong>and</strong> obsolete<br />
water <strong>and</strong> waste systems<br />
Legal Planning <strong>for</strong> approximation Missing in most countries<br />
<strong>Strategic</strong> documents Missing in certain countries<br />
<strong>and</strong> sectors<br />
Transposition Relatively low level of<br />
transposition of key directives<br />
Chapter 2<br />
En<strong>for</strong>cement Lack of capacity <strong>for</strong> the<br />
en<strong>for</strong>cement of newly<br />
transposed directives<br />
Chapter 2<br />
Institutional Capacity of ministry Relatively low number of staff Chapter 2<br />
<strong>and</strong> specialised agency <strong>for</strong> an increased body of<br />
environmental legislation<br />
Lack of specialised Few of the countries have Chapter 2<br />
institutions (environmental specialised institutions, e.g.<br />
fund, national regulators) environmental funds<br />
Coordination Insufficient coordination among<br />
line ministries — competition<br />
<strong>for</strong> scarce funds <strong>and</strong> power,<br />
associated political influence on<br />
the process of project selection<br />
Chapter 2<br />
Investment Lack of national environmental Necessary to properly map<br />
planning <strong>and</strong> investment strategies funding needs, available funding<br />
project by sources, as well as other issues<br />
identification such as institutional approaches<br />
Weak pipeline management Lack of proper coordination <strong>and</strong><br />
communication between<br />
institutions in managing pipelines<br />
of environmental investment<br />
projects<br />
Lack of key sectoral Some sectoral plans <strong>and</strong><br />
strategies <strong>and</strong> plans programmes <strong>for</strong> the<br />
implementation of directives<br />
are missing<br />
S T R AT E G I C M O V E S
tus of the country regarding EU accession. A certain political stability is needed to<br />
fulfil the obligations taken on with the Stabilisation <strong>and</strong> Association Agreement<br />
(SAA). Political will is needed <strong>for</strong> the whole spectrum of re<strong>for</strong>ms, from institutional<br />
restructuring (administration <strong>and</strong> utilities) to the alignment of the legal<br />
framework <strong>and</strong> the en<strong>for</strong>cement of commitments undertaken.<br />
Economic<br />
Low levels of GDP<br />
With the exception of Croatia, the SEE countries have relatively low levels<br />
of per capita GDP. Croatia has relatively higher GDP, at a level comparable to<br />
that in the new EU member states in CEE. The SEE countries are all countries<br />
in transition, requiring serious re<strong>for</strong>ms in all sectors of society, including road<br />
infrastructure, education <strong>and</strong> health care. The proportion of the state budget<br />
earmarked <strong>for</strong> the environment is still relatively low, although it is growing (Eurostat<br />
website). The amounts in the budget dedicated to environmental infrastructure<br />
investment are there<strong>for</strong>e extremely low compared to the overall<br />
investment needs. (For further details see Chapter 4.)<br />
The global economic recession<br />
In the past year, the global economic recession has deepened, affecting almost all<br />
areas of life, including investments in environmental infrastructure. National budgets<br />
are feeling the pressure of decreasing revenues, <strong>and</strong> as a result some infrastructure<br />
projects have been suspended <strong>for</strong> the time being in order to balance national budgets.<br />
One of the reasons <strong>for</strong> this is the lack of clarity regarding the link between environmental<br />
infrastructure investments <strong>and</strong> regional economic development. In<br />
addition, due to the financial <strong>and</strong> economic crisis some of the problems faced by<br />
the water <strong>and</strong> waste utilities even in good economic times are escalating — <strong>for</strong> example<br />
the non-payment of bills, difficulties in accessing loans etc. Many banks <strong>and</strong><br />
investors have less capital, <strong>and</strong> where capital is available, borrowing terms are far less<br />
favourable, making the requirements of project proponents themselves far stricter.<br />
Consequently, financiers are less inclined to take big risks <strong>and</strong> would rather invest<br />
in solid <strong>and</strong> well-managed operations. Funding that is relatively stable <strong>and</strong> that only<br />
slightly decreases becomes even more valuable. (For further details on the economic<br />
situation see Chapter 4, <strong>and</strong> on utility re<strong>for</strong>ms see Chapter 6.)<br />
Af<strong>for</strong>dability of environmental investments <strong>and</strong> availability of subsidies<br />
Due to low GDP <strong>and</strong> low levels of development, most SEE communities will<br />
have difficulty af<strong>for</strong>ding the investments that are required in order to ensure the<br />
protection of their environment <strong>and</strong> their quality of life, <strong>and</strong> compliance with<br />
new legislative requirements. In particular, users of the new infrastructure will be<br />
unable to af<strong>for</strong>d the user charges that are required in order to ensure the operation<br />
<strong>and</strong> maintenance of that infrastructure, let alone to secure capital investment.<br />
(For further details on af<strong>for</strong>dability see Chapter 6.)<br />
C H A P T E R 3<br />
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S T R AT E G I C M O V E S<br />
Financial<br />
High level of investment needed<br />
The investments in water <strong>and</strong> waste infrastructure that are needed in order to<br />
reach full compliance are extremely high relative to the GDPs of SEE countries. The<br />
EU water <strong>and</strong> waste acquis introduce high EU st<strong>and</strong>ards <strong>for</strong> inbuilt infrastructure.<br />
Compliance with the EU environmental acquis requires the construction of new<br />
infrastructure such as sanitary l<strong>and</strong>fills, wastewater treatment plants <strong>for</strong> towns with<br />
fewer than 10,000 inhabitants etc. Even the EU-10 countries experience difficulties<br />
achieving compliance years after joining the EU. Some of them are even facing legal<br />
actions. The situation is even less favourable in SEE, where existing infrastructure has<br />
suffered from years of underinvestment. (For further details see Chapter 2.)<br />
Poor bankability of proposed investments<br />
Related to af<strong>for</strong>dability, in many cases large-scale infrastructure investments<br />
that are needed <strong>for</strong> compliance with legislative requirements (e.g. the construction<br />
of mechanical WWTPs or sophisticated waste management <strong>and</strong> disposal sites) are<br />
not attractive investments due to long payback periods <strong>and</strong> other constraints. This<br />
greatly inhibits the availability of investment capital <strong>and</strong> also requires more sophisticated<br />
project planning <strong>and</strong> preparation, which is lacking in the region.<br />
Legal<br />
Low level of transposition of key directives<br />
The full transposition of the investment-heavy directives is an important driver<br />
<strong>for</strong> environmental infrastructure projects, as it will place a legal burden on national<br />
<strong>and</strong> local governments to create the conditions <strong>and</strong> undertake the actions necessary<br />
<strong>for</strong> investments to take place. The CEE experience has shown that very often the<br />
process is carried out within a short period of time, <strong>and</strong> that compromises are often<br />
made in terms of quality. (For further details see Chapter 4.)<br />
<strong>Strategic</strong> framework<br />
The drafting of national <strong>and</strong> local horizontal <strong>and</strong> sectoral (water <strong>and</strong> waste)<br />
strategies also belongs among the “planning” challenges. However, it also has strong<br />
legal implications as strategies set the framework <strong>and</strong> the direction <strong>for</strong> subsequent<br />
laws <strong>and</strong> regulations. Drafting strategies through wide stakeholder dialogue has<br />
the benefit of combining different interests at an early stage <strong>and</strong> attracting support<br />
<strong>for</strong> future actions. Significant progress has been made in strategy drafting in SEE<br />
during the last two to three years. The drafting of strategic horizontal <strong>and</strong> sectoral<br />
documents is very important as it “translates” the vision of the government in a<br />
given sector, creates the institutional framework, <strong>and</strong> provides the legal technology.<br />
The availability of strategic documents is indispensable <strong>for</strong> the absorption of funding<br />
from the Instrument <strong>for</strong> Pre-accession Assistance (IPA). (For further details on<br />
strategic documents see Chapter 5, <strong>and</strong> on IPA see Chapter 7.)
En<strong>for</strong>cement<br />
The proper functioning of environmental infrastructure investment is impossible<br />
without the strong en<strong>for</strong>cement of legislation. In general, the region is<br />
characterised by insufficient en<strong>for</strong>cement of environmental legislation <strong>and</strong> insufficient<br />
imposition of fines, due in part to the weak capacity of the inspectorates<br />
in terms of numbers, knowledge <strong>and</strong> equipment. Another reason <strong>for</strong> the<br />
low level of en<strong>for</strong>cement of legislation in general is the absence of a culture of<br />
en<strong>for</strong>cement <strong>and</strong> compliance. The link between the inspectorates <strong>and</strong> the line<br />
ministries is not always strong enough. The connection between the inspectorates<br />
<strong>and</strong> the prosecution is weak, <strong>and</strong> inspectors are rarely trained to carry out<br />
investigations. Additionally, there is a vast body of EU environmental legislation,<br />
<strong>and</strong> the resources available <strong>for</strong> inspection fall far short of the laws to be en<strong>for</strong>ced.<br />
Experience in CEE has shown that in the rush to transpose EU legislation, the aspect<br />
of en<strong>for</strong>cement has often been disregarded. The financial benefits of en<strong>for</strong>cement<br />
are often vague <strong>and</strong> difficult to quantify, which means that an<br />
important pressure factor is missing. (For further details on en<strong>for</strong>cement see<br />
Chapter 5, <strong>and</strong> on the benefits of en<strong>for</strong>cement see Chapter 9.)<br />
Institutional<br />
Capacity of central-level institutions<br />
The adoption of the EU environmental acquis will <strong>for</strong>ce environmental institutions<br />
in SEE to adapt all their systems <strong>for</strong> the implementation of the acquis. As the<br />
environment has a prominent role in the EU acquis, governments will have to adapt<br />
national <strong>and</strong> regional environmental institutions in order to reflect EU priorities.<br />
Based on the experience of CEE countries, it is likely that the current capacity of<br />
the environmental ministries will turn out to be insufficient <strong>for</strong> the administration of<br />
all the requirements arising from the adoption of the acquis. One of the mistakes<br />
made in CEE countries is the failure to ensure proper human resources planning in<br />
relation to the requirements of the EU acquis. In general, environmental institutions<br />
should significantly increase their staff. However, it is very probable that the ministries<br />
of finance will exert pressure in the opposite direction <strong>and</strong> push <strong>for</strong> staff cuts.<br />
The availability of environmental experts in general, <strong>and</strong> of environmental investment<br />
experts in particular, is of the utmost importance <strong>and</strong> governments should adapt<br />
university programmes in this direction. They should also take advantage of the available<br />
twinning <strong>and</strong> other training programmes that draw on the experiences of other<br />
EU member states to improve the skills <strong>and</strong> capacities of their staff.<br />
Communication <strong>and</strong> coordination<br />
Inter-institutional communication <strong>and</strong> coordination, as well as the relationship<br />
between the central level <strong>and</strong> local levels of governance are also areas of critical importance.<br />
(For further details on institutions, see Chapter 5.)<br />
C H A P T E R 3<br />
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C H A P T E R 3<br />
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S T R AT E G I C M O V E S<br />
Investment planning<br />
National environmental investment planning <strong>and</strong> project identification<br />
Only the <strong>for</strong>mer Yugoslav Republic of Macedonia has adopted a national environmental<br />
investment strategy (NEIS). Such strategies provide a clear overview<br />
of the national environmental investment needs on the one h<strong>and</strong>, <strong>and</strong> of the national<br />
financial framework on the other, including budgetary allocations, IPA funding,<br />
bilateral grants <strong>and</strong> IFI financing. They also analyse institutional capacity to<br />
carry out investments. In an ideal case, environmental investment strategies should<br />
come up with ranked priority lists based on clear <strong>and</strong> transparent criteria <strong>and</strong> comprising<br />
projects that are clearly supported by the government.<br />
Project identification <strong>and</strong> preparation<br />
Although at one time the countries lacked capacity <strong>for</strong> project identification<br />
<strong>and</strong> preparation, huge progress has been made since 2001, partly due to the implementation<br />
of the PEIP. However, there is still room <strong>for</strong> improvement. Project<br />
preparation gaps have been covered by project preparation facilities.<br />
General observations<br />
• Financing environmental infrastructure projects in compliance with the EU<br />
environmental acquis requires the establishment of a clear legal <strong>and</strong> strategic<br />
framework <strong>and</strong> the re<strong>for</strong>m of institutional <strong>and</strong> financial systems. The process<br />
necessitates significant financial allocations as well as the political will to re<strong>for</strong>m<br />
the main institutions.<br />
• The global economic recession has added further constraints to the financial situation<br />
in the SEE region <strong>and</strong> has affected investments in environmental infrastructure;<br />
some infrastructure projects have been suspended.<br />
• In relation to af<strong>for</strong>dability, in many cases large-scale infrastructure investments<br />
are not attractive due to long payback periods <strong>and</strong> other constraints.<br />
• The full transposition of the investment-heavy directives is an important driver<br />
<strong>for</strong> environmental infrastructure projects as it will place a legal burden on national<br />
<strong>and</strong> local governments to undertake the necessary actions <strong>for</strong> investments<br />
to take place.<br />
• The lack of key sectoral <strong>and</strong> environmental investment strategies delays environmental<br />
investments as strategies set the framework <strong>and</strong> the direction <strong>for</strong> follow-up<br />
laws <strong>and</strong> regulations. The same is valid <strong>for</strong> local management plans.<br />
Drafting strategies <strong>and</strong> plans through wide stakeholder dialogue has the benefit<br />
of combining different interests at an early stage <strong>and</strong> of attracting support <strong>for</strong><br />
future actions.<br />
• The insufficient level of en<strong>for</strong>cement of environmental legislation in SEE countries<br />
is a hindrance to the proper functioning of environmental infrastructure
investments. The capacity of the inspectorates is weak <strong>and</strong> a culture of compliance<br />
is lacking; the link between the inspectorates <strong>and</strong> the line ministries is not<br />
always strong <strong>and</strong> the connection between the inspectorates <strong>and</strong> the prosecution<br />
is weak.<br />
• The current capacity of environmental ministries may turn out to be insufficient<br />
<strong>for</strong> the administration of all future environmental requirements. However, there<br />
is pressure from ministries of finance to avoid an increase in staff numbers.<br />
Obstacles to environmental infrastructure<br />
financing — municipal level<br />
Political<br />
Local governments in SEE often suffer as a result of the deficiencies of the national<br />
political system. In many cases the mayor represents a party that is not in<br />
power, thus his or her leverage to attract funding <strong>and</strong> implement environmental<br />
investment projects is limited. Conversely, those municipalities close to the governing<br />
party may receive extra funding.<br />
Local governments also struggle with a multitude of competing funding priorities<br />
such as road <strong>and</strong> transport infrastructure, health, education etc. In many cases,<br />
these investments are more visible <strong>and</strong> tangible than environmental investments<br />
(with the exception of water supply, waste collection <strong>and</strong> the prevention of illegal<br />
dumping), thus local politicians tend to give them priority. This is a particular<br />
problem in the case of wastewater projects, where the population <strong>and</strong> elected leaders<br />
are able to refer to traditional methods of household wastewater disposal, the<br />
negative environmental impacts of which are not immediately visible (REC, 2005).<br />
Economic/financial<br />
Devolvement of responsibility without adequate resources<br />
As a general rule, following the process of decentralisation there is a serious mismatch<br />
between the obligations of the municipalities <strong>and</strong> their financial capacities<br />
to manage these obligations. This is particularly true <strong>for</strong> waste <strong>and</strong> water management.<br />
Municipal budgets are almost always insufficient to cover investments in environmental<br />
infrastructure, <strong>and</strong> in most cases municipalities are prevented by legal,<br />
political <strong>and</strong> capacity-related obstacles from raising sufficient resources to carry<br />
out the investments needed in order to fulfil their obligations in these sectors. Very<br />
often local governments’ h<strong>and</strong>s are tied — they are legally prevented from taking<br />
on significant debts (by debt service ratio laws), <strong>and</strong> from adjusting the amount<br />
<strong>and</strong> type of charges imposed on users of infrastructure or penalties <strong>for</strong> non-payment<br />
(by state controls on tariffs). They often face political constraints in the reorganisation<br />
of utilities to better manage <strong>and</strong> collect fees to cover the operation<br />
<strong>and</strong> maintenance of their infrastructure. However, with the implementation of the<br />
EU acquis, much of this is changing <strong>for</strong> the better in the region.<br />
C H A P T E R 3<br />
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C H A P T E R 3<br />
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TABLE 2: Key challenges <strong>and</strong> constraints at municipal level<br />
TYPE CONSTRAINTS DESCRIPTION ADDRESSED IN<br />
GREATER DETAIL IN<br />
Political Political affiliation Mayors from the ruling party are<br />
favoured at the expense of<br />
mayors from opposition parties<br />
Lack of political will Results from the election cycle<br />
<strong>and</strong> the need to raise tariffs <strong>and</strong><br />
lay people off<br />
Chapter 4<br />
Competing priorities Budgets are limited <strong>and</strong><br />
politicians sometimes prefer the<br />
more tangible projects<br />
Economic/ Insufficient municipal Budgetary allocations <strong>for</strong> Chapter 3<br />
financial budget (revenue <strong>and</strong> municipalities are generally lower<br />
expenditure mismatch) than the funds needed to achieve<br />
compliance with legal investment<br />
Over-reliance on grants Fostering a grant-dependent<br />
culture prevents local governments<br />
from implementing other re<strong>for</strong>ms<br />
Economies of scale Organisational difficulties are<br />
experienced in setting up<br />
regional associations<br />
(e.g. <strong>for</strong> waste management)<br />
Institutional Decentralisation (also has Some important environmental Chapter 3<br />
legal aspects) functions have been devolved to<br />
local governments, whose<br />
capacities remain weak<br />
Local government Local governments have increased Chapter 3<br />
staff capacity environmental responsibilities with<br />
no or few members of staff<br />
Unre<strong>for</strong>med water Results in lack of utility Chapter 2<br />
<strong>and</strong> waste utilities independence, fragmented water<br />
utilities, <strong>and</strong> the cross-subsidising<br />
of costs from stronger<br />
to weaker departments<br />
Cooperation between Modern waste management is Chapter 2<br />
waste utilities carried out at regional level <strong>and</strong><br />
cooperation is needed between<br />
utilities<br />
Cooperation with Lack of regular consultations Chapter 3<br />
national authorities between national <strong>and</strong> local<br />
authorities<br />
Planning Lack of regional waste<br />
<strong>and</strong> water management plans<br />
Environment as a Other issues such as road<br />
relatively low priority infrastructure <strong>and</strong> social services<br />
may have a higher relative<br />
priority than environment,<br />
especially waste management<br />
S T R AT E G I C M O V E S
TABLE 2: Key challenges <strong>and</strong> constraints at municipal level (continued)<br />
Inadequate capacity <strong>for</strong> financial, environmental<br />
<strong>and</strong> investment planning<br />
Many local governments lack the capacity to underst<strong>and</strong> environmental infrastructure<br />
investments in the context of a market economy, including issues of social<br />
af<strong>for</strong>dability, cost recovery, depreciation <strong>and</strong> the appropriate use of subsidies.<br />
They are reluctant to take on loans, either due to legal restrictions on debt servicing<br />
or insecurity about their repayment capacities stemming from inadequate financial<br />
management practices. They there<strong>for</strong>e prioritise investments that can be<br />
serviced by grants or inexpensive soft loans from the central government or <strong>for</strong>eign<br />
donors, rather than real needs driven by rational environmental <strong>and</strong> financial<br />
planning (REC, 2005). In the meantime, necessary but more expensive <strong>and</strong> complex<br />
investments are postponed; the environment <strong>and</strong> society are further degraded;<br />
<strong>and</strong> necessary institutional re<strong>for</strong>ms <strong>and</strong> popular awareness-raising programmes are<br />
not implemented. While not denying that local governments should optimise<br />
funding by using the “free” grant options first, this should not be done at the expense<br />
of revenue-increasing re<strong>for</strong>ms or a clear analysis of the af<strong>for</strong>dability of environmental<br />
investments.<br />
Legal/institutional<br />
Decentralisation <strong>and</strong> institutional capacities<br />
All SEE countries have devolved significant environmental responsibilities to<br />
the local governments. The decentralisation process has been accomplished in all<br />
countries except <strong>for</strong> Serbia. In Albania, decentralisation is partly accomplished,<br />
having been completed in the water <strong>and</strong> waste sectors. In the process of decentralisation,<br />
SEE countries have transferred competencies <strong>for</strong> environmental services to<br />
the municipal level. In many cases, these are new responsibilities at the local government<br />
level, <strong>and</strong> the institutions have not managed to adjust their staff <strong>and</strong> capacities<br />
to properly manage the obligations. So far there has been no sufficient<br />
human <strong>and</strong> financial resource planning in connection with the newly acquired responsibilities<br />
in environment. The human resources capacity of local governments<br />
C H A P T E R 3<br />
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<br />
TYPE CONSTRAINTS DESCRIPTION ADDRESSED IN<br />
GREATER DETAIL IN<br />
Project Low capacity <strong>for</strong><br />
preparation project preparation<br />
Low level of project maturity Lack of feasibility studies prior to<br />
initiating the design phase; lack of<br />
EIAs; failure to take into account<br />
institutional <strong>and</strong> financial issues<br />
when planning environmental<br />
infrastructure<br />
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S T R AT E G I C M O V E S<br />
in SEE is generally low relative to the increasing obligations under the decentralisation<br />
process. This also has a bearing on the financial challenge discussed above,<br />
linked to insufficient available municipal budgets compared to the legal obligations<br />
of the municipalities. After new functions <strong>and</strong> responsibilities are devolved<br />
to the local level, most of the responsibility <strong>for</strong> identifying, preparing <strong>and</strong> implementing<br />
bankable projects is also shifted to the local level (REC, 2005). Other institutional<br />
constraints include the capacity of local consultants <strong>and</strong> the shortage<br />
of professional project managers able to take responsibility <strong>for</strong> the overall process<br />
— not only the preparation of the technical documentation but also the facilitation<br />
of smooth teamwork <strong>and</strong> consensus building across various groups of stakeholders.<br />
En<strong>for</strong>cement of laws<br />
As local governments do not have at their disposal sufficient budgets <strong>for</strong> the<br />
implementation of their responsibilities, the state does not have the moral right to<br />
impose real sanctions <strong>for</strong> non-compliance. Local governments are not there<strong>for</strong>e<br />
“punished” by higher levels of administration if they are unable to carry out certain<br />
m<strong>and</strong>atory activities due to financial <strong>and</strong> capacity problems. Additionally, the municipalities<br />
do not have the power to impose local fines on polluters who represent<br />
higher levels of the state. The polluter pays principle is seldom fully <strong>and</strong> effectively<br />
applied at the national level, thus municipalities have little leverage over large polluters<br />
that provide employment in a community, <strong>and</strong> that may be owned by a state<br />
holding company or even a ministry (REC, 2005).<br />
Cooperation with national authorities<br />
Cooperation with national authorities is critical to the successful implementation<br />
of infrastructure investment projects. National authorities generally control environmental<br />
investment priorities <strong>for</strong> the country <strong>and</strong>, through this, access to<br />
international grants <strong>and</strong> loans as well as funds from the countries’ own national<br />
capital investment budgets (REC, 2005).<br />
Planning<br />
Local <strong>and</strong>/or regional environmental sector plans (waste management plans <strong>and</strong><br />
water management plans) are a basic prerequisite <strong>for</strong> carrying out environmental investment<br />
projects. Investment projects are very often based on perceived infrastructure<br />
needs rather than on a holistic approach that investigates all aspects of an environmental<br />
problem <strong>and</strong> proposes an appropriate solution. Furthermore, these plans are<br />
legal requirements of the water <strong>and</strong> waste framework directives <strong>and</strong> a precondition<br />
<strong>for</strong> accessing certain international grant funding such as the EU IPA.<br />
Aspects of project preparation<br />
Detailed environmental investment preparation is generally the responsibility<br />
of the project proponent — that is, the institution that will own <strong>and</strong> manage the<br />
investment. In most cases in SEE, <strong>for</strong> the water <strong>and</strong> waste sectors this will be a re-
gional or local institution — an authority or utility company owned by the local authority.<br />
In general, local governments <strong>and</strong> their associated bodies lack not only adequate<br />
skills to prepare investment projects, but also the skills to oversee <strong>and</strong><br />
cooperate with expert consultants, whether domestic or international, in the preparation<br />
of their environmental investment projects. Some of the issues that complicate<br />
project preparation are presented below.<br />
Willingness to pay<br />
In general, the problem of unpaid bills in SEE is significant. In a context in<br />
which water supply <strong>and</strong> waste management services were previously provided almost<br />
free of charge, any hike in price is likely to result in resistance.<br />
<strong>Regional</strong>isation<br />
Both water <strong>and</strong> waste utilities in SEE are currently highly fragmented. New<br />
EU-compliant infrastructure requires high levels of investment but is also intended<br />
to serve a bigger population. There is there<strong>for</strong>e a need <strong>for</strong> better cooperation between<br />
municipalities, as well as the establishment of new financial, legal <strong>and</strong> institutional<br />
incentives, <strong>and</strong> this need will remain in the future.<br />
Availability of data<br />
It is very important to adapt the size of the project to current <strong>and</strong> future needs.<br />
Updated population data <strong>and</strong> reliable <strong>for</strong>ecasts of population growth <strong>and</strong> demographic<br />
changes are vital to proper project sizing.<br />
Locating infrastructure<br />
When locating infrastructure, project proponents can opt <strong>for</strong> a “centralised”<br />
approach, where all elements of the infrastructure are placed in one location; or a<br />
“decentralised” approach, where elements of the infrastructure are placed in different<br />
locations. In general, there is no ready <strong>for</strong>mula <strong>for</strong> success in a given project<br />
location, as conditions differ <strong>for</strong> each project. Nevertheless, the chosen project location<br />
can have an impact on many other areas of municipality activities such as<br />
economic development, biodiversity protection <strong>and</strong> unemployment. Locating infrastructure<br />
projects stimulates the NIMBY (“not in my back yard”) syndrome<br />
within the local community.<br />
Identification of sources of finance<br />
Once the project has been <strong>for</strong>mulated, an important activity is the identification<br />
of possible financing sources. In terms of external sources of finance, other<br />
than the project proponent itself, the options <strong>for</strong> the SEE region include national<br />
government sources; grants from the EC <strong>and</strong>/or bilateral donors; loans from commercial<br />
banks <strong>and</strong>/or IFIs; <strong>and</strong> private sector involvement. The challenge here is<br />
that local governments very often have limited knowledge of potential sources of<br />
financing <strong>and</strong> lack underst<strong>and</strong>ing of their specific rules <strong>and</strong> requirements. Local<br />
C H A P T E R 3<br />
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<br />
S T R AT E G I C M O V E S 67
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C H A P T E R 3<br />
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S T R AT E G I C M O V E S<br />
governments are often dependent on guidance <strong>and</strong> permission from national authorities<br />
to access sources of financing, <strong>and</strong> this can be hampered by political <strong>and</strong><br />
communication issues. Lack of underst<strong>and</strong>ing of the priorities <strong>and</strong> requirements of<br />
external sources of finance results in local governments being unable to communicate<br />
their investment projects effectively in the terms required to attract financing,<br />
<strong>and</strong> being unable to prepare the documentation required to access it.<br />
General observations<br />
• Local politicians struggle with a multitude of competing funding priorities:<br />
those that are more visible <strong>and</strong> tangible than environmental priorities may end<br />
up higher on the political agenda.<br />
• There is a mismatch between the obligations imposed on municipalities as a<br />
result of the decentralisation process, <strong>and</strong> the financial <strong>and</strong> human resources<br />
capacities at their disposal to manage these obligations.<br />
• Many local governments lack an underst<strong>and</strong>ing of environmental infrastructure<br />
investments in the context of a market economy, including issues of social<br />
af<strong>for</strong>dability, cost recovery, depreciation <strong>and</strong> the appropriate use of subsidies.<br />
• Local governments <strong>and</strong> their associated bodies generally lack adequate skills to<br />
prepare investment projects <strong>and</strong> to oversee <strong>and</strong> cooperate with expert consultants<br />
in the preparation of their environmental investment projects. They often<br />
have a limited knowledge of possible sources of financing, <strong>and</strong> lack underst<strong>and</strong>ing<br />
of their specific rules <strong>and</strong> requirements.<br />
• Water <strong>and</strong> waste utilities in SEE are highly fragmented <strong>and</strong> cooperation between<br />
municipalities is poor. At the same time, there are (<strong>and</strong> will be) economic<br />
pressures <strong>for</strong> economies of scale.
Chapter 4<br />
Economic development <strong>and</strong><br />
the EU accession process<br />
S T R AT E G I C M O V E S 69
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S T R AT E G I C M O V E S
Economic development in SEE<br />
The level of economic development of a country <strong>and</strong> a region has a direct bearing<br />
on ability to invest in public projects in general, <strong>and</strong> in environmental infrastructure<br />
projects in particular. The size of the national budget is directly correlated<br />
with the budgetary amounts allocated to the institutions (in most cases ministries)<br />
in charge of investments in water <strong>and</strong> waste infrastructure. It also defines the budgetary<br />
amounts that trickle down to the local governments <strong>for</strong> carrying out their<br />
often newly acquired legal obligations in the waste <strong>and</strong> water sectors.<br />
The current economic situation <strong>and</strong> the related per capita income, the number<br />
of unemployed people <strong>and</strong> the number of people living below the poverty line<br />
all have an influence on the political climate at the local level. They also influence<br />
the level of political will to re<strong>for</strong>m the water <strong>and</strong> waste utilities, since an impoverished<br />
local population will not accept — politically or financially — a serious increase<br />
in water <strong>and</strong> waste tariffs.<br />
The process of economic transition to a market-based economy, or at least its<br />
acceleration in the majority of SEE countries, started after 2000 because of the wars<br />
FIGURE 4: GDP per capita at purchasing power parity in SEE countries<br />
USD<br />
18,000<br />
16,000<br />
14,000<br />
12,000<br />
10,000<br />
8,000<br />
6,000<br />
4,000<br />
2,000<br />
0<br />
2004 2005 2006 2007 2008<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
Croatia FYR<br />
Macedonia<br />
Montenegro Serbia<br />
Source: IMF country reports, national banks, Eurostat, national <strong>and</strong> federal statistical offices, the World Bank, NCB, SEE ministries of finance<br />
Kosovo (under<br />
UNSCR 1244)<br />
S T R AT E G I C M O V E S 71
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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<br />
S T R AT E G I C M O V E S<br />
in the mid-1990s <strong>and</strong> the political situation in some of the countries. The process<br />
was delayed by around 10 years compared to <strong>Central</strong> European countries <strong>and</strong> Bulgaria<br />
<strong>and</strong> Romania — a fact that has had a profound impact on the region’s competitiveness<br />
<strong>and</strong> <strong>for</strong>eign investment flows.<br />
The process of economic transition was enhanced by big inflows of aid <strong>and</strong> accompanied<br />
by strong economic growth sustained at an average of between 4 <strong>and</strong><br />
7 percent between 2004 <strong>and</strong> 2008. Kosovo (as defined under UNSCR 1244)<br />
demonstrated the lowest economic growth of 4.2 percent, followed by Croatia <strong>and</strong><br />
the <strong>for</strong>mer Yugoslav Republic of Macedonia with 4.5 percent average growth, <strong>and</strong><br />
Montenegro, Bosnia <strong>and</strong> Herzegovina <strong>and</strong> Albania with growth varying between<br />
5.5 <strong>and</strong> 6 percent. Serbia achieved the most significant growth rates of 6.6 percent<br />
on average (EC, Economic <strong>and</strong> Financial Affairs website). The majority of countries<br />
with GDP at purchasing power parity (PPP) per capita ranging from USD<br />
6,800 (Albania) to USD 16,500 (Croatia) were classified by the World Bank as<br />
middle-income countries in 2008 (World Bank website). Kosovo (as defined under<br />
UNSCR 1244), with USD 2,600, falls behind all the SEE countries.<br />
The major factors contributing to sustainable economic development were the<br />
dynamic development of the private sector, price liberalisation, the restructuring<br />
<strong>and</strong> privatisation of key industrial enterprises, the modernisation of the financial<br />
sector, increased revenues <strong>and</strong> a robust growth in exports. Additional factors seen<br />
as facilitating stable economic growth were the improvement in the transparency<br />
<strong>and</strong> accountability of public services, the creation of institutions <strong>for</strong> the regulation<br />
<strong>and</strong> supervision of the market economy, the provision of necessary legislation, the<br />
stimulation of private consumption, the widening of retail trade <strong>and</strong> ongoing financial<br />
intermediations. In all countries inflation rates were kept low <strong>and</strong> currencies<br />
remained stable in recent years due to national governments’ cautious monetary<br />
<strong>and</strong> fiscal consolidation policies (EC, Economic <strong>and</strong> Financial Affairs website).<br />
However, inflation trends have begun to reassert themselves as a consequence of rising<br />
global food <strong>and</strong> oil prices <strong>and</strong> weakened pressure on the dem<strong>and</strong> side in 2008.<br />
Poverty, unemployment <strong>and</strong> the exclusion of vulnerable strata of society are still<br />
a cause <strong>for</strong> concern <strong>for</strong> many SEE countries. The long period of instability, isolation<br />
<strong>and</strong> economic turmoil had an adverse effect on living st<strong>and</strong>ards <strong>for</strong> the majority of<br />
the region’s population <strong>and</strong> was accompanied by a deterioration in social <strong>and</strong> health<br />
services. The labour market situation is steadily improving in Albania, Croatia,<br />
Montenegro <strong>and</strong> Serbia, where the official unemployment rate in 2008 ranged between<br />
11 <strong>and</strong> 14 percent. In the <strong>for</strong>mer Yugoslav Republic of Macedonia, unemployment<br />
stood at 33 percent of the labour <strong>for</strong>ce in 2008, while Kosovo (as defined<br />
under UNSCR 1244) <strong>and</strong> Bosnia <strong>and</strong> Herzegovina had the worst employment figures<br />
at approximately 40 percent unemployment in 2008. Nevertheless, real levels of<br />
unemployment are lower, since a significant number of people who are registered as<br />
unemployed are working in the grey economy (EC, Economic <strong>and</strong> Financial Affairs<br />
website). The absolute poverty level is also constantly decreasing.
FIGURE 5: Foreign direct investments in SEE<br />
% of GDP<br />
18<br />
16<br />
14<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
The current account deficit of national governments has tended to increase in<br />
all SEE countries as a consequence of reduced aid flow, the rise in oil <strong>and</strong> commodity<br />
prices, <strong>and</strong> greater imports of goods triggered by credit growth. In recent<br />
years the account balance was positive only in Kosovo (as defined under UNSCR<br />
1244). The trade account deficit also remains relatively high due to the orientation<br />
of national economies towards imports. Foreign direct investment saw a significant<br />
boost in the region, driven by large purchase deals, privatisation processes<br />
<strong>and</strong> growing interest on the part of investors in the financial, construction <strong>and</strong><br />
manufacturing sectors (EBRD website).<br />
The region’s mid-term macroeconomic outlook remains favourable <strong>and</strong> is dependent<br />
on the maintenance of internal <strong>and</strong> regional stability, the continuation of<br />
structural re<strong>for</strong>ms, re<strong>for</strong>ms in the business <strong>and</strong> labour sectors, market liberalisation,<br />
infrastructural restructuring, <strong>and</strong> the privatisation of strategic enterprises (EBRD<br />
website). Reduced state intervention, the stimulation of private sector development,<br />
<strong>and</strong> the re<strong>for</strong>m of the public administration <strong>and</strong> judiciary system should also be addressed<br />
in country-specific mid- <strong>and</strong> long-term development plans <strong>and</strong> strategies.<br />
C H A P T E R 4<br />
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<br />
2004 2005 2006 2007 2008<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
Croatia FYR<br />
Macedonia<br />
Montenegro Serbia<br />
Source: IMF country reports, national banks, Eurostat, national <strong>and</strong> federal statistical offices, the World Bank, NCB, SEE ministries of finance<br />
S T R AT E G I C M O V E S 73
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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<br />
S T R AT E G I C M O V E S<br />
The impact of the global economic recession on economic<br />
development in SEE<br />
The deep financial crisis <strong>and</strong> the contraction of global economic activity have had<br />
a serious impact on SEE countries. This impact has been transmitted mainly through<br />
a decline in investments, exports <strong>and</strong> consumption (World Bank website).<br />
The growth trend recorded in SEE countries in recent years slowed down in<br />
the second half of 2008 <strong>and</strong> is expected to continue to slow down throughout 2009.<br />
According to the latest estimates, SEE countries demonstrated an average GDP<br />
growth of 5.7 percent in 2008, lower than the 6.7 percent recorded a year earlier.<br />
Industrial production saw the largest decline among economic sectors, showing a<br />
drop of 21 percent. Croatia <strong>and</strong> Serbia, followed by the <strong>for</strong>mer Yugoslav Republic<br />
of Macedonia <strong>and</strong> Bosnia <strong>and</strong> Herzegovina, were most affected by the crisis. Forecasts<br />
<strong>for</strong> 2009 are also pessimistic, as the negative implications of the economic crisis<br />
were more pronounced than was initially expected at the beginning of the year.<br />
Growth projections suggest a significant decline in real GDP by 2.1 percent on average<br />
(Kosovo <strong>Central</strong> Bank, Annual Report 2008), with the exception of Albania,<br />
which is expected to grow by 0.4 percent in 2009. The economic slowdown is anticipated<br />
to derive from a decline in credit in the real sector, <strong>and</strong> a further decline<br />
in exports <strong>and</strong> <strong>for</strong>eign direct investments. The recession taking place in developed<br />
countries will also substantially affect the level of remittances to SEE, which represent<br />
an important source of financing in these countries. The inflationary pressures<br />
experienced by EU countries in 2008 were also apparent in SEE, affected by<br />
increases in oil <strong>and</strong> food prices since energy <strong>and</strong> food represent the largest share of<br />
the consumer basket in the region. Annual average inflation reached 7.6 percent in<br />
SEE in 2008, compared to 3.3 percent in the previous year. However, economic<br />
projections <strong>for</strong> 2009 predict a significant decline in prices due to the global recession.<br />
Price increases <strong>and</strong> the decline in exports triggered by the world economic<br />
crisis resulted in a further deepening of the current account deficit in national<br />
economies. The average current account deficit to GDP ratio was around 16.6 percent<br />
in SEE in 2008, compared to 14.8 percent in the previous year. Foreign direct<br />
investments declined in most countries in the region, accompanied by a significant<br />
decline in exports. Furthermore, the recession in EU countries will significantly affect<br />
tourism revenues.<br />
General observations<br />
• The transition to a market-based economy was delayed by around 10 years, beginning<br />
only after 2000. This had a profound impact on the region’s competitiveness<br />
<strong>and</strong> <strong>for</strong>eign investment flows.<br />
• There was strong economic growth sustained at between 4 <strong>and</strong> 8 percent between<br />
2004 <strong>and</strong> 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<br />
the economic recession, economic activity in SEE has contracted sharply since<br />
the second half of 2008 as a result of less <strong>for</strong>eign direct investment, a reduced<br />
dem<strong>and</strong> <strong>for</strong> exports, <strong>and</strong> less cross-border lending.<br />
• In Albania, Croatia, Montenegro <strong>and</strong> Serbia, the unemployment rate in 2008<br />
ranged between 11 <strong>and</strong> 14 percent; in the <strong>for</strong>mer Yugoslav Republic of Macedonia<br />
it was around 33 percent; <strong>and</strong> in Kosovo (as defined under UNSCR<br />
1244) <strong>and</strong> Bosnia <strong>and</strong> Herzegovina it was approximately 40 percent. This has<br />
a direct impact on the af<strong>for</strong>dability of, <strong>and</strong> willingness to pay <strong>for</strong>, environmental<br />
infrastructure services.<br />
• The region’s mid-term macroeconomic outlook remains favourable but is dependent<br />
on the maintenance of internal <strong>and</strong> regional stability, the continuation<br />
of structural re<strong>for</strong>ms, market liberalisation, the improvement of<br />
infrastructure, <strong>and</strong> privatisation.<br />
EU accession<br />
EU accession as a driver <strong>for</strong> change<br />
For SEE countries, EU accession is by far the biggest driving <strong>for</strong>ce <strong>and</strong> incentive<br />
<strong>for</strong> development <strong>and</strong> <strong>for</strong> political <strong>and</strong> economic re<strong>for</strong>ms, just as it once was<br />
<strong>for</strong> CEE countries. The EU agenda is there<strong>for</strong>e a high priority in these countries.<br />
The pre-accession period provides a unique window of opportunity <strong>for</strong> re<strong>for</strong>ms,<br />
<strong>and</strong> political will is generally strong. This opportunity is supported by the available<br />
benefits of accession in the <strong>for</strong>m of, <strong>for</strong> example, technical support, guidance, capacity<br />
building <strong>and</strong> financial assistance. The pre-accession period is there<strong>for</strong>e a<br />
chance to develop human capacity <strong>and</strong> to consolidate <strong>and</strong> strengthen institutions<br />
to increase their ability to implement the EU environmental acquis.<br />
The SEE EU accession challenge<br />
The transposition <strong>and</strong> implementation of the environmental acquis is a huge<br />
challenge <strong>for</strong> SEE countries. The challenges are to be found at almost all levels<br />
of society — legislative, institutional, economic <strong>and</strong> political. The process requires<br />
the harmonisation of national legislation <strong>and</strong> clear descriptions of the<br />
roles <strong>and</strong> responsibilities of ministries <strong>and</strong> local authorities. Re<strong>for</strong>ms must be<br />
undertaken at all levels.<br />
An underlying principle of the negotiations is that, by the time of accession,<br />
countries must have fully transposed <strong>and</strong> implemented EU legislation. Transitional<br />
measures can be granted <strong>for</strong> specific pieces of legislation, provided that the measures<br />
are limited in time <strong>and</strong> scope. However, transitional periods are not usually<br />
granted <strong>for</strong> horizontal legislation (EIA, access to in<strong>for</strong>mation etc.) or <strong>for</strong> framework<br />
legislation (such as waste or water framework legislation).<br />
C H A P T E R 4<br />
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<br />
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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<br />
S T R AT E G I C M O V E S<br />
On the institutional level, the tasks ahead include strengthening the administration<br />
capacity of national <strong>and</strong> local authorities, clearly defining responsibilities,<br />
identifying investment needs, developing financing strategies <strong>and</strong> implementation<br />
plans, <strong>and</strong> strengthening the capacity of water <strong>and</strong> waste utilities.<br />
Upgrading environmental infrastructure requires major capital investments as<br />
well as joint ef<strong>for</strong>ts by local <strong>and</strong> national authorities. It is estimated that infrastructure<br />
investments will represent more than 2 or 3 percent of SEE countries’<br />
GDP (REC, 2005). National budgets in SEE are currently limited, <strong>and</strong> the share<br />
allocated to the environment is usually small.<br />
Political will is of great importance in the implementation of the wide re<strong>for</strong>ms<br />
needed. Governments in all SEE countries have committed themselves to this objective<br />
<strong>and</strong> are, to varying degrees, implementing re<strong>for</strong>ms. While public opinion in<br />
SEE is largely in favour of EU integration, this support will rapidly be withdrawn<br />
if governments fail to deliver. According to EC Communication 2008/127, societies<br />
remain divided on a few key issues such as the integration of different communities<br />
<strong>and</strong> also, in some cases, constitutional re<strong>for</strong>m. Further ef<strong>for</strong>ts are there<strong>for</strong>e<br />
needed in order to achieve consensus on such issues <strong>and</strong> to proceed with the necessary<br />
political <strong>and</strong> economic re<strong>for</strong>ms (EC COM [2008] 127). Delivering on environmental<br />
infrastructure improvements is an aspect of the EU accession process<br />
that is highly visible <strong>and</strong> that leads to tangible improvements in quality of life.<br />
Experience from the EU accession process in CEE countries illustrates that the<br />
adoption of the acquis raises the importance of the environment on the national<br />
agenda. Lessons learnt show that early in the process focus should be placed on institutional<br />
<strong>and</strong> administrative re<strong>for</strong>m. Hasty <strong>and</strong> insufficiently coordinated transposition<br />
of the acquis has been seen to lead to non-integrated, unclear, complicated<br />
<strong>and</strong> low-quality legislation. Restructuring responsibilities among ministries can reduce<br />
fragmentation <strong>and</strong> lead to good governance.<br />
The road to accession<br />
The EU enlargement process currently covers the countries of SEE, Turkey, <strong>and</strong><br />
more recently Icel<strong>and</strong>. In recent years, SEE countries have moved closer to the EU<br />
<strong>and</strong> have embarked on political, administrative <strong>and</strong> legislative re<strong>for</strong>ms (EC 2008,<br />
IP/08/378). Croatia <strong>and</strong> the <strong>for</strong>mer Yugoslav Republic of Macedonia have<br />
achieved the status of c<strong>and</strong>idate countries. Accession negotiations with Croatia<br />
started in October 2005. The <strong>for</strong>mer Yugoslav Republic of Macedonia became a<br />
c<strong>and</strong>idate country in December 2005. In October 2009, the Commission recommended<br />
that negotiations <strong>for</strong> EU accession should be opened. Albania, Bosnia <strong>and</strong><br />
Herzegovina, Kosovo (as defined under UNSCR 1244), Montenegro <strong>and</strong> Serbia<br />
are all potential c<strong>and</strong>idates that have the prospect of beginning EU membership negotiations<br />
when they are ready. Albania submitted its application <strong>for</strong> c<strong>and</strong>idate status<br />
in April 2009 <strong>and</strong> Montenegro in December 2008 (EC COM [2009] 533).
TABLE 3: Stabilisation <strong>and</strong> Association Agreements<br />
In the SEE countries, the Stabilisation <strong>and</strong> Association Process (SAP), established<br />
in 1999, is the negotiation framework designed to bring the countries increasingly<br />
closer to the EU. 3 Through the SAP, SEE countries benefit from free<br />
access to the EU single market as well as access to EU financial support <strong>for</strong> their re<strong>for</strong>m<br />
ef<strong>for</strong>ts. The SAP also includes assistance <strong>for</strong> reconstruction, development<br />
<strong>and</strong> stabilisation (CARDS/IPA). <strong>Central</strong> to the process is the stabilisation <strong>and</strong> association<br />
agreement (SAA), which defines the contractual relationship between<br />
the EU <strong>and</strong> each individual SEE country <strong>and</strong> encompasses mutual rights <strong>and</strong> obligations.<br />
The SAP has three aims:<br />
• to stabilise the countries <strong>and</strong> encourage their swift transition to a market<br />
economy;<br />
• to promote regional cooperation; <strong>and</strong><br />
• to lead to eventual membership of the EU.<br />
An important factor in the SAP is regional cooperation, which is a vital<br />
component <strong>for</strong> regional stability <strong>and</strong> prosperity. Cooperation is essential in<br />
successfully tackling transboundary issues, including environmental issues, <strong>and</strong><br />
key common challenges (such as energy shortages, pollution, <strong>and</strong> transport<br />
infrastructure). 4<br />
The SAAs constitute powerful engines <strong>for</strong> trade integration, domestic re<strong>for</strong>m<br />
<strong>and</strong> rapprochement to the EU, not least through clauses that encourage legislative<br />
approximation <strong>and</strong> the building of administrative capacity. Benefits of the agreements<br />
include economic development through enhanced trade <strong>and</strong> economic cooperation<br />
leading to the creation of attractive conditions <strong>for</strong> investments, not least<br />
in the environmental sector. At the same time, they encourage individual entrepreneurial<br />
initiatives <strong>and</strong> generate employment. Another benefit is progress in po-<br />
C H A P T E R 4<br />
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<br />
COUNTRY SIGNED ENTERED INTO FORCE<br />
Albania June 2006 April 2009<br />
Bosnia <strong>and</strong> Herzegovina June 2008 Interim agreement in <strong>for</strong>ce since July 2008<br />
Croatia October 2001 February 2005<br />
FYR Macedonia April 2001 April 2004<br />
Montenegro October 2007 January 2008<br />
Serbia April 2008 Interim agreement in <strong>for</strong>ce since April 2008<br />
Kosovo (as defined under UNSCR 1244) Participation through the Stabilisation Process Tracking<br />
Mechanism. In March 2007, enhanced SAP tracking<br />
mechanism structures were set up.<br />
Source: EC national progress reports 2009, DG Enlargement website http://ec.europa.eu/enlargement/index_en.htm<br />
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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<br />
BOX 1: Planning <strong>for</strong> approximation<br />
National Strategy <strong>for</strong> <strong>Environmental</strong> Approximation, 2007<br />
the <strong>for</strong>mer Yugoslav Republic of Macedonia<br />
The National Strategy <strong>for</strong> <strong>Environmental</strong> Approximation (NSEA) was adopted in 2008 <strong>and</strong> provides a roadmap <strong>for</strong><br />
the full <strong>and</strong> effective approximation process, addressing the required legal transposition <strong>and</strong> practical implementation<br />
actions, the timeframe, the responsible institutions <strong>and</strong> the related investments to achieve full compliance with EU environmental<br />
legislation. The main goal of the strategy is to set out the government’s approach to the complex obligations<br />
of the EU environmental acquis: it defines a sustainable, comprehensive framework of actions, with associated<br />
costs, <strong>for</strong> legal transposition <strong>and</strong> technical implementation in all 10 environmental sectors.<br />
Human <strong>and</strong> financial resources are optimised through the prioritisation of EU obligations <strong>and</strong> requirements. The<br />
NSEA provides financial arrangements to secure full compliance with environmental legislation <strong>and</strong> st<strong>and</strong>ards,<br />
taking into account the national economic circumstances <strong>and</strong> priorities, <strong>and</strong> the available <strong>and</strong> potential <strong>for</strong>eign<br />
aid <strong>for</strong> infrastructure projects. To this end, compliance with the heavy-investment directives is <strong>for</strong>eseen after the<br />
<strong>for</strong>mer Yugoslav Republic of Macedonia has become a member of the EU.<br />
The NSEA prepared 19 directive-specific implementation plans (DSIPs) <strong>and</strong> nine sector approximation strategies<br />
(SASs) based on 73 pieces of EU legislation. The process of developing the DSIPs, SASs <strong>and</strong> NSEA involved determining<br />
the present status of the approximation process <strong>and</strong> of specific national conditions <strong>and</strong> requirements;<br />
selecting the EU legislation on which the SASs <strong>and</strong> the NSEA should be based <strong>and</strong> <strong>for</strong> which DSIPs should be<br />
prepared; preparing gap analyses; defining all the actions necessary <strong>for</strong> full approximation; preparing the DSIPs<br />
<strong>and</strong> SASs; prioritising the implementation of EU legislation across sectors; <strong>and</strong> preparing the NSEA. An approximation<br />
plan was developed as an integral part of the NSEA, based on the prioritised EU legislation <strong>and</strong> taking into<br />
account the governmental priorities already identified <strong>and</strong> the financial implications <strong>and</strong> constraints.<br />
S T R AT E G I C M O V E S<br />
litical <strong>and</strong> economic re<strong>for</strong>ms, including institution building <strong>and</strong> public administration<br />
re<strong>for</strong>m. Further re<strong>for</strong>ms are needed in order fully to enjoy the benefits of the<br />
agreements (EC COM [2006] 27 final). Kosovo (as defined under UNSCR 1244)<br />
participates in the SAP through the Stabilisation Process Tracking Mechanism<br />
(STM) that has been specially devised to promote policy dialogue between the EU<br />
<strong>and</strong> the Kosovan authorities on EU approximation matters.<br />
Financial Assistance from the European Community<br />
The EU Instrument <strong>for</strong> Pre-accession Assistance (IPA) 5 provides focused financial<br />
aid to the c<strong>and</strong>idate countries <strong>and</strong> potential c<strong>and</strong>idate countries. Introduced<br />
in 2007, the IPA replaced the mechanisms available between 2000 <strong>and</strong> 2006, notably<br />
CARDS, SAPARD, ISPA <strong>and</strong> Phare. Financial assistance through the IPA is<br />
given to support countries to introduce the political, economic <strong>and</strong> institutional re<strong>for</strong>ms<br />
required in order to achieve con<strong>for</strong>mity with EU st<strong>and</strong>ards. European Union<br />
funding aims at medium- <strong>and</strong> long-term changes in society <strong>and</strong> the economy as a<br />
whole, <strong>and</strong> the pace of re<strong>for</strong>m is closely related to the pace of the accession process.<br />
The total IPA allocation <strong>for</strong> the period 2007 to 2013 is EUR 11.5 billion.
The IPA comprises five components. The first two components — transition<br />
assistance <strong>and</strong> institution building; <strong>and</strong> cross-border cooperation — are open to all<br />
beneficiary countries. The other three components — regional development (transport,<br />
environment <strong>and</strong> economic development); human resources development<br />
(strengthening human capital <strong>and</strong> combating exclusion); <strong>and</strong> rural development<br />
— require a high degree of financial administration capacity adapted to the EU<br />
system <strong>and</strong> are there<strong>for</strong>e reserved <strong>for</strong> c<strong>and</strong>idate countries. Community assistance<br />
to cross-border cooperation under the IPA has been extended to cover the borders<br />
between SEE countries <strong>and</strong> countries with adjacent EU member states. This assistance<br />
was substantially increased <strong>for</strong> the period 2007 to 2011 as compared to previous<br />
years (EC COM [2008] 127).<br />
General observations<br />
• The SEE countries have moved closer to EU membership in recent years as the<br />
region has made progress, to varying degrees, in carrying out re<strong>for</strong>ms <strong>and</strong> in<br />
meeting the criteria <strong>and</strong> conditions established in the Stabilisation <strong>and</strong> Accession<br />
Process.<br />
• For SEE countries, the prospect of EU accession is the strongest driver of re<strong>for</strong>m<br />
<strong>and</strong> is a high priority on the national agenda. The pre-accession period provides<br />
a unique window of opportunity <strong>for</strong> re<strong>for</strong>ms throughout this process, as<br />
the political will is relatively strong. It is a chance to develop human capacities<br />
<strong>and</strong> to consolidate <strong>and</strong> strengthen institutions enabling them to implement the<br />
EU environmental acquis.<br />
• Lessons learnt from CEE show that early in the process emphasis should be<br />
given to institutional <strong>and</strong> administrative re<strong>for</strong>m <strong>and</strong> that precipitous <strong>and</strong> insufficiently<br />
coordinated transposition may lead to non-integrated, unclear, complicated<br />
<strong>and</strong> low-quality legislation.<br />
• IPA financial assistance supports countries to introduce the necessary political,<br />
economic <strong>and</strong> institutional re<strong>for</strong>ms in line with EU requirements.<br />
Infrastructure investment implications<br />
of the EU directives<br />
This section provides a brief overview of the EU environmental directives in<br />
the water, waste <strong>and</strong> air sectors that are most relevant to environmental investments,<br />
focusing on the changes that have taken place since 2005. The main implementation<br />
<strong>and</strong> investment implications per sector are presented in tables. More<br />
detailed in<strong>for</strong>mation about the objectives, implementation <strong>and</strong> investment implications<br />
are provided in the 2005 REC publication.<br />
C H A P T E R 4<br />
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S T R AT E G I C M O V E S 79
80<br />
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FIGURE 6: The waste hierarchy<br />
BEST OPTION<br />
WORST OPTION<br />
Source: REC, 2009b<br />
S T R AT E G I C M O V E S<br />
Prevent waste<br />
in the first place<br />
Reuse the product<br />
Recycle or compost<br />
the material<br />
Recover the energy<br />
(by incinerating)<br />
Dispose of the product<br />
(in a l<strong>and</strong>fill)<br />
Waste<br />
The goal of EU waste-related policies is to create a recycling society in the<br />
medium to long term by cutting the amount of waste generated, introducing initiatives<br />
to prevent new waste, making better use of resources, <strong>and</strong> encouraging a<br />
shift to sustainable consumption patterns. The EU waste policy is based on the<br />
waste hierarchy: the treatment options range from the most favourable <strong>and</strong> environmentally<br />
sound — that is, prevention — to the option with the highest environmental<br />
impact — l<strong>and</strong>filling. In the new Waste Framework Directive,<br />
incineration is categorised as a recovery option, providing that it meets certain energy<br />
efficiency st<strong>and</strong>ards.<br />
The policy instruments behind this approach are the new Waste Framework<br />
Directive (WFD) (2008/98/EC) <strong>and</strong> the Hazardous Waste Directive<br />
(94/31/EC) 6 . These are complemented by more detailed legislation setting st<strong>and</strong>ards<br />
in connection with some of the treatment options: the Waste L<strong>and</strong>fill Directive<br />
(99/31/EC), the Waste Incineration Directive (2000/76/EC) <strong>and</strong> the<br />
Sewage Sludge Directive (86/278/EEC). Recycling <strong>and</strong> recovery targets have been<br />
set <strong>for</strong> some of the major waste flows such as packaging (the Packaging Directive,<br />
94/62/EC). Other waste streams (such as waste electronic <strong>and</strong> electrical equipment,<br />
tyres, batteries <strong>and</strong> end-of-life vehicles) are also subject to “extended producer<br />
responsibility”, including recycling <strong>and</strong> recovery targets, with the main<br />
financial <strong>and</strong> physical responsibility falling on the producers. Some of the relevant<br />
directives are presented below.<br />
New developments in the EU waste acquis<br />
The Waste Framework Directive<br />
The new Waste Framework Directive (WFD,<br />
2008/98/EC), adopted in November 2008, is the main piece of<br />
EU waste legislation setting definitions <strong>and</strong> introducing new<br />
concepts. The directive emphasises the importance of prevention,<br />
recycling <strong>and</strong> reuse. In the context of the SEE countries<br />
applying <strong>for</strong> EU membership, this means that the construction<br />
of modern installations should not compromise national ef<strong>for</strong>ts<br />
to treat waste using alternative methods, as long as the objectives<br />
<strong>and</strong> benchmarking (including applicable limit values <strong>for</strong><br />
air <strong>and</strong> water discharges) of the EU directives are being met.<br />
The WFD points out that “Member states shall take appropriate<br />
measures to establish an integrated <strong>and</strong> adequate network<br />
of disposal installations, taking account of the best available<br />
technology not involving excessive costs.” This text is the legal<br />
basis <strong>for</strong> designing national strategies calling <strong>for</strong> new, modern<br />
waste disposal facilities with a proper geographical coverage.
BOX 2: Planning sequence<br />
According to the Waste Framework Directive, the planning sequence is as follows:<br />
NATIONAL WASTE<br />
MANAGEMENT STRATEGY<br />
NATIONAL WASTE<br />
MANAGEMENT PLAN<br />
BOX 3: Investment implications of the Waste Framework Directive<br />
The WFD includes provisions <strong>for</strong> the separate collection of hazardous waste,<br />
waste oils <strong>and</strong> bio-waste. In practice, SEE countries should secure investments <strong>for</strong><br />
the separate collection <strong>and</strong> treatment of all relevant waste streams. The WFD embeds<br />
the polluter pays principle in waste management that implies that the costs of<br />
disposal must be borne by the holder or the producer of the product. This will lead<br />
to one of the main paradigm changes in SEE <strong>and</strong> will entail a change in the perception<br />
of MSW management as a service with low costs <strong>and</strong> of relatively low quality.<br />
Another important principle in the WFD is the full cost recovery principle,<br />
including compensation of the real costs to the environment.<br />
Implementing the directive<br />
The WFD embeds the requirement <strong>for</strong> waste management plans to be developed<br />
at national/regional <strong>and</strong> local levels. The main purpose of these plans is to<br />
provide an outline of waste streams <strong>and</strong> treatment options. This is directly relevant<br />
C H A P T E R 4<br />
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REGIONAL WASTE<br />
MANAGEMENT PLANS<br />
MUNICIPAL WASTE<br />
MANAGEMENT PLANS<br />
The WFD does not itself introduce a requirement <strong>for</strong> significant capital costs. These are incurred as a result of the<br />
waste stream–related directives. The most significant cost element associated with the directive itself is the provision<br />
of an adequate institutional structure, establishing the competent authority/ies with the necessary technical<br />
<strong>and</strong> human resources; <strong>and</strong> the preparation of waste management plans. The main expenditures are:<br />
• Initial set-up costs: establishing the competent authority/ies; devising systems <strong>and</strong> procedures.<br />
• Providing training; preparing technical guidance notes; <strong>and</strong> preparing a waste management strategy <strong>and</strong> detailed<br />
plans.<br />
Ongoing costs include the issuing of permits <strong>and</strong> registrations; inspections of waste management facilities <strong>and</strong><br />
requisite en<strong>for</strong>cement actions; reporting obligations; consultation <strong>and</strong> coordination procedures; <strong>and</strong> a communications<br />
programme.<br />
Capital <strong>and</strong> operational costs such as those related to the establishment, upgrading <strong>and</strong> operation of waste management<br />
facilities mainly fall under the waste stream–related directives. Ultimately, the full costs of facility provision<br />
<strong>and</strong> operation should be recovered from waste producers. Financial resources should preferably derive from<br />
the private sector, normally in the context of producer liability legislation.<br />
S T R AT E G I C M O V E S 81
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TABLE 4: The main implementation <strong>and</strong> investment implications of the waste directives<br />
DIRECTIVE IMPLEMENTATION<br />
IMPLICATIONS<br />
INVESTMENT IMPLICATIONS LIKELY INVESTOR<br />
The Waste Development of waste The directive does not itself introduce Municipalities, waste<br />
Framework management plans at national/ a requirement <strong>for</strong> significant capital utilities/companies,<br />
Directive regional <strong>and</strong> local levels costs. The main expenditures can waste transporters<br />
(2008/98/EC) be summarised as initial set-up costs:<br />
Assessment of existing disposal establishing the competent<br />
installations to determine the authority/ies, devising systems <strong>and</strong><br />
additional infrastructure needed procedures; providing training <strong>and</strong><br />
in order to establish an preparing technical guidance notes;<br />
integrated <strong>and</strong> adequate <strong>and</strong> preparing a waste management<br />
network of disposal installations strategy <strong>and</strong> detailed plans<br />
Waste L<strong>and</strong>fill Different waste categories Establishment of sorting stations, Municipalities, waste<br />
Directive subject to special treatment <strong>and</strong> recycling facilities, biodegradable utilities/companies,<br />
(1999/31/EC) disposal <strong>and</strong> l<strong>and</strong>fill ban<br />
Development of waste<br />
waste treatment facilities <strong>and</strong><br />
proper sanitary l<strong>and</strong>fills<br />
industry<br />
management strategies <strong>for</strong> Closure <strong>and</strong> remediation of<br />
different types of waste non-compliant l<strong>and</strong>fills<br />
Incineration Permitting procedures <strong>for</strong> incine-<br />
Development of hazardous waste<br />
l<strong>and</strong>fills <strong>and</strong> inert waste l<strong>and</strong>fills<br />
as well as facilities <strong>for</strong> materials that<br />
may no longer be l<strong>and</strong>filled (tyres,<br />
healthcare waste, flammables, liquids)<br />
Installation of monitoring equipment Municipalities, waste<br />
Directive ration <strong>and</strong> co-incineration plants to monitor parameters, conditions utilities/companies<br />
(2000/76/EC)<br />
Technological requirements<br />
<strong>and</strong> mass concentrations relevant to the<br />
incineration or co-incineration process<br />
<strong>for</strong> incineration facilities <strong>and</strong> Upgrading of existing<br />
monitoring incineration <strong>and</strong> co-incineration plants<br />
Hazardous Waste<br />
Procedures on the public right<br />
of access to in<strong>for</strong>mation, in<br />
particular with regard to the<br />
location of facilities<br />
Plans <strong>for</strong> the management of Upgrading or construction of Industry, waste<br />
Directive hazardous waste to be drawn infrastructure <strong>for</strong>: collection systems utilities/companies<br />
(91/689/EEC) up <strong>and</strong> made public <strong>and</strong> facilities; transportation; <strong>and</strong> the<br />
(to be repealed final safe disposal of hazardous waste<br />
by WFD on Integration with overall waste<br />
December 12, management strategies to<br />
2010) ensure proper treatment<br />
S T R AT E G I C M O V E S<br />
Design <strong>and</strong> implementation of<br />
systems <strong>for</strong> monitoring the<br />
l<strong>and</strong>filling of hazardous wastes
with respect to investments, since <strong>for</strong> many EU-funded projects the existence of<br />
a management plan is a precondition <strong>for</strong> receiving financing. Further requirements<br />
include carrying out an assessment of existing disposal installations in order to identify<br />
the additional infrastructure needed to establish an integrated <strong>and</strong> adequate<br />
network of disposal installations.<br />
Water<br />
The protection of water resources, of fresh-water <strong>and</strong> salt-water ecosystems,<br />
<strong>and</strong> of drinking <strong>and</strong> bathing waters is one of the cornerstones of environmental<br />
protection in Europe. The goals of the European Water Policy are to clean up polluted<br />
water <strong>and</strong> to ensure that clean water remains clean. The Water Framework Directive<br />
sets the objective of achieving good status in all surface water <strong>and</strong><br />
groundwater bodies by 2015. It also introduces the principle of preventing any further<br />
deterioration in status.<br />
The directives making up the EU water framework are the Water Framework<br />
Directive (2000/60/EC), the Drinking Water Directive (98/83/EC), the Urban<br />
Waste Water Treatment Directive (91/271/EEC), the Dangerous Substances in<br />
Water Directive (2006/11/EC), the Nitrates Directive (91/676/EEC) <strong>and</strong> the<br />
Bathing Water Directive (2006/7/EC). The new Bathing Water Directive from<br />
2006 repeals the previous directive (76/160/EEC) <strong>and</strong> ensures that citizens are<br />
given better <strong>and</strong> earlier in<strong>for</strong>mation about the quality of their bathing waters. The<br />
new directive has a stronger emphasis on bathing quality management <strong>and</strong> moves<br />
away from the simple sampling <strong>and</strong> monitoring of bathing waters. The directive is<br />
integrated into all other EU measures protecting the quality of waters through the<br />
Water Framework Directive (EC DG Enlargement website).<br />
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TABLE 4: The main implementation <strong>and</strong> investment implications of the waste directives (continued)<br />
DIRECTIVE IMPLEMENTATION<br />
IMPLICATIONS<br />
INVESTMENT IMPLICATIONS LIKELY INVESTOR<br />
Sewage Sludge Implemented in close Construction of facilities <strong>for</strong> the Municipalities, water<br />
Directive cooperation with authorities treatment of sewage sludge, including utilities/companies<br />
(86/278/EEC) responsible <strong>for</strong> implementing incinerators or other facilities to treat<br />
the Urban Waste Water those types of sludge that cannot be<br />
Treatment Directive used <strong>for</strong> agricultural purposes<br />
Requires adquate capacities of Development of monitoring infrastructure<br />
laboratories <strong>for</strong> testing sewage to test the quality of sewage sludge<br />
sludge<br />
Source: REC, 2005; REC <strong>and</strong> Umweltbundesamt GmbH, 2008; <strong>and</strong> EC COM(2001) 304<br />
S T R AT E G I C M O V E S 83
84<br />
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TABLE 5: The main implementation <strong>and</strong> investment implications of the water directives<br />
DIRECTIVE IMPLEMENTATION<br />
IMPLICATIONS<br />
INVESTMENT IMPLICATIONS LIKELY INVESTOR<br />
The Water Identification of river basins <strong>and</strong> The directive does not itself <strong>Regional</strong> governments<br />
Framework their assignment to individual introduce the requirement of (river basin<br />
Directive river basin districts significant capital costs. The main authorities), industry<br />
(2000/60/EC) costs relate to: the institutional <strong>and</strong> agro-industry<br />
Establishment of competent autho- set-up; <strong>and</strong> establishing an<br />
rities, using existing structures or appropriate monitoring system<br />
creating new ones, <strong>and</strong> the covering groundwater <strong>and</strong> surface<br />
establishment of administrative<br />
arrangements<br />
waters<br />
Drinking Water<br />
Member states are obliged to draw<br />
up river basin management plans<br />
by the end of 2009, setting the<br />
objectives to be reached in rivers,<br />
lakes coastal waters <strong>and</strong><br />
groundwaters across the EU<br />
Identification <strong>and</strong> assessment of Upgrading of water supply systems Municipalities, water<br />
Directive the current status of infrastructure in order to minimise pollution utilities/companies<br />
(98/83/EC) risks <strong>and</strong> to provide adequate<br />
The main responsibility <strong>for</strong> the<br />
upgrading of infrastructure will be<br />
service<br />
borne by municipalities or by public Upgrading of the equipment<br />
utility companies delivering water of water treatment stations to<br />
ensure the removal from water of<br />
Special attention should be given<br />
to cooperation with authorities<br />
all substances listed by the directive<br />
responsible <strong>for</strong> sewage collection <strong>and</strong> Establishment of efficient<br />
treatment, as the construction monitoring infrastructure to<br />
of water supply systems should be measure the quality of water<br />
accompanied by sewerage<br />
connection infrastructure<br />
delivered to customers<br />
Urban Waste Ensuring appropriate technical Upgrading of sewage collection Municipalities, water<br />
Water Treatment infrastructure networks utilities/companies,<br />
Directive industry<br />
(91/271/EEC) Establishment of emission limits <strong>for</strong> Construction of wastewater<br />
concentrations of specific substances<br />
in urban wastewater discharges<br />
treatment plants<br />
<strong>and</strong> from certain industrial sectors Installation of monitoring<br />
equipment to control the quality<br />
Establishment of “sensitive areas”<br />
<strong>and</strong> “less sensitive areas”, influenced<br />
by the quality of discharged waters<br />
of effluent water<br />
S T R AT E G I C M O V E S<br />
Attention should be given to<br />
coherence with the Sewage Sludge<br />
Directive when constructing<br />
wastewater treatment plants
Air<br />
Since the 1970s, EU air quality policy has aimed to control emissions from mobile<br />
sources, improve fuel quality <strong>and</strong> promote <strong>and</strong> integrate environmental protection<br />
requirements into the transport <strong>and</strong> energy sectors. The EU uses different<br />
ways to reduce exposure to air pollution, <strong>for</strong> example through legislation, the reduction<br />
of cross-border pollution or the development of a thematic strategy such<br />
as Clean Air <strong>for</strong> Europe (CAFE).<br />
Bearing in mind EU air quality legislation <strong>and</strong> the experiences of EU new member<br />
states, it is clear that the directives presented in this section represent a significant<br />
investment challenge <strong>and</strong> require infrastructure development <strong>and</strong> upgrading.<br />
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TABLE 5: The main implementation <strong>and</strong> investment implications of the water directives (continued)<br />
DIRECTIVE IMPLEMENTATION<br />
IMPLICATIONS<br />
INVESTMENT IMPLICATIONS LIKELY INVESTOR<br />
Dangerous Setting up of programmes to Municipalities <strong>and</strong> industrial Municipalities, industry<br />
Substances in reduce the discharge of dangerous companies will have to invest in<br />
Water Directive substances cleaner technologies as well as<br />
(2006/11/EC) in the treatment <strong>and</strong> pre-treatment<br />
Identification of point sources of wastewater <strong>for</strong> certain<br />
of pollution substances<br />
Establishment of monitoring systems<br />
The directive should be implemented<br />
in close cooperation with the IPPC<br />
Directive <strong>and</strong> in the broader context<br />
of the Water Framework Directive<br />
Installation of water quality<br />
monitoring equipment<br />
Nitrates Directive Detection of water pollution, or Reconstruction of manure storage Agro-industry<br />
(91/676/EEC) threat of pollution, by nitrogen facilities on farms with sizeable<br />
<strong>and</strong> the designation of vulnerable<br />
zones with a significant<br />
concentrations of livestock<br />
contribution of nitrogen to the Installation of water quality<br />
environment monitoring equipment<br />
Bathing Water<br />
Development of action plans<br />
<strong>and</strong> the monitoring of their<br />
implementation<br />
Assessment of the current status of Upgrading of wastewater treatment Municipalities, water<br />
Directive bathing waters, followed by an ef<strong>for</strong>t plants <strong>for</strong> both municipal utilities/companies<br />
(2006/7/EC) to identify sources of pollution <strong>and</strong> industrial sewage<br />
Development of a plan <strong>for</strong> the Installation of monitoring<br />
upgrading of facilities equipment<br />
Source: REC, 2005; REC <strong>and</strong> Umweltbundesamt GmbH, 2008; <strong>and</strong> EC COM(2001) 304<br />
S T R AT E G I C M O V E S 85
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BOX 4: Investment implications of the Directive on Ambient Air Quality <strong>and</strong> Cleaner Air <strong>for</strong> Europe<br />
The conducting of preliminary assessments <strong>and</strong> the continuous monitoring of ambient air quality require public<br />
sector investments to establish air quality monitoring equipment <strong>and</strong> modelling capacity. In areas with bad ambient<br />
air quality, it may be difficult to identify investment projects be<strong>for</strong>e conducting the assessments. In areas in<br />
which levels of pollutants are above the permitted norms, public <strong>and</strong> private sector investments are needed in<br />
order to reduce pollutant emissions <strong>and</strong> to achieve compliance.<br />
S T R AT E G I C M O V E S<br />
Achieving <strong>and</strong> maintaining compliance with EC policies <strong>and</strong> legislation on<br />
air quality management presents a major challenge to c<strong>and</strong>idate countries: in<br />
order to minimise the associated administrative burden <strong>and</strong> costs, this challenge<br />
needs to be managed in a systematic <strong>and</strong> cost-effective manner. The H<strong>and</strong>book<br />
on the Implementation of the EC <strong>Environmental</strong> Acquis (2008) provides guidance<br />
on efficient implementation procedures. A checklist of key questions to be<br />
considered when implementing the directives <strong>and</strong> preparing corresponding<br />
strategies is provided.<br />
New developments in the EU air acquis<br />
The Directive on ambient air quality <strong>and</strong> cleaner air <strong>for</strong> Europe (2008/<br />
50/EC), adopted in 2008, merges most existing legislation into a single directive<br />
with no change to existing air quality objectives 7 , with the exception of the fourth<br />
daughter directive relating to arsenic, cadmium, mercury, nickel <strong>and</strong> polycyclic aromatic<br />
hydrocarbons in ambient air. The directive extends existing st<strong>and</strong>ards to include<br />
objectives <strong>for</strong> fine particulate matter (PM2.5), including the limit value <strong>and</strong><br />
exposure-related objectives (exposure concentration obligation <strong>and</strong> exposure reduction<br />
targets). It introduces the possibility to discount natural sources of pollution<br />
when assessing compliance against limit values.<br />
Implementing the directive<br />
The implementation of the directive involves a similar procedure to that <strong>for</strong><br />
the Air Quality Framework Directive. The first step should be the designation<br />
of the competent authorities <strong>and</strong> bodies responsible <strong>for</strong> implementing the directive,<br />
assessing ambient air quality, approving the measuring devices, ensuring<br />
the accuracy of measuring devices <strong>and</strong> their compatibility with European<br />
quality requirements, assuring overall st<strong>and</strong>ards, analysing assessment methods<br />
<strong>and</strong> coordinating Community-wide quality assurance programmes on their territory.<br />
The second step is to develop a system <strong>for</strong> assessing the quality of ambient<br />
air based on common methods <strong>and</strong> criteria. A system should also be<br />
developed <strong>for</strong> gathering, reporting <strong>and</strong> publishing in<strong>for</strong>mation, including the<br />
dissemination of that in<strong>for</strong>mation to the public.
BOX 5: Investment implications of the IPPC Directive<br />
Integrated Pollution Prevention <strong>and</strong> Control (IPPC) Directive 8<br />
The directive replaces Council Directive 96/61/EC of September 24, 1996 on<br />
the same subject. The purpose of the directive is to achieve the integrated prevention<br />
<strong>and</strong> control of pollution arising from a range of listed activities. It lays down<br />
measures to prevent or reduce emissions to air, water <strong>and</strong> l<strong>and</strong> from these activities,<br />
including measures on waste, in order to achieve a high level of protection <strong>for</strong> the<br />
environment as a whole. The IPPC Directive represents a major change in the permitting<br />
system <strong>for</strong> certain installations. It introduces an integrated permitting system<br />
<strong>for</strong> industrial <strong>and</strong> agricultural activities with a high pollution potential. The<br />
permit must contain specific conditions including emission limit values <strong>and</strong> the<br />
application of best available techniques (BAT), <strong>and</strong> can only be issued if certain<br />
environmental conditions are met. The companies themselves bear responsibility<br />
<strong>for</strong> preventing <strong>and</strong> reducing any pollution they may cause. This includes using all<br />
appropriate pollution-prevention measures — preventing all large-scale pollution;<br />
avoiding waste production; using energy efficiently; <strong>and</strong> ensuring accident prevention<br />
<strong>and</strong> damage limitation.<br />
Implementing the directive<br />
Implementing the IPPC Directive entails setting up, or restructuring, a regulatory<br />
body (e.g. a competent authority) <strong>and</strong> any agencies that it might require.<br />
It also requires drawing up an IPPC inventory <strong>and</strong> assessing the current situation.<br />
Guidance documents on IPPC principles <strong>and</strong> the use of BAT must be provided.<br />
The IPPC Directive specifies that permit conditions should include<br />
emission limit values <strong>for</strong> various pollutants, in particular the main air-polluting<br />
substances listed in Annex III.<br />
General observations<br />
• The EU waste policy is based on the waste hierarchy: the options range from<br />
prevention as the most favourable, to the least favourable — l<strong>and</strong>filling.<br />
• The Waste Framework Directive is not associated with significant capital costs.<br />
Costs are related to the provision of an adequate institutional structure, the establishment<br />
of competent authority/ies, <strong>and</strong> the preparation of waste manage-<br />
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The IPPC Directive imposes extensive obligations <strong>and</strong> substantial costs on industry <strong>and</strong> the government at all levels.<br />
However, the investment implications of compliance <strong>for</strong> industry will be far greater than the direct costs of<br />
implementing the legislation. Investments related to en<strong>for</strong>cement include mainly the setting up <strong>and</strong> operation<br />
of the necessary institutional framework <strong>and</strong> authorities; the development of guidance documents; the training<br />
of staff <strong>and</strong> inspectors etc.<br />
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TABLE 6: The main implementation <strong>and</strong> investment implications of the air directives<br />
DIRECTIVE IMPLEMENTATION<br />
IMPLICATIONS<br />
INVESTMENT IMPLICATIONS LIKELY INVESTOR<br />
The Air Quality Designation of the competent Establishment of air quality monitoring Local <strong>and</strong> regional<br />
Framework authorities <strong>and</strong> bodies responsible equipment <strong>and</strong> modelling capacity governments,<br />
Directive <strong>for</strong> implementing the directives industry<br />
(96/62/EC) In areas of bad ambient air quality, it<br />
Assessment of ambient air quality might be difficult to identify investment<br />
projects be<strong>for</strong>e conducting the<br />
Ensuring the accuracy of measuring<br />
devices <strong>and</strong> their compatibility<br />
assessments.<br />
with European quality requirements, Public <strong>and</strong> private sector investment<br />
assuring overall st<strong>and</strong>ards is needed in areas where pollutant levels<br />
are above permitted norms in order to<br />
Development of a system <strong>for</strong> assessing bring down emissions of polluting<br />
the quality of ambient air based<br />
on common methods <strong>and</strong> criteria<br />
substances <strong>and</strong> achieve compliance<br />
Directive on<br />
Development of a system <strong>for</strong> gathering,<br />
reporting <strong>and</strong> publishing in<strong>for</strong>mation,<br />
including dissemination to the public<br />
See the Air Quality Framework See the Air Quality Framework Directive As above<br />
Ambient Air<br />
Quality <strong>and</strong><br />
Cleaner Air <strong>for</strong><br />
Europe<br />
(2008/50/EC)<br />
Directive above above<br />
Large Ensuring that existing plants are Investments should focus on introducing Industry, energy<br />
Combustion modified to comply with required new processes <strong>for</strong> cleaner technologies utilities<br />
Plants emission levels <strong>and</strong> that new plants (retrofitting) <strong>and</strong> introducing air<br />
Directive<br />
(2001/80/EC)<br />
comply with specified emission limits pollution control systems in installations<br />
Designating institutions responsible Installations put into operation after<br />
<strong>for</strong> identifying all installations falling 1987 must comply with the directive<br />
under the directive, separately <strong>for</strong><br />
old installations (in operation<br />
be<strong>for</strong>e 1987) <strong>and</strong> newer ones<br />
as of the day of EU accession<br />
Integrated<br />
Establishing a system <strong>for</strong> inspection<br />
<strong>and</strong> monitoring<br />
Setting up or restructuring a Investment costs related to en<strong>for</strong>cement Industry, agro-<br />
Pollution body (e.g. a competent include mainly the setting up <strong>and</strong> running industry <strong>and</strong><br />
Prevention <strong>and</strong> authority) <strong>and</strong> agencies of the necessary institutional framework waste utilities<br />
Control (IPPC) <strong>and</strong> authorities, the development of<br />
Directive Requires the identification of guidance documents, the training<br />
(2008/1/EC) installations requiring control<br />
by the IPPC <strong>and</strong> the assessment<br />
of their current situation<br />
of staff <strong>and</strong> inspectors etc.<br />
S T R AT E G I C M O V E S<br />
Guidance documents on IPPC<br />
principles <strong>and</strong> the use of BAT<br />
must be provided<br />
Source: REC, 2005; REC <strong>and</strong> Umweltbundesamt GmbH, 2008; <strong>and</strong> EC COM (2001) 304
ment plans. The highest costs are incurred as a result of the waste stream–related<br />
directives <strong>and</strong> the L<strong>and</strong>fill Directive.<br />
• The strategic framework <strong>for</strong> water has been in place since 2000, when the Water<br />
Framework Directive was adopted. The biggest investment implications in<br />
water in SEE are associated with the Drinking Water <strong>and</strong> the Urban Waste<br />
Water Treatment Directives.<br />
• The Directive on Ambient Air Quality <strong>and</strong> Cleaner Air <strong>for</strong> Europe<br />
(2008/50/EC) merges most of the existing legislation into a single directive<br />
with no change to existing air quality objectives. The main public investment<br />
in air is associated with the establishment of a network of monitoring equipment<br />
while significant private investments will be needed <strong>for</strong> the implementation<br />
of the IPPC <strong>and</strong> LCP Directives.<br />
<strong>Environmental</strong> investment needs <strong>and</strong> benefits<br />
The implementation <strong>and</strong> en<strong>for</strong>cement of environmental legislation is one of<br />
the most important areas of work <strong>for</strong> SEE countries in relation to environmental<br />
infrastructure development. As previously indicated, this process requires significant<br />
ef<strong>for</strong>ts towards the upgrading <strong>and</strong> construction of new environmental facilities<br />
such as wastewater treatment plants <strong>and</strong> sanitary l<strong>and</strong>fills. In order to identify<br />
where the financial challenge will be the most significant, this section looks at investment<br />
needs as required by EU environmental legislation <strong>and</strong> highlights the implementation<br />
<strong>and</strong> investment implications <strong>for</strong> SEE countries.<br />
Benefits <strong>for</strong> South Eastern European countries of compliance<br />
with the environmental acquis<br />
Implementing the EU environmental acquis entails large costs. However, it is important<br />
to bear in mind that the process will also eventually lead to a range of benefits<br />
<strong>for</strong> all sectors of society. In a study commissioned by the EC DG Environment in<br />
2007, the total monetary benefits <strong>for</strong> SEE countries is estimated at between EUR 1.4<br />
<strong>and</strong> 2 billion per year (Arcadis Ecolas NV <strong>and</strong> IEEP, 2007). The total benefits of clean<br />
drinking-water supply <strong>for</strong> SEE countries are estimated to amount to up to EUR 851<br />
million per year upon full compliance. Furthermore, the implementation of the air-related<br />
environmental acquis is expected to lead to approximately 4,475 fewer cases of<br />
premature death from respiratory diseases <strong>and</strong> lung cancer per year.<br />
The calculation is based on direct benefits with respect to public health <strong>and</strong> includes<br />
the reduction of illness <strong>and</strong> mortality, resource benefits (<strong>for</strong> example those<br />
gained from reduced water pre-treatment costs as water quality improves; <strong>for</strong>est products<br />
<strong>and</strong> sustainable agriculture), <strong>and</strong> eco-services gains such as the protection of<br />
species, habitats <strong>and</strong> ecosystems. Wider socioeconomic benefits relate to increased<br />
employment through environmental investments, eco-efficiency gains, the develop-<br />
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TABLE 7: Benefits of implementing the EU environmental acquis over different sectors<br />
BENEFIT TYPE AIR WATER WASTE<br />
Health Reduction in respiratory Households benefiting from Reduced share of population at risk<br />
diseases <strong>and</strong> early mortality connection to (improved) of exposure to contaminated water/<br />
quality water hazardous substances/odour/<br />
explosion (methane)<br />
Resource Reduced damage to building Reduction of contaminants in Reduced primary inputs through<br />
stock, crops etc. surface water recycling, energy recovery etc.<br />
Eco-systems Reduced pollution stress to Likely changes in river <strong>and</strong> Avoidance of leachates, methane emis<br />
terrestrial <strong>and</strong> aquatic<br />
eco-systems (acidification <strong>and</strong><br />
ground-level ozone)<br />
lake water quality sions<br />
Social Quality of life Confidence in drinking water Reduced discrimination by fewer low<br />
income households living close to<br />
unprotected l<strong>and</strong>fills etc.<br />
Wider Employment in air pollution Employment via tourism Employment <strong>for</strong> recycling etc.<br />
control equipment, increased<br />
locational quality<br />
related to water recreation<br />
Source: Arcadis Ecolas NV <strong>and</strong> IEEP, 2007<br />
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ment of new <strong>and</strong> existing industries or economic sectors, <strong>and</strong> economic benefits from<br />
natural resources (e.g. tourism). Some benefits arising from the implementation of directives<br />
— such as biodiversity protection — are more difficult to estimate in monetary<br />
<strong>for</strong>m. The environmental benefits will increase if principles of sustainability are<br />
implemented horizontally in other sectors, such as transport, energy <strong>and</strong> agriculture.<br />
<strong>Environmental</strong> capital investment needs<br />
An analysis of the state of the environment <strong>and</strong> the status of utilities <strong>for</strong> environmental<br />
services in SEE countries exposes the deficiencies in the environmental<br />
infrastructure. Experiences from the new EU member states show that the development<br />
of realistic, long-term national strategies <strong>for</strong> implementing the environmental<br />
acquis was a crucial step in the overall process, <strong>and</strong> assisted in the<br />
mobilisation of domestic <strong>and</strong> <strong>for</strong>eign sources of finance. In the case of the new EU<br />
member states, overall assistance from the EC <strong>and</strong> <strong>for</strong>eign sources constituted only<br />
a small proportion of the total amount needed. Certain environmental directives<br />
will be especially difficult to implement, not only because of the investment required,<br />
but also because of the amount of infrastructure to be built. Some of the<br />
most financially dem<strong>and</strong>ing directives are presented in Box 6.<br />
It has been estimated that the c<strong>and</strong>idate countries will have to spend on average<br />
between 2 <strong>and</strong> 3 percent of their GDP over several years in order to achieve full<br />
implementation (REC, 2005). Table 9 shows the estimated investments needed in<br />
order to comply with the total EU environmental acquis.
Main costs <strong>for</strong> upgrading infrastructure<br />
Waste sector<br />
It will be necessary to upgrade the quality <strong>and</strong> environmental<br />
per<strong>for</strong>mance of existing facilities to ensure that they reach<br />
compliance with the environmental st<strong>and</strong>ards set as part of national<br />
policies <strong>and</strong> strategies. The costs incurred in establishing<br />
new facilities will depend on the number, type <strong>and</strong> capacities of<br />
the additional facilities required. Funds need to be raised <strong>for</strong> capital<br />
investment expenditures <strong>and</strong> to cover recurrent operational<br />
costs. Ultimately, the full costs of facility provision <strong>and</strong> operation<br />
should be recovered from waste producers.<br />
Meeting the requirements laid down in the Waste Framework<br />
Directive, the Hazardous Waste Directive <strong>and</strong> the L<strong>and</strong>fill<br />
Directive is likely to be very costly. The provision of<br />
facilities of a higher st<strong>and</strong>ard, together with the creation of an<br />
adequate institutional structure, will constitute the largest elements<br />
of the overall cost of achieving compliance. It should<br />
be appreciated that the provision of facilities will incur not<br />
only initial capital costs but also significant recurring annual<br />
costs <strong>for</strong> operation <strong>and</strong> maintenance, together — in the case of<br />
l<strong>and</strong>fills — with long-term costs <strong>for</strong> remediation <strong>and</strong> aftercare.<br />
A study on the costs of implementing EC waste management<br />
legislation in Slovakia estimates the total capital costs (net present<br />
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TABLE 8: Total benefits (in EUR million) <strong>for</strong> SEE countries of full compliance with the water-related directives<br />
ANNUAL BENEFITS TOTAL DISCOUNTED BENEFITS<br />
LOW ESTIMATE HIGH ESTIMATE LOW ESTIMATE HIGH ESTIMATE<br />
Albania 60.5 103.6 495 847<br />
Bosnia <strong>and</strong> Herzegovina 75.3 95.8 616 783<br />
Croatia 60.6 378.6 610.0 3810.9<br />
FYR Macedonia 66.7 80.5 546 658<br />
Montenegro 66.2 71.8 541 587<br />
Kosovo (as defined<br />
under UNSCR 1244)<br />
14.3 21.1 117 172<br />
Serbia 467 521 3,818 4,260<br />
TOTAL 811 1,272 6,743 11,118<br />
Note: Value in EUR of the annual benefits upon full compliance with the water directives <strong>and</strong> the total discounted benefits over 20 years of<br />
compliance with the water directives in the respective countries.<br />
Source: Arcadis Ecolas NV <strong>and</strong> IEEP, 2007<br />
BOX 6: Investment-heavy directives<br />
Air sector<br />
• Air Quality Directive (96/62/EC)<br />
• Large Combustion Plants Directive<br />
(2001/80/EC)<br />
Waste sector<br />
• L<strong>and</strong>fill Directive (1999/31/EC)<br />
• Incineration Directive (2000/76/EC)<br />
• Hazardous Waste Directive (91/689/EEC)<br />
• Sewage Sludge Directive (86/278/EEC)<br />
Water sector<br />
• Drinking Water Directive (98/83/EC)<br />
• Urban Waste Water Treatment Directive<br />
(91/271/EEC)<br />
• Dangerous Substances in Water Directive<br />
(76/464/EEC)<br />
• Nitrates Directive (91/676/EEC)<br />
• Bathing Water Directive (76/160/EEC)<br />
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TABLE 9: Estimated funding needed to achieve compliance with the EU environmental acquis<br />
COUNTRIES ESTIMATED FUNDING TIMELINE REFERENCE<br />
NEEDED TO ACHIEVE<br />
COMPLIANCE WITH THE EU<br />
ENVIRONMENTAL ACQUIS<br />
OF ESTIMATE<br />
Albania EUR 252 million <strong>for</strong> Until 2013 National Strategy <strong>for</strong> Development<br />
environmental investments<br />
<strong>and</strong> water <strong>and</strong> sanitation<br />
<strong>and</strong> Integration (March 2008)<br />
Bosnia <strong>and</strong> EUR 3.8 billion CARDS projects: Federal <strong>Environmental</strong><br />
Herzegovina Strategy <strong>and</strong> <strong>Environmental</strong> Strategy in RS<br />
Croatia Between EUR 6 <strong>and</strong> 12 billion Until 2013 CARDS 2004 projects, IPA projects,<br />
EPEEF programmes<br />
FYR EUR 3.13 billion (EUR 2,947 Until 2030 CARDS 2005 project “<strong>Environmental</strong><br />
Macedonia million capital costs <strong>and</strong> Management Strengthening” (Developing<br />
EUR 182.4 million a National Strategy <strong>for</strong> <strong>Environmental</strong><br />
operational costs) Approximation)<br />
Montenegro EUR 32.5 billion 2008–2012 National Programme <strong>for</strong> Integration<br />
Serbia EUR 652 million (according Full EC SEC(2009)<br />
to estimates during implementation<br />
the preparation of the National of harmonised<br />
Programme <strong>for</strong> <strong>Environmental</strong> laws should be<br />
Protection) achieved by the<br />
end of 2012<br />
Kosovo (as EUR 21.5 million 2007–2013 Estimate based on national strategies<br />
defined under <strong>and</strong> medium-term expenditure<br />
UNSCR 1244) framework<br />
Source: REC survey, 2009<br />
S T R AT E G I C M O V E S<br />
value in 1999 at 5 percent) to be EUR 1.17 billion. A similar study <strong>for</strong> Latvia shows<br />
capital costs of EUR 237.9 million. The latter study estimates only the impact of the<br />
Hazardous Waste <strong>and</strong> Waste L<strong>and</strong>fill Directives, which have the greatest cost impact.<br />
In addition, the implementation of the waste directives will require investments in<br />
human competencies, <strong>for</strong> example through the training of staff. Without sufficient,<br />
suitably trained staff, systems <strong>for</strong> waste management planning, regulation <strong>and</strong> en<strong>for</strong>cement<br />
cannot be effectively implemented. Adequate budgets there<strong>for</strong>e need to be<br />
ensured to enable the responsible institutions to per<strong>for</strong>m their functions effectively.<br />
Salaries need to be set at appropriate levels to attract <strong>and</strong> retain qualified staff (REC<br />
<strong>and</strong> Umweltbundesamt GmbH, 2008).<br />
Water sector<br />
It will be necessary to upgrade facilities as a result of implementing the water directives.<br />
Finance needs to be raised <strong>for</strong> capital investment expenditures <strong>and</strong> recurrent<br />
operational costs. Ultimately, costs should be recovered from water users/polluters,<br />
that is, from consumers (domestic, industrial <strong>and</strong> agricultural sectors).
BOX 7: Financing regional waste management centres in Croatia<br />
The costs incurred in establishing new facilities are dependent on the st<strong>and</strong>ards<br />
that have to be adopted <strong>and</strong> the number, type <strong>and</strong> size of the facilities required <strong>for</strong><br />
complying with these new st<strong>and</strong>ards. The current levels of treatment available <strong>for</strong><br />
wastewater, drinking water, industrial discharges <strong>and</strong> agricultural practices are decisive<br />
in terms of final costs. Such a wide variety of changes are needed that it is impossible<br />
to give a precise figure of the costs of implementing water legislation.<br />
Although the majority of SEE countries have institutions devoted to the prevention<br />
of water pollution <strong>and</strong> to the permitting of installations, there is a need to upgrade them<br />
in order to implement the entire body of legislation, in particular the new framework<br />
directive. New working methods should be introduced in line with the new st<strong>and</strong>ards<br />
applied, such as emission limits, quality objectives, best available techniques <strong>and</strong> the<br />
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The total investment needed in the waste sector in Croatia is estimated at EUR 3.25 billion. Depending on the<br />
final number of regional waste management centres (RWMCs), the assessed investments will range from EUR 350<br />
to 400 million in order to bring the l<strong>and</strong>fills to operational level. The financing of RWMC construction is envisaged<br />
through public sources (state budget, budgets of local <strong>and</strong> regional self-government units, EU funds, the <strong>Environmental</strong><br />
Protection <strong>and</strong> Energy Efficiency Fund [EPEEF], bank loans) as well as private sources (private<br />
investments in WMCs, public-private partnerships [PPP], concessions, the primary separation <strong>and</strong> collection of<br />
waste, recycling <strong>and</strong> collecting plants/facilities). In phase one of the RWMC financing structure, public costs<br />
(l<strong>and</strong>fill site, infrastructure <strong>and</strong> transfer station) will be financed up to 80 percent from EU funds <strong>and</strong> the EPEEF;<br />
<strong>and</strong> 20 percent by local authorities. Bank loans will be used <strong>for</strong> the establishment of a collection system <strong>and</strong> <strong>for</strong><br />
the construction of the municipal waste disposal system at the level of the local (regional) self-government. In<br />
phase two, the costs of mechanical biological treatment (MBT) plants will be financed by the private sector (PPP)<br />
<strong>and</strong>, if possible, the public sector. Investments are required <strong>for</strong> MBT facilities, l<strong>and</strong>fills <strong>and</strong> infrastructure, the construction<br />
of transfer stations along with system set-up costs.<br />
Source: REC, 2009b<br />
BOX 8: Challenges to financing waste management in Kosovo (as defined under UNSCR 1244)<br />
Based on the medium-term expenditure budget <strong>for</strong> the years 2010 to 2012, <strong>for</strong>eseen expenditure in the field of<br />
environment <strong>for</strong> capital investments is EUR 14.8 million. For approved projects (2008 to 2012) the total is EUR<br />
3.425 million, <strong>and</strong> <strong>for</strong> new projects EUR 9.8 million.<br />
The main challenges identified in financing waste management projects in Kosovo (as defined under UNSCR<br />
1244) are, to a large extent, representative of the situation in several SEE countries. They include defining clear<br />
responsibilities at central <strong>and</strong> local level; settling ownership issues in relation to l<strong>and</strong>fills <strong>and</strong> wastewater treatment<br />
plants; increasing the limited budget <strong>for</strong> environmental management; establishing eco-funds; providing<br />
mechanisms <strong>for</strong> obtaining international funds <strong>and</strong> loans; strengthening the existing financing system; <strong>and</strong> improving<br />
payment <strong>and</strong> fee collections.<br />
Source: REC survey, 2009; <strong>and</strong> REC, 2009b<br />
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TABLE 10: Indicative estimates of investment outlays <strong>for</strong> the waste sector<br />
BENEFIT TYPE AIR<br />
Albania Estimated investment needs up to 2022 are EUR 150 million <strong>for</strong> the waste sector; investment<br />
of EUR 9.8 million is <strong>for</strong>eseen <strong>for</strong> the L<strong>and</strong>fill Directive until 2012<br />
Bosnia <strong>and</strong> No in<strong>for</strong>mation available<br />
Herzegovina<br />
Croatia Estimated investment needs are EUR 7.6 billion <strong>for</strong> the waste sector. Of this, EUR 11 million<br />
are needed <strong>for</strong> the WFD (2007–2010), EUR 191 million <strong>for</strong> the L<strong>and</strong>fill Directive (2010–2018);<br />
<strong>and</strong> EUR 9 million <strong>for</strong> the Hazardous Waste Directive (2009–2013)<br />
FYR Estimated investment needs up to 2012 are EUR 211 million <strong>for</strong> the waste sector. Of this,<br />
Macedonia EUR 400 million are needed <strong>for</strong> the WFD; EUR 6 billion <strong>for</strong> the L<strong>and</strong>fill Directive;<br />
EUR 500 million <strong>for</strong> the Hazardous Waste Directive; EUR 400 million <strong>for</strong> the Sewage Sludge<br />
Directive; <strong>and</strong> EUR 300 million <strong>for</strong> the Incineration Directive<br />
Kosovo (as Estimated investment needs up to 2012 are EUR 4.6 million <strong>for</strong> the waste sector. Of this,<br />
defined under EUR 1.2 million are needed <strong>for</strong> the WFD (2007–2013); EUR 0.7 million <strong>for</strong> the L<strong>and</strong>fill Directive<br />
UNSCR 1244) (2008–2012); EUR 1.041 million <strong>for</strong> the Hazardous Waste Directive (2007–2012);<br />
<strong>and</strong> EUR 1.75 million <strong>for</strong> the Incineration Directive (2008–2012)<br />
Montenegro Estimated investment needs are EUR 129.7 million, of which EUR 128.5 million are investments,<br />
remediation <strong>and</strong> management costs; <strong>and</strong> EUR 1.18 million administrative costs<br />
Source: REC survey, 2009<br />
TABLE 11: Infrastructure facility needs identified in the waste sector in Serbia<br />
29 regional sanitary 44 transfer 17 recycling 7 composting 4 incinerators<br />
l<strong>and</strong>fills <strong>for</strong> 160 stations <strong>for</strong> 63 centres <strong>for</strong> 160 facilities <strong>for</strong> <strong>for</strong> 160<br />
municipalities municipalities municipalities 146 municipalities municipalities<br />
Source: National Sustainable Development Strategy 2008<br />
S T R AT E G I C M O V E S<br />
need <strong>for</strong> wide-ranging monitoring together with facilities <strong>and</strong> data processing. As in<br />
the waste sector, budgets need to be allocated <strong>for</strong> human <strong>and</strong> institutional reorganisation<br />
<strong>and</strong> training (REC <strong>and</strong> Umweltbundesamt GmbH, 2008).<br />
Air quality sector<br />
The major costs of implementing the air quality directives will be borne by the<br />
source operators, who will need to cover the costs of emission abatement equipment,<br />
the upgrading of existing plants or the installation of new plants. Funds there<strong>for</strong>e<br />
need to be raised <strong>for</strong> capital investment <strong>and</strong> any recurrent operational costs.<br />
The application of the air quality directives will also require the provision of training<br />
to ensure that staff have sufficient competencies to per<strong>for</strong>m the required tasks<br />
in relation to air quality monitoring, modelling, management, planning, <strong>and</strong> regulation<br />
<strong>and</strong> en<strong>for</strong>cement.
BOX 9: Cost implications <strong>for</strong> implementing the Water Framework Directive in Albania<br />
The costs of ensuring that large combustion plants reduce emissions to an acceptable<br />
level may include the construction of new plants to replace outdated ones,<br />
<strong>and</strong> the addition of new units to less-polluting plants to compensate <strong>for</strong> energy<br />
losses. The closure of certain industries will represent the biggest cost. In Estonia,<br />
the application of BAT to large combustion plants is estimated to require capital<br />
outlay of EUR 427.9 million by 2005 <strong>and</strong> EUR 801.8 million by 2010 (REC <strong>and</strong><br />
Umweltbundesamt GmbH, 2008).<br />
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In Albania, the cost of full transposition of the legal framework <strong>for</strong> the Water Framework Directive (WFD) is estimated<br />
at EUR 800,000. The total implementation costs <strong>for</strong> the institutional set-up amount to one-off costs of<br />
EUR 5.4 million <strong>and</strong> recurrent costs of EUR 524,000 per year. These costs will be sustained primarily by the national<br />
competent authority responsible <strong>for</strong> implementing the WFD <strong>and</strong> by the new river basin authorities. The total<br />
costs relate mainly to the establishment of the necessary administrative infrastructure <strong>and</strong> to building its capacity,<br />
as well as to establishing <strong>and</strong> operating the monitoring system, rather than to technical measures, which are<br />
assumed to arise under other directives.<br />
The total estimated cost of technical assistance projects — over EUR 4.8 million — reflects the ambitious scope<br />
of the directive. It has been estimated that the operating costs (excluding capital costs) of the monitoring required<br />
to comply with the WFD will be EUR 182,000 per year. However, the present allocation in the MoEFWA<br />
budget <strong>for</strong> monitoring (which also covers operating costs only) is just EUR 110,000 per year, an estimated third<br />
of which (EUR 37,000 per year) is available <strong>for</strong> water. On this basis, the additional operating costs required <strong>for</strong><br />
water monitoring would be EUR 145,000 per year.<br />
Source: REC Survey 2009<br />
BOX 10: Capital investment needs in the water sector in Bosnia <strong>and</strong> Herzegovina<br />
Federation of Bosnia <strong>and</strong> Herzegovina (12-year period)<br />
• Water supply: EUR 594.4 million<br />
• Water protection: EUR 467.2 million<br />
Republika Srpska<br />
Investments are to be realised in two phases until 2033.<br />
• Infrastructure revitalisation<br />
• Water distribution network: EUR 143.3 million (KM 280 million)<br />
• Wastewater treatment plants: EUR 1.2 million (KM 2.3 million)<br />
• New system developments<br />
• Water distribution network: EUR 77.4 million (KM 151.4 million<br />
• Wastewater treatment plants: EUR 150.8 million (KM 295 million)<br />
Source: REC survey, 2009<br />
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TABLE 12: Indicative estimates of investment outlays <strong>for</strong> the water sector<br />
Albania EUR 6.2 million <strong>for</strong> updating the legislation according to the Water Framework Directive<br />
Bosnia <strong>and</strong> EUR 2.83 billion <strong>for</strong> upgrading infrastructure according to the EU water acquis<br />
Herzegovina<br />
Croatia EUR 3.5 billion <strong>for</strong> upgrading infrastructure until 2023 according to the EU water acquis<br />
FYR EUR 724 million <strong>for</strong> upgrading infrastructure according to the EU water acquis<br />
Macedonia<br />
Kosovo (as EUR 3.5 million <strong>for</strong> updating the legislation according to the Water Framework Directive<br />
defined under<br />
UNSCR 1244)<br />
Montenegro EUR 769.9 million, of which EUR 765.7 million are investment costs <strong>and</strong> EUR 4.2 million<br />
administrative costs<br />
Serbia No data available<br />
Source: REC Survey, 2009<br />
TABLE 13: Identified investment needs in the water sector in the <strong>for</strong>mer Yugoslav Republic of Macedonia<br />
WATER SUPPLY WASTEWATER WASTEWATER<br />
NETWORK NETWORK TREATMENT PLANTS<br />
EXISTING UPGRADE EXISTING UPGRADE EXISTING UPGRADE NEW<br />
NEEDED NEEDED NEEDED<br />
Agglomerations<br />
over 15,000 p.e.<br />
27 20 27 21 4 1 22<br />
Agglomerations<br />
between 2,000<br />
<strong>and</strong> 15,000 p.e.<br />
41 38 41 38 3 1 37<br />
Source: REC survey, 2008<br />
S T R AT E G I C M O V E S<br />
General observations<br />
• The implementation of environmental legislation, <strong>and</strong> especially of certain investment-heavy<br />
directives, requires significant ef<strong>for</strong>ts towards the upgrading<br />
<strong>and</strong> construction of new environmental facilities in water <strong>and</strong> waste that will entail<br />
significant public <strong>and</strong> private costs representing more than 2 to 3 percent<br />
of the countries’ GDP.<br />
• Compliance will eventually lead to a range of benefits linked to improved health<br />
<strong>and</strong> a better living environment.
BOX 11: Main costs arising in relation to legislation in the air quality sector<br />
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1. Establishing <strong>and</strong> maintaining a network of air quality monitoring stations <strong>and</strong> associated quality assurance<br />
equipment, <strong>and</strong> reporting the monitoring results. These costs will be borne by the central government.<br />
2. Preparing emissions inventories of greenhouse gases <strong>and</strong> pollutants that significantly affect air quality.<br />
These costs will be borne by the central government.<br />
3. Preparing plans <strong>and</strong> programmes to achieve compliance with ambient air quality limits. These costs will<br />
be borne by the central government.<br />
4. Compliance with emission limits <strong>and</strong> technical requirements under the directives, or the implementation<br />
of plans <strong>and</strong> programmes designed to improve ambient air quality. These costs will be borne by the polluters<br />
themselves (industry, householders, motorists etc.).<br />
5. Staff training. Without suitably trained staff, systems <strong>for</strong> air quality monitoring, modelling, management, planning,<br />
<strong>and</strong> regulation <strong>and</strong> en<strong>for</strong>cement cannot be effectively implemented. It is important to ensure that adequate<br />
budgets are provided to enable the responsible institutions to per<strong>for</strong>m their functions effectively.<br />
Source: REC <strong>and</strong> Umweltbundesamt GmbH, 2008<br />
BOX 12: Cost of implementing the IPPC Directive in the <strong>for</strong>mer Yugoslav Republic of Macedonia<br />
In order to achieve compliance with the IPPC Directive, EUR 572 million investments <strong>and</strong> EUR 39 million annual<br />
operating costs have to be covered by industry (investment <strong>and</strong> operating costs in abatement systems), the Ministry<br />
of Environment <strong>and</strong> Physical Planning, <strong>and</strong> the municipalities (mainly training, administration <strong>and</strong> staff costs).<br />
(National <strong>Environmental</strong> Investment Strategy, 2009)<br />
TABLE 14: Indicative estimates of investment outlays <strong>for</strong> the air sector<br />
BENEFIT TYPE AIR<br />
Croatia Estimated investment needs up to 2011 are EUR 3.2 million. Of this, EUR 2 million are allocated to<br />
air quality directives; EUR 0.7 million to the IPPC Directive; <strong>and</strong> EUR 0.5 million to the LCP Directive.<br />
FYR Estimated investment needs between 2007 <strong>and</strong> 2011 are EUR 1.127 billion. Of this, EUR 5 million<br />
Macedonia are allocated to air quality directives; EUR 572 million to the IPPC Directive; <strong>and</strong> EUR 550 million<br />
to the LCP Directive.<br />
Kosovo (as defined<br />
under UNSCR 1244)<br />
Estimated investment needs between 2009 <strong>and</strong> 2012 are EUR 1.075 million.<br />
Montenegro Estimated investment needs up to 2012 are EUR 12.96 million.<br />
Source: REC survey, 2009<br />
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Chapter 5<br />
National strategic <strong>and</strong><br />
institutional framework<br />
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Update on progress<br />
in national environmental legislation<br />
One of the preconditions <strong>for</strong> developing environmental infrastructure is to have<br />
in place legislation of the appropriate quality. Over the past few years, SEE countries<br />
have made progress in drafting <strong>and</strong> adopting new laws that follow the requirements<br />
of the EU directives. The basic elements of the legislative structure are<br />
in place, <strong>and</strong> work on drafting secondary legislation is ongoing in all countries. In<br />
general, despite the progress achieved, considerable ef<strong>for</strong>ts are needed in the <strong>for</strong>thcoming<br />
period in order to meet the requirements of the EU environmental acquis.<br />
The first challenge is related to the further drafting <strong>and</strong> adoption of national legislation<br />
<strong>and</strong> strategies transposing the EU acquis. Once the legislative framework<br />
is in place, en<strong>for</strong>cement <strong>and</strong> compliance remain the biggest challenges.<br />
Below is an overview of the most significant developments with respect to the<br />
legislative <strong>and</strong> strategic framework in SEE countries since 2006. The in<strong>for</strong>mation<br />
builds on data collected during the course of PEIP implementation <strong>and</strong> has been<br />
cross-checked with the EC progress reports from 2009 <strong>for</strong> the c<strong>and</strong>idate <strong>and</strong> potential<br />
c<strong>and</strong>idate countries. 9 A list of strategic documents providing guidance <strong>for</strong><br />
infrastructure investment in the water <strong>and</strong> waste sectors in SEE countries can be<br />
found in Annex 3.<br />
Overview of environmental legislative<br />
<strong>and</strong> strategic developments in SEE<br />
In Albania, preparations in the field of environment are advancing slowly <strong>and</strong><br />
remain at an early stage <strong>for</strong> a number of sectors. The new draft law on environmental<br />
protection, incorporating a number of important directives such as the<br />
IPPC, LCP <strong>and</strong> Water Framework Directives, has not yet been adopted (EC SEC<br />
[2009] 1337). The Crosscutting Strategy <strong>for</strong> the Environment was adopted in 2007<br />
<strong>and</strong> sets out the government’s policies in the field of environmental protection.<br />
The strategy is the first environmental strategy document adopted at national level.<br />
It <strong>for</strong>esees the steps necessary to achieve the approximation of the legal framework<br />
in the light of European integration, as well as measures <strong>for</strong> transferring the administration<br />
of natural resources to the community. The project “Implementation<br />
of the national plan <strong>for</strong> the approximation of environmental legislation” (August<br />
2008 to November 2010), funded by EU CARDS 2006, is expected to improve<br />
legislation in the water <strong>and</strong> waste sectors. In general, it can be concluded that there<br />
have been some positive legislative developments but that implementation <strong>and</strong> en<strong>for</strong>cement<br />
remain weak (EC SEC[2009] 1337).<br />
The water sector has seen the most notable developments in recent years.<br />
Progress has been underpinned by the adoption of the Re<strong>for</strong>m of the Water Utilities<br />
in July 2008. Developments related to the water re<strong>for</strong>m are aligned with EU<br />
water policy <strong>and</strong> are aimed at decentralisation, privatisation <strong>and</strong> full cost recovery<br />
operations. The re<strong>for</strong>m has led to the improvement of existing strategies <strong>and</strong><br />
will lead to the development of new policies. On the legislative side, the law on<br />
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the regulatory framework in the water supply <strong>and</strong> wastewater administration sector<br />
was adopted in 2008 <strong>and</strong> it is expected that the amended version of the National<br />
Water Strategy of 2003 will be adopted in 2010. Implementing legislation<br />
<strong>and</strong> action plans <strong>for</strong> legislative approximation to the Water Framework Directive<br />
<strong>and</strong> the Nitrates <strong>and</strong> Urban Waste Water Treatment Directives are pending<br />
adoption (EC SEC [2009] 1337).<br />
There is still a need to improve the legislative <strong>and</strong> strategic framework in the<br />
solid waste sector. Limited progress has been made on developing the Solid Waste<br />
Management Strategy, which is one of the bottlenecks to the improvement of waste<br />
management systems (waste collection, treatment services <strong>and</strong> final sanitary l<strong>and</strong>filling).<br />
The National Waste Management Plan is expected to be adopted in 2010.<br />
Although the government has earmarked a satisfactory budget <strong>for</strong> the waste sector,<br />
the need <strong>for</strong> good planning <strong>and</strong> <strong>for</strong> efficient policies <strong>and</strong> strategies is an immediate<br />
priority in order to make use of available EU funds <strong>and</strong> to invest efficiently.<br />
In Bosnia <strong>and</strong> Herzegovina, a state-level environment law ensuring harmonised<br />
countrywide environmental protection has not yet been adopted. The<br />
draft law will be presented in June 2010. The <strong>Environmental</strong> Law will define the<br />
establishment of the Environment Agency of Bosnia <strong>and</strong> Herzegovina. The preparation<br />
of accompanying strategies <strong>and</strong> secondary legislation is in process in both entities.<br />
Republika Srpska is currently preparing the Nature Protection Strategy <strong>and</strong><br />
the Air Protection Strategy. The Federation of Bosnia <strong>and</strong> Herzegovina has completed<br />
the preparation of the Federal Strategy <strong>for</strong> <strong>Environmental</strong> Protection comprising<br />
four separate strategies — on nature protection, air protection, waste<br />
management <strong>and</strong> water management. The strategy is expected to be adopted by<br />
the end of 2009. According to the EC progress report, the transposition <strong>and</strong> implementation<br />
of the acquis in the field of horizontal legislation requires considerable<br />
improvement. The implementation of environmental legislation remains a<br />
concern <strong>and</strong> the integration of environmental aspects in other sectors remains weak<br />
(EC SEC [2009] 1338).<br />
In Bosnia <strong>and</strong> Herzegovina, the main developments have been registered in the<br />
water sector. The implementation of the Water Framework Directive has begun via<br />
the entity water laws (in the Federation in 2006, <strong>and</strong> in Republika Srpska in 2006).<br />
The adopted water laws envisage the greater involvement of local government units<br />
in project identification <strong>and</strong> preparation activities. Implementing legislation has<br />
been adopted <strong>for</strong> water laws <strong>and</strong> water charges, <strong>and</strong> <strong>for</strong> harmful <strong>and</strong> dangerous<br />
substances <strong>and</strong> their maximum levels in surface waters. Water agencies have been<br />
operational in the Federation of Bosnia <strong>and</strong> Herzegovina since January 2008. Agencies<br />
are still to be established in Republika Srpska: two agencies are planned in Bijeljina<br />
<strong>and</strong> Trebinje. The adoption of the Water Management Strategy in the<br />
Federation is expected at the beginning of 2010 (EC SEC [2009] 1338).<br />
The Solid Waste Management Strategy in Bosnia <strong>and</strong> Herzegovina, developed<br />
through an EU/Phare project, was adopted in 2000. The legislative framework in the<br />
waste sector is incomplete, which creates an obstacle to the development of physical<br />
infrastructure. Little progress has there<strong>for</strong>e been achieved in the construction of regional<br />
sanitary l<strong>and</strong>fills <strong>and</strong> in the rehabilitation <strong>and</strong> closure of unregulated l<strong>and</strong>fills.
BOX 13: Planning hierarchy in Croatia<br />
There has been some progress in the adoption of implementing regulations with respect<br />
to waste products that can no longer be disposed of in l<strong>and</strong>fills without pre-treatment<br />
(such as medical waste). However, no progress has been made in relation to rules<br />
or regulations governing the system <strong>for</strong> the recycling <strong>and</strong> recovery of priority waste<br />
streams, such as packaging, motor oil <strong>and</strong> tyres (EC SEC [2009] 1338).<br />
Croatia has made significant ef<strong>for</strong>ts to harmonise its national legislation with<br />
the EU environmental acquis. Several acts have been passed in the air, water <strong>and</strong><br />
waste sectors, <strong>and</strong> strategic documents have been drawn up. The National Strategy<br />
<strong>for</strong> Sustainable Development was adopted in 2009.<br />
The Act on Waters <strong>and</strong> the Act on Water Management Financing, which will<br />
constitute the primary legislation <strong>for</strong> water management, have not yet been enacted.<br />
This is hampering the <strong>for</strong>eseen restructuring of the sector <strong>and</strong> is slowing<br />
down the transposition process. The existing versions of both acts are from 2005<br />
<strong>and</strong> are currently being amended. In addition to these two acts, water management<br />
in Croatia is regulated by approximately 40 subordinate acts. Implementing legislation<br />
in relation to hazardous substances in waters <strong>and</strong> wastewater has been enacted.<br />
The Water Management Strategy was adopted in 2008. Despite this<br />
progress, considerable ef<strong>for</strong>ts will be needed to further align with <strong>and</strong> implement<br />
the acquis in the water, industrial pollution control <strong>and</strong> risk management, climate<br />
change <strong>and</strong> horizontal sectors. Monitoring <strong>and</strong> reporting activities need to be improved<br />
(EC SEC [2009] 1333).<br />
Implementing legislation has been adopted on waste from extractive industries<br />
<strong>and</strong> the management of polychlorinated biphenyls (PCB) <strong>and</strong> polychlorinated terphenyls<br />
(PCT). Amending legislation on the classification of waste <strong>and</strong> on the supervision<br />
of transboundary movements of waste has also been adopted (EC SEC<br />
[2009] 1333). The Waste Management Law was adopted in 2005 (amended in<br />
2006) <strong>and</strong> the complementary National Waste Management Strategy (NWMS)<br />
in 2005. The National Waste Management Plan (NWMP) <strong>for</strong> the period 2007 to<br />
2015 was adopted in 2007. Sustained ef<strong>for</strong>ts are needed towards the remediation<br />
of existing l<strong>and</strong>fills <strong>and</strong> hotspots <strong>and</strong> the further establishment of systems <strong>for</strong> the<br />
collection <strong>and</strong> management of different categories of waste (EC SEC [2009] 1333).<br />
Kosovo (as defined under UNSCR 1244) is at an early stage in terms of alignment<br />
with European environmental st<strong>and</strong>ards. However, progress has been<br />
achieved in both the horizontal <strong>and</strong> vertical legislative framework in the water,<br />
waste <strong>and</strong> air sectors. The new draft Law on <strong>Environmental</strong> Protection was<br />
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• Waste Management Strategy of the Republic of Croatia (Official Gazette, No. 130/05) — 2005.<br />
• Waste Management Plan of the Republic of Croatia <strong>for</strong> the period 2007 to 2015 (Official Gazette, No. 85/07)<br />
— June 2007.<br />
• According to the Waste Management Plan <strong>and</strong> obligations arising from the Waste Law (Official Gazette,<br />
No. 178/04, 111/06, 60/08), 21 counties prepared draft regional waste management plans in 2008.<br />
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adopted in 2009, <strong>and</strong> horizontal laws on EIA, SEA <strong>and</strong> IPPC were adopted in the<br />
first half of 2009. The Kosovo <strong>Environmental</strong> Action Plan (KEAP) 2006–2010<br />
(2006) is aimed at the gradual improvement of the environmental situation <strong>and</strong><br />
the improvement of public health in general. The <strong>Environmental</strong> Protection<br />
Agency has been operational since 2007.<br />
The Law on Water was adopted in 2004. The Wastewater Treatment Strategy<br />
was adopted the same year. There has been no progress in the establishment of river<br />
basin authorities, envisaged by the Water Law. The Water Law provides <strong>for</strong> the establishment<br />
of a river basin authority that will be responsible <strong>for</strong> water resource<br />
management in the territory of the river basins. There is currently no national water<br />
management strategy.<br />
Water management is a key element in the <strong>Environmental</strong> Action Plan, given the<br />
growing scarcity of water in Kosovo (as defined under UNSCR 1244) <strong>and</strong> the region.<br />
In the KEAP, the construction of wastewater treatment plants is listed as a priority.<br />
The most important developments in the environmental sector in Kosovo (as<br />
defined under UNSCR 1244) have been achieved in the waste sector, although<br />
there is still a mixture of competencies between the Ministry of Environment <strong>and</strong><br />
Spatial Planning (MESP) <strong>and</strong> the Water <strong>and</strong> Waste Regulatory Office (WWRO).<br />
The Law on Waste Management <strong>and</strong> Disposal (2006) was enacted along with<br />
a number of pieces of secondary legislation covering construction <strong>and</strong> demolition<br />
waste; used batteries <strong>and</strong> accumulators; end-of-life vehicles; packaging waste; the<br />
competencies of the owners <strong>and</strong> operators of waste treatment facilities; the administration<br />
of waste l<strong>and</strong>fills; hazardous waste; waste electrical <strong>and</strong> electronic<br />
equipment; as well as medical products <strong>and</strong> waste. The Administrative Instruction<br />
on Conditions <strong>for</strong> the Designation of the Location <strong>and</strong> Construction of L<strong>and</strong>fills<br />
was approved in January 2009. The Draft Administrative Instruction on Licences<br />
<strong>for</strong> Waste Administration is expected to be adopted by the end of 2009 <strong>and</strong> will<br />
regulate the duties <strong>and</strong> responsibilities of the licensing authorities. The National<br />
Waste Management Strategy is being prepared <strong>and</strong> should be finalised in 2009.<br />
In the <strong>for</strong>mer Yugoslav Republic of Macedonia, the basic elements of the legislative<br />
framework are in place. A number of legal documents have been adopted<br />
<strong>and</strong>/or amended in compliance with the EU acquis. After passing the horizontal<br />
<strong>and</strong> vertical laws, the most intensive drafting of bylaws is taking place <strong>for</strong> the waste<br />
sector, <strong>and</strong> partially in the air, noise <strong>and</strong> water sectors. The strategic framework is<br />
well developed, with only a few gaps remaining<br />
The National Strategy <strong>for</strong> Sustainable Development (NSSD) is expected to be<br />
approved in 2009. The National <strong>Environmental</strong> Investment Strategy (NEIS),<br />
which was adopted in April 2009, sets clear national priorities, streamlining the<br />
available national funds <strong>and</strong> leveraging international financing sources towards<br />
solving priority environmental problems.<br />
Following the adoption of the new Law on Water, the major challenge is to establish<br />
an integrated water management approach <strong>and</strong> to overcome barriers resulting<br />
from the inherited institutional disparities. Activities will mostly comprise<br />
the adoption of the approximated laws <strong>and</strong> the transfer of competencies from the
Ministry of Agriculture, Forestry <strong>and</strong> Water Economy (MAFWE) <strong>and</strong> the Ministry<br />
of Transport <strong>and</strong> Communications (MTC) to the Ministry of Environment<br />
<strong>and</strong> Physical Planning (MEPP).<br />
The water strategy <strong>and</strong> respective river basin management plans must be put in<br />
place as an important prerequisite <strong>for</strong> the planning <strong>and</strong> further re<strong>for</strong>m of existing<br />
institutions, as well as <strong>for</strong> the creation of new institutions (e.g. river basin management<br />
bodies). A national strategy on water management is currently being developed<br />
<strong>and</strong> is due to be completed by the middle of 2010. Transposition ef<strong>for</strong>ts<br />
need to be stepped up. No progress has as yet been achieved in applying the polluter<br />
pays principle (EC SEC [2009]1335).<br />
Amendments to the Waste Management Law have been enacted, including<br />
provisions on sanctions <strong>and</strong> on the level of fines (EC SEC [2009] 1335). The most<br />
important regulation to have been put into effect recently is the Ordinance on the<br />
L<strong>and</strong>filling of Waste, which regulates disposal st<strong>and</strong>ards. With the en<strong>for</strong>cement<br />
of this regulation, the gradual closure of non-compliant l<strong>and</strong>fills is <strong>for</strong>eseen, accompanied<br />
by the provision of additional l<strong>and</strong>fill capacity through the construction<br />
of regional sanitary l<strong>and</strong>fills.<br />
Sub-laws on hazardous waste management (OGRM No. 15/2008) have been<br />
adopted. One obstacle to the implementation of these regulations is the absence of<br />
a suitable institutional structure, even though it is required by the Law on Waste<br />
Management. Another area that has recently been covered by secondary legislation<br />
is the h<strong>and</strong>ling of healthcare waste (OGRM No. 146/2007).<br />
The National Waste Management Strategy (2008–2020), adopted in April<br />
2008, represents the basis <strong>for</strong> the preparation <strong>and</strong> implementation of an integrated<br />
<strong>and</strong> cost-effective waste management system.<br />
In Montenegro, activities have been carried out since May 2006 in relation to<br />
the ratification of international conventions in the environmental sector. The process<br />
of harmonising national laws with the relevant EU directives was given additional<br />
emphasis after November 2007 <strong>and</strong> a set of new laws was adopted, <strong>for</strong> example on<br />
EIA, SEA, air quality, waste management, water management <strong>and</strong> industrial pollution<br />
control. Harmonisation in these areas is continuing through the adoption of<br />
secondary legislation, <strong>and</strong> particular attention will be dedicated to areas where harmonisation<br />
remains at a low level. The Law on Environment was adopted in July<br />
2008 <strong>and</strong> was followed by the establishment of the <strong>Environmental</strong> Protection<br />
Agency. The National Programme <strong>for</strong> Integration into the EU <strong>for</strong> 2008 to 2012<br />
has been adopted. It includes a chapter on the environment (covering issues such as<br />
horizontal legislation, air quality <strong>and</strong> climate change, waste management, water<br />
management etc.). The government adopted a national environmental policy setting<br />
out national priorities <strong>and</strong> addressing cross-cutting issues, such as the need to bring<br />
gradually all environmental protection issues together under a single ministry. According<br />
to the EC progress report, Montenegro has made some progress on legislative<br />
alignment with European st<strong>and</strong>ards (EC SEC [2009] 1336).<br />
The Law on Waters regulates the legal status <strong>and</strong> integrated management of waters,<br />
shore l<strong>and</strong> <strong>and</strong> water-related facilities. Funds <strong>for</strong> financing water management<br />
operations will be provided in accordance with the Law on the Financing of Waters,<br />
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which is in the drafting phase. The key strategic documents that provide guidance <strong>for</strong><br />
the development of water supply <strong>and</strong> sewage facilities <strong>and</strong> wastewater treatment plants<br />
include master plans <strong>for</strong> wastewater drainage <strong>and</strong> treatment <strong>for</strong> the southern, <strong>and</strong> <strong>for</strong><br />
the central <strong>and</strong> northern regions respectively (2004, 2005); <strong>and</strong> master plans <strong>for</strong> water<br />
supply (2006). Legislation in the area of water management will be harmonised with<br />
the EU acquis through the adoption of new secondary legislation. Alignment with<br />
European st<strong>and</strong>ards needs to be improved substantially <strong>and</strong> further ef<strong>for</strong>ts are required<br />
in order to improve implementation <strong>and</strong> en<strong>for</strong>cement (EC SEC [2009] 1336).<br />
The most significant progress has been observed in the waste sector. The Law<br />
on Waste Management (2008) represents the legislative framework in the field of<br />
waste management. Local self-government units will develop local waste management<br />
plans based on the Republic Waste Management Plan. The law introduces innovations<br />
in waste management practices, as local governments are obliged to<br />
comply with requirements on selective waste collection, waste disposal in sanitary<br />
l<strong>and</strong>fills <strong>and</strong> waste treatment in accordance with EU st<strong>and</strong>ards. Financial <strong>and</strong> administrative<br />
limitations have delayed the implementation of the Waste Management<br />
Law from November 1, 2008 to January 1, 2010 (EC SEC [2009] 1336).<br />
The key documents that set the strategic directions <strong>for</strong> activities in waste management<br />
<strong>and</strong> provide <strong>for</strong> integrated regulation are the National Waste Management<br />
Policy (2004) <strong>and</strong> the <strong>Strategic</strong> Master Plan <strong>for</strong> Waste Management at Republic<br />
Level (2005). Developments can be seen in the implementation of the <strong>Strategic</strong><br />
Master Plan <strong>for</strong> Waste Management, as the preparation of project documentation<br />
<strong>for</strong> identified priority projects has been initiated. According to the EC progress report,<br />
alignment with European st<strong>and</strong>ards needs to be considerably improved <strong>and</strong><br />
accelerated, in particular concerning the L<strong>and</strong>fill Directive <strong>and</strong> the Waste Shipments<br />
Regulation (EC SEC [2009] 1336).<br />
There was little progress in the adoption of environmental laws in Serbia until<br />
May 2009, when a set of 16 environmental laws was adopted (amendments, new<br />
laws <strong>and</strong> regulations). The adopted laws are aimed at achieving harmony with EU<br />
regulations, <strong>and</strong> at introducing stricter penal policies. Among the laws adopted<br />
were the Law on <strong>Environmental</strong> Protection, the Law on Waste Management <strong>and</strong><br />
the Law on Packaging <strong>and</strong> Packaging Waste. A National Sustainable Development<br />
Strategy (NSDS) was adopted in May 2008. It is structured around three pillars:<br />
knowledge-based sustainability; socio-economic conditions; <strong>and</strong> the environment<br />
<strong>and</strong> natural resources. Legislation en<strong>for</strong>cement at all levels has still to be ensured.<br />
Progress in the area of water quality is lagging behind <strong>and</strong> there is no legal or<br />
institutional framework in place (EC SEC [2009] 1339). There is a lack of longterm<br />
planning <strong>for</strong> the water sector, <strong>and</strong> there are currently no appropriate strategies<br />
<strong>for</strong> preparing <strong>and</strong> implementing water infrastructure investment projects at any<br />
level (national, regional, local).<br />
The new Water Act (last amended in 1996), which introduces new instruments<br />
<strong>for</strong> the financing of the water sector, including appropriate tariffs, is currently<br />
being drafted <strong>and</strong> had not been adopted as of the date of this publication.<br />
The draft of the new Water Act will be harmonised with EU directives as well as<br />
with relevant national legislation.
The current Water Management Strategy was prepared in 1991 <strong>and</strong> adopted<br />
in 1996, <strong>and</strong> is not in compliance with the EU water acquis. The future strategy <strong>for</strong><br />
the development of the water sector should define the reorganisation of the water<br />
sector in order to achieve long-term sustainable water management. Due to the<br />
then existing economic conditions, measures from the 2001–2005 mid-term plan<br />
<strong>for</strong> the water sector have not been implemented, nor has the mid-term plan <strong>for</strong><br />
2006–2010 been adopted.<br />
Progress can be noted with the adoption of the Law on Waste Management<br />
(2009) that provides <strong>for</strong> the complete harmonisation of national legislation with<br />
the EU acquis. The law regulates waste planning <strong>and</strong> management, as well as measures<br />
<strong>and</strong> procedures <strong>for</strong> the collection, transportation, reuse, recycling, treatment<br />
<strong>and</strong> disposal of all types of waste, including communal, medical <strong>and</strong> hazardous<br />
waste, from the national level down to the local level. Laws on packaging <strong>and</strong> packaging<br />
waste have also been adopted (EC SEC [2009] 1339). Twenty pieces of secondary<br />
legislation are in the drafting or adoption stage. The National Waste<br />
Management Strategy from 2003 is currently being revisited <strong>and</strong> the draft will be<br />
submitted <strong>for</strong> adoption procedure in 2009. The new strategy will define possible<br />
locations <strong>for</strong> regional waste management centres.<br />
General observations<br />
• The countries of SEE have made significant progress in drafting <strong>and</strong> adopting<br />
new laws <strong>and</strong> strategies in accordance with the EU environmental acquis, but<br />
despite the progress achieved, considerable ef<strong>for</strong>ts are needed to meet the requirements<br />
of the acquis.<br />
• The transposition <strong>and</strong> implementation of EU environmental legislation is<br />
a precondition <strong>for</strong> unblocking environmental investments in SEE countries.<br />
• The development of an environmental investment strategy <strong>and</strong> of key policy<br />
objectives <strong>and</strong> priorities is essential to ensure effective financing <strong>for</strong> environmental<br />
infrastructure.<br />
En<strong>for</strong>cement of environmental legislation<br />
in the water <strong>and</strong> waste sectors<br />
The en<strong>for</strong>cement of EU water <strong>and</strong> waste legislation is just as important <strong>for</strong> unblocking<br />
environmental infrastructure investments as the adoption of targeted,<br />
quality laws <strong>and</strong> regulations. Only strong pressure on national institutions <strong>and</strong> local<br />
governments to comply with commitments in the water <strong>and</strong> waste sectors can generate<br />
sufficient political will <strong>for</strong> re<strong>for</strong>m. This pressure would come from strong <strong>and</strong><br />
independent national <strong>and</strong> local en<strong>for</strong>cement institutions — that is, environmental<br />
inspectorates. Economic operators <strong>and</strong> citizens should also feel the consequences<br />
of illegal actions. There is a close link between the en<strong>for</strong>cement of legislation <strong>and</strong><br />
its effect on the credibility <strong>and</strong> financial security of environmental infrastructure<br />
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investments. For example, it would be very difficult to proceed with the establishment<br />
of a regional solid waste management system <strong>and</strong> the construction of a new<br />
sanitary l<strong>and</strong>fill with fair gate fees if no corresponding sanctions are imposed on the<br />
illegal dumping of waste.<br />
The current capacities of environmental inspectorates are relatively weak in<br />
terms of the number of inspectors <strong>and</strong> their expertise in the EU environmental acquis.<br />
Particularly in periods of economic crisis, governments tend to cut staff numbers.<br />
Outst<strong>and</strong>ing agreements with the International Monetary Fund (IMF)<br />
represent an additional pressure to make staff cuts.<br />
The re<strong>for</strong>m of environmental inspection is an integral part of a wider regulatory<br />
<strong>and</strong> judicial re<strong>for</strong>m (World Bank, 2007). Even if the inspectorates are strong<br />
enough to spot environmental irregularities <strong>and</strong>, in more extreme cases, crimes, it<br />
is of little use if the link with the prosecution <strong>and</strong> the court is weak. This raises the<br />
entirely different issue of the need to enhance the environmental expertise of the<br />
police, the prosecution <strong>and</strong> the courts.<br />
In most SEE countries there is a separate water inspectorate, which raises problems<br />
especially in relation to the en<strong>for</strong>cement of the IPPC Directive, since it requires<br />
a multi-environmental media approach, joint inspections, <strong>and</strong> thus good<br />
coordination.<br />
Strengthened en<strong>for</strong>cement goes h<strong>and</strong> in h<strong>and</strong> with increased awareness — especially<br />
among citizens <strong>and</strong> businesses — of the importance of compliance with environmental<br />
legislation <strong>and</strong>, even more importantly, of the benefits of compliance.<br />
The modern <strong>and</strong> more successful approach to en<strong>for</strong>cement <strong>and</strong> compliance relies to<br />
a great extent on prevention, action, education <strong>and</strong> dialogue rather than punishment.<br />
En<strong>for</strong>cement methods can also be combined with incentives, defined as the<br />
conscious use of rewards <strong>and</strong> penalties to encourage good per<strong>for</strong>mance. Non-binding<br />
mechanisms such as economic incentives to stimulate certain behaviour can also<br />
be used in the <strong>for</strong>m of state subsidies, tax relief or lowered insurance premiums.<br />
Enhanced en<strong>for</strong>cement is inseparable from strong monitoring <strong>and</strong> reporting<br />
systems, which, un<strong>for</strong>tunately, are lacking in SEE countries, where there is much<br />
work to be done in this respect. This lack of monitoring <strong>and</strong> reporting systems ties<br />
the h<strong>and</strong>s of inspectors <strong>and</strong> decreases the efficiency of their work.<br />
Since 2001, the REC has been the secretariat of a network of environmental inspectors<br />
in SEE. Between 2001 <strong>and</strong> 2005, the network was known as the Balkan <strong>Environmental</strong><br />
Regulatory <strong>and</strong> En<strong>for</strong>cement Network (BERCEN). In 2005, BERCEN<br />
was replaced by the <strong>Environmental</strong> Compliance <strong>and</strong> En<strong>for</strong>cement Network <strong>for</strong> Accession<br />
(ECENA). BERCEN <strong>and</strong> ECENA have been addressing the above issues <strong>for</strong><br />
the past eight years through trainings, exchange programmes <strong>and</strong> publications.<br />
For many years there has been a debate in Europe regarding the criminalisation<br />
of certain environmental offences. In 2008, the European Commission passed an<br />
important piece of legislation in this direction, which is presented in Box 15.
General observations<br />
• The en<strong>for</strong>cement of EU water <strong>and</strong> waste legislation is just as important <strong>for</strong> unblocking<br />
environmental infrastructure investments as the adoption <strong>and</strong> transposition<br />
of targeted, quality laws <strong>and</strong> regulations.<br />
• There is a low level of awareness among citizens <strong>and</strong> businesses of the importance<br />
of compliance with environmental legislation <strong>and</strong>, even more importantly,<br />
of the benefits of such compliance.<br />
• The inspection culture in SEE is predominantly focused on punishment rather<br />
than prevention, action, education <strong>and</strong> dialogue.<br />
• The current capacities of inspectorates are relatively weak in terms of numbers,<br />
knowledge <strong>and</strong> equipment. The police, prosecution <strong>and</strong> courts have little environmental<br />
expertise. The re<strong>for</strong>m of environmental inspection is an integral<br />
part of a wider regulatory <strong>and</strong> judicial re<strong>for</strong>m.<br />
• In many cases, the en<strong>for</strong>cement <strong>and</strong> regulatory functions of the administration<br />
are not divided.<br />
• In most SEE countries there is a separate water inspectorate, which raises problems<br />
especially with respect to the en<strong>for</strong>cement of the IPPC Directive.<br />
• Companies lack strong monitoring <strong>and</strong> reporting systems, which reduces the efficiency<br />
of the inspectors’ work.<br />
<strong>Environmental</strong> institutions<br />
Human resources capacity<br />
The current capacity of environmental institutions (ministries, agencies etc.) will be<br />
insufficient <strong>for</strong> the administration of all the requirements arising from the adoption of<br />
the acquis. The increasing volume of environmental legislation will <strong>for</strong>ce governments<br />
to alter human resource capacities accordingly, or face understaffing. At the same time,<br />
it is highly probable that ministries of finance will exert pressure in the opposite direction<br />
<strong>and</strong> call <strong>for</strong> staff cuts due to budgetary constraints, agreements with IFIs etc.<br />
One of the mistakes made in CEE countries during the EU integration process<br />
was the lack of proper human resources planning linked to the requirements of the<br />
EU acquis. The availability of environmental experts in general, <strong>and</strong> of environmental<br />
investment experts in particular, is of the utmost importance <strong>and</strong> governments<br />
should adapt the educational system (including university programmes) to the new situation.<br />
Current staff should also receive training on the new environmental acquis.<br />
Figure 7 illustrates the response of Slovenia to the human resources issue in the<br />
pre-accession <strong>and</strong> post-accession periods.<br />
In SEE countries there is already an awareness of the institutional challenges,<br />
<strong>and</strong> the establishment of IPA implementation bodies is an example. This is not<br />
a straight<strong>for</strong>ward process <strong>and</strong> institutional capacity is a serious problem that has to<br />
be tackled in a targeted way.<br />
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110<br />
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BOX 14: <strong>Environmental</strong> Compliance <strong>and</strong> En<strong>for</strong>cement Network <strong>for</strong> Accession (ECENA)<br />
ECENA was established by high-level officials from SEE environmental ministries in March 2005. It is an in<strong>for</strong>mal<br />
network of environmental authorities from the member states, c<strong>and</strong>idate countries <strong>and</strong> potential c<strong>and</strong>idates. The<br />
members of ECENA are Albania, Bosnia <strong>and</strong> Herzegovina, Bulgaria, Croatia, Kosovo (as defined under UNSCR 1244),<br />
the <strong>for</strong>mer Yugoslav Republic of Macedonia, Montenegro, Serbia <strong>and</strong> Turkey. The European Commission is also<br />
a member of ECENA.<br />
The mission of ECENA is to protect the environment in its member countries through the effective transposition,<br />
implementation <strong>and</strong> en<strong>for</strong>cement of EU environmental legislation by increasing the effectiveness of inspectorate<br />
bodies <strong>and</strong> promoting compliance with environmental requirements. ECENA builds on previous experiences gained<br />
through the activities of the Accession Countries Network <strong>for</strong> the Implementation <strong>and</strong> En<strong>for</strong>cement of <strong>Environmental</strong><br />
Law (AC IMPEL) <strong>and</strong> BERCEN.<br />
Further in<strong>for</strong>mation: www.ecena.org<br />
S T R AT E G I C M O V E S<br />
Local-level institutions will be increasingly faced with the obligation to implement<br />
a growing volume of legislation following the process of decentralisation.<br />
If human resources are not properly planned, local-level institutions will also suffer<br />
from a chronic lack of human capacities.<br />
Institutional fragmentation<br />
One of the weaknesses of environmental institutions in SEE is their high level of<br />
fragmentation — that is, competencies are scattered between several institutions that<br />
sometimes do not have good systems of communication with one another. This is a<br />
significant problem <strong>and</strong> leads to the overlapping of responsibilities <strong>and</strong> funding.<br />
From Figure 8 it is clear that SEE countries have a high level of fragmentation<br />
compared to CEE countries, which were <strong>for</strong>ced to streamline their institutions in<br />
the pre-accession period. For example, one of the most common re<strong>for</strong>ms in CEE<br />
was to move water-related competencies to the core environmental ministry, as<br />
happened in Hungary, Bulgaria, Slovakia <strong>and</strong> Romania.<br />
Fragmented competencies sometimes lead to unclear responsibilities: in some<br />
cases, important tasks fall between two institutions <strong>and</strong> as a result do not receive<br />
the necessary attention. For example, in the <strong>for</strong>mer Yugoslav Republic of Macedonia,<br />
hazardous waste management is not recognised within the competencies of<br />
the Ministry of Environment <strong>and</strong> Physical Planning because the industrial sector<br />
is under the responsibility of the Ministry of the Economy. Likewise, chemicals<br />
come under the responsibility of the Ministry of Health, while pesticides are the responsibility<br />
of the Ministry <strong>for</strong> Agriculture, Forestry <strong>and</strong> Water Economy.<br />
<strong>Environmental</strong> protection agencies<br />
One of the common approaches to separating regulatory functions from policy<br />
functions is to establish environmental protection agencies (EPAs). This can<br />
reduce the fragmentation of institutions, create stronger links to the reporting
BOX 15: <strong>Environmental</strong> Crime Directive<br />
structure; <strong>and</strong> promote communication between different levels of government,<br />
given that many regulatory functions have been decentralised (World Bank, 2007).<br />
The following SEE countries have recently established EPAs — Croatia, Serbia,<br />
Kosovo (as defined under UNSCR 1244) <strong>and</strong> Montenegro. In Albania, the<br />
Agency <strong>for</strong> Environment <strong>and</strong> Forestry was established in 2006.<br />
Communication <strong>and</strong> coordination<br />
Many of the environmental directives, including the water <strong>and</strong> waste directives,<br />
concern more than one institution, thus adequate systems of inter-institutional cooperation<br />
<strong>and</strong> coordination must be established. Coordination <strong>and</strong> communication<br />
between central <strong>and</strong> local levels of governance is also vital.<br />
Re<strong>for</strong>m of water <strong>and</strong> waste utilities<br />
Water <strong>and</strong> waste utility re<strong>for</strong>m should also be included among the institutional<br />
challenges since these are the main institutions to implement environmental infrastructure<br />
investments. The status <strong>and</strong> competency of a utility are directly linked<br />
to the success of any potential investment. Although a large proportion of the work<br />
must be carried out at the local level (since in most cases utilities are owned by the<br />
municipalities), the impulse <strong>for</strong> re<strong>for</strong>m <strong>and</strong> the principles of re<strong>for</strong>m should come<br />
from the central level. (For further discussion of utilities see Chapter 6.)<br />
<strong>Environmental</strong> funds<br />
The establishment of a specialised institution <strong>for</strong> environmental financing<br />
(i.e. an environmental fund) is one of the options to help solve institutional deficiency.<br />
This option has already been put into effect in Croatia, Serbia <strong>and</strong> Republika<br />
Srpska (Bosnia <strong>and</strong> Herzegovina), <strong>and</strong> there are plans <strong>for</strong> the<br />
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Directive 2008/99/EC on the protection of the environment through criminal law<br />
(minimum requirements to be implemented):<br />
• The directive lays down a list of environmental offences that must be considered criminal offences.<br />
• Offences should be subject to effective, proportionate <strong>and</strong> dissuasive criminal sanctions.<br />
• The directive sets only a minimum st<strong>and</strong>ard of environmental protection through criminal law. Member states<br />
are free to maintain or introduce more stringent protective measures.<br />
• Offences relevant to the current publication are:<br />
– the collection, transportation, recovery or disposal of waste, including the supervision of such operations<br />
<strong>and</strong> the aftercare of disposal sites, if they cause serious adverse consequences to people or nature; <strong>and</strong><br />
– the shipment of waste in a non-negligible quantity.<br />
Further in<strong>for</strong>mation: www.ecena.org<br />
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112<br />
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FIGURE 7: Staffing comparison to Slovenian Environment Ministry<br />
180<br />
150<br />
120<br />
90<br />
60<br />
30<br />
0<br />
Slovenia<br />
2004<br />
Source: World Bank, 2006<br />
S T R AT E G I C M O V E S<br />
Slovenia<br />
2006<br />
Serbia FYR<br />
Macedonia<br />
Albania Croatia Kosovo<br />
(under<br />
UNSCR<br />
1244)<br />
Bosnia Montenegro<br />
<strong>and</strong><br />
Herzegovina<br />
establishment of environmental funds in Montenegro. However, experiences<br />
from CEE are mixed, thus authorities should take particular care to create institutions<br />
with clear, targeted responsibilities that are well funded <strong>and</strong> politically independent.<br />
10 (For further details see Chapter 7.)<br />
Institutional responsibility in the water <strong>and</strong> waste sectors<br />
According to the EC progress report, ef<strong>for</strong>ts are still needed in Albania to<br />
strengthen the administrative capacity of all institutions involved in environmental<br />
policy making. Cooperation <strong>and</strong> coordination between institutions remain<br />
poor. Additional monitoring <strong>and</strong> inspection capacity is required at regional level<br />
(EC SEC [2009] 1337).<br />
The main responsibility <strong>for</strong> environmental policy at the national level belongs<br />
to the Ministry of Environment, Forestry <strong>and</strong> Water Administration (MoEFWA)<br />
<strong>and</strong> the Ministry of Public Works, Transport <strong>and</strong> Telecommunications<br />
(MoPWTT). The MoEFWA is also responsible <strong>for</strong> river basin management. The<br />
MoPWTT manages a capital investment programme that contributes to the development<br />
of communal environmental infrastructure, including waste sector infrastructure.<br />
The MoEFWA is in charge of developing strategies, drafting laws <strong>and</strong>
FIGURE 8: Institutions with environmental competencies<br />
Fragmentation index<br />
7<br />
6<br />
5<br />
4<br />
3<br />
2<br />
1<br />
0<br />
Pol<strong>and</strong><br />
Estonia<br />
Source: World Bank, 2006<br />
Latvia<br />
Czech<br />
Republic<br />
Hungary<br />
setting basic tariffs in the waste sector, while the MoPWTT is responsible <strong>for</strong> investments.<br />
The Ministry of the Economy, Trade <strong>and</strong> Energy (MoETE) drafts industrial<br />
waste management policy <strong>and</strong> collects statistics on the generation, recycling<br />
<strong>and</strong> disposal of industrial waste. The Ministry of Health bears responsibility <strong>for</strong><br />
medical waste. In cooperation with the Institute of Public Health (IPH) <strong>and</strong> the<br />
State Sanitary Inspectorate (SSI), the Ministry of Health is responsible <strong>for</strong> monitoring<br />
the quality of drinking water <strong>and</strong> bathing water.<br />
According to the existing legislation, the municipalities <strong>and</strong> regions are responsible<br />
<strong>for</strong> municipal waste management (collection, transportation, treatment<br />
<strong>and</strong> final disposal). They also bear the responsibility <strong>for</strong> preparing local <strong>and</strong> regional<br />
waste management plans, suggesting the appropriate location <strong>for</strong> l<strong>and</strong>fills<br />
in their territory <strong>and</strong> defining the fees. Municipalities can subcontract companies<br />
to per<strong>for</strong>m certain tasks within the waste management systems.<br />
Administrative capacity in the environment sector remains generally weak in<br />
Bosnia <strong>and</strong> Herzegovina. According to the EC, the human <strong>and</strong> technical capacities<br />
of the inspectorates are inadequate to ensure compliance with environmental<br />
legislation at entity, canton <strong>and</strong> local level (EC SEC [2009] 1338).<br />
Lithuania<br />
Romania<br />
Slovakia<br />
Kosovo (under<br />
UNSCR 1244)<br />
Slovenia<br />
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Montenegro<br />
Bulgaria<br />
Albania<br />
FYR Macedonia<br />
Bosnia <strong>and</strong><br />
Herzegovina<br />
Serbia<br />
Croatia<br />
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114<br />
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BOX 16: Institutions <strong>for</strong> IPA implementation in the <strong>for</strong>mer Yugoslav Republic of Macedonia<br />
For the first IPA period, starting in 2007, the division of roles <strong>for</strong> IPA implementation has been agreed <strong>and</strong> is set out<br />
in a series of documents, including operational agreements between the Ministry of Finance, the Ministry of Environment<br />
<strong>and</strong> Physical Planning (MEPP) <strong>and</strong> the Ministry of Transport <strong>and</strong> Communication <strong>for</strong> Component III (regional<br />
development). Some institutions are already in place <strong>and</strong> have started their work.<br />
In the MoEPP, a unit is <strong>for</strong>eseen with the primary role of implementing IPA projects in the environment sector, <strong>and</strong> in<br />
2008 only six persons were engaged <strong>for</strong> this unit. According to the National Plan <strong>for</strong> the Adoption of the Acquis<br />
(NPAA), this unit should engage 20 persons <strong>for</strong> the successful implementation of the projects. It is there<strong>for</strong>e clear that,<br />
in the current situation, the structure is insufficient <strong>for</strong> dealing with IPA projects; <strong>and</strong> accreditation is still missing. Following<br />
their recruitment, new staff members will require training <strong>and</strong> capacity building in order to prepare them <strong>for</strong><br />
their future duties. Sufficient time must there<strong>for</strong>e be planned <strong>for</strong> the starting phase.<br />
S T R AT E G I C M O V E S<br />
The Ministry of Foreign Trade <strong>and</strong> Economic Relations (MoFTER) <strong>and</strong> entity<br />
ministries are responsible <strong>for</strong> the environmental directives. More specifically, the<br />
ministries of health, the institutes <strong>for</strong> public health, the municipalities <strong>and</strong> the cantons<br />
are responsible <strong>for</strong> the implementation of the Drinking Water Directive.<br />
Waste management is h<strong>and</strong>led at both state <strong>and</strong> entity levels. Solid waste management<br />
laws applicable to each entity within Bosnia <strong>and</strong> Herzegovina are developed<br />
<strong>and</strong> approved at entity level. Ef<strong>for</strong>ts are made to harmonise legislation in the<br />
entities. At federal level, waste issues fall under the responsibility of MoFTER. Municipalities<br />
are responsible <strong>for</strong> organising waste management services, usually<br />
through the department of communal affairs. The municipalities have attempted<br />
to compensate <strong>for</strong> the weakness of the national legislation in the waste sector by en<strong>for</strong>cing<br />
local regulations on waste management.<br />
The Federal Ministry of Agriculture, Water Management <strong>and</strong> Forestry <strong>and</strong> the<br />
Federal Ministry of Physical Planning, Environment <strong>and</strong> Tourism are responsible<br />
<strong>for</strong> river basin management in the Federation of Bosnia <strong>and</strong> Herzegovina. In Republika<br />
Srpska, this responsibility belongs to the Ministry of Agriculture, Forestry<br />
<strong>and</strong> Water Management.<br />
There has been overall progress in Croatia in terms of administrative capacity.<br />
However, the number of staff recruited is generally lower than is required to set up<br />
adequate administrative capacities at national, regional <strong>and</strong> local level. Improved<br />
coordination mechanisms <strong>and</strong> decision-making procedures are needed, given the<br />
high level of fragmentation of environmental responsibilities across ministries <strong>and</strong><br />
public bodies (EC SEC [2009] 1333).<br />
In Croatia, the Ministry <strong>for</strong> <strong>Environmental</strong> Protection, Physical Planning <strong>and</strong><br />
Construction (MoEPPPC) is responsible <strong>for</strong> the waste sector at the national level.<br />
Two important bodies in relation to financing environmental infrastructure are<br />
the Croatian Environment Agency <strong>and</strong> the <strong>Environmental</strong> Protection <strong>and</strong> Energy<br />
Efficiency Fund (EPEEF), which assists the waste sector in the preparation of technical<br />
documentation <strong>and</strong> IPA applications.<br />
Responsibility <strong>for</strong> water management <strong>and</strong> <strong>for</strong> public water utilities is centralised<br />
under Croatian Waters, a governmental institution. The Ministry of <strong>Regional</strong> De-
velopment, Forestry <strong>and</strong> Water Management (MoRDFWM) issues concessions<br />
<strong>for</strong> water extraction. The Ministry of Agriculture, Fisheries <strong>and</strong> Rural Development<br />
is responsible <strong>for</strong> monitoring the quality of drinking water.<br />
The administrative structures <strong>for</strong> the environment in Kosovo (as defined<br />
under UNSCR 1244) suffer from a lack of resources. By way of illustration, the<br />
budget of the Ministry of Environment <strong>and</strong> Spatial Planning is the lowest of any<br />
ministry in Kosovo (as defined under UNSCR 1244), <strong>and</strong> there is a shortage of<br />
staff. Some responsibilities have been transferred to the municipal level, although<br />
municipalities often lack environmental officers <strong>and</strong> inspectors. Ef<strong>for</strong>ts have been<br />
made to improve coordination between bodies, in particular relating to the position<br />
of the <strong>Environmental</strong> Protection Agency (EC SEC [2009] 1333).<br />
The Water <strong>and</strong> Waste Regulatory Office (WWRO) was established in 2007<br />
<strong>and</strong> is the independent economic regulator <strong>for</strong> water <strong>and</strong> solid waste services. Its<br />
responsibilities include licensing public enterprises; setting <strong>and</strong> approving service<br />
tariffs <strong>for</strong> regulated services; monitoring <strong>and</strong> en<strong>for</strong>cing compliance with service<br />
st<strong>and</strong>ards <strong>for</strong> licensed service providers; supervising <strong>and</strong> en<strong>for</strong>cing the disconnection<br />
regime <strong>and</strong> unlawful connections; <strong>and</strong> establishing <strong>and</strong> supporting customers<br />
in each service area (a total of seven regions). The activities of the WWRO are financed<br />
through licence fees payable by licensed service providers.<br />
The Association of Water <strong>and</strong> Waste Companies of Kosovo (SHUKOS) promotes<br />
the joint interests of regional companies responsible <strong>for</strong> water supply <strong>and</strong><br />
sewerage services <strong>and</strong> provides operational assistance.<br />
The Ministry of Health, through the National Institute of Public Health, is responsible<br />
<strong>for</strong> reporting on drinking water quality. The Ministry of the Economy <strong>and</strong><br />
Finance, through the Policy <strong>and</strong> Monitoring Unit, monitors publicly owned enterprises<br />
in order to ensure the accountability <strong>and</strong> transparency of their operations. It is<br />
responsible <strong>for</strong> monitoring <strong>and</strong> en<strong>for</strong>cing drinking water quality st<strong>and</strong>ards.<br />
Administrative capacity in the <strong>for</strong>mer Yugoslav Republic of Macedonia <strong>for</strong> the<br />
implementation <strong>and</strong> en<strong>for</strong>cement of environmental legislation remains far from sufficient<br />
at both central <strong>and</strong> local levels. The situation is particularly critical <strong>for</strong> the inspectorates.<br />
Coordination among administrative bodies responsible <strong>for</strong> environmental<br />
issues is inefficient. The government adopted a plan to strengthen environmental management<br />
capacity at central <strong>and</strong> local levels <strong>for</strong> the period 2009 to 2014. However, the<br />
lack of financial assessment <strong>and</strong> the absence of systems <strong>for</strong> monitoring <strong>and</strong> evaluating<br />
implementation are a continuing challenge (EC SEC [2009] 1335).<br />
The overall process of environmental approximation is embedded in the Ministry<br />
of Environment <strong>and</strong> Physical Planning (MoEPP). Various departments within<br />
the ministry have competency in policy making; in<strong>for</strong>mation systems; regulation<br />
<strong>and</strong> st<strong>and</strong>ardisation; <strong>and</strong> inspection <strong>and</strong> supervision of the en<strong>for</strong>cement of laws<br />
<strong>and</strong> regulations in the area of environment.<br />
To implement environmental investments, continuous consultations <strong>and</strong> integrated<br />
actions must be carried out within the Ministry of Agriculture, Forestry <strong>and</strong><br />
Water Economy, the Ministry of Transport <strong>and</strong> Communications, the Ministry of<br />
Health, the Ministry of the Economy, <strong>and</strong> the Ministry of Finance. There is a lack<br />
of coordination among these institutions. As a result, there are overlapping invest-<br />
C H A P T E R 5<br />
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<br />
S T R AT E G I C M O V E S 115
116<br />
C H A P T E R 5<br />
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S T R AT E G I C M O V E S<br />
ment activities (e.g. at least three ministries finance water projects), while significant<br />
gaps exist in certain areas (hazardous waste management is not recognised as<br />
the responsibility of the MoEPP because the industrial sector is the responsibility<br />
of the Ministry of the Economy, chemicals are the responsibility of the Ministry of<br />
Health, <strong>and</strong> pesticides are the responsibility of the Ministry of Agriculture, Forestry<br />
<strong>and</strong> Water Economy).<br />
The competent authorities in water management issues are the Ministry of<br />
Agriculture, Forestry <strong>and</strong> Water Economy, the Ministry of Transport <strong>and</strong> Communications<br />
<strong>and</strong> the Ministry of Environment <strong>and</strong> Physical Planning. As of 2010,<br />
the MoEPP will be responsible <strong>for</strong> water protection issues <strong>and</strong> water inspection<br />
services in line with the new Water Act.<br />
As the MoEPP is currently preparing to take over the majority of water management<br />
functions in the near future (from 2010), it will be a major challenge to<br />
strengthen the human resources capacities of the ministry to take over water management<br />
tasks. The most critical issue will be the transfer of responsibilities (<strong>and</strong><br />
power) from the Ministry of Agriculture, Forestry <strong>and</strong> Water Economy.<br />
Further ef<strong>for</strong>ts are needed in Montenegro to strengthen the administrative capacity<br />
of all institutions involved in environmental policy making <strong>and</strong> en<strong>for</strong>cement.<br />
According to the EC progress report, the sharing of responsibility <strong>for</strong> the<br />
water sector between the Ministry of Spatial Planning <strong>and</strong> <strong>Environmental</strong> Protection<br />
(MoSPEP) <strong>and</strong> other ministries needs to be streamlined. Coordination between<br />
the bodies involved in environmental protection issues, particularly in<br />
inspection activities, needs to be improved (EC SEC [2009] 1336).<br />
The newly established Ministry of Spatial Planning <strong>and</strong> <strong>Environmental</strong> Protection<br />
(<strong>for</strong>merly the Ministry of Tourism <strong>and</strong> Environment) is the main institution<br />
responsible <strong>for</strong> waste management activities in Montenegro.<br />
Waste management activities are also regulated at the local level <strong>and</strong> are the responsibility<br />
of local self-governments. The collection, transportation <strong>and</strong> disposal<br />
of waste are organised within municipal public utility companies (PUCs). The<br />
MoSPEP Project Implementation Unit was established in 2008. Its main goals are<br />
to provide support to local self-governments <strong>for</strong> the preparation of project documentation,<br />
<strong>and</strong> to assist in securing financing from international organisations <strong>and</strong><br />
financial institutions. Also in 2008, permit issuing, inspection, monitoring <strong>and</strong> reporting<br />
functions were taken over by the newly established <strong>Environmental</strong> Protection<br />
Agency.<br />
The Directorate <strong>for</strong> Water within the Ministry of Agriculture, Forestry <strong>and</strong><br />
Water Management, <strong>and</strong> the State Hydro-meteorological Service are responsible<br />
<strong>for</strong> river basin management.<br />
According to the EC, institutional capacity <strong>and</strong> technical <strong>and</strong> human resources<br />
in Serbia remain insufficient, especially at the local level. Better coordination is<br />
needed with the central level, <strong>and</strong> greater attention will have to be given to en<strong>for</strong>cement<br />
(EC SEC [2009] 1339).<br />
The institutions responsible <strong>for</strong> waste management include the Ministry of Environment<br />
<strong>and</strong> Spatial Planning (MoESP), the Serbian Environment Protection
Agency (SEPA), the Environment Protection Fund, <strong>and</strong> the Recycling Agency.<br />
The Ministry of Agriculture, Forestry <strong>and</strong> Water Management, through its<br />
Water Directorate, has overall responsibility <strong>for</strong> the water sector. The Water Directorate<br />
assists the water sector in project preparation <strong>and</strong> IPA applications, finances<br />
technical assistance <strong>for</strong> project preparation <strong>and</strong> co-finances the actual<br />
construction of infrastructure. The Jaroslav Cerni Institute <strong>for</strong> the Development<br />
of Water Resources assists the Water Directorate by preparing baseline studies. The<br />
public company Srbija Vode is responsible <strong>for</strong> maintaining regional water infrastructure<br />
(flood management etc.) but not municipal infrastructure. The Ministry<br />
of Health is responsible <strong>for</strong> monitoring the quality of drinking water. The province<br />
of Vojvodina has its own analogous institutions. The municipalities are responsible<br />
<strong>for</strong> environmental management <strong>and</strong> inspection. The municipal public utility<br />
companies provide water supply <strong>and</strong> wastewater treatment services.<br />
A table showing institutions with environmental responsibilities can be<br />
found in Annex 1.<br />
General observations<br />
• The current capacities of environmental institutions (ministries, agencies etc.)<br />
may prove to be insufficient <strong>for</strong> the administration of all the requirements of the<br />
environmental acquis.<br />
• The experience of the new member states (EU-10) has shown the importance<br />
of proper human resources planning <strong>for</strong> institutions at central <strong>and</strong> local government<br />
levels to respond to the newly acquired environmental obligations.<br />
• <strong>Environmental</strong> institutions in SEE often suffer from a high level of fragmentation<br />
<strong>and</strong> are lacking adequate systems of communication with one another. This<br />
leads to an unclear division of competencies <strong>and</strong> responsibilities.<br />
• The level of institutional operational transparency <strong>and</strong> accountability at national<br />
<strong>and</strong> local levels is low.<br />
• One of the possible approaches to separating regulatory from policy functions<br />
is the establishment of environmental protection agencies.<br />
• <strong>Environmental</strong> funds are one option to address institutional deficiencies.<br />
However, their success depends on principles of transparency, autonomy <strong>and</strong><br />
accountability.<br />
C H A P T E R 5<br />
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S T R AT E G I C M O V E S 117
118<br />
S T R AT E G I C M O V E S
Chapter 6<br />
Water <strong>and</strong> waste utilities in SEE —<br />
Status <strong>and</strong> re<strong>for</strong>m<br />
S T R AT E G I C M O V E S 119
120<br />
S T R AT E G I C M O V E S
Introduction<br />
This chapter presents an overview of water <strong>and</strong> waste utilities, their operational<br />
efficiency, <strong>and</strong> their readiness <strong>for</strong> technical <strong>and</strong> organisational changes.<br />
Differences between countries with respect to utility re<strong>for</strong>m are relatively small.<br />
All countries are at the very beginning of the utility re<strong>for</strong>m process. The transfer of<br />
ownership from the state level to the local level has been completed (with the exception<br />
of Montenegro <strong>and</strong> Serbia).<br />
As a result of the decentralisation process, in most countries of the region responsibility<br />
<strong>for</strong> water services, solid waste services <strong>and</strong> sewage treatment falls<br />
squarely on the lowest self-governing municipal level.<br />
However, no significant ef<strong>for</strong>ts have been made to reorganise the public utilities<br />
into more efficient organisations that work according to sound economic principles.<br />
The public utility companies (PUCs) are burdened with obsolete<br />
infrastructure, leading to water <strong>and</strong> energy losses that increase their operational<br />
costs <strong>and</strong> decrease net income. Further inefficiencies stem from low tariffs <strong>and</strong> bill<br />
collection rates, overstaffing, <strong>and</strong> the absence of sound organisation <strong>and</strong> management<br />
inherited from the past. Without appropriate legislation, plans, strategies<br />
<strong>and</strong> support from the national level, the municipal PUCs are unable to improve<br />
their own status, organisation <strong>and</strong> efficiency, even where there is local-level political<br />
will to do so.<br />
In Croatia <strong>and</strong> Serbia, the national ministries (<strong>and</strong> in some cases funds) responsible<br />
<strong>for</strong> environment, water <strong>and</strong>/or infrastructure provide financial <strong>and</strong> technical<br />
assistance to the preparation of regional infrastructure projects <strong>and</strong> to<br />
construction. However, this financial <strong>and</strong> technical assistance is not accompanied<br />
by sufficient institutional assistance <strong>for</strong> the creation <strong>and</strong> development of the regional<br />
utility companies that should run these regional installations.<br />
Albania, Kosovo (as defined under UNSCR 1244) <strong>and</strong> Montenegro have made<br />
ef<strong>for</strong>ts to create regional companies 11 in a systematic way, while in Croatia <strong>and</strong> Serbia,<br />
regional companies are being established based on regional (waste management)<br />
infrastructure projects in the pipeline. Even though a systematic approach has the<br />
potential to achieve better results than a case-based approach, both groups of countries<br />
face great difficulties in establishing regional utility companies. The emerging<br />
regional utility companies are weak or virtually non-existent: they comprise one or<br />
two members of staff who, in most cases, do not have the required skills or leverage,<br />
<strong>and</strong> the municipal utility companies have not yet been integrated into them.<br />
In most SEE countries there are project preparation units/departments that belong<br />
to relevant ministries <strong>and</strong>/or environmental protection funds.<br />
The following two sections describe in greater detail the current state of infrastructure<br />
<strong>and</strong> the utility companies in each individual country.<br />
The current status of the water <strong>and</strong> waste utilities has a direct impact on the<br />
potential <strong>for</strong> investments in water <strong>and</strong> waste. The utilities’ political independence,<br />
adequate human resources capacity, sound organisational set-up <strong>and</strong> financial<br />
health are preconditions <strong>for</strong> successful investments: the water <strong>and</strong> waste utilities are<br />
the project proponents in any investments <strong>and</strong> must secure proper physical <strong>and</strong> fi-<br />
S T R AT E G I C M O V E S 121
122<br />
C H A P T E R 6<br />
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<br />
FIGURE 9: The “vicious” cycle of water supply <strong>and</strong> sewerage utilities<br />
WASTE MANAGEMENT CENTRE<br />
S T R AT E G I C M O V E S<br />
POOR OPERATIONAL<br />
EFFICIENCY<br />
DETERIORATED<br />
CLIMATE FOR<br />
PRIVATE SECTOR<br />
PARTICIPATION<br />
Source: REC, 2007<br />
LACK OF FINANCING<br />
SERVICE PERFORMANCE<br />
PROBLEMS<br />
POOR TARIFF COLLECTION<br />
AND COST RECOVERY<br />
LOW “BANKABILITY” OF MUNICIPAL UTILITY<br />
AND ITS INVESTMENT PROJECTS<br />
POOR MANAGEMENT<br />
PRACTICES<br />
WATER SERVICES<br />
DEMAND:<br />
CUSTOMER<br />
PERCEPTION,<br />
AFFORDABILITY<br />
AND POLITICAL<br />
ACCEPTABILITY<br />
nancial implementation of the projects. This section also presents an overview of<br />
the utility re<strong>for</strong>ms currently under way. Re<strong>for</strong>ms in most SEE countries are at a<br />
very early stage <strong>and</strong> there are a variety of approaches that will be described separately<br />
<strong>for</strong> the water <strong>and</strong> waste sectors.<br />
During 2008, the PEIP team conducted a survey regarding the status of re<strong>for</strong>ms<br />
<strong>and</strong> the status of infrastructure in the water <strong>and</strong> waste sectors in PEIP countries. In<br />
addition, in<strong>for</strong>mation from national PEIP workshops in Albania, Croatia, Montenegro<br />
<strong>and</strong> Serbia; individual interviews with key stakeholders; <strong>and</strong> already published<br />
national <strong>and</strong> regional reports by DABLAS (2006) <strong>and</strong> the World Bank<br />
(2006) have been used in order to provide an updated overview of the status of re<strong>for</strong>ms<br />
in the water <strong>and</strong> waste sectors.<br />
Status of utilities <strong>and</strong> status of re<strong>for</strong>ms<br />
in the water sector<br />
Water supply <strong>and</strong> wastewater services in SEE are traditionally the responsibility<br />
of municipalities. During recent re<strong>for</strong>ms, the ownership of facilities in most<br />
SEE countries has been transferred from the state level to the municipalities. In<br />
Montenegro, assets are still owned by the state. Most utility operations in the region
FIGURE 10: Number of water utilities in SEE countries<br />
160<br />
140<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
Source: REC survey, 2008<br />
Croatia FYR<br />
Macedonia<br />
are integrated in the municipal administration, thus the financial <strong>and</strong> operational<br />
status of the utilities tends not to be fully transparent, <strong>and</strong> decisions are politically<br />
influenced. The municipalities lack data on income, expenses, investment needs<br />
<strong>and</strong> quality of services. This greatly inhibits their chances of acquiring external capital<br />
funding <strong>for</strong> investment projects.<br />
The water utilities in all SEE countries face similar problems, with varying degrees<br />
of severity. These problems lead to low levels of operating-cost recovery —<br />
that is, the ratio of tariff revenues to operating costs. Furthermore, water <strong>and</strong> wastewater<br />
tariffs are not set at a level sufficient <strong>for</strong> cost recovery <strong>and</strong> there is a large proportion<br />
of unpaid bills, which does not allow the utilities to invest in the repair, let<br />
alone the expansion, of their infrastructure.<br />
There is a high level of fragmentation of utilities throughout the region. Kosovo<br />
(as defined under UNSCR 1244) recently carried out the regionalisation of its<br />
water utilities. Officially, seven regional utilities, responsible <strong>for</strong> both water <strong>and</strong><br />
waste, were established in 2007. However, the Kosovo Trust Agency (KTA) that<br />
managed the process ceased to exist in 2008, <strong>and</strong> the regional utilities have still not<br />
become operational. It is still not clear who owns the regional utilities, thus in practice<br />
the municipal utilities are still operating on their own. In Albania, there are 54<br />
municipal water utilities <strong>and</strong> one regional water utility.<br />
C H A P T E R 6<br />
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<br />
Kosovo<br />
(under<br />
UNSCR 1244)<br />
Montenegro Serbia<br />
S T R AT E G I C M O V E S 123
124<br />
C H A P T E R 6<br />
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<br />
FIGURE 11: Unaccounted-<strong>for</strong> water (UfW) in SEE countries<br />
%<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
S T R AT E G I C M O V E S<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
Source: REC survey, 2008<br />
no data no data<br />
Croatia FYR<br />
Macedonia<br />
Kosovo<br />
(under<br />
UNSCR 1244)<br />
Montenegro Serbia<br />
Individual utilities have a very limited impact on the development of the policy<br />
<strong>and</strong> regulatory framework, although they function within it <strong>and</strong> all aspects of<br />
their management <strong>and</strong> operations are directly dependent on it. A good policy <strong>and</strong><br />
regulatory framework in the water <strong>and</strong> wastewater sectors is there<strong>for</strong>e essential in<br />
order to re<strong>for</strong>m <strong>and</strong> to improve the per<strong>for</strong>mance of the water utilities. In addition,<br />
a robust institutional system <strong>for</strong> the regulation of the sector is of the utmost importance<br />
<strong>for</strong> en<strong>for</strong>cement <strong>and</strong> compliance with the policy framework.<br />
Figure 11 shows very high unaccounted-<strong>for</strong> water (Uf W), while Figure 12 indicates<br />
very low water invoice collection rates, especially in Kosovo (as defined<br />
under UNSCR 1244) <strong>and</strong> the <strong>for</strong>mer Yugoslav Republic of Macedonia.<br />
The water infrastructure investment programmes of IFIs such as the European<br />
Bank <strong>for</strong> Reconstruction <strong>and</strong> Development (EBRD), the World Bank <strong>and</strong> the German<br />
bank Kreditanstalt fur Wiederaufbau (Kf W) are often accompanied by a dem<strong>and</strong><br />
<strong>for</strong> institutional re<strong>for</strong>m aimed at reducing operational <strong>and</strong> financial risk by<br />
improving transparency <strong>and</strong> accountability, but also by improving technical operations,<br />
service quality <strong>and</strong> organisational efficiency (see the example from the <strong>for</strong>mer<br />
Yugoslav Republic of Macedonia described below). In most cases, such<br />
dem<strong>and</strong>s are accompanied by an offer of technical assistance.
FIGURE 12: Water invoice collection rates (percentage)<br />
%<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
Source: REC survey, 2008<br />
Montenegro Serbia Kosovo<br />
(under<br />
UNSCR 1244)<br />
According to the two-year water sector re<strong>for</strong>m implementation plan, Albania<br />
had 56 municipal utility companies in 2008. Since then, two municipal companies<br />
(Berat <strong>and</strong> Kucova) have merged into a regional company (Berat region),<br />
which means that there are currently 55 municipal utilities <strong>and</strong> one regional water<br />
utility. By the end of the water re<strong>for</strong>m process, there will be 12 regional water utility<br />
companies (Gjinali <strong>and</strong> Olldashi, 2008). According to the World Bank survey,<br />
tariff revenues in Albania cover on average less than half of the operating costs, the<br />
remaining costs being covered by subsidies. This prompted the launch of a comprehensive<br />
re<strong>for</strong>m in 2007. In addition to decentralisation followed by regionalisation,<br />
the aim of the re<strong>for</strong>m was to further commercialise the water supply <strong>and</strong><br />
sewerage system <strong>and</strong> to make companies self-sustaining based on long-term plans<br />
to improve per<strong>for</strong>mance indicators <strong>and</strong> fulfil obligations towards customers.<br />
Albanian water utilities have 13 staff per 1,000 water supply connections on<br />
average. Only a h<strong>and</strong>ful of utilities have high enough tariffs to cover operating costs.<br />
The level of payment collection is 73 percent, which is the highest level reported<br />
among the SEE countries surveyed. Water disconnection is not allowed by law in<br />
Albania. Utilities receive an operating subsidy from the government, but the subsidy<br />
scheme is to be phased out by 2012 according to the water re<strong>for</strong>m strategy.<br />
C H A P T E R 6<br />
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<br />
FYR<br />
Macedonia<br />
no data<br />
Croatia<br />
S T R AT E G I C M O V E S 125
126<br />
C H A P T E R 6<br />
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<br />
S T R AT E G I C M O V E S<br />
The full transfer of the predetermined subsidy is conditional on improvements in<br />
per<strong>for</strong>mance, as measured by some of the indicators computed as part of the benchmarking<br />
programme: utilities need to reduce water losses, increase bill collection<br />
rates <strong>and</strong> reduce costs in order to be eligible <strong>for</strong> the whole of the subsidy.<br />
As a first step, during 2007 <strong>and</strong> 2008 the ownership of the utilities was completely<br />
transferred from the government to local authorities. The regionalisation of<br />
the currently fragmented water supply companies is a priority, as the government<br />
hopes that it will lead to lower service costs. The first case of regionalisation in Albania<br />
was the merger of the Berat <strong>and</strong> Kucova water companies, which was completed<br />
in 2008 with a EUR 6 million grant from the German Government directed<br />
to the (re)construction of the water supply infrastructure.<br />
The Albanian Government, with the support of the World Bank, provides<br />
benchmarking <strong>and</strong> technical assistance to the water <strong>and</strong> wastewater utilities of the<br />
country to prepare five-year operational plans. According to the two-year water<br />
sector re<strong>for</strong>m plan, this practice has already been successfully adopted by five utilities,<br />
while the rest of the companies will follow (Gjinali <strong>and</strong> Olldashi, 2008). Based<br />
on the results of the benchmarking exercises, per<strong>for</strong>mance objectives are set <strong>for</strong> the<br />
companies, <strong>and</strong> the allocation of operating subsidies <strong>and</strong> investment grants from<br />
the government is partly based on progress made towards achieving these objectives.<br />
Furthermore, a training programme targeting the staff of 55 utilities is to be<br />
launched in Albania in 2009 (REC survey 2008; <strong>and</strong> Gjinali <strong>and</strong> Olldashi, 2008).<br />
In Bosnia <strong>and</strong> Herzegovina there is no national body regulating tariff setting.<br />
No re<strong>for</strong>ms of the water utilities have taken place in either of the two entities, the<br />
Federation of Bosnia <strong>and</strong> Herzegovina (FBiH) <strong>and</strong> Republika Srpska (RS). Water<br />
laws at entity level were passed in 2006 <strong>and</strong> have been in <strong>for</strong>ce since January 2008.<br />
There are two water agencies in FBiH <strong>and</strong> two in RS.<br />
Water supply <strong>and</strong> wastewater services are highly fragmented <strong>and</strong> are the responsibility<br />
of 136 water utilities owned <strong>and</strong> controlled by municipalities. The current<br />
operational <strong>and</strong> financial condition of these utilities is generally weak. Bosnian<br />
water utilities have 13 staff per 1,000 water supply connections on average.<br />
The national average <strong>for</strong> Uf W is estimated at 50 percent. The estimated national<br />
average level of payment collection is 70 percent, <strong>and</strong> disconnection from the<br />
water supply is not allowed by law. The level of cost recovery varies among the utilities,<br />
but in most cases it is insufficient — that is, operating costs are not covered by<br />
revenues from tariffs. The government provides a total of about KM 30 million/year<br />
in operating subsidy to the water sector (REC survey, 2008; <strong>and</strong> UNDP, 2004).<br />
The process of transposition is ongoing <strong>and</strong> the water management strategies<br />
<strong>for</strong> FBiH <strong>and</strong> RS should be completed by the end of 2009. Some individual re<strong>for</strong>m<br />
initiatives are outlined in the new legislation, such as the merging of public<br />
enterprises <strong>for</strong> catchments of the Sava River basin <strong>and</strong> the Adriatic Sea into agencies<br />
<strong>for</strong> the water area of the Sava River <strong>and</strong> Adriatic Sea. Private participation in<br />
the water sector is not yet developed, although the increasing of private sector capital<br />
is being considered (REC survey 2008; <strong>and</strong> UNDP, 2004).<br />
In Croatia, the overall responsibility <strong>for</strong> managing water is centralised under the<br />
governmental institution Croatian Waters. The water utilities are publicly owned in the
<strong>for</strong>m of communal company, communal institution, or individual facility owned by<br />
the local government. Croatia has a long tradition of communal companies in the water<br />
sector, <strong>and</strong> any future re<strong>for</strong>m should strive towards lowering their number <strong>and</strong> increasing<br />
their efficiency. No systematic re<strong>for</strong>m of the water utilities has yet taken place.<br />
However, the consolidation of water utilities is envisaged in the Water Management<br />
Strategy in the period until 2015. In many cases the price of services does not reflect the<br />
real operational costs. However, full recovery of operating costs is achieved in most<br />
medium-sized <strong>and</strong> large towns. However, in most cases depreciation cannot be covered<br />
from tariff revenues. Water <strong>and</strong> wastewater services in many municipal companies,<br />
especially smaller ones, are cross-financed by other activities (REC survey 2008).<br />
To date, there have been re<strong>for</strong>ms only at individual utility level. Inadequate tariff<br />
setting leads to a situation in which systems are not well maintained; facilities are<br />
old <strong>and</strong> depreciated, with some not functioning; interventions take place only at<br />
critical points; <strong>and</strong> big water losses exist. However, in the authors’ opinion the technical<br />
per<strong>for</strong>mance of the utilities in Croatia is better than average in the region<br />
(REC survey, 2008).<br />
According to the Law on Local Self-Government, municipalities in Kosovo<br />
(as defined under UNSCR 1244) are responsible <strong>for</strong> providing water (<strong>and</strong>/or<br />
waste) services. This responsibility is to be implemented through a service agreement<br />
signed by the municipality <strong>and</strong> the relevant regional water (or waste) company<br />
that provides services in the municipality.<br />
The water <strong>and</strong> waste sectors recently underwent a process of consolidation (restructuring)<br />
under the supervision of the Kosovo Trust Agency (KTA), whereby<br />
municipal water <strong>and</strong> waste enterprises have been merged into seven regional water<br />
<strong>and</strong> wastewater companies <strong>and</strong> seven regional waste collection companies. Municipal<br />
enterprises located in areas with Serbian majorities did not participate in<br />
this process <strong>and</strong> remain unconsolidated.<br />
Another aspect of the re<strong>for</strong>m was the establishment of a legal framework <strong>for</strong> the<br />
economic regulation of the water <strong>and</strong> solid waste service providers in November<br />
2004 (under UNMIK Regulation 2004/49). As a result, the Water <strong>and</strong> Waste Regulatory<br />
Office of Kosovo (WWRO) was established in 2004.<br />
A third step of the re<strong>for</strong>m was the incorporation of the public water <strong>and</strong> waste<br />
companies. This phase was finalised in 2007 by trans<strong>for</strong>ming water <strong>and</strong> waste regionalised<br />
companies into joint stock companies with a clearly defined legal <strong>and</strong> financial<br />
identity, governed according to the principles of corporate governance. The<br />
ownership of these enterprises is regulated by the Law on Publicly Owned Enterprises<br />
(adopted on June 13, 2008). The privatisation was undertaken via spin-off<br />
<strong>and</strong> liquidation, <strong>and</strong> investors were invited to buy through open competitive tenders<br />
(WWRO, 2009).<br />
The KTA, which previously administrated the regional water companies,<br />
ceased operations in June 2008, since which time the ownership of the public utility<br />
companies has not been defined. The Privatisation Agency of Kosovo (PAK)<br />
has been established as the successor to the KTA.<br />
According to the Water Supply Tariff Policy, the WWRO is responsible <strong>for</strong> tariff<br />
setting <strong>and</strong> “collects per<strong>for</strong>mance data from the water companies, computes in-<br />
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dicators using these data”, <strong>and</strong> sets “targets, the fulfilment of which is annually monitored”<br />
(WWRO, 2009). Thus far, the WWRO has carried out two tariff-setting<br />
processes <strong>for</strong> one-year tariffs (2006/2007 <strong>and</strong> 2007/2008), although there are plans<br />
to set tariffs <strong>for</strong> a period of three years.<br />
During 2008, a positive trend could be observed in the per<strong>for</strong>mance of the<br />
seven regional water companies (WWRO, 2009). However, two critical problems<br />
st<strong>and</strong> out: the low rate of payment collection, at 57 percent 12 (World Bank, 2006);<br />
<strong>and</strong> the lack of cost recovery <strong>for</strong> operations. Operating costs are barely covered by<br />
revenues, which makes the budget situation in the water utilities very tight. The<br />
new tariffs designed by the WWRO <strong>and</strong> the above-mentioned WWRO project<br />
<strong>for</strong> the per<strong>for</strong>mance monitoring of water companies are improving the situation.<br />
However, <strong>for</strong> capital investments, grants <strong>and</strong> af<strong>for</strong>dable loans are needed. Estimated<br />
Uf W is 59 percent; the bill collection rate is estimated at 43 percent; <strong>and</strong> there are<br />
on average seven staff per 1,000 connections.<br />
Service providers are only just meeting their direct operation costs <strong>and</strong> there is<br />
no capacity <strong>for</strong> the financing of capital investments, including capital maintenance.<br />
In order to achieve compliance with EU st<strong>and</strong>ards <strong>and</strong> to satisfy the current supply<br />
<strong>and</strong> dem<strong>and</strong> imbalance, cash revenue has to increase considerably, either by increasing<br />
collection efficiency or by raising tariffs, or by a combination of the two<br />
(REC survey, 2008).<br />
Currently most water PUCs in the <strong>for</strong>mer Yugoslav Republic of Macedonia<br />
are poorly organised <strong>and</strong> suffer from poor operational capacities. Tariffs are generally<br />
too low, resulting in insufficient resources <strong>for</strong> capital maintenance let alone infrastructure<br />
investment. Low tariffs, combined with the lack of will to re<strong>for</strong>m PUCs,<br />
result in insufficient capacity to implement EU-compliant wastewater treatment.<br />
According to the 2008 REC survey, the national average Uf W is up to 60 percent.<br />
A survey by the World Bank (2006) estimates the national average payment<br />
collection rate at between 50 <strong>and</strong> 60 percent, while in urban areas it averages 75<br />
percent. Households seem better at bill payment than industrial customers. The<br />
collection of payments has improved recently, due to more stringent ef<strong>for</strong>ts such as<br />
warnings to non-paying customers, court procedures, <strong>and</strong>, in some cases, disconnection<br />
from the network.<br />
According to the current rules, the municipality nominates two-thirds of the<br />
members of the PUC management board, as well as the director. Such a structure<br />
can lead to heavy political interference in the day-to-day management of the municipal<br />
enterprise. Tariff setting is guided more by political ambition than financial<br />
rationale <strong>and</strong> the desire <strong>for</strong> financial sustainability. Operating costs are there<strong>for</strong>e<br />
rarely covered by tariff revenues.<br />
Several projects supported by IFIs <strong>and</strong> bilateral donors are preparing the country<br />
<strong>for</strong> re<strong>for</strong>ms in the water sector. The government strategies outline specific tasks<br />
<strong>for</strong> the water service. A minimum service st<strong>and</strong>ard will be established <strong>for</strong> calculating<br />
the costs of services, raising the level of grants <strong>and</strong> developing an effective fiscal<br />
equalisation. As mentioned above, Kf W introduced a benchmarking approach<br />
be<strong>for</strong>e funding water supply projects in utilities. Within this programme, Kf W<br />
also introduced a quality management approach with help from an institutional
strengthening consultant who will assist these municipalities in meeting the benchmarks<br />
in the first phase. The programme covers the municipalities of Gostivar,<br />
Tetovo, Kavadarci, Negotino, Bitola, Kocani, Gevgelija <strong>and</strong> Radovis.<br />
In Montenegro, local governments <strong>for</strong>m water supply <strong>and</strong> wastewater public<br />
utility companies, while the assets remain in the h<strong>and</strong>s of the central government.<br />
The municipalities are responsible <strong>for</strong> the provision of services, <strong>and</strong> the government<br />
is responsible <strong>for</strong> capital investments. Public enterprises are legally independent entities:<br />
in practice they have limited autonomy <strong>and</strong> no control over crucial aspects of<br />
their business, such as tariffs, staff hiring <strong>and</strong> firing, <strong>and</strong> investments. The PUCs are<br />
controlled by (in order of importance): 1) a board of directors; 2) the corresponding<br />
department of the municipality; 3) the deputy mayor; <strong>and</strong> 4) the tax department of<br />
the Ministry of Finance (normal annual financial control).<br />
The proportion of illegal connections is estimated at about 6.5 percent in Montenegro,<br />
<strong>and</strong> the estimated national average level of payment collection is between<br />
60 <strong>and</strong> 75 percent. The water utilities in Montenegro have between eight <strong>and</strong> 12<br />
employees per 1,000 water supply connections. Operating costs are not usually covered<br />
by revenues from tariffs, thus government <strong>and</strong> municipal subsidies make up the<br />
balance. The tariffs are set by municipalities, which means that tariff setting is influenced<br />
by local political issues. In general, tariffs cover only operation <strong>and</strong> basic<br />
maintenance. There is only one example of public-private partnership, in the water<br />
PUC of the municipality of Budva (REC survey, 2008).<br />
The Government of Montenegro regards water supply <strong>and</strong> sewerage services<br />
as essential to economic growth, especially in relation to the country’s tourism industry.<br />
It is recognised that the water sector should improve its efficiency, cost-effectiveness<br />
<strong>and</strong> per<strong>for</strong>mance. The government there<strong>for</strong>e intends to decentralise<br />
infrastructure ownership <strong>and</strong> then to support municipal utilities to merge into regional<br />
utilities (WURP WG, 2007).<br />
According to the water utility re<strong>for</strong>m plan adopted in July 2007, assets <strong>and</strong><br />
ownership should be transferred to the local government, which will be fully responsible<br />
<strong>for</strong> compliance with all laws <strong>and</strong> regulations related to service st<strong>and</strong>ards,<br />
tariff rates <strong>and</strong> pricing, <strong>and</strong> the collection, treatment <strong>and</strong> disposal of municipal<br />
sewage. The Ministry of Spatial Planning <strong>and</strong> <strong>Environmental</strong> Protection is identifying<br />
interested donor organisations to support the further implementation of the<br />
water utility re<strong>for</strong>m plan.<br />
Current institutional <strong>and</strong> financing ef<strong>for</strong>ts are focused on the coastal region,<br />
where municipal water supply <strong>and</strong> sewerage infrastructure is being upgraded. The<br />
joint service <strong>and</strong> coordination company VODACOM has been established <strong>for</strong> the<br />
Tivat region. The government’s water utility re<strong>for</strong>m plan proposes the introduction<br />
of grants that would be available to fund part of the costs associated with the merger<br />
of utilities, including legal costs <strong>and</strong> costs related to labour restructuring. A condition<br />
<strong>for</strong> obtaining these funds is that utilities prepare substantial strategic re<strong>for</strong>m<br />
plans (REC survey, 2008).<br />
In Serbia, PUCs are owned by the municipalities <strong>and</strong> each town <strong>and</strong> municipality<br />
has its own water utility. Most PUCs are not separated by sector(waste/water/<br />
green spaces) <strong>and</strong> the accounting lacks transparency. It is there<strong>for</strong>e hard to separate<br />
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revenues from different sectors <strong>and</strong> different services, let alone relate costs to tariffs.<br />
The level of bill collection is 60 percent. Disconnection due to non-payment of<br />
bills is allowed by law but it is almost never applied in the case of households.<br />
Service revenues are not sufficient to cover operational costs. Cross-financing<br />
between these sectors <strong>and</strong> subsidising from the municipality are commonplace (Dax,<br />
2008). Tariffs are set at municipality level, usually by a political decision that is sensitive<br />
to popular voting. It is recognised that tariffs in municipal PUCs are too low<br />
<strong>and</strong> that this is a major problem. At present there are no utilities in private ownership<br />
<strong>and</strong>, according to the applicable laws, the assets of PUCs cannot be privatised.<br />
Public-private partnerships are possible according to the legislation, but as yet<br />
there is no practice in place, nor is it expected in the near future. The Serbian Government<br />
is considering future privatisation in the water sector, although it is not yet<br />
defined in any strategy, policy or plan. Government preparations <strong>for</strong> a re<strong>for</strong>m of the<br />
PUCs are at an early stage. A re<strong>for</strong>m strategy that may include privatisation options<br />
is currently being drafted within the Ministry of Finance (REC survey, 2008).<br />
Status of utilities <strong>and</strong> status<br />
of re<strong>for</strong>ms in the waste sector<br />
In some SEE countries, where a waste utility, either public or private, serves several<br />
settlements (e.g. a town <strong>and</strong> the surrounding settlements, or sometimes a whole region),<br />
a uni<strong>for</strong>m tariff is set <strong>for</strong> the whole service area even though the cost of serving<br />
the individual settlements differs. Such practices inevitably translate into cross-financing<br />
between service users. Several countries have started the re<strong>for</strong>m process, which<br />
includes sector separation <strong>and</strong> geographical regionalisation, but only Croatia has made<br />
actual progress. In terms of current waste tariffs, charges are not based on the weight<br />
or volume of waste produced but on household surface area. This, combined with a<br />
lack of en<strong>for</strong>cement of rules against illegal dumping, does not encourage waste prevention,<br />
reuse or recycling as m<strong>and</strong>ated by EU legislation. Also, there is a marked difference<br />
between the charges levied on commercial enterprises <strong>and</strong> industry compared<br />
to household charges: the higher charges <strong>for</strong> enterprises represent another <strong>for</strong>m of<br />
cross-subsidisation. The justification often given by municipal authorities in response<br />
to both these issues, but especially with respect to cross-financing, is that this approach<br />
to setting tariffs has been inherited from the earlier system. Nevertheless, the true reasons<br />
are partly social <strong>and</strong> partly political: policy makers are more willing to charge enterprises,<br />
as they are perceived as being able to af<strong>for</strong>d higher prices than households <strong>and</strong><br />
as being less able to effect change in terms of voting numbers.<br />
From an institutional point of view, municipal solid waste (MSW) management<br />
is even more dem<strong>and</strong>ing than water <strong>and</strong> wastewater management: based on good international<br />
practice it has been shown that it is more economically viable to organise<br />
waste management systems over larger territories covering a bigger number of inhabitants.<br />
This is because modern l<strong>and</strong>fills are expensive facilities <strong>and</strong> a minimum volume<br />
of waste is needed to justify their construction. At the same time, in the SEE<br />
region there is no tradition of municipalities jointly solving their MSW problems by
TABLE 15: Tariffs <strong>for</strong> municipal solid waste in SEE<br />
establishing inter-municipal bodies. This is <strong>and</strong> will remain a big challenge to MSW<br />
management in the near future, since sound <strong>and</strong> responsible financial management<br />
that meets recognised international st<strong>and</strong>ards will be a prerequisite <strong>for</strong> any technical<br />
improvements in infrastructure. Instruments <strong>and</strong> mechanisms will have to be put in<br />
place that allow <strong>for</strong> lasting cooperation between municipalities, since EU-compliant<br />
l<strong>and</strong>fills are only viable <strong>for</strong> regional systems that apply economies of scale.<br />
In the SEE region as a whole, current tariffs <strong>and</strong> fee collection efficiency often<br />
fall short of full cost recovery <strong>for</strong> the service provided, especially in regions with<br />
very low income levels. It is common practice <strong>for</strong> the missing amount to be covered<br />
by general municipal budgetary allocations.<br />
The availability of waste monitoring data in Albania is low <strong>and</strong> there is a lack of<br />
appropriate waste statistics. Waste management services, although incomplete, exist<br />
in urban areas (covering 80 to 90 percent), while only 10 to 20 percent of rural areas<br />
are covered by waste management schemes. There is no systematic approach in the<br />
waste sector, <strong>and</strong> each municipal waste management scheme is organised in a different<br />
way, ranging from purely public enterprises to different PPP arrangements.<br />
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COUNTRY HOUSEHOLDS OTHER USERS REMARKS<br />
Albania Flat annual rate: Flat annual rate: Rates set by<br />
EUR 13 to 33/year EUR 45 to 1,350/year local authorities<br />
Bosnia <strong>and</strong> Mostly monthly rates based on Varies significantly based on Rates set by local authorities;<br />
Herzegovina surface area of residential region/municipality <strong>and</strong> type collected by service providers<br />
premises: EUR 0.05 to 0.4/m2 of industry<br />
Croatia Monthly rate based on surface Monthly rate based on surface Rates set by local authorities;<br />
area of residential premises: area of commercial premises: collected by service providers<br />
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<br />
UNSCR 1244) /household source of waste<br />
FYR Macedonia Monthly rate based on (1) Monthly rate based on (1) Rates set by local authorities;<br />
surface area of premises: surface area of premises: collected by service providers<br />
EUR 0.01 to 0.05/m2 ; or (2) EUR 0.02 to 0.08/m2 ; or<br />
flat rate: EUR 1.5 to 5.0/house (2) flat rate: EUR 1.7 to 7.5/user<br />
Montenegro* Mostly monthly rates based on Mostly monthly rates based on Rates set by local authorities;<br />
surface area of premises: surface area of premises, but collected by service providers<br />
EUR 0.03/m2 adjusted according to amount<br />
of waste generated<br />
Serbia† Mostly monthly rates based Mostly monthly rates based Rates set by local authorities;<br />
on surface area of premises: on surface area of premises: collected by service providers<br />
EUR 0.04/m2 EUR 0.12/m2 Source: REC survey, 2009<br />
* Household tariffs in Podgorica are given <strong>for</strong> indicative purposes<br />
† MSW management tariffs <strong>for</strong> Belgrade are given <strong>for</strong> indicative purposes<br />
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FIGURE 13: Waste tariff collection rates in SEE countries (percentages)<br />
%<br />
100<br />
90<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Albania<br />
(businesses)<br />
S T R AT E G I C M O V E S<br />
Montenegro<br />
(businesses)<br />
Source: REC survey, 2008<br />
Bosnia <strong>and</strong><br />
Herzegovina<br />
(overall)<br />
Albania<br />
(household)<br />
Montenegro<br />
(household)<br />
Kosovo (under<br />
UNSCR 1244)<br />
(overall)<br />
FYR Macedonia<br />
(rural)<br />
FYR Macedonia<br />
(urban)<br />
no data no data<br />
In urban areas the municipalities determine the waste management fees, which<br />
currently vary between EUR 8 <strong>and</strong> 18 per household per year. Such fees can only<br />
cover collection <strong>and</strong> transportation, but not the proper treatment <strong>and</strong> final disposal<br />
of waste. In most cities <strong>and</strong> towns, waste collection <strong>and</strong> transportation services<br />
are subcontracted by the municipality to private companies.<br />
The responsibility <strong>for</strong> environmental policy at the national level belongs to the<br />
Ministry of Environment, Forestry <strong>and</strong> Water Administration (MoEFWA) <strong>and</strong><br />
the Ministry of Public Works, Transport <strong>and</strong> Telecommunications (MoPWTT).<br />
Both ministries are in charge of developing strategies, drafting laws <strong>and</strong> setting<br />
basic tariffs in the waste sector. Some progress has been achieved in updating waste<br />
management legislation, which defines the basic responsibilities at national <strong>and</strong><br />
local level, but the relevant strategies, policies <strong>and</strong> plans are not yet in place. However,<br />
there are several regional plans related to internationally funded regional l<strong>and</strong>fill<br />
projects, as described below.<br />
According to the existing legislation, the municipalities <strong>and</strong> regions are responsible<br />
<strong>for</strong> municipal waste management (collection, transportation, treatment<br />
Croatia<br />
Serbia
<strong>and</strong> final disposal). They are also responsible <strong>for</strong> preparing local <strong>and</strong> regional<br />
plans on waste management; suggesting the appropriate location <strong>for</strong> l<strong>and</strong>fills in<br />
their territory; <strong>and</strong> defining fees.<br />
The EU CARDS 2006 project “Implementation of the national plan <strong>for</strong> the approximation<br />
of environmental legislation” is expected to improve legislation <strong>and</strong><br />
enable the effective control of solid waste management. A main component of the<br />
project is to develop the institutional capacity of the MoEFWA. The National<br />
Waste Management Plan <strong>and</strong> Strategy will be drafted approximately by the end of<br />
2010 after the Law on Waste Management has been adopted (planned by the end<br />
of 2009). There is a development project <strong>for</strong> Korca region, supported by Kf W in<br />
cooperation with Sida <strong>and</strong> the Albanian Government, to construct a regional sanitary<br />
l<strong>and</strong>fill in the city of Maliq to serve the Korca region. The institutional framework<br />
<strong>for</strong> the project is also under development. Another example is the l<strong>and</strong>fill<br />
being constructed in Bushat, where the l<strong>and</strong>fill management body <strong>and</strong> collection<br />
system have already been established.<br />
Approximately 36 percent of Bosnia <strong>and</strong> Herzegovina is covered by municipal<br />
solid waste management services. The municipalities are responsible <strong>for</strong> organising<br />
waste management services in the <strong>for</strong>m of municipal public utility companies.<br />
Bosnia <strong>and</strong> Herzegovina still lacks adequate legislation <strong>for</strong> solving the issue of waste<br />
management at state <strong>and</strong> entity level. Municipalities have attempted to compensate<br />
<strong>for</strong> this deficiency by en<strong>for</strong>cing local regulations on waste management.<br />
The 2003 National <strong>Environmental</strong> Action Plan (NEAP) proposes two options<br />
<strong>for</strong> an intermediate solution: regional l<strong>and</strong>fills at 16 (entity option) or 14 (interentity<br />
option) locations, which would ultimately result in the long-term solution<br />
comprising six major regional l<strong>and</strong>fills in Bosnia <strong>and</strong> Herzegovina, located in Banja<br />
Luka, Tuzla, Mostar, Bijeljina, Bihac <strong>and</strong> Livno. Since 2003, two sanitary regional<br />
l<strong>and</strong>fills have been built in Banja Luka <strong>and</strong> Sarajevo. The 2008 IPA project<br />
“Strengthening of Bosnia <strong>and</strong> Herzegovina’s <strong>Environmental</strong> Institutions, Preparation<br />
<strong>for</strong> Pre-accession Funds <strong>and</strong> Support to <strong>Environmental</strong> Infrastructure Development”<br />
is providing technical assistance to environmental infrastructure<br />
investment project preparation (feasibility studies) <strong>for</strong> the regional l<strong>and</strong>fills envisaged<br />
in Gorazde, Srednje Bosanski canton, Visoko, Ljubuski region, Prijedor, Derventa<br />
<strong>and</strong> Trebinje. This has been complemented by World Bank (IDA) loans <strong>for</strong><br />
Sarajevo, Zenica, Tuzla, Bihac, Banja Luka <strong>and</strong> Bijeljina. Also, during the implementation<br />
of this project, 145 illegal dumpsites have been closed <strong>and</strong> remediated,<br />
<strong>and</strong> another 40 are due <strong>for</strong> closure.<br />
There are at present in Croatia mostly municipal public utility companies<br />
dealing with waste management, <strong>and</strong> three regional companies in the process of<br />
establishment. According to the National Waste Management Plan (NWMP)<br />
<strong>for</strong> the period 2007 to 2015, the 21 Croatian counties are obliged to prepare<br />
draft regional waste management plans. Counties are allowed to draft joint waste<br />
management plans <strong>and</strong> <strong>for</strong>m joint regional waste management companies to operate<br />
the regional waste management centres (RWMCs). The final number of<br />
RWMCs will there<strong>for</strong>e be 21 or fewer.<br />
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At the local level, the current charges <strong>for</strong> the collection, transportation <strong>and</strong> disposal<br />
of municipal waste from households are based on living or commercial surface<br />
calculation (KN/sqm). The tariffs differ <strong>for</strong> households <strong>and</strong> commercial<br />
spaces. The higher tariffs <strong>for</strong> commercial spaces are intended to subsidise the low<br />
tariffs <strong>for</strong> households. However, revenues are insufficient <strong>and</strong> local authorities are<br />
often co-financing waste management operational costs from their budgets. The<br />
Waste Law prescribes the introduction of a charge calculation system based on<br />
quantities of produced waste (number of households, tonnes) in order to compute<br />
realistic charges <strong>for</strong> households <strong>and</strong> producers of municipal waste. The future<br />
RWMCs will be obliged to introduce such tariff calculation systems.<br />
Around 39 percent of municipal waste is collected in Kosovo (as defined<br />
under UNSCR 1244) (90 percent in urban areas, <strong>and</strong> less than 10 percent in rural<br />
areas) (WWRO, 2009). Hazardous waste, chemicals, industrial waste <strong>and</strong> medical<br />
waste streams are not properly managed.<br />
Similar to the situation in the water sector, the municipal waste companies have<br />
undergone a process of consolidation. Waste collection <strong>and</strong> transportation services<br />
are operated by seven regional public companies. The number <strong>and</strong> size of the<br />
regional waste companies mirrors the regions established <strong>for</strong> water <strong>and</strong> wastewater<br />
companies, without being based on the size of the population or similar criteria.<br />
During 2008, the trend showed that service per<strong>for</strong>mance by the regional waste<br />
companies declined compared to 2007. The negative changes were brought about<br />
by lower bill collection rates <strong>and</strong> lower revenues.<br />
The National Waste Management Strategy <strong>for</strong> 2010 to 2020 will be elaborated<br />
during 2009. One of the following two options is likely: (i) waste collection<br />
<strong>and</strong> transportation provided by regional companies owned by<br />
municipalities, <strong>and</strong> waste disposal services provided by a central company; or<br />
(ii) waste collection as well as waste disposal services provided by regional companies.<br />
To date, waste collection <strong>and</strong> transportation services are operated by<br />
seven regional public companies. The publicly owned Kosovo L<strong>and</strong>fill Management<br />
Company (KLMC) manages solid waste disposal. The Water <strong>and</strong><br />
Waste Regulatory Office (WWRO) is the independent economic regulator <strong>for</strong><br />
solid waste services, as well as <strong>for</strong> water. Its responsibilities include licensing<br />
public enterprises; setting <strong>and</strong> approving tariffs <strong>for</strong> regulated services; monitoring<br />
<strong>and</strong> en<strong>for</strong>cing compliance with service st<strong>and</strong>ards on the part of licensed<br />
service providers; <strong>and</strong> supporting customers in each of the seven service area regions.<br />
The municipal waste fee is EUR 3.5 per household, <strong>and</strong> the invoice collection<br />
rate is only around 30 percent.<br />
In the <strong>for</strong>mer Yugoslav Republic of Macedonia, there are only municipal<br />
waste management PUCs. A small proportion of waste collectors are private companies,<br />
typically those dealing with waste in rural areas. Regular waste collection<br />
services are mainly limited to urban areas. In total, around 70 percent of the total<br />
Macedonian population benefit from regular waste collection services (in rural<br />
settlements the proportion is around 10 percent). Waste disposal practices do not<br />
comply with any technical <strong>and</strong>/or environmental st<strong>and</strong>ards.
The National Solid Waste Management Strategy (2008), as well as the National<br />
Waste Management Plan (2005) <strong>and</strong> the revised version of this document<br />
contain specifications <strong>for</strong> the establishment of a regional solid waste management<br />
system (a maximum of eight regions, corresponding to the country’s statistical<br />
regions). Inter-municipal public enterprises will be established <strong>for</strong> the<br />
purposes of regionalising waste management in order to apply economies of scale<br />
<strong>and</strong> implement EU st<strong>and</strong>ards. <strong>Regional</strong> companies owning facilities that include<br />
l<strong>and</strong>fills will be established, while individual communal enterprises will be responsible<br />
<strong>for</strong> fee collection <strong>and</strong> will pay the respective regional waste management<br />
centre a fee per tonne of l<strong>and</strong>filled waste.<br />
In Montenegro, municipal publicly owned waste management public utilities<br />
carry out the collection, transportation <strong>and</strong> disposal of waste. The National Waste<br />
Management Policy, the <strong>Strategic</strong> Waste Management Master Plan (SWMMP) <strong>for</strong><br />
the regional level (2005 to 2014), <strong>and</strong> the National Waste Management Plan (2008<br />
to 2012) provide a basis <strong>for</strong> the necessary re<strong>for</strong>m of the waste sector.<br />
According to the 2005 SWMMP, Montenegro is divided into eight waste collection<br />
areas. The future l<strong>and</strong>fill network <strong>and</strong> transfer stations are based on suggested<br />
groupings <strong>and</strong> estimated amounts of waste. Each area in which waste is<br />
collected will be using one inter-municipal l<strong>and</strong>fill constructed according to the<br />
requirements of the EU Waste L<strong>and</strong>fill Directive.<br />
Within the newly established Ministry of Spatial Planning <strong>and</strong> <strong>Environmental</strong><br />
Protection (MSPEP, <strong>for</strong>merly the Ministry of Tourism <strong>and</strong> Environment) a project<br />
implementation unit was established in 2008. Its main goal is to provide support<br />
to local self-governments in the preparation of project documentation, <strong>and</strong><br />
to assist in securing financing from international organisations <strong>and</strong> IFIs. It will also<br />
assist in the <strong>for</strong>mation of eight regional waste management public utility companies.<br />
According to the <strong>Strategic</strong> Waste Management Master Plan, the territory of<br />
Montenegro is divided into eight waste management regions: Bar, Berane, Kotor,<br />
Herceg Novi, Mojkovac, Niksic, Pljevlja <strong>and</strong> Podgorica.<br />
Currently in Serbia there are municipal publicly owned waste management utility<br />
companies that have been trying to attract private sector participation. In smaller<br />
municipalities, a single PUC covers the water <strong>and</strong> waste sectors <strong>and</strong> other communal<br />
services, often cross-subsidising between sectors. As mentioned in Chapter 2,<br />
the 2003 National Waste Management Strategy envisages 29 regional sanitary l<strong>and</strong>fills,<br />
44 transfer stations, 17 recycling centres, seven composting facilities, <strong>and</strong> four<br />
incinerators. The updated Waste Management Strategy, currently being drafted,<br />
will probably increase the number of composting facilities required, in line with the<br />
waste management hierarchy set out in the EU Waste Framework Directive.<br />
Waste management regions will include three to nine municipalities with between<br />
90,000 <strong>and</strong> 550,000 inhabitants. There are two ongoing regional projects in<br />
which several municipalities will use the same l<strong>and</strong>fill — in Duboko (Uzice region)<br />
<strong>and</strong> Muntina Padina (Pirot region). For these two locations there are ongoing<br />
negotiations <strong>and</strong> procedures <strong>for</strong> establishing a regional PUC/waste<br />
management centre, but neither of the two RWMCs has yet been established.<br />
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Other considerations<br />
in water <strong>and</strong> waste utility re<strong>for</strong>m<br />
Af<strong>for</strong>dability<br />
The af<strong>for</strong>dability of water <strong>and</strong> waste tariffs (that is, the upper limit that can<br />
be charged <strong>for</strong> services) refers mainly to af<strong>for</strong>dability on the part of households,<br />
enterprises <strong>and</strong> public institutions. Af<strong>for</strong>dability thus implies that the amount<br />
spent by households <strong>for</strong> services should not be a major part of the household income<br />
— that is, it should by no means lead to households having to cut down<br />
on basic necessities such as food or heating. The World Bank envisages the establishment<br />
of an upper limit <strong>for</strong> household charges <strong>for</strong> water <strong>and</strong> waste management<br />
services at 4 percent <strong>and</strong> between 0.7 <strong>and</strong> 1.5 percent of household<br />
disposable income respectively. When designing a tariff policy, it is there<strong>for</strong>e<br />
essential to carry out an analysis in order to obtain an overview of the average<br />
household income, as well as the composition <strong>and</strong> distribution of that income,<br />
based on which a decision can be made as to whether there is a problem of af<strong>for</strong>dability<br />
that needs to be addressed.<br />
It is also important <strong>for</strong> project developers to recognise when af<strong>for</strong>dability limits<br />
will constrain the scale of a proposed capital investment. If adequate tariffs cannot<br />
be imposed on the users of infrastructure, to cover at least the cost of operation<br />
<strong>and</strong> maintenance, then project proponents (<strong>and</strong> the experts who prepare the investments)<br />
may need to consider alternative solutions. This is a complex issue <strong>for</strong><br />
local governments <strong>and</strong> often leads to delays.<br />
Willingness to pay<br />
Willingness to pay refers to the “expected” charge that service users are ready to<br />
pay <strong>for</strong> a given service, or <strong>for</strong> a given change in service level. The term describes<br />
beneficiaries’ perceptions <strong>and</strong> preferences correlated to the level, quality <strong>and</strong> price<br />
of the service, or changes to them. In assessing the potential effect of a tariff increase<br />
subsequent to investments <strong>and</strong> service improvements, willingness to pay by<br />
<strong>and</strong> large reflects the likely level of increase in payments that will not cause concern<br />
to users or affect their readiness to pay <strong>for</strong> the improved service.<br />
Willingness to pay <strong>for</strong> waste management services is influenced by a considerable<br />
number of factors:<br />
• current service level (scope) <strong>and</strong> quality;<br />
• history of changes, in particular to service quality, <strong>and</strong> past tariff increases;<br />
• fairness of charges;<br />
• af<strong>for</strong>dability of tariffs;<br />
• transparency in tariff setting (i.e. public involvement in the decision-making<br />
process);<br />
• confidence in the service provider (public or private);
• importance of public health <strong>and</strong> other environmental issues; <strong>and</strong><br />
• past experience with private sector involvement in the provision of public services,<br />
if the planned tariff increase is related to service improvement that involves<br />
a public-private partnership.<br />
Willingness to pay is commonly assessed <strong>and</strong> quantified by carrying out special<br />
surveys focusing on identifying service consumers’ behaviour. The recommended<br />
approach to determining willingness to pay <strong>for</strong> changes in water <strong>and</strong> waste<br />
management service levels is to use methods based on hypothetical behaviour, such<br />
as contingent valuation or stated preference technique (conjoint analysis). It is particularly<br />
important to disclose to service users the tariff-setting methods <strong>and</strong> the<br />
benefits of extending the service area, improving service efficiency (e.g. reducing<br />
losses in water supply networks by their rehabilitation), <strong>and</strong> counteracting health<br />
risks (e.g. by constructing wastewater treatment plants <strong>and</strong>/or sanitary l<strong>and</strong>fills).<br />
Campaigns can there<strong>for</strong>e be a catalyst towards increasing willingness to pay <strong>for</strong> improved<br />
services. Assessments of willingness to pay can be an important tool <strong>for</strong><br />
those preparing investments in order to demonstrate the credibility of investments<br />
where current bill collection rates are low (as in most SEE countries) but where<br />
service providers wish to upgrade the entire system.<br />
<strong>Regional</strong>isation<br />
Maximising the efficiency of environmental investments generally requires cooperation<br />
between small <strong>and</strong> medium-sized municipalities in the sharing of infrastructure<br />
<strong>and</strong> service systems. This is particularly necessary in the waste management sector<br />
<strong>and</strong> can enable municipalities greatly to improve the af<strong>for</strong>dability of their planned investment<br />
projects. <strong>Regional</strong> water management facilities, <strong>and</strong> central wastewater treatment<br />
plants in particular, require less investment capital <strong>and</strong> have lower operation <strong>and</strong><br />
maintenance costs. Such cooperation is also a requirement <strong>for</strong> accessing certain grant<br />
funds, particularly those from the EU. This is an obstacle <strong>for</strong> many local governments,<br />
which tend to be highly politicised <strong>and</strong> wary of cooperation with outside institutions.<br />
It also requires sophisticated planning <strong>and</strong> cooperation experience <strong>and</strong> skills, which<br />
local governments lack. Failure to cooperate <strong>and</strong>/or surrender competencies to regional<br />
institutions is a major bottleneck to proper investment planning.<br />
In order to overcome insufficient funding <strong>and</strong> inadequate logistics in the<br />
process of planning <strong>and</strong> implementing waste management projects in smaller municipalities,<br />
regionalisation allows <strong>for</strong> the pooling of resources <strong>and</strong> the application<br />
of economies of scale.<br />
<strong>Regional</strong>isation requires an appropriate institutional <strong>for</strong>m in order to bring<br />
those who intend to use the regional facilities under one umbrella. Within a region,<br />
it is vital to establish an organisational structure that will facilitate cooperation<br />
<strong>and</strong> the development of regional infrastructure. In particular,<br />
mechanisms must be identified that will enable the necessary shared capital expenditure<br />
<strong>and</strong> the shared recovery of capital <strong>and</strong> operating costs. The main challenge<br />
is to bring tariffs, operational costs, available waste collection equipment<br />
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<strong>and</strong> the daily routine of enterprises within a sound integrated system functioning<br />
under universal conditions over the entire area. Institutional models of regionalisation<br />
may take the following <strong>for</strong>ms:<br />
• Municipalities retain their own service company.<br />
• One company is responsible <strong>for</strong> the entire collection system.<br />
• Municipalities remain responsible <strong>for</strong> internal collection systems within settlements,<br />
while haulage between settlements <strong>and</strong> the l<strong>and</strong>fill is carried out by a<br />
different service company (linked to the central l<strong>and</strong>fill).<br />
• A combination of the above.<br />
Associations of municipalities<br />
One way to ensure economy of scale is to create associations of municipalities<br />
developing regional solutions. Such ef<strong>for</strong>ts are severely hindered by issues of joint<br />
property ownership, expense sharing, <strong>and</strong> other costs that are unrecoverable from<br />
co-owners. <strong>Regional</strong> experience suggests that joint service associations require specialised,<br />
complex legislation, since municipalities give up fundamental rights, such<br />
as tariff setting <strong>and</strong> property ownership.<br />
Lack of proper incentives <strong>for</strong> necessary inter-municipal cooperation<br />
Achieving economies of scale is a burning issue, especially in the area of solid<br />
waste management. The setting up of a municipal solid waste management system<br />
in compliance with EU directives <strong>and</strong> st<strong>and</strong>ards — including the construction<br />
of new, modern facilities as well as the organisation of the service itself —<br />
is prohibitively expensive <strong>for</strong> most SEE municipalities. The environmental st<strong>and</strong>ards<br />
that modern l<strong>and</strong>fills are obliged to meet, including the provision of plastic<br />
linings, drainage networks, monitoring wells, leachate treatment facilities <strong>and</strong><br />
l<strong>and</strong>fill gas management systems, as well as other indivisible elements such as<br />
compactor vehicles, fencing, weighing stations, permanent guards etc., make<br />
small, local l<strong>and</strong>fills unfeasible. The costs can only be commercially justified <strong>and</strong><br />
borne by a large number of users. It is there<strong>for</strong>e the environmental st<strong>and</strong>ards <strong>and</strong><br />
technology costs that trigger economies of scale <strong>and</strong> the regionalisation of SWM<br />
systems, unless one municipality is large enough to economically justify a solid<br />
waste management system with individual state-of-the-art disposal, which is usually<br />
the case in capital cities. Apart from technical improvements to the MSW<br />
management system, there are certain policy, legislative, economic, financial <strong>and</strong><br />
institutional prerequisites (REC, 2009b).<br />
Private sector participation<br />
The present publication does not have an ideological basis <strong>and</strong> does not advocate<br />
stronger or weaker private sector participation (PSP). Private sector participation<br />
is only one of the options <strong>for</strong> providing greater financing <strong>and</strong> better<br />
management <strong>for</strong> the utilities <strong>and</strong> it is inevitably accompanied by certain risks that
must be taken into consideration. Below we provide a brief overview of the situation<br />
with respect to PSP in the region, <strong>and</strong> of the main <strong>for</strong>ms of PSP.<br />
Water<br />
In SEE the private sector has not traditionally been involved in providing water<br />
supply <strong>and</strong> wastewater treatment services. In a context in which water utility efficiency<br />
is low <strong>and</strong> the quality of service unsatisfactory, there will be stronger pressure<br />
on governments <strong>and</strong> municipalities to undertake serious re<strong>for</strong>ms. Attracting<br />
private sector participation in running the utilities is only one of the possible solutions<br />
<strong>for</strong> increasing efficiency <strong>and</strong> improving cost recovery. Other benefits come<br />
in the <strong>for</strong>m of improved management, better value <strong>for</strong> consumers <strong>and</strong> easier access<br />
to capital. Private sector participation in the region is almost absent, with a few<br />
rare exceptions.<br />
In Albania there have been several cases of private sector participation in water<br />
utilities:<br />
• Management contract financed through World Bank credit <strong>for</strong> four cities: Durres,<br />
Lezhe, Fier <strong>and</strong> Sar<strong>and</strong>a. This contract expired in July 2008.<br />
• Management contract financed through Kf W <strong>for</strong> Kavaja. This contract expired<br />
in May 2008.<br />
• Concession contract financed through Kf W <strong>for</strong> Elbasan. This contract was<br />
suspended in December 2006.<br />
In Bosnia <strong>and</strong> Herzegovina, Montenegro <strong>and</strong> Serbia there has not yet been any<br />
involvement of the private sector in the water utilities.<br />
Main <strong>for</strong>ms of private sector participation<br />
As shown in Table 16, there are six main <strong>for</strong>ms of private sector participation<br />
in water utilities, with varying degrees of private participation in the ownership of<br />
the physical assets (e.g. pipes); participation in operation <strong>and</strong> maintenance; capital<br />
investments such as pipe replacement; the distribution of commercial risk; <strong>and</strong><br />
the duration of the contract.<br />
Pros <strong>and</strong> cons of involving the private sector in the water utilities<br />
Involving private-sector participation in water utilities may not be a solution<br />
in itself. Benefits <strong>and</strong> drawbacks have to be carefully considered. Table 17 presents<br />
some generic arguments <strong>for</strong> <strong>and</strong> against the private sector, which must be taken<br />
into consideration when planning re<strong>for</strong>ms.<br />
The advantages of PSP are potentially greater in SEE, since there is a bigger discrepancy<br />
between the experience of international water utility operators <strong>and</strong> that<br />
of local operators. Better access to capital is another strong argument <strong>for</strong> PSP in developing<br />
countries. However, municipal <strong>and</strong> state decision makers are more reluctant<br />
to embrace PSP, mainly due to concerns about af<strong>for</strong>dability <strong>and</strong> the desire to<br />
harvest some of the efficiency gains locally.<br />
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BOX 18: Build-operate-transfer agreement <strong>for</strong> Zagreb wastewater treatment plant<br />
In Croatia, the city of Zagreb has a build-operate-transfer (BOT) contract <strong>for</strong> its wastewater treatment plant. The BOT<br />
contract is <strong>for</strong> 28 years. The project also includes the construction of supporting infrastructure.<br />
A special-purpose company — Zagrebacke Otpadne Vode d.o.o. — was set up <strong>for</strong> the project. The company is owned<br />
by a sponsor consortium comprising RWE AQUA GmbH (owned indirectly by RWE AG) <strong>and</strong> SHWHolter-<br />
Wassertechnik GmbH (a fully owned subsidiary of Berlinwasser Holding Aktiengesellschaft).<br />
The EBRD provided around EUR 55 million out of the total cost of EUR 270 million.<br />
Co-financing of EUR 115 million was provided by the German bank Kreditanstalt fur Wiederaufbau (KfW). By lending<br />
directly to the concessionaire, the EBRD is allowing the city to use its own credit capacity <strong>for</strong> other important projects.<br />
The city will control the private company through a long-term concession contract, which sets out the discharge st<strong>and</strong>ards<br />
with which wastewater must comply. The project is an example of how public-private partnerships work.<br />
The private consortium agreed to build the plant in line with EU environmental st<strong>and</strong>ards, to operate it, <strong>and</strong> to transfer<br />
it at the end of the concession period to the city of Zagreb. The city assumes risk in terms of the volume of water<br />
used <strong>and</strong> risk regarding the collection of the wastewater tariff.<br />
This allocation of risk ensures that the private operator constructs the plant <strong>and</strong> operates it efficiently in order to comply<br />
with EU environmental st<strong>and</strong>ards, while the city has the incentive to collect tariffs to pay a fee to the operator.<br />
(EBRD website).<br />
S T R AT E G I C M O V E S<br />
Implementation of PSP options<br />
Private sector involvement in water utilities is dependent on several conditions.<br />
The higher the level of PSP, the greater its dependency on each of these conditions.<br />
Waste<br />
Although, as in the water sector, there are a number of alternatives <strong>for</strong> PSP in the<br />
waste sector, based on international experience only contracting <strong>and</strong> concession are<br />
suitable in the field of solid waste management services. Contracting is usually suitable<br />
<strong>for</strong> collection activities <strong>and</strong> will usually have a duration of between three <strong>and</strong> five<br />
years. Under certain circumstances — <strong>for</strong> example if big investments are required —<br />
this may be extended to seven years. A concession is appropriate if investments in<br />
buildings (i.e. transfer stations) or facilities (i.e. a l<strong>and</strong>fill) are envisaged. The relatively<br />
long depreciation period <strong>for</strong> these investments requires a longer-term agreement<br />
(15 years or longer). In addition, attention must be paid to conditions <strong>for</strong> the<br />
h<strong>and</strong>ing over of assets after the concession ends. There are several examples in SEE<br />
of private companies providing collection <strong>and</strong> transportation services.<br />
Potential risks of PSP<br />
There are a number of potential benefits when introducing PSP, including better<br />
access to capital, greater efficiency etc. Nevertheless, potential risks are also present.<br />
When considering PSP, a municipality should assess both benefits <strong>and</strong> risks<br />
be<strong>for</strong>e making a final decision.
TABLE 16: Main options <strong>for</strong> private sector participation <strong>and</strong> the allocation of responsibilities<br />
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OPTIONS SERVICE MANAGEMENT LEASE BOT CONCESSION DIVESTITURE<br />
CONTRACT CONTRACT<br />
Asset Public Public Public Public <strong>and</strong> Public Public or<br />
ownership private private <strong>and</strong><br />
public<br />
Operations <strong>and</strong> Public <strong>and</strong> Private Private Private Private Private<br />
maintenance private<br />
Capital<br />
investment<br />
Private Public Public Public Private Private<br />
Commercial<br />
risk<br />
Tariff collection<br />
Public Public Shared Private Private Private<br />
risk Public/private Public/private Private Public Private Private<br />
Construction<br />
risk<br />
None None None/low High Low Very low<br />
Duration 1-2 years 3-5 years 8-15 years 20-30 years 25-30 years Indefinite<br />
(may be limited<br />
by licence)<br />
Source: A combination of tables from World Bank Toolkit <strong>for</strong> Private Participation in Water <strong>and</strong> Sanitation (adjusted).<br />
TABLE 17: Pros <strong>and</strong> cons of PSP in water utilities<br />
PROS CONS<br />
Increased technical, operational <strong>and</strong> managerial<br />
per<strong>for</strong>mance<br />
Profit orientation outweighs efficiency gains<br />
• Possibility <strong>for</strong> (full) cost recovery Negative impact on tariffs <strong>and</strong> af<strong>for</strong>dability<br />
• Improved access to capital<br />
Increased operating efficiency Staff reduction negatively affects employees, their families <strong>and</strong><br />
the community<br />
Reduced political influence Government/municipal concerns about loss of control <strong>and</strong><br />
power<br />
The presence of independent, profit-motivated private Water management should be a public service per se, as water<br />
providers influences government policy towards water<br />
services <strong>and</strong> the way it is en<strong>for</strong>ced<br />
is a basic human need<br />
Source: REC, 2009a<br />
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TABLE 18: Conditions <strong>for</strong> the successful implementation of private sector options<br />
CONDITION SERVICE MANAGEMENT LEASE BOT CONCESSION DIVESTITURE<br />
CONTRACT CONTRACT (BULK) (RETAIL)<br />
Stakeholder Unimportant Low to moderate Moderate to high Moderate to high High levels High levels<br />
support <strong>and</strong><br />
political<br />
commitment<br />
levels needed levels needed levels needed needed needed<br />
Cost-recovering Not necessary Preferred but Necessary Preferred Necessary Necessary<br />
tariffs in the short not necessary<br />
term in the short term<br />
Autonomy of<br />
the utility<br />
Unimportant Important Very important Unimportant Very important Very important<br />
Good system Possible to Sufficient Good Good Good Good<br />
in<strong>for</strong>mation proceed with in<strong>for</strong>mation in<strong>for</strong>mation in<strong>for</strong>mation in<strong>for</strong>mation in<strong>for</strong>mation<br />
only limited required to required required required required<br />
in<strong>for</strong>mation set incentives<br />
Developed Minimal Minimal Strong capacity Strong capacity Strong Strong<br />
regulatory monitoring monitoring <strong>for</strong> regulation <strong>for</strong> regulation regulatory regulatory<br />
framework capacity needed capacity needed <strong>and</strong> coordination <strong>and</strong> coordination capacity capacity<br />
needed needed needed<br />
Good country Not necessary Not necessary Not necessary Higher rating Higher rating Higher rating<br />
credit rating (limited will reduce will reduce will reduce<br />
relevance) costs costs costs<br />
Source: Toolkit <strong>for</strong> Private Participation in Water <strong>and</strong> Sanitation, World Bank, 2000 (adjusted)<br />
S T R AT E G I C M O V E S<br />
Risks:<br />
• The lack of an adequate waste fee collection structure may result in insufficient<br />
financial means to conclude a contract.<br />
• Local politicians should accept a certain level of independence on the part of<br />
solid waste management services: ongoing influence over collection activities is<br />
no longer possible.<br />
• If an insufficient number of private companies are interested, the competition<br />
may not be optimal, resulting in a less than optimum price/quality ratio.<br />
• If the municipal organisation is not developed — due, <strong>for</strong> example, to various<br />
changes in the number of municipalities in the past — the control function of<br />
the municipality may be insufficient.<br />
• Poor-quality tender documentation may result in the need <strong>for</strong> additional<br />
arrangements. The private company that already has a contract may misuse its<br />
position <strong>and</strong> impose unfavourable conditions <strong>for</strong> the additional services.
General observations<br />
• As a result of the decentralisation process, responsibility <strong>for</strong> water services, solid<br />
waste services <strong>and</strong> sewage treatment falls on the lowest self-governing municipal<br />
level.<br />
• Water <strong>and</strong> waste utilities in SEE suffer from various inherited problems, including<br />
low tariffs <strong>and</strong> bill payment rates; overstaffing; <strong>and</strong> the absence of<br />
sound organisation <strong>and</strong> management. These problems make full cost recovery<br />
difficult to achieve. In addition, there is a high level of fragmentation among<br />
utilities throughout the region.<br />
• No significant ef<strong>for</strong>ts have been made to reorganise public utilities into more<br />
efficient organisations working according to sound economic principles. The<br />
political independence of the utilities, their adequate human resources capacity,<br />
efficient organisational set-up <strong>and</strong> financial health are preconditions <strong>for</strong><br />
successful investments.<br />
• European practice has shown that in order to optimise the efficiency of municipal<br />
solid waste management, cooperation among municipalities <strong>and</strong> the<br />
sharing of infrastructure <strong>and</strong> service systems are essential.<br />
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S T R AT E G I C M O V E S
Chapter 7<br />
Financing environmental<br />
infrastructure investments<br />
S T R AT E G I C M O V E S 145
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S T R AT E G I C M O V E S
Introduction<br />
The financing of environmental infrastructure investments in SEE comes from<br />
several clearly identifiable sources:<br />
• the state budget;<br />
• municipal budgets;<br />
• extra-budgetary funds;<br />
• grants from the European Union;<br />
• grants from bilateral donors;<br />
• loans from IFIs;<br />
• loans from other commercial banks; <strong>and</strong><br />
• own funds of a municipal, county or publicly owned company or utility.<br />
The authors are of the opinion that there is a place <strong>for</strong> all these sources of financing<br />
<strong>and</strong> that national governments should have a clear strategy regarding which<br />
sources to use <strong>for</strong> which types of projects <strong>and</strong> investments.<br />
It should be emphasised that there are difficulties <strong>and</strong> obstacles in relation<br />
to the different sources of financing, which can be overcome by employing<br />
a differentiated approach.<br />
Domestic sources of finance<br />
Public (state, county, municipal etc.) budgets play an essential role in financing the<br />
rehabilitation of <strong>and</strong> capital investments in environmental infrastructure. Although<br />
in most cases they are insufficient to meet environmental investment needs they reflect<br />
two important things: the nominal size of the national <strong>and</strong> municipal budgets;<br />
<strong>and</strong>, more importantly, the priority (in terms of the percentage of the total budget)<br />
that the country attaches to environmental investment. While GDP <strong>and</strong> consequent<br />
budget growth are a slow process dependent on many factors, budgetary allocations<br />
<strong>for</strong> the environment are entirely an issue of priority <strong>and</strong> can be influenced.<br />
National budgetary funds are also of huge importance <strong>for</strong> providing national<br />
co-financing <strong>for</strong> projects in which a large share is financed from EU or bilateral<br />
grants <strong>and</strong>/or IFIs. Other sources of co-financing are loans to government; local<br />
budgetary funds; loans to municipalities; loans to utility companies; the private sector<br />
(as part of a public-private partnership arrangement); <strong>and</strong> carbon financing.<br />
In principle, local government activity is financed through the income collected<br />
from local taxes, fees, other sources of local income (e.g. rent or sale of local properties,<br />
interest, fines, subsidies, <strong>and</strong> grants/donations), <strong>and</strong> funds transferred from the<br />
central budget, as well as their own share of national taxes. Municipalities can also borrow<br />
funds <strong>for</strong> local public purposes, according to the criteria set by special laws.<br />
The coordination of environmental financing flows at national level is of primary<br />
importance to ensure complementarity in the financing of environmental in-<br />
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FIGURE 14: Proportion of environmental expenditure as percentage of GDP (2004–2005)<br />
%<br />
1.2<br />
1.0<br />
0.8<br />
0.6<br />
0.4<br />
0.2<br />
0<br />
FYR<br />
Macedonia<br />
Albania<br />
S T R AT E G I C M O V E S<br />
Bosnia <strong>and</strong><br />
Herzegovina<br />
2004 2005<br />
Serbia<br />
Source: Eurostat, government budgets<br />
Kosovo (under<br />
UNSCR 1244)<br />
Croatia<br />
Latvia<br />
Estonia<br />
Romania<br />
Slovakia<br />
Bulgaria<br />
frastructure <strong>and</strong> to stimulate cooperation among the relevant ministries. Such coordination<br />
is required in relation to the generation of revenue <strong>for</strong> environmental<br />
improvements <strong>and</strong> the creation of effective disbursement mechanisms <strong>for</strong> the financial<br />
resources accumulated. These mechanisms are required to have clearly defined<br />
long-term objectives, transparent project selection procedures, <strong>and</strong> developed<br />
project implementation <strong>and</strong> monitoring schemes (EC COM [2001] 304).<br />
Most countries are not able to coordinate their respective donors, as coordination<br />
depends to a large extent on the donors themselves <strong>and</strong>, in most cases, is not<br />
carried out on a regular basis.<br />
In 2001, it was estimated that, on average, c<strong>and</strong>idate countries needed to increase<br />
their environmental expenditure by 2 to 3 percent of their GDP in order to<br />
achieve compliance with the requirements of the EU environmental acquis. It can<br />
be assumed that the figure would be the same <strong>for</strong> the current c<strong>and</strong>idate countries<br />
<strong>and</strong> potential c<strong>and</strong>idates (EC COM [2001] 304).<br />
As can be seen from Figure 14, the majority of SEE countries are slowly increasing<br />
the proportion of their environment-related expenditures <strong>and</strong> approach-<br />
Pol<strong>and</strong><br />
Austria<br />
Hungary<br />
Italy<br />
Slovenia<br />
Denmark
ing the levels of expenditure in the new member states. However, old member states<br />
still allocate a far bigger share <strong>for</strong> the environment. Even Serbia, Kosovo (as defined<br />
under UNSCR 1244) <strong>and</strong> Croatia — the biggest investors in environmental<br />
protection in the region — directed less than 0.04 percent of their national<br />
GDP <strong>for</strong> this purpose in 2004–2005.<br />
Domestic financing of environmental<br />
infrastructure projects in SEE<br />
There is a funding gap in Albania with respect to environmental projects<br />
due to the low level of domestic funds. Legislation passed in 2002 introduced<br />
the possibility of generating income through environmental taxes, tariffs <strong>and</strong><br />
charges. <strong>Environmental</strong> investment projects are almost fully financed with assistance<br />
from bilateral donors <strong>and</strong> IFIs. However, the Ministry of Public Works,<br />
Transport <strong>and</strong> Telecommunications (MoPWTT) has elaborated a mid-term financial<br />
plan <strong>for</strong> investments in the area of water <strong>and</strong> waste infrastructure, <strong>and</strong><br />
manages a capital investment programme that contributes to the development<br />
of communal environmental infrastructure (ADA, 2008a). The programme envisages,<br />
<strong>for</strong> the year 2011, the construction of four regional l<strong>and</strong>fills <strong>and</strong> the closure<br />
of five existing dumpsites in five regions. State budget allocations <strong>for</strong> the<br />
waste sector <strong>for</strong> 2009 are EUR 2.3 million; <strong>for</strong> 2010 EUR 5.2 million; <strong>and</strong> <strong>for</strong><br />
2011 a predicted EUR 13 million.<br />
Only projects included in the Public Investment Programme (PIP) of Bosnia<br />
<strong>and</strong> Herzegovina are considered a national priority <strong>and</strong> eligible <strong>for</strong> financing. The<br />
PIP comprises projects <strong>for</strong> which financing has been secured, or will be secured in<br />
the future period, including environmental infrastructure. Investments in the waste<br />
<strong>and</strong> water sectors are financed mainly by the EU or IFIs. However, the federal government<br />
also provides financing <strong>for</strong> water <strong>and</strong> waste projects from the federal<br />
budget, even though current financing conditions are not favourable (REC, PEIP<br />
Analytical Reports 2007–2009).<br />
In Croatia, the <strong>Environmental</strong> Protection Operational Programme, co-financed<br />
by the IPA, provides the basis <strong>for</strong> the financing of environmental infrastructure<br />
projects. A large proportion of projects receive funding through the<br />
recently established <strong>Environmental</strong> Protection <strong>and</strong> Energy Efficiency Fund<br />
(EPEEF), the Croatian Bank <strong>for</strong> Reconstruction <strong>and</strong> Development (HBOR), <strong>and</strong><br />
previous EU programmes (Phare <strong>and</strong> ISPA). One of the priority objectives of the<br />
HBOR includes environmental protection, the sustainable use of natural resources,<br />
<strong>and</strong> the financing of infrastructure, including environmental infrastructure (ADA,<br />
2008b). The bank has elaborated specific loan programmes: an infrastructure loan<br />
programme <strong>and</strong> an environmental protection loan programme dealing with the<br />
upgrading <strong>and</strong> reconstruction of municipal infrastructure. Loans are given <strong>for</strong> up<br />
to 15 years with an annual interest rate of 4 percent <strong>for</strong> projects investing in specially<br />
protected areas <strong>and</strong> 6 percent <strong>for</strong> all others. In 2007, loans to the amount of<br />
EUR 66 million were approved by HBOR to further promote investments in environmental<br />
protection <strong>and</strong> energy projects.<br />
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S T R AT E G I C M O V E S<br />
Future environmental improvements in Kosovo (as defined under UNSCR<br />
1244) depend on the budget allocated to the Ministry of Environment <strong>and</strong> Spatial<br />
Planning (MoESP) <strong>and</strong> on donor support. The priority project is the Air Quality<br />
Monitoring Network, <strong>for</strong> which 30 percent of the costs (EUR 965,000 <strong>for</strong> the period<br />
2008–2010) will be covered from the consolidated budget of Kosovo (as defined<br />
under UNSCR 1244).<br />
Foreseen expenditures in the field of environment <strong>for</strong> the years 2010 to 2012 in the<br />
<strong>for</strong>m of capital investments <strong>for</strong> approved projects total EUR 3.4 million, whereas investments<br />
in new projects will total EUR 9.8 million. Currently projects worth EUR<br />
24 million are being implemented with IPA co-financing <strong>for</strong> the closure of dumpsites<br />
<strong>and</strong> <strong>for</strong> investment in water utilities (REC, PEIP Analytical Reports 2007–2009).<br />
The Kosovo <strong>Environmental</strong> Action Plan (KEAP), listing all environment-related<br />
priority goals <strong>for</strong> 2006 to 2010, is the main framework <strong>for</strong> all activities undertaken<br />
<strong>for</strong> the purposes of environmental improvement <strong>and</strong> protection. The<br />
KEAP stipulates a clear division of responsibilities between all stakeholders involved<br />
in environmental decision making <strong>and</strong> provides guidelines <strong>for</strong> international<br />
funding mechanisms <strong>and</strong> donor coordination. The KEAP is based on funding<br />
from a variety of donors <strong>and</strong> participation from the government budget of between<br />
5 <strong>and</strong> 20 percent. However, the share of funds currently dedicated to projects in the<br />
field of environment from the government budget under the KEAP is not sufficient<br />
to bring about significant environmental improvements (KEAP, 2006).<br />
The Government of the <strong>for</strong>mer Yugoslav Republic of Macedonia commits the<br />
biggest share of public resources <strong>for</strong> the environment — at least 88 percent of the<br />
available funds — to the water <strong>and</strong> waste sectors through the competent line ministries.<br />
Each year, environmental expenditures are allocated through its <strong>Environmental</strong><br />
Investment Programme (EIP) in the <strong>for</strong>m of grants. Between 2004 <strong>and</strong> 2007,<br />
the EIP approved financial support to 254 environmental projects, the majority of<br />
which were in the areas of water <strong>and</strong> waste. The Ministry of Transport <strong>and</strong> Communications<br />
(MTC) is responsible <strong>for</strong> communal infrastructure improvement <strong>and</strong><br />
continuously invests in water supply <strong>and</strong> sanitation projects co-financed by grants,<br />
loans or the national budget with support from IFIs <strong>and</strong> bilateral donors (ADA,<br />
2008c). Additionally, each line ministry has elaborated an annual investment programme<br />
allocating funds <strong>for</strong> the preparation of environmental project documentation<br />
<strong>and</strong> the construction of water supply <strong>and</strong> sanitation facilities. Water<br />
management-related projects are also supported. The total environmental expenditures<br />
of the EIP <strong>and</strong> the Ministry of Environment <strong>and</strong> Physical Planning amounted<br />
to EUR 2.12 million in 2006; <strong>and</strong> to EUR 1.97 million in 2007. Total environmental<br />
expenditures from the Ministry of Transport <strong>and</strong> Communications’ own<br />
budgetary sources in relation to water supply <strong>and</strong> sanitation purposes amounted to<br />
EUR 3.028 million in 2006, <strong>and</strong> EUR 3.725 million in 2007 (ADA, 2008d).<br />
The National <strong>Environmental</strong> Investment Strategy (NEIS) was adopted recently <strong>for</strong><br />
the period 2009–2013 <strong>and</strong> is designed to set up a comprehensive system streamlining<br />
the available national funds <strong>and</strong> leveraging the international financing sources towards<br />
solving environmental problems in the fields of water, waste, air quality, energy <strong>and</strong> na-
ture protection (NEIS, 2009). A key objective of the strategy is to establish a pipeline<br />
of bankable projects <strong>and</strong> provide the basis <strong>for</strong> the selection <strong>and</strong> prioritisation of projects<br />
financed by budgetary funds, IFIs <strong>and</strong> bilateral donors. For the period 2009–<br />
2013, the plan is to spend some 56 percent of the funds available on water supply <strong>and</strong><br />
sanitation; <strong>and</strong> around 32 percent on waste management issues.<br />
Between 2002 <strong>and</strong> 2006, a large proportion of expenditure at national level in<br />
Montenegro was in the area of solid waste management. Currently, the Ministry<br />
of Finance is responsible <strong>for</strong> infrastructure construction <strong>and</strong> maintenance investments<br />
(ADA, 2008d). One of the strategic objectives of the national fiscal policy<br />
is to introduce capital budget <strong>and</strong> increase allocations <strong>for</strong> capital investments to<br />
undertake significant infrastructure investments.<br />
In the period 2003–2008, a positive trend has been recorded in environmental<br />
investment, especially in terms of infrastructure projects in the field of wastewater<br />
treatment, water supply <strong>and</strong> waste management. From 2003 to 2005, the percentage<br />
of projects funded from donations was significantly higher compared to domestic<br />
funding <strong>and</strong> loans; while from 2005 to 2008 the trend changed —<br />
donations decreased while financing from own funds <strong>and</strong> loans significantly increased.<br />
In 2008, funding from internal resources represents the largest proportion,<br />
followed by credits <strong>and</strong> grants (REC survey, 2009).<br />
In 2008, funds from the state capital budget provided <strong>for</strong> environmental projects<br />
within the communal sector totalled EUR 2,345 million: EUR 1,545 million<br />
<strong>for</strong> sanitary l<strong>and</strong>fills <strong>and</strong> EUR 0.8 million <strong>for</strong> wastewater treatment facilities. In<br />
2007, the budget <strong>for</strong> the environment was about EUR 1.8 million; in 2008 it was<br />
about EUR 5 million; <strong>and</strong> the budget <strong>for</strong> 2009 is about EUR 5.2 million (REC,<br />
PEIP Analytical Reports, 2007–2009).<br />
National financial resources <strong>for</strong> environmental investments in Serbia are still<br />
very limited. They are currently being disbursed only <strong>for</strong> technical assistance <strong>for</strong><br />
project preparation, <strong>and</strong> in rare cases <strong>for</strong> the construction of infrastructure. Domestic<br />
financial resources are supplemented by <strong>for</strong>eign assistance, which is channelled<br />
mainly through the Ministry <strong>for</strong> the National Investment Plan (NIP), as<br />
well as two units of the Ministry of Finance (MoF): the Development Aid Coordination<br />
Unit (DACU) <strong>and</strong> the National IPA Office (NIPAC). The principal<br />
sources <strong>for</strong> water quality improvement investment programmes are budgetary<br />
funds allocated by the Water Directorate of the Ministry of Agriculture, Forestry<br />
<strong>and</strong> Water Management (MoAFWM), received from charges <strong>for</strong> water consumption,<br />
abstraction <strong>and</strong> pollution; the state budget; donations; <strong>and</strong> loans from IFIs<br />
(ADA, 2008g). The Water Directorate <strong>and</strong> the Srbijavode public water management<br />
company are responsible <strong>for</strong> directing accumulated funds towards the construction<br />
<strong>and</strong> maintenance of the water supply <strong>and</strong> sanitation infrastructure.<br />
The Ministry <strong>for</strong> the National Investment Plan promotes investments into<br />
strategic infrastructure <strong>and</strong> recently launched a programme to finance infrastructure<br />
improvement, including environmental infrastructure, in the poorest 40 municipalities<br />
in Serbia, with grants covering 100 percent of eligible costs (ADA,<br />
2008f ). The project “Clean up Serbia” was launched in 2009 by the Ministry of En-<br />
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vironment <strong>and</strong> Spatial Planning <strong>and</strong> is aimed at the remediation of illegal dumpsites<br />
in more than 10 locations, the cleaning of riverbeds, as well as the capacity building<br />
of eco-industry. A total of EUR 6.5 million has been allocated <strong>for</strong> this purpose.<br />
In 2006–2007, EUR 20 million (1.2 percent of the total state budget allocations)<br />
were directed to environmental protection measures. The main emphasis was on the<br />
underdeveloped waste management sector (EUR 11.4 million), followed by water<br />
supply <strong>and</strong> wastewater treatment (EUR 4.9 million) <strong>and</strong> air pollution (EUR 3.7 million).<br />
In 2008, the Ministry <strong>for</strong> the National Investment Plan approved around EUR<br />
4.2 million <strong>for</strong> water sector infrastructure <strong>and</strong> disbursed around EUR 1.1 million in<br />
11 Serbian municipalities (REC, PEIP Analytical Reports, 2007–2009).<br />
Between November 2008 <strong>and</strong> June 2009, the effects of the global financial crisis<br />
could be observed on environmental investment projects financed from the national<br />
budget. The Ministry <strong>for</strong> the National Investment Plan had to cut down the<br />
amount of funding previously agreed, <strong>and</strong> most municipalities (especially the<br />
smaller <strong>and</strong> poorer ones) are finding it increasingly difficult to secure funds <strong>for</strong><br />
projects. Many projects that had seen progress in the previous period came to a<br />
halt, while only some of the richer <strong>and</strong> more proactive municipalities made progress<br />
in this period. For the next period, important <strong>and</strong> increasing challenges will probably<br />
be felt in the smaller, less-developed municipalities (REC survey, 2009).<br />
The establishment of environmental protection funds in SEE<br />
The establishment of an environmental fund is one of the available institutional<br />
solutions with respect to environmental investments. In CEE countries, experiences<br />
with environmental funds have been mixed <strong>and</strong> there are examples of both<br />
well-functioning funds <strong>and</strong> funds that have failed to per<strong>for</strong>m <strong>and</strong> have been dissolved.<br />
This suggests that environmental funds are an institutional <strong>for</strong>m that has no<br />
guarantee of success per se. Some of the prerequisites <strong>for</strong> success are clear responsibilities,<br />
a fixed time horizon, <strong>and</strong> clear sources of capitalisation. Setting up a fund<br />
also requires significant investments in terms of human resources.<br />
In Albania, preparatory work began in the mid-1990s to establish an environmental<br />
fund, but the Ministry of Finance stopped the initiative. Both the<br />
governmental programme <strong>and</strong> the Intersectoral Strategy <strong>for</strong> the Environment<br />
call <strong>for</strong> the establishment of a national environmental fund (REC, PEIP Analytical<br />
Reports, 2007–2009).<br />
<strong>Environmental</strong> funds have been established in both entities of Bosnia <strong>and</strong><br />
Herzegovina. The <strong>Environmental</strong> Fund of the Federation of Bosnia <strong>and</strong> Herzegovina<br />
(EFFBiH) <strong>and</strong> the <strong>Environmental</strong> Fund of Republika Srpska (EFRS) were<br />
founded by the governments of the two entities under their respective Law on the<br />
<strong>Environmental</strong> Fund (in 2006 in FBiH; <strong>and</strong> in 2002 in RS) defining all the necessary<br />
conditions <strong>and</strong> scope of activities of the funds. The funds were established<br />
<strong>for</strong> the purpose of collecting <strong>and</strong> allocating funding <strong>for</strong> the development of water<br />
management infrastructure; waste minimisation <strong>and</strong> the adoption of integrated<br />
waste management; <strong>and</strong> the construction of other municipal infrastructure facilities<br />
necessary to meet EU accession st<strong>and</strong>ards.
The EFRS is largely funded via the state budget, but it can also obtain funds<br />
from <strong>for</strong>eign <strong>and</strong> international sources, such as IFI loan <strong>and</strong> soft loan schemes.<br />
Starting from 2008, fund revenues are secured through fees <strong>for</strong> the use of natural<br />
resources <strong>and</strong> <strong>for</strong> environmental impacts; the RS budget; fees levied on polluters;<br />
<strong>and</strong> grants (ADA, 2008j). Funds are allocated through loans, subsidies, financial<br />
help <strong>and</strong> donations. Since money is allocated to the EFRS from water fees (15 percent<br />
of total revenues), the Ministry of Water Management, Forestry <strong>and</strong> Agriculture<br />
requires the EFRS to dedicate those funds to water protection activities.<br />
At the time of writing there are no employees under the EFFBiH; the documents<br />
regulating the work of the EFFBiH still remain at draft level, <strong>and</strong> their adoption is<br />
not expected in the near future. Initial funding was received <strong>for</strong> the establishment of<br />
the EFFBiH <strong>and</strong> additional revenues (water charges) were allocated from 2006. Unspent<br />
finances are expected to be accumulated under the EFFBiH <strong>and</strong> directed to<br />
environmental projects after the fund becomes operational (ADA, 2008i). There<br />
have been no environmental expenditures to date. Various IFIs have a keen interest<br />
in the actual establishment <strong>and</strong> stable functioning of the EFFBiH according to the<br />
best available practice, helping both entity funds to apply jointly <strong>for</strong> IPA <strong>and</strong> bilateral<br />
donor funding. At present, the status of the fund appears complex <strong>and</strong> the decision<br />
to start operation could depend on strong external technical assistance to build up the<br />
foundation <strong>for</strong> a solid environmental institution in FBiH.<br />
Croatia’s <strong>Environmental</strong> Protection <strong>and</strong> Energy Efficiency Fund (EPEEF),<br />
which is an extra-budgetary fund, became operational in 2004. A tool <strong>for</strong> implementing<br />
environmental policy <strong>and</strong> financing environmental programmes, at present<br />
it focuses primarily on co-financing municipal projects in waste. The fund’s<br />
resources come from earmarked charges levied on environmental polluters <strong>and</strong><br />
users; charges <strong>for</strong> industrial waste <strong>and</strong> motor vehicle charges; budget transfers; <strong>and</strong><br />
revenues from international bilateral <strong>and</strong> multilateral cooperation in the field of<br />
environment (ADA, 2008k). Fund resources are allocated through grants, soft<br />
loans, subsidised interest rates <strong>and</strong> loans from commercial banks, <strong>and</strong> are used primarily<br />
to finance programmes <strong>and</strong> projects in accordance with the National <strong>Environmental</strong><br />
Protection Strategy <strong>and</strong> National <strong>Environmental</strong> Action Plan, strategic<br />
energy documents, <strong>and</strong> other related strategies <strong>and</strong> regulations. Financing is directed<br />
to general environmental protection, the sustainable use of natural resources,<br />
waste management (65 percent of overall expenditures in 2005–2008), <strong>and</strong> support<br />
<strong>for</strong> energy efficiency <strong>and</strong> renewable energy sources.<br />
The EPEEF is responsible <strong>for</strong> the promotion <strong>and</strong> establishment of cooperation<br />
with international <strong>and</strong> domestic financial institutions. Jointly with the Croatian<br />
Bank <strong>for</strong> Reconstruction <strong>and</strong> Development (HBOR), the fund supports the Loan<br />
Programme <strong>for</strong> the Financing of <strong>Environmental</strong> Protection, Energy Efficiency <strong>and</strong><br />
Renewable Energy Sources. The fund is also involved in managing EU assistance<br />
to Croatia <strong>and</strong> is currently implementing a project <strong>for</strong> developing waste management<br />
infrastructure under the IPA 2007–2009 <strong>Environmental</strong> Protection Operational<br />
Programme (EPOP). In 2006, the EPEEF disbursed a total of EUR 102<br />
million, of which EUR 100 million was allocated <strong>for</strong> environmental projects, <strong>and</strong><br />
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S T R AT E G I C M O V E S<br />
EUR 2.35 million <strong>for</strong> energy efficiency projects (REC, PEIP Analytical Reports,<br />
2007–2009). Croatian Waters is responsible <strong>for</strong> providing assistance in project<br />
preparation <strong>and</strong> IPA applications in the water sector.<br />
Between 2007 <strong>and</strong> 2009, EUR 21.5 million were disbursed <strong>for</strong> the remediation<br />
of official l<strong>and</strong>fills; EUR 14.3 million were allocated <strong>for</strong> the remediation <strong>and</strong><br />
closure of illegal dumpsites; <strong>and</strong> EUR 53.4 million <strong>for</strong> the remediation of hotspots.<br />
Between 2009 <strong>and</strong> 2011, the EPEEF will give EUR 51.5 million to support investments<br />
<strong>for</strong> the establishment <strong>and</strong> construction of RWMCs (REC, PEIP Analytical<br />
Reports, 2007–2009).<br />
The authorities in Kosovo (as defined under UNSCR 1244) are investigating<br />
the possibility of establishing an environmental fund <strong>and</strong> the government is in the<br />
process of developing the first draft of the law on establishing the fund, which<br />
would probably be managed initially by the Ministry of Environment <strong>and</strong> Spatial<br />
Planning <strong>and</strong> later trans<strong>for</strong>med into an independent body. The EC CARDS project<br />
assisted in developing an appropriate frame <strong>for</strong> the structure of the fund (REC,<br />
PEIP Analytical Reports, 2007–2009). No investments are planned utilising this<br />
fund. Anther reason <strong>for</strong> the slow progress in terms of establishing the fund is the<br />
pending permission of the IMF. The budget allocated <strong>for</strong> environment in 2010 by<br />
the Ministry of Environment <strong>and</strong> Spatial Planning has not yet been approved because<br />
the government is experiencing difficulties in assessing capital investments<br />
in the environmental sector (REC survey, 2009).<br />
The Fund <strong>for</strong> <strong>Environmental</strong> <strong>and</strong> Nature Protection <strong>and</strong> Promotion of the <strong>for</strong>mer<br />
Yugoslav Republic of Macedonia was established in 1998. Between 1998<br />
<strong>and</strong> 2001, USAID technical assistance was provided to the fund with the aim of developing<br />
an effective, transparent financing institution capable of providing grant<br />
<strong>and</strong> loan finance to local administrations <strong>and</strong> industry in order to facilitate pollution<br />
prevention <strong>and</strong> environmental protection. From its creation, the fund was exposed<br />
to highly variable political <strong>and</strong> economic conditions, resulting in frequent<br />
changes of leadership <strong>and</strong> the lack of a long-term strategy <strong>for</strong> its operations. The<br />
general perception of the fund by other stakeholders was that it lacked clearly defined<br />
priorities <strong>and</strong> transparent financing strategies <strong>and</strong> procedures, <strong>and</strong> that it was<br />
exposed to political influences affecting project selection procedures. As a consequence,<br />
based on the recommendations of the IMF, the fund ceased operations<br />
under the new Law on Environment. <strong>Environmental</strong> investments are now administered<br />
through an environmental investment programme integrated within the<br />
structure of the Ministry of Environment <strong>and</strong> Physical Planning as the Department<br />
<strong>for</strong> Sustainable Development <strong>and</strong> Investments (ADA, 2008d). The ministry<br />
continues to collect charges <strong>and</strong> to provide limited financial assistance in the <strong>for</strong>m<br />
of grants to NGOs, public enterprises <strong>and</strong> local authorities. The Macedonian environmental<br />
fund thus became a political hostage <strong>and</strong> can serve as an example of<br />
how not to manage an environmental fund.<br />
For more than five years the Ministry of Tourism <strong>and</strong> Environment of Montenegro<br />
has been considering the possibility of introducing an eco-revolving fund<br />
<strong>for</strong> financing environmental investment projects by public utilities at the municipal
level (ADA, 2008l). The purpose of the revolving fund would be to provide funds<br />
<strong>for</strong> water supply <strong>and</strong> wastewater treatment, waste management, the construction of<br />
roads <strong>and</strong> other infrastructure projects. The environmental fund is expected to become<br />
operational in 2009, pending the adoption of a corresponding law by the Parliament.<br />
The fund will be set up as an independent legal entity, but its overall human<br />
<strong>and</strong> financial resource endowments remain to be decided. The fund’s activities are<br />
expected to cover all the main environmental sectors, including capital investments<br />
in infrastructure, the promotion of environmental education <strong>and</strong> research, <strong>and</strong> the<br />
use of renewable energy sources. Financial resources will be provided by the fund in<br />
the <strong>for</strong>m of grants, subsidies <strong>and</strong> soft loans. The fund is intended to mediate the use<br />
of resources provided by the government, <strong>and</strong> possibly by international organisations<br />
<strong>and</strong> IFIs (REC, PEIP Analytical Reports, 2007–2009).<br />
One of the main domestic sources of financing <strong>for</strong> environmental protection in<br />
Serbia is the <strong>Environmental</strong> Protection Fund (EPF). The fund covers the development<br />
<strong>and</strong> implementation of programmes <strong>and</strong> projects in the field of environmental<br />
protection, the sustainable use of natural resources, environmental<br />
infrastructure, energy efficiency <strong>and</strong> renewable energy (ADA, 2008h). In practice,<br />
the EPF mostly finances projects in the waste sector (<strong>and</strong> some in the air sector),<br />
while water sector projects are funded by the Water Directorate belonging to the<br />
Ministry of Agriculture, Forestry <strong>and</strong> Water Management (MoAFWM). Since<br />
2006, the EPF has been allocating grants <strong>for</strong> the preparation of project documentation<br />
in relation to the clean-up, remediation <strong>and</strong> closure of existing l<strong>and</strong>fills. Since<br />
2007, financing has been allocated <strong>for</strong> the actual construction of regional l<strong>and</strong>fills.<br />
None of these projects has yet been completed, although significant progress has<br />
been made in the regional l<strong>and</strong>fills in Uzice <strong>and</strong> Prokuplje: most of the funds have<br />
been secured <strong>and</strong> the construction is under way.<br />
In 2007, the EPF disbursed a total of EUR 2 million entirely <strong>for</strong> the waste sector,<br />
directed to the preparation of project documentation <strong>for</strong>, <strong>and</strong> the actual construction<br />
of, the first phase of the regional waste l<strong>and</strong>fill in Prokuplje, <strong>and</strong> to the<br />
upgrading of seven municipal l<strong>and</strong>fills.<br />
In 2008, the EPF disbursed EUR 17.4 million in total, of which EUR 9.4 million<br />
(54 percent) was dedicated to the waste sector; <strong>and</strong> EUR 0.77 million (13.5<br />
percent) to the air protection sector. In 2009, the EPF secured a total of EUR 15<br />
million, entirely <strong>for</strong> the waste sector (REC, PEIP Analytical Reports, 2007–2009).<br />
The water sector is financed from the Directorate <strong>for</strong> Waters.<br />
Fund revenues include charges <strong>for</strong> nature <strong>and</strong> resource use; pollution charges;<br />
a proportion of funds from privatisation; funds from multilateral <strong>and</strong> bilateral programmes,<br />
projects <strong>and</strong> other activities in the field of environmental protection <strong>and</strong><br />
energy efficiency; reinvested income; <strong>and</strong> contributions, donations <strong>and</strong> grants.<br />
Fund assets are granted through loans, guarantees, direct grants <strong>and</strong> interest rate<br />
subsidies on commercial loans (ADA, 2008h). Currently, between 70 <strong>and</strong> 80 percent<br />
of resources are allocated through grants, although in the future it is planned<br />
to increase the share of loans. In 2006, the amount directed to the EPF from charges<br />
was about 0.02 percent of GDP, thus it is clear that, with the current low revenues<br />
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BOX 19: Case study — <strong>Environmental</strong> Fund of the Republic of Slovenia<br />
The <strong>Environmental</strong> Fund of the Republic of Slovenia was established in 1993 in order to manage assets earmarked<br />
<strong>for</strong> environmental protection. It is the only specialised institution in Slovenia that provides financial assistance to environmental<br />
projects. The fund supports environmental investments in compliance with the priorities defined by the<br />
legislation in <strong>for</strong>ce <strong>and</strong> directs funding to industry, municipalities, local infrastructure companies <strong>and</strong> households.<br />
The fund is the biggest specialised financial institution granting soft loans; issuing guarantees; providing financial, economic<br />
<strong>and</strong> technical consulting services; <strong>and</strong> acting as a financial intermediary. The total capital <strong>and</strong> liabilities of the<br />
fund were EUR 120 million on December 31, 2007. The largest proportion of funding (70 percent) comes from the<br />
Earmarked Asset Fund, loans from IFIs, <strong>and</strong> grants from international funds. Earmarked funds come mainly from environmental<br />
taxes, non-refundable funds from the budget of the Ministry of the Environment <strong>and</strong> Spatial Planning <strong>for</strong><br />
environmental investments, <strong>and</strong> EU funds. The fund has a legal obligation to maintain the real value of its assets <strong>and</strong><br />
to cover operating costs from loan interest rates.<br />
For legal entities, funding is directed to support investments in environmental infrastructure, environmentally sound<br />
technologies <strong>and</strong> products, energy efficiency, energy saving <strong>and</strong> the use of renewable energy. For households, funding<br />
covers investments assisting conversion from fossil fuels to renewable energy sources <strong>and</strong> energy-saving technologies,<br />
water consumption reduction, <strong>and</strong> connections to sewerage systems <strong>and</strong> small wastewater treatment plants.<br />
Loans to households have significantly increased — from 9 percent in 2002 to 36 percent in 2006.<br />
Opportunities <strong>for</strong> loans are made public through tenders <strong>and</strong> public calls <strong>for</strong> applications. The fund also co-finances<br />
projects with the aim of in<strong>for</strong>ming <strong>and</strong> raising the awareness of potential borrowers about the purposes of the fund’s<br />
favourable loans (Slovenian <strong>Environmental</strong> Fund Annual Report, 2007). The project evaluation procedure includes assessing<br />
success in meeting the key priorities set in national strategic documents <strong>and</strong> EU legislation; assessing the adequacy<br />
of technological solutions; <strong>and</strong> general environmental criteria. Between 1995 <strong>and</strong> 2006, some 10,031 loans<br />
were granted, worth a total of EUR 239.3 million.<br />
S T R AT E G I C M O V E S<br />
from charges, the EPF is not able to provide a significant amount of money or support<br />
to projects eligible <strong>for</strong> financing, such as those on environmental protection,<br />
energy efficiency <strong>and</strong> renewable energy.<br />
General observations<br />
• Public (state, county, municipal etc.) budgets, although insufficient in most<br />
cases, have an essential role in financing the rehabilitation of, <strong>and</strong> capital investments<br />
in, environmental infrastructure. They indicate priorities <strong>and</strong> provide<br />
co-financing <strong>for</strong> loans <strong>and</strong> grants from the EU, IFIs <strong>and</strong> bilateral donors.<br />
• The coordination of environmental financing flows at national level is of primary<br />
importance in ensuring complementarities in the financing of environmental<br />
infrastructure <strong>and</strong> in stimulating cooperation between the relevant ministries.<br />
• SEE countries are slowly increasing the proportion of their environment-related<br />
expenditures <strong>and</strong> are approaching the levels of new member states. However,<br />
funds are not sufficient to cover all the required expenditures.
International financial assistance<br />
This section contains an overview of donor activities in SEE <strong>and</strong> donor involvement<br />
in financing environmental infrastructure projects. The European<br />
Union is the main international donor in SEE. The overall objective of its assistance<br />
in SEE is to bring the countries closer to EU principles <strong>and</strong> st<strong>and</strong>ards. In the<br />
area of infrastructure, projects are selected on the basis of their contribution to laying<br />
the foundations <strong>for</strong> sustainable economic development <strong>and</strong> growth, <strong>and</strong> in particular<br />
to meeting basic infrastructure needs in the least-developed countries.<br />
However, in the c<strong>and</strong>idate countries additional emphasis is placed on core investment,<br />
especially in the fields of environment, transport <strong>and</strong> energy.<br />
Sources of grant support — Instrument<br />
<strong>for</strong> Pre-accession Assistance (IPA)<br />
Financial assistance from the European Union to SEE countries is provided<br />
through the Instrument <strong>for</strong> Pre-accession Assistance (IPA). Initiated in 2007, the<br />
IPA represents the main instrument of financial support channelled from the EU<br />
<strong>and</strong> replaces previous pre-accession mechanisms such as Phare, ISPA <strong>and</strong> CARDS.<br />
The main objective of the IPA is to help beneficiary countries to implement the re<strong>for</strong>ms<br />
needed to fulfil EU membership requirements <strong>and</strong> to make progress in the<br />
Stabilisation <strong>and</strong> Association Process (EC, DG Regio, IPA website). The instrument<br />
is designed to simplify all pre-accession assistance into a single framework<br />
both <strong>for</strong> c<strong>and</strong>idate countries (Croatia <strong>and</strong> the <strong>for</strong>mer Yugoslav Republic of Macedonia)<br />
<strong>and</strong> <strong>for</strong> the potential c<strong>and</strong>idates, <strong>and</strong> to facilitate the trans<strong>for</strong>mation from<br />
one status to another. Under IPA assistance, special emphasis is given to institution<br />
building; strengthening the capacities <strong>and</strong> structures needed <strong>for</strong> the management<br />
of pre-structural funds; <strong>and</strong> financing infrastructure investments. The average<br />
annual allocation <strong>for</strong> SEE under the IPA <strong>for</strong> the period 2007 to 2011 is about EUR<br />
800 million (EC, 2008). This represents the highest per capita amount provided<br />
by the EC to any other region in the world (approximately EUR 30 annually). Allocations<br />
to the environment under Component I <strong>for</strong> 2007 <strong>and</strong> 2008 totalled EUR<br />
63 million <strong>and</strong> EUR 59 million respectively. Multi-beneficiary environmental programmes<br />
allocated a total of EUR 3.7 million (EC SEC [2009] 1309).<br />
The IPA is an important source of funding <strong>for</strong> projects focusing on the institutional<br />
strengthening <strong>and</strong> capacity building of national authorities in the field of<br />
environment, sustainable resources management, environmental policy, environmental<br />
infrastructure upgrading <strong>and</strong> reconstruction, water supply <strong>and</strong> sanitation facilities,<br />
municipal waste management, air quality improvement, <strong>and</strong> environmental<br />
impact assessment. The IPA is also regarded as a potential source of funding <strong>for</strong><br />
urban wastewater management projects, under the condition that a re<strong>for</strong>m of the<br />
public utilities is carried out addressing cost-recovery issues.<br />
Three of the IPA components are directly related to the financing of environmental<br />
projects — Component I: Transition Assistance <strong>and</strong> Institution Building;<br />
Component II: Cross-Border Cooperation (with EU member states <strong>and</strong> other<br />
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FIGURE 15: IPA allocations to SEE countries (2007–2012)<br />
EUR<br />
million<br />
250<br />
200<br />
150<br />
100<br />
50<br />
0<br />
Albania<br />
S T R AT E G I C M O V E S<br />
Bosnia <strong>and</strong><br />
Herzegovina<br />
Croatia Kosovo (under FYR<br />
UNSCR 1244) Macedonia<br />
2007 2008 2009 2010 2011 2012<br />
Source: EC, DG Enlargement<br />
Montenegro<br />
Serbia<br />
countries eligible <strong>for</strong> IPA funding; <strong>and</strong> Component III: <strong>Regional</strong> Development<br />
(environment, transport <strong>and</strong> economic development). Financial support through<br />
the IPA is delivered via annual national <strong>and</strong> multi-beneficiary programmes based<br />
on country-specific multi-annual indicative programming documents (MIPDs) <strong>and</strong><br />
multi-annual indicative financial frameworks (MIFFs), which are strategic documents<br />
that indicatively allocate funds per beneficiary country <strong>and</strong> per component.<br />
In the potential c<strong>and</strong>idate countries, infrastructure investments are supported<br />
through Component I, while c<strong>and</strong>idate countries implement pre-structural policies<br />
<strong>and</strong> receive financial support through access to Component III. Under IPA Component<br />
II, environment projects in eligible cross-border areas receive financing through<br />
cross-border cooperation programmes. Annual national programmes define precisely<br />
the projects to be provided with grants during the <strong>for</strong>thcoming financial year under<br />
Component I <strong>for</strong> both sets of countries, while three-year rolling operational programmes<br />
in energy, transport <strong>and</strong> environment allow more flexibility in the financing<br />
of multi-annual projects under Components I <strong>and</strong> II (EC, DG Regio, IPA website).<br />
In 2007 <strong>and</strong> 2008, under Component I national programmes, approximately<br />
EUR 63 million <strong>and</strong> EUR 59 million respectively were allocated to environment-
FIGURE 16: IPA allocations to SEE countries per capita (2007–2012)<br />
EUR<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
related projects, while multi-beneficiary programmes directed funding totalling<br />
EUR 3.7 million to a number of environment-related projects. Under IPA Component<br />
III, approximately EUR 280 million were allocated to the environment in<br />
2007 to 2009 (EC, 2009).<br />
Component III of the IPA, open to c<strong>and</strong>idate countries, also focuses on the environment<br />
via operational programmes (OPs), which define the area of involvement<br />
(technical assistance, water management or solid waste management) <strong>and</strong><br />
indicate the investment projects to be supported. An operational programme constitutes<br />
the overarching document defining a number of short-term <strong>and</strong> mid-term<br />
national environmental priorities <strong>and</strong> objectives that need to be addressed in the<br />
current programming period. It draws on existing EU <strong>and</strong> national environmental<br />
policies <strong>and</strong> strategies <strong>and</strong> is designed to prepare national institutions to meet the<br />
environmental requirements of the EU accession process. One of the specific objectives<br />
of the Environment Protection OP (EPOP) is to support investments in<br />
the environmental infrastructure sector.<br />
Technical assistance <strong>for</strong> rein<strong>for</strong>cing administrative capacity <strong>for</strong> the implementation<br />
of assistance delivered under the EPOP constitutes an additional priority.<br />
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Croatia Kosovo (under FYR<br />
UNSCR 1244) Macedonia<br />
2007 2008 2009 2010 2011 2012<br />
Source: EC, DG Enlargement<br />
Montenegro<br />
Serbia<br />
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160<br />
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FIGURE 17: IPA allocations to SEE countries per component (2007–2012)<br />
EUR<br />
million<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
S T R AT E G I C M O V E S<br />
Croatia FYR Macedonia Albania Bosnia <strong>and</strong> Kosovo (under<br />
Herzegovina UNSCR 1244)<br />
I – Transition Assistance<br />
<strong>and</strong> Institution Building<br />
IV – Human Resources<br />
Development<br />
Montenegro<br />
II – Cross-border cooperation III – <strong>Regional</strong> development<br />
V – Rural Development<br />
Serbia<br />
Source: Multi-annual Indicative Planning Documents 2007–2009 <strong>and</strong> Multi-annual Indicative Planning Documents 2009–2011: Albania, Bosnia <strong>and</strong><br />
Herzegovina, Croatia, Kosovo (as defined under UNCSR 1244), the <strong>for</strong>mer Yugoslav Republic of Macedonia, Montenegro <strong>and</strong> Serbia<br />
To achieve these priorities, the EPOP anticipates investments in a series of “flagship”<br />
projects that have significant environmental benefits. These can be either<br />
large-scale projects (above EUR 10 million) or smaller projects.<br />
In the IPA national programme <strong>for</strong> all SEE countries under Component I, it is<br />
planned to channel EUR 1 million to Albania, EUR 1.5 million to Bosnia <strong>and</strong><br />
Herzegovina, EUR 5 million to Serbia, <strong>and</strong> EUR 1.225 million to Montenegro to<br />
establish project preparation facilities (PPFs); <strong>and</strong> EUR 3 million to the <strong>for</strong>mer<br />
Yugoslav Republic of Macedonia to establish a project preparation <strong>and</strong> support facility<br />
(PPSF) with the overall objective of improving the planning, programming<br />
<strong>and</strong> implementation of the IPA <strong>and</strong> to ensure that the national authorities submit<br />
good-quality project proposals to the European Commission (IPA 2008c).<br />
A total of EUR 25 million will be invested in the creation of the Infrastructure<br />
Preparation Facility in Kosovo (as defined under UNSCR 1244) to support the
TABLE 19: EC projects (allocations in million EUR) according to sector <strong>and</strong> country (2007–2009)<br />
preparation <strong>and</strong> implementation of infrastructure investments in the social sector,<br />
as well as in the fields of transport <strong>and</strong> environment. Investments are intended to<br />
help municipalities <strong>and</strong> public <strong>and</strong> private companies running utilities to identify<br />
<strong>and</strong> prepare priority infrastructure projects <strong>for</strong> financing through IFI loans,<br />
EC grants, <strong>and</strong>/or the government budget, <strong>and</strong> to provide financial support to<br />
the upgrading of infrastructure by providing grant co-financing using loans extended<br />
by IFIs (IPA 2008d).<br />
A total of EUR 3.393 million will be spent on the establishment of the Facility<br />
<strong>for</strong> Project Preparation <strong>and</strong> Rein<strong>for</strong>cement of Administrative Capacity in Croatia.<br />
It will provide flexible technical support (twinning, twinning light <strong>and</strong><br />
technical assistance) to Croatian authorities; address specific needs identified <strong>for</strong><br />
the country; <strong>and</strong> help to prepare a pipeline of projects <strong>for</strong> further funding with<br />
a view to rein<strong>for</strong>cing the institutional <strong>and</strong> administrative capacity <strong>for</strong> the management<br />
of IPA funds (IPA 2007a).<br />
Lessons learned after the first phase of IPA implementation<br />
A key challenge <strong>for</strong> the countries in relation to the implementation of the IPA<br />
is their capacity to absorb funds. This is dependent on national capacities to set up<br />
the necessary institutions; to prepare the required project documentation, including<br />
feasibility studies; <strong>and</strong> to provide co-financing. IPA funds <strong>for</strong> investment in<br />
environmental infrastructure require substantial co-financing of approximately 30<br />
percent of total project costs. To address the co-financing requirements, countries<br />
C H A P T E R 7<br />
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<br />
ENERGY TRANSPORT WATER AND MUNICIPAL SOCIAL ALL<br />
ENVIRONMENT INFRA-<br />
STRUCTURE<br />
SECTORS SECTORS<br />
Albania 0 (0) 4 (15) 3 (27) 0 (0) 3 (23) 10 (64)<br />
Bosnia <strong>and</strong><br />
Herzegovina<br />
2 (4) 2 (2) 3 (7) 1 (1) 4 (8) 12 (21)<br />
Croatia 2 (2) 7 (206) 28 (48) 0 (0) 0 (0) 37 (257)<br />
Kosovo (as<br />
defined under<br />
UNSCR 1244)<br />
2 (13) 2 (9) 1 (18) 1 (14) 4 (43) 10 (96)<br />
FYR<br />
Macedonia<br />
1 (2) 3 (30) 4 (17) 1 (7) 6 (9) 15 (65)<br />
Montenegro 1 (2) 1 (6) 2 (5) 0 (0) 2 (3) 6 (15)<br />
Serbia 1 (6) 7 (27) 7 (33) 2 (67) 12 (76) 29 (209)<br />
Western<br />
Balkans<br />
9 (28) 26 (295) 48 (154) 5 (89) 31 (160) 119 (726)<br />
Source: WCIBP database<br />
S T R AT E G I C M O V E S 161
162<br />
C H A P T E R 7<br />
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<br />
BOX 19: Example from Croatia — IPA EPOP 2007–2009 as a tool to streamline IPA III regional development funds<br />
In Croatia, IPA funds are implemented through three multi-annual operational programmes (OPs). In the environmental<br />
sector, the <strong>Environmental</strong> Protection Operational Programme (EPOP 2007–2009) was devised in<br />
order to define priorities <strong>and</strong> implementation means <strong>and</strong> mechanisms. The expected impacts of the EPOP are<br />
the achievement of compliance with the EU acquis <strong>and</strong> improved institutional capacity in the management of<br />
future structural funds (IPA EPOP Croatia 2007).<br />
One of the specific objectives of the EPOP was to support investment in the environmental infrastructure sector.<br />
The current EPOP under IPA 2007–2009 relates to the waste management <strong>and</strong> water quality protection sectors. The<br />
EPOP defines three priority axes <strong>and</strong> two lists of priority projects <strong>for</strong> the water <strong>and</strong> waste sectors.<br />
The priority axes are: 1) the development of waste management infrastructure <strong>for</strong> establishing an integrated waste management<br />
system in Croatia (EC contribution: EUR 26.3 million); 2) the protection of Croatia’s water resources through<br />
improved water supply <strong>and</strong> wastewater integrated management systems (EC contribution: EUR 26.5 million); <strong>and</strong> 3)<br />
technical assistance (EC contribution: EUR 699,750).<br />
The 14 water sector projects on the EPOP list are related to water supply <strong>and</strong>/or water treatment facilities (including<br />
sewerage networks where relevant). Of the 12 waste sector projects, 11 are related to the construction of regional<br />
waste management centres, <strong>and</strong> one to the remediation <strong>and</strong> closure of an ab<strong>and</strong>oned hazardous waste l<strong>and</strong>fill.<br />
During consultations between the REC <strong>and</strong> the Croatian Ministry of <strong>Environmental</strong> Protection, Physical Planning <strong>and</strong><br />
Construction it was decided to harmonise the PEIP lists with the EPOP list. As a result, the PEIP lists contain all the projects<br />
in the EPOP list, plus an additional three projects related to the remediation of hazardous waste sites.<br />
The project applications approved <strong>for</strong> IPA funding in the current programming period are the water supply, sewerage<br />
<strong>and</strong> wastewater treatment plant in Slavonski Brod; the regional waste management centre <strong>for</strong> Zadar county; the<br />
Kastijun county waste management centre <strong>for</strong> Istria; <strong>and</strong> the Mariscina regional waste management centre.<br />
S T R AT E G I C M O V E S<br />
need to allocate funds from the national budget <strong>and</strong>/or loans, private sector participation<br />
or other financial mechanisms such as carbon financing. The IPA can<br />
be seen as a learning exercise that will prepare future member states <strong>for</strong> the challenges<br />
<strong>and</strong> opportunities of the EU Structural <strong>and</strong> Cohesion Funds.<br />
As the first result of IPA operation, a set of national <strong>and</strong> regional programmes, as<br />
well as horizontal (multi-beneficiary) programmes, covering the environmental sector<br />
were elaborated under IPA Component I. Projects receiving support from IPA 2007<br />
<strong>and</strong> 2008 are approved <strong>and</strong> under implementation, <strong>and</strong> approval of the next set of IPA<br />
projects is currently taking place. However, due to the financial crisis, IPA funds <strong>for</strong><br />
2009 are slightly smaller (Presentation: Fiedler, 2008a). Current funding continuously<br />
helps countries to strengthen national capacities <strong>for</strong> environmental management; <strong>and</strong><br />
to upgrade municipal environmental infrastructure, including the establishment of integrated<br />
waste management systems <strong>and</strong> the modernisation of water supply <strong>and</strong> wastewater<br />
treatment facilities. Several regional programmes <strong>for</strong> environment were<br />
established under IPA 2007, 2008 <strong>and</strong> 2009 to improve integrated water management<br />
in the region, to facilitate approximation to the EU acquis in the field of water, <strong>and</strong> to<br />
create a sustainable pipeline of projects dealing with water protection.<br />
Current practice shows that the majority of countries were able to prepare lists<br />
of environmental investment projects eligible <strong>for</strong> financing. However, many of the
projects were at different stages of development: some of them were launched more<br />
than 10 years ago <strong>and</strong> quality requirements have changed significantly, along with<br />
the operating legal framework <strong>and</strong> the bodies responsible <strong>for</strong> issuing permits at national<br />
<strong>and</strong> local level (Presentation: Glavocevic, 2008). The staffing <strong>and</strong> administrative<br />
capacities of project proponents were not sufficient; <strong>and</strong> the level of<br />
expertise <strong>and</strong> number of employees involved in project preparation was in some<br />
cases underestimated. Many project beneficiaries demonstrated weak implementation<br />
<strong>and</strong> operation capacity. In some cases, ownership of the utility or l<strong>and</strong> was<br />
an issue, while in other cases the determination of the location <strong>and</strong> the approval<br />
process were delaying factors (Presentation: Unterwurzacher, 2008).<br />
Other challenges outlined in the IPA III process in c<strong>and</strong>idate countries include<br />
delays <strong>and</strong> difficulties in the accreditation/compliance assessment process, which<br />
is seen as long <strong>and</strong> complex <strong>and</strong> as creating a significant bottleneck in project implementation<br />
(Presentation: Ozdemir, 2009).<br />
Bilateral donor assistance<br />
Bilateral donors are important sources of finance <strong>for</strong> SEE countries. Assistance<br />
from donors plays an important role in know-how transfer, capacity building <strong>and</strong><br />
the co-financing of infrastructure projects. Donors channel significant amounts to<br />
support the reconstruction <strong>and</strong> stabilisation processes of the region. Bilateral donor<br />
institutions are primarily political institutions. This implies that they have diverse<br />
strategies, priority areas <strong>and</strong> budget envelopes that are subject to the changing goals<br />
of <strong>for</strong>eign policy support <strong>and</strong> that can alter abruptly. External aid is provided<br />
mainly in the <strong>for</strong>m of grants via development agencies or selected ministries; in<br />
some cases loans are provided. Grant support is primarily directed towards institutional<br />
strengthening <strong>and</strong> capacity building, project preparation, <strong>and</strong> in rare cases<br />
to direct investments. Bilateral donors are mainly involved in financing capital investment<br />
<strong>for</strong> small-scale infrastructure. However, they play a vital role in providing<br />
grants <strong>for</strong> large infrastructure investments as well. In SEE countries, where local<br />
governments are often unable to secure co-financing <strong>for</strong> investment loans, bilateral<br />
grants can make it possible to receive the loan in the first place.<br />
Trends in bilateral donors commitments<br />
This section presents an overview of bilateral environmental support in order<br />
to show how environmental commitments are shared by environmental sectors,<br />
beneficiaries <strong>and</strong> donor countries. The calculations are based on the database maintained<br />
by OECD on official development assistance (ODA).<br />
Even the total ODA bilateral assistance to SEE countries in recent years shows<br />
a decreasing tendency due to a coordinated shift of assistance to other regions. This<br />
is a result of the significant progress in economic development <strong>and</strong> political stabilisation<br />
in the SEE region, <strong>and</strong> the recent introduction of the EU IPA, which<br />
was designed to finance the urgent development needs of the SEE countries. However,<br />
assistance from bilateral donors to environmental infrastructure projects<br />
shows an increasing trend. The total allocation <strong>for</strong> the improvement of water sup-<br />
C H A P T E R 7<br />
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<br />
S T R AT E G I C M O V E S 163
164<br />
C H A P T E R 7<br />
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<br />
FIGURE 18: Bilateral ODA environmental infrastructure allocations to SEE countries (2005–2007)<br />
USD<br />
million<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Source: Authors’ calculation based on OECD data<br />
S T R AT E G I C M O V E S<br />
2005 2006 2007<br />
ply <strong>and</strong> sanitation <strong>and</strong> waste management investments grew from USD 49 million<br />
in 2004 to almost USD 63 million in 2007, an increase of 22 percent in two years.<br />
The following countries provide bilateral ODA grant support to SEE countries<br />
<strong>for</strong> environmental infrastructure projects (listed in order of importance): Germany,<br />
Austria, Japan, Norway, Sweden, Switzerl<strong>and</strong>, the Netherl<strong>and</strong>s, Italy, Luxembourg,<br />
Spain, the United Kingdom, the United States <strong>and</strong> Greece. Around half of the assistance<br />
to environmental infrastructure was provided by Germany.<br />
The majority of donor institutions are assisting in water-related issues <strong>and</strong> contributing<br />
to waste sector projects. Technical assistance <strong>for</strong> project preparation is provided<br />
by most countries. Financing is channelled in the <strong>for</strong>m of grants, except <strong>for</strong> Kf W,<br />
which also offers loans. A maximum size of eligible project is set by only a few donor<br />
organisations: in general project size is flexible. A co-financing requirement in the<br />
<strong>for</strong>m of own contribution was highlighted by Austria <strong>and</strong> Germany; however, most<br />
donor institutions require some <strong>for</strong>m of financial commitment by project proponents.<br />
IFI financing<br />
In the context of this publication, international financing institutions are international<br />
banks providing financial assistance to countries with economies in<br />
transition. The financial support is provided in the <strong>for</strong>m of soft loans with pay-
FIGURE 19: <strong>Environmental</strong> infrastructure commitments by recipient (2005–2007)<br />
USD<br />
million<br />
30<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
2005 2006 2007<br />
Source: OECD ODA database<br />
back conditions more favourable than those of other commercial loans. IFIs also<br />
provide technical assistance <strong>for</strong> project preparation. These financial institutions<br />
are there<strong>for</strong>e one of the major sources of financial <strong>and</strong> technical support <strong>for</strong> the<br />
development of environmental investment infrastructure in SEE. The most important<br />
IFIs <strong>and</strong> the distribution of financing assistance <strong>for</strong> the SEE region are presented<br />
in Figure 22. Each IFI channelled around EUR 700 million to the region,<br />
with the exception of the CEB with a contribution of EUR 200 million. The total<br />
amount of EUR 3 billion represents a major contribution to the financing of infrastructure<br />
in the countries concerned. The average funding provided per project<br />
ranges from EUR 20 million <strong>for</strong> the CEB to EUR 90 million <strong>for</strong> the EIB. The difference<br />
reflects the nature of the projects financed, which include small technical<br />
cooperation schemes <strong>and</strong> massive transport projects (EC, 2009).<br />
Table 20 illustrates the extent of IFI financial support between 2007 <strong>and</strong> 2009<br />
<strong>and</strong> its distribution by sector <strong>and</strong> country. According to the UN Development Activity<br />
Database DAC Codification, the municipal infrastructure sector comprises<br />
the following activities: multi-sectoral aid; urban development <strong>and</strong> management;<br />
C H A P T E R 7<br />
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<br />
Croatia FYR<br />
Montenegro Serbia<br />
Macedonia<br />
S T R AT E G I C M O V E S 165
166<br />
C H A P T E R 7<br />
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<br />
FIGURE 20: <strong>Environmental</strong> infrastructure commitments by recipient per capita (2005–2007)<br />
USD<br />
8<br />
7<br />
6<br />
5<br />
4<br />
3<br />
2<br />
1<br />
0<br />
S T R AT E G I C M O V E S<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
2005 2006 2007<br />
Source: OECD ODA database<br />
Croatia FYR Montenegro Serbia<br />
Macedonia<br />
rural development; non-agricultural alternative development; multi-sectoral education/training<br />
<strong>and</strong> research/scientific institutions.<br />
The largest share of funding was concentrated in the transport <strong>and</strong> municipal<br />
infrastructure sectors, <strong>and</strong> to a lesser extent in the water <strong>and</strong> environment sectors.<br />
Three countries — Serbia, Croatia <strong>and</strong> Bosnia <strong>and</strong> Herzegovina — together received<br />
approximately 70 percent of the total IFI financial assistance over the period,<br />
with the <strong>for</strong>mer Yugoslav Republic of Macedonia <strong>and</strong> Albania lagging significantly<br />
behind. Montenegro <strong>and</strong> Kosovo (as defined under UNSCR 1244) benefited from<br />
smaller amounts.<br />
In terms of the distribution of investments <strong>for</strong> water <strong>and</strong> environment, Croatia received<br />
the largest share of investments, followed by Serbia, Albania <strong>and</strong> Bosnia <strong>and</strong><br />
Herzegovina. Montenegro, Kosovo (as defined under UNSCR 1244) <strong>and</strong> the <strong>for</strong>mer<br />
Yugoslav Republic of Macedonia benefited from far smaller amounts of investment directed<br />
to the environment <strong>and</strong> water protection. However, in per capita terms Figure<br />
24 shows that Croatia received most allocations from IFIs <strong>for</strong> water <strong>and</strong> environment,<br />
followed by Montenegro <strong>and</strong> Albania. Bosnia <strong>and</strong> Herzegovina, Kosovo (as defined<br />
under UNSCR 1244), the <strong>for</strong>mer Yugoslav Republic of Macedonia <strong>and</strong> Serbia re-
FIGURE 21: Share of environmental infrastructure investments by bilateral donors (2005–2007)<br />
Netherl<strong>and</strong>s<br />
1%<br />
Luxembourg<br />
2%<br />
Japan<br />
10%<br />
Switzerl<strong>and</strong><br />
6%<br />
Sweden<br />
1%<br />
Spain<br />
1%<br />
Norway<br />
10%<br />
Italy<br />
6%<br />
Source: OECD ODA database<br />
Others<br />
1%<br />
Austria<br />
10%<br />
ceived the least financing per capita. This is probably due to the fact that Croatia had<br />
the most advanced projects, in terms of bankability <strong>and</strong> maturity <strong>for</strong> financing.<br />
The European Bank <strong>for</strong> Reconstruction <strong>and</strong> Development (EBRD) provides<br />
funds to build market economies, as well as project co-financing <strong>for</strong> banks,<br />
industries <strong>and</strong> businesses. Loans <strong>and</strong> equity finance, financial guarantees <strong>and</strong> technical<br />
assistance <strong>for</strong> project preparation are major instruments <strong>for</strong> the direction of<br />
funding. The EBRD provides long-term loans (up to 15 years) with a grace period<br />
<strong>and</strong> interest rates based on the credit risk of the borrower. Loans of between EUR<br />
5 <strong>and</strong> 250 million (up to 35 percent of total project costs) are provided to projects<br />
demonstrating clear creditworthiness <strong>and</strong> profitability, positive environmental effects<br />
(an EIA is necessary) <strong>and</strong> a positive influence on the local economy. Co-financing<br />
from <strong>for</strong>eign <strong>and</strong> domestic partners is necessary. The bank promotes<br />
co-financing <strong>and</strong> <strong>for</strong>eign direct investments; helps to mobilise domestic capital;<br />
<strong>and</strong> provides grants <strong>and</strong> technical assistance <strong>for</strong> project preparation. The bank has<br />
a set of country-specific <strong>and</strong> sector-specific strategies related to municipal <strong>and</strong> environmental<br />
infrastructure <strong>and</strong> natural resources management.<br />
In 2006, the EBRD, with partner IFIs <strong>and</strong> donors, launched the multi-donor<br />
Western Balkans Fund to mobilise additional grant funding <strong>for</strong> the countries of<br />
the region <strong>and</strong> to strengthen the coordination of EBRD donor assistance.<br />
C H A P T E R 7<br />
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<br />
Germany<br />
52%<br />
S T R AT E G I C M O V E S 167
168<br />
C H A P T E R 7<br />
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<br />
FIGURE 22: IFI assistance to the municipal infrastructure sector in SEE countries (2007–2009)<br />
EUR<br />
million<br />
900<br />
800<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
Source: WBICP database<br />
TABLE 20: Distribution by sector <strong>and</strong> country of IFI allocations (2007–2009) (number of projects, allocations in million EUR)<br />
ENERGY TRANSPORT WATER AND MUNICIPAL SOCIAL ALL<br />
ENVIRONMENT INFRA-<br />
STRUCTURE<br />
SECTORS SECTORS<br />
Albania 1 (28) 9 (165) 6 (78) 1 (10) 4 (29) 21 (309)<br />
Bosnia <strong>and</strong><br />
Herzegovina<br />
3 (74) 6 (352) 9 (74) 5 (165) 5 (12) 28 (676)<br />
Croatia 2 (2) 9 (325) 32 (278) 2 (109) 1 (22) 46 (736)<br />
Kosovo (as<br />
defined under<br />
UNSCR 1244)<br />
4 (19) 2 (9) 1 (18) 1 (14) 6 (52) 14 (111)<br />
FYR<br />
Macedonia<br />
2 (37) 6 (166) 4 (17) 2 (27) 7 (22) 21 (267)<br />
Montenegro 3 (16) 2 (21) 3 (22) 0 (0) 2 (3) 10 (62)<br />
Serbia 3 (53) 9 (146) 10 (110) 8 (470) 13 (86) 43 (865)<br />
Western<br />
Balkans<br />
18 (229) 43 (1,184) 65 (597) 19 (794) 38 (224) 183 (3,027)<br />
Source: WCIBP database<br />
S T R AT E G I C M O V E S<br />
CEB EBRD EIB<br />
WB
FIGURE 23: IFI allocations <strong>for</strong> water <strong>and</strong> environment in SEE countries (2007–September 2009)<br />
EUR<br />
million<br />
300<br />
250<br />
200<br />
150<br />
100<br />
50<br />
0<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
Croatia FYR<br />
Macedonia<br />
C H A P T E R 7<br />
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<br />
Kosovo (under<br />
UNSCR 1244)<br />
Montenegro<br />
FIGURE 24: IFI allocations <strong>for</strong> water <strong>and</strong> environment in SEE countries per capita (2007–September 2009)<br />
EUR<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
Croatia FYR<br />
Macedonia<br />
Kosovo (under<br />
UNSCR 1244) Montenegro<br />
Serbia<br />
Serbia<br />
S T R AT E G I C M O V E S 169
170<br />
C H A P T E R 7<br />
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<br />
S T R AT E G I C M O V E S<br />
The Western Balkans Fund has already established itself as the main instrument<br />
<strong>for</strong> funding technical assistance assignments across SEE, covering a wide range<br />
of sectors with allocations of more than EUR 25 million, about EUR 17 million<br />
of which have been approved as grant support <strong>for</strong> more than 40 projects over the<br />
whole region. The fund focuses on municipal infrastructure improvement, transport,<br />
communications, tourism, <strong>and</strong> financial <strong>and</strong> private sector development. In<br />
the area of environment <strong>and</strong> municipal infrastructure, the fund focuses on providing<br />
support to projects <strong>for</strong> water supply, wastewater collection <strong>and</strong> treatment,<br />
solid waste management, district heating, natural gas distribution <strong>and</strong> urban public<br />
transport. During the period 1991 to 2008, the EBRD signed agreements on 18<br />
environmental infrastructure projects <strong>for</strong> loan support in SEE (EBRD, 2008). The<br />
majority of projects were <strong>for</strong> water supply <strong>and</strong> sewage collection <strong>and</strong> treatment.<br />
The global financial crisis has placed severe dem<strong>and</strong>s on financial institutions,<br />
businesses, utilities <strong>and</strong> government agencies, thus the EBRD has indicated as a priority<br />
the rein<strong>for</strong>cement of financial institutions investing in improvements in environmental<br />
infrastructure <strong>and</strong> business development (EBRD, 2009).<br />
The EBRD has been active in SEE countries <strong>for</strong> several years <strong>and</strong> is progressively<br />
increasing its long-term lending to the region. It plays a crucial role in supporting<br />
environmental infrastructure projects, with particular emphasis on road<br />
rehabilitation, solid waste management <strong>and</strong> water supply <strong>and</strong> wastewater treatment.<br />
The focus of the EBRD’s activities is the continuous implementation of municipal<br />
infrastructure projects under a sovereign guarantee by the institutional<br />
strengthening of entities <strong>and</strong> improving the efficiency of operating companies. In<br />
c<strong>and</strong>idate countries, the EBRD concentrates on working with a number of large<br />
<strong>and</strong> medium-sized municipalities to develop environmental infrastructure projects<br />
<strong>for</strong> prospective IPA co-financing. Additional priorities <strong>for</strong> the EBRD in the region<br />
are the promotion of policy dialogue; support to the development of viable<br />
schemes <strong>for</strong> the privatisation <strong>and</strong> commercialisation of state-owned utilities; <strong>and</strong><br />
the adaptation of the fiscal decentralisation process (EBRD, 2009).<br />
The Council of Europe Development Bank (CEB) is a multilateral development<br />
bank with a mission to contribute to strengthening social cohesion in Europe<br />
<strong>and</strong> to achieving sustainable <strong>and</strong> equitable growth. It grants medium- to<br />
long-term loans <strong>and</strong> provides guarantees <strong>and</strong> technical assistance to social infrastructure<br />
projects in close collaboration with other IFIs. The CEB channels financial<br />
assistance to the region through long-term loans with low interest rates <strong>and</strong><br />
specific repayment schedules adapted to meet national borrower requirements. Its<br />
current activities cover environmental protection, public services infrastructure<br />
<strong>and</strong> the financing of projects in response to emergency situations in the event of<br />
natural or ecological disasters (CEB, 2007a). At present, between 17 <strong>and</strong> 20 percent<br />
of the total approved amount relates to environmental projects <strong>and</strong> the prevention<br />
of natural disasters.<br />
Faced with the impact of the crisis in CEE <strong>and</strong> SEE, the CEB recently significantly<br />
intensified its role in the financing of public social infrastructure, with particular<br />
focus on municipal infrastructure <strong>and</strong> enhanced coordination with the<br />
Neighbourhood Investment Fund (NIF) <strong>and</strong> the Infrastructure Project Facility
BOX 20: Case study — <strong>Environmental</strong> infrastructure project in SEE supported by the EBRD<br />
Doboko Solid Waste Project, Serbia<br />
(IPF), <strong>and</strong> with other multilateral development banks within the Western Balkans<br />
Investment Framework (CEB, 2009).<br />
The CEB finances projects related to the clean-up <strong>and</strong> protection of surface<br />
waters <strong>and</strong> groundwater; the decontamination of soils <strong>and</strong> aquifers; the reduction<br />
<strong>and</strong> treatment of solid <strong>and</strong> liquid waste; renewable energy production <strong>and</strong> energysaving<br />
measures; air <strong>and</strong> noise pollution reduction; <strong>and</strong> cleaner means of transport<br />
<strong>and</strong> transportation networks.<br />
In Albania <strong>and</strong> Bosnia <strong>and</strong> Herzegovina, financial resources have been allocated<br />
<strong>for</strong> projects related to the basic municipal infrastructure <strong>and</strong> environmental<br />
protection, <strong>and</strong> to improving the per<strong>for</strong>mance of private <strong>and</strong> public companies<br />
<strong>and</strong> utilities. In Croatia, the CEB allocated resources <strong>for</strong> the improvement of quality<br />
of life on the isl<strong>and</strong>s through investments in the construction of municipal <strong>and</strong><br />
social infrastructure facilities <strong>and</strong> environmental protection. In Serbia, projects<br />
were supported <strong>for</strong> the rehabilitation of local infrastructure damaged by a series of<br />
l<strong>and</strong>slides in 2005 <strong>and</strong> 2006 (CEB, 2006).<br />
The European Investment Bank (EIB) is the financing institution of the European<br />
Union, supporting viable capital investment projects fostering the policy<br />
objectives of the EU. The EIB has been active in SEE countries <strong>for</strong> several years<br />
<strong>and</strong> is progressively increasing its long-term lending in the region. Financing from<br />
the EIB assists these countries in the EU integration process <strong>and</strong> helps them to<br />
meet EU accession criteria. It also provides incentives <strong>for</strong> political <strong>and</strong> economic<br />
re<strong>for</strong>m. In 2008, the EIB concluded loan contracts in SEE countries reaching an annual<br />
record level of EUR 577 million, bringing total EIB lending in the region to<br />
EUR 3.1 billion since 1995. The EIB operates in SEE under a specific pre-accession<br />
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The proposed project involves the construction of the first regional solid waste l<strong>and</strong>fill that will serve nine municipalities<br />
in Serbia. The project will include two lines <strong>for</strong> the separation of recyclable materials, all the required<br />
subsidiary facilities, infrastructure <strong>and</strong> a protected zone. The intended project includes three transfer stations,<br />
transportation, <strong>and</strong> the closure <strong>and</strong> remediation of existing dumpsites financed through EAR funding <strong>and</strong> the<br />
Serbian Government’s Eko fund.<br />
The project will result in the first regional l<strong>and</strong>fill fully compliant with the EU <strong>and</strong> the National Solid Waste Management<br />
Strategy. It will provide a model to be replicated <strong>for</strong> the financing of other regional waste management<br />
companies in Serbia <strong>and</strong> will promote the implementation of a nationwide solid waste management programme<br />
creating new legal <strong>and</strong> institutional structures to support economies of scale, employ new technology <strong>and</strong> establish<br />
best practice management techniques.<br />
This is the first regional waste management project in Serbia focusing on tariffs <strong>for</strong> waste management services<br />
that are based on cost-recovery principles. The project will introduce market-based structures <strong>and</strong> establish<br />
a clear contractual basis among stakeholders <strong>for</strong> the provision of waste management services. A loan of up to<br />
EUR 5 million from the total of EUR 11.9 million planned <strong>for</strong> the Doboko project has been secured through a municipal<br />
support agreement between the cities of Cacak <strong>and</strong> Uzice <strong>and</strong> the EBRD.<br />
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m<strong>and</strong>ate covering the period 2007 to 2013, established <strong>for</strong> the modernisation of infrastructure<br />
facilities in the energy, transport <strong>and</strong> environmental sectors (EIB 2008).<br />
After an initial focus on the urgent reconstruction <strong>and</strong> rehabilitation of basic<br />
infrastructure, EIB activity in SEE has been concentrated on the upgrading <strong>and</strong><br />
modernisation of the municipal infrastructure facilities, either with direct loans or<br />
through dedicated lines of credit to local banks (global loans). The bank works<br />
closely with the EC in order to support project preparation <strong>and</strong> co-finance projects<br />
within the IPA. The EIB also co-finances operations with other IFIs, particularly<br />
the EBRD, WB <strong>and</strong> CEB.<br />
The bank’s lending priorities include environmental protection <strong>and</strong> improvement,<br />
sustainable energy production <strong>and</strong> the improvement of trans-European<br />
transport <strong>and</strong> telecommunications networks. Major projects financed in this<br />
framework were the rehabilitation of hydropower plants <strong>and</strong> electric power distribution<br />
systems in Bosnia <strong>and</strong> Herzegovina; the construction of the Belgrade bypass<br />
<strong>and</strong> the rehabilitation of Gazela Bridge in Serbia; a road rehabilitation programme<br />
in Bosnia <strong>and</strong> Herzegovina; <strong>and</strong> the construction of a motorway in Albania. In all<br />
SEE countries the bank is providing financing to small <strong>and</strong> medium-scale projects<br />
in municipal infrastructure, including the rehabilitation <strong>and</strong> construction of water<br />
supply <strong>and</strong> sewerage treatment facilities.<br />
The World Bank (WB), as an international financing institution, provides low-interest<br />
loans, interest-free credit, <strong>and</strong> grants to developing countries <strong>for</strong> a wide array of<br />
purposes, including investments in municipal infrastructure, environmental protection<br />
<strong>and</strong> natural resources management. The WB is one of the implementing agencies<br />
<strong>for</strong> the Global Environment Facility (GEF). The GEF has been used in Bosnia <strong>and</strong><br />
Herzegovina, Croatia <strong>and</strong> Serbia in the context of the Black Sea <strong>and</strong> Danube Basin<br />
GEF Partnership, <strong>and</strong> in other SEE countries <strong>for</strong> environment projects<br />
along with WB loans (EC, 2009). The International Finance Corporation, as a part<br />
of the World Bank Group, together with USAID <strong>and</strong> a number of European <strong>and</strong><br />
Nordic donors, has established the Balkans Infrastructure Development Facility (BID-<br />
Facility) to provide technical assistance <strong>and</strong> to help public sector entities in SEE to attract<br />
private sector participation <strong>and</strong> investments in infrastructure development.<br />
The World Bank has been extensively engaged in providing financial support,<br />
technical assistance, policy advice <strong>and</strong> analytical services in support of environmental<br />
projects in SEE. One of the priorities in the region is to guarantee the improved<br />
management of municipal infrastructure <strong>and</strong> the delivery of services. The WB’s specific<br />
objectives in the environmental field are water re<strong>for</strong>m <strong>and</strong> rehabilitation, solid<br />
waste management <strong>and</strong> district heating; access to clean water supply <strong>and</strong> sanitation<br />
in rural areas; private sector <strong>and</strong> business growth with an emphasis on environmental<br />
protection incentives; <strong>and</strong> support <strong>for</strong> a transparent legal <strong>and</strong> regulatory environmental<br />
framework. In the SEE region, the largest shares have been channelled to<br />
pollution abatement, water <strong>and</strong> l<strong>and</strong> resources management projects.<br />
In each of the Stabilisation <strong>and</strong> Association Process countries, loans are provided<br />
in the <strong>for</strong>m of specific investment loans with a long-term focus (five to 15 years) supporting<br />
infrastructure development projects; short-term <strong>and</strong> development policy loans<br />
enhancing policy <strong>and</strong> institutional re<strong>for</strong>ms. The WB Group also offers special
BOX 21: Case study — <strong>Environmental</strong> project in SEE supported by the EIB in 2008<br />
The rehabilitation <strong>and</strong> construction of water <strong>and</strong> sanitation facilities<br />
grants to facilitate development projects. In order to be financed, all project applications<br />
are required to have defined financial <strong>and</strong> environmental goals in line with country<br />
strategic documents <strong>and</strong> recognised as a priority by the national government.<br />
At the end of 2008, the WB launched a number of initiatives to help weaker developing<br />
countries to deal with the consequences of the financial crisis. The Infrastructure<br />
Crisis Facility (ICF), established by several IFIs, will help to ensure that<br />
viable, privately funded infrastructure projects facing temporary liquidity problems<br />
due to limited private participation will get access to funding regardless of the<br />
financial crisis. This facility will comprise a loan funding trust, an equity facility <strong>and</strong><br />
an advisory facility (EC, 2009). The ICF will provide USD 300 million to the<br />
fund <strong>and</strong> additional funding is expected from other IFIs <strong>and</strong> national governments.<br />
In SEE, WB lending focuses on urban infrastructure improvements with a specific<br />
emphasis on water supply <strong>and</strong> wastewater treatment, solid waste management,<br />
district heating, transportation, <strong>and</strong> increased public sector energy efficiency. Funding<br />
is also directed towards general environmental protection <strong>and</strong> natural resources<br />
management in environmentally sensitive areas <strong>and</strong> coastal zones.<br />
General observations<br />
• Under EU IPA assistance, which replaces previous pre-accession mechanisms,<br />
special emphasis is given to institution building, strengthening the capacities<br />
<strong>and</strong> structures needed <strong>for</strong> the management of pre-structural funds, <strong>and</strong> the financing<br />
of infrastructure investments.<br />
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The EIB is lending EUR 60 million <strong>for</strong> the implementation of water <strong>and</strong> sanitation projects in the municipalities<br />
<strong>and</strong> cantons of the Federation of Bosnia <strong>and</strong> Herzegovina. The main objective of the project is to improve the<br />
quality of life of the country’s citizens <strong>and</strong> to meet Bosnia <strong>and</strong> Herzegovina’s needs regarding future compliance<br />
with EU environmental legislation.<br />
The EIB loan will finance an investment programme <strong>for</strong> water management in 15 towns, which will result in the<br />
improvement <strong>and</strong> expansion of water supply <strong>and</strong> sanitation systems <strong>and</strong> the construction of wastewater treatment<br />
facilities.<br />
The EIB loan will cover up to 50 percent of the total costs of the planned projects, which will be co-financed by<br />
the budget of the Federation of Bosnia <strong>and</strong> Herzegovina, the country’s municipalities <strong>and</strong> cantons, <strong>and</strong> the IPA.<br />
The remaining funds will be provided by the EBRD <strong>and</strong> the World Bank, representing another example of the<br />
good coordination <strong>and</strong> cooperation among all three IFIs in SEE.<br />
Project preparation in a number of towns is already in progress, assisted by grants provided by the EU under the<br />
<strong>Environmental</strong> Project Preparation Facility. Some of the required feasibility studies have already been completed<br />
in cooperation with the municipal authorities <strong>and</strong> internationally experienced consultants — <strong>for</strong> example in Velika<br />
Kladusa, Orasje <strong>and</strong> Bosanski Petrovac.<br />
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BOX 22: Case study — Project in SEE financed by the WB<br />
Inl<strong>and</strong> Waters, Croatia<br />
The project will help to increase the service coverage of water supply <strong>and</strong> wastewater collection <strong>and</strong> treatment<br />
in inl<strong>and</strong> Croatia. It is in line with the country’s goal to achieve compliance with EU directives <strong>and</strong> to provide goodquality<br />
water <strong>and</strong> wastewater treatment.<br />
Technical assistance (EUR 5 million) — (i) EU accession support will include: the institutional strengthening of<br />
Croatian Waters <strong>and</strong> the Ministry of Agriculture, Forestry <strong>and</strong> Water Management, <strong>and</strong> the preparation of engineering<br />
studies <strong>and</strong> designs to be financed by the EU <strong>and</strong> other sources; (ii) project implementation support will<br />
include consultancy services <strong>and</strong> training necessary <strong>for</strong> project implementation; <strong>and</strong> (iii) the institutional strengthening<br />
of utilities will be used by the project beneficiary utilities <strong>and</strong> provide consultancy services <strong>and</strong> training <strong>for</strong><br />
utilities to increase efficiency <strong>and</strong> improve services.<br />
Investments (EUR 100 million) — Three sets of proposed utility investments will increase water supply coverage <strong>and</strong><br />
improve water supply services; increase sewerage coverage <strong>and</strong> improve wastewater collection services; improve the<br />
treatment of collected wastewater in accordance with international st<strong>and</strong>ards; <strong>and</strong> enhance flood protection measures<br />
in the central Posavina area, which includes the Lonjsko Polje flood protection area (a Ramsar wetl<strong>and</strong> site).<br />
S T R AT E G I C M O V E S<br />
• A key challenge in the implementation of the IPA is capacity to absorb funds<br />
— that is, to set up the necessary institutions; to prepare the required project<br />
documentation, including feasibility studies; <strong>and</strong> to provide co-financing. The<br />
staffing <strong>and</strong> administrative capacities of project proponents are often inadequate,<br />
<strong>and</strong> in some cases the number of employees involved in project preparation,<br />
<strong>and</strong> their expertise, has been underestimated.<br />
• Assistance from international bilateral donors plays an important role in the<br />
transfer of know-how, institution strengthening, capacity building <strong>and</strong> the cofinancing<br />
of infrastructure projects.<br />
• The largest share of IFI funding has been concentrated in transport <strong>and</strong> municipal<br />
infrastructure, <strong>and</strong> to a lesser extent in water <strong>and</strong> the environment.<br />
Project preparation facilities<br />
Project preparation facilities (PPFs) are instruments used by the EC <strong>and</strong> IFIs to<br />
provide support to infrastructure improvements. Usually, these facilities fund technical<br />
assistance <strong>for</strong> the preparation of sound infrastructure projects over a defined<br />
period of time (two to three years in general). The PPFs are designed to support the<br />
development of an appropriate pipeline of bankable projects <strong>and</strong> to promote cofinancing<br />
opportunities between local governments, the EC, <strong>and</strong> bilateral <strong>and</strong> multilateral<br />
donors. The specific objectives of PPFs include supporting the achievement<br />
of national priority development goals; elaborating effective strategic plans in different<br />
sectors, often followed by more detailed investment strategies; <strong>and</strong> increasing<br />
the effectiveness of development assistance channelled to beneficiary countries.<br />
Technical assistance is given <strong>for</strong> making an assessment of urgent country needs in
the field of infrastructure; identifying projects available <strong>and</strong> eligible <strong>for</strong> future funding;<br />
<strong>and</strong> carrying out preparatory studies <strong>for</strong> specific projects, including institutional<br />
framework studies, dem<strong>and</strong> <strong>and</strong> tariff studies, project feasibility studies <strong>and</strong><br />
beneficiary assessments. The facilitation <strong>and</strong> structuring of project financing, the<br />
groundwork <strong>for</strong> project implementation <strong>and</strong> the identification of additional technical<br />
assistance are also provided. These facilities are established in countries where<br />
project preparation capacities are the weakest. The links between the facilities described<br />
below is continuous. Project preparation undertaken by the <strong>Environmental</strong><br />
Project Preparation Facility (EPPF) is continued by the Infrastructure Project<br />
Facility (IPF) in 2008. The IPF is to become part of a broader Western Balkan Investment<br />
Framework with closer cooperation with IFIs in 2010.<br />
The <strong>Environmental</strong> Project Preparation Facility (EPPF) was launched by<br />
the EC in 2006 to run <strong>for</strong> 24 months, with an overall budget of EUR 1.8 million.<br />
All SEE countries were beneficiaries, with special emphasis on the <strong>for</strong>mer Yugoslav<br />
Republic of Macedonia <strong>and</strong> Albania. The specific objective of the EPPF was to<br />
provide support in project preparation, to speed up IFI financing of priority pollution<br />
abatement projects, <strong>and</strong> to help overcome the constraints facing the environmental<br />
sector. All environmental sectors were eligible to receive financing from<br />
the EPPF. Other objectives included enhanced collaboration with IFIs in the identification<br />
of priority environmental investment projects <strong>and</strong> the transfer of knowhow<br />
in project development to SEE (IPF, 2008).<br />
During the implementation period, a total of 11 project preparation studies<br />
were completed, representing potential investments of around EUR 160 million.<br />
These project preparation studies included an assessment of the technical, environmental,<br />
social, financial, economic <strong>and</strong> institutional viability <strong>and</strong> sustainability<br />
of the projects, including consumer af<strong>for</strong>dability <strong>and</strong> tariff strategies that would<br />
contribute to cost recovery from service beneficiaries without imposing undue financial<br />
burdens on them. The recommended proposed projects are there<strong>for</strong>e considered<br />
to be both sustainable <strong>and</strong> bankable. The final EPPF project pipeline is<br />
presented in Table 21.<br />
A large number of projects prepared by the EPPF are currently co-financed <strong>and</strong><br />
undergoing implementation. The high success rate <strong>for</strong> funded projects is due to<br />
close collaboration with IFIs from the beginning of the process. Coordination with<br />
IFIs during the preparatory stages facilitates financing once project preparation has<br />
been completed. A positive example is the project “Small <strong>and</strong> Medium-Sized<br />
Towns Water <strong>and</strong> Wastewater Development” in Bosnia <strong>and</strong> Herzegovina, which<br />
has been taken up by the IPF Municipal Window. The following municipalities<br />
will receive grant funding <strong>for</strong> project implementation, thus project preparation will<br />
translate into project implementation co-financed by a grant from the EC <strong>and</strong> a<br />
loan from the EIB generating some EUR 121 million in total project investment<br />
in Bosnia <strong>and</strong> Herzegovina between 2010 <strong>and</strong> 2014: Bosanski Petrovac Water <strong>and</strong><br />
Wastewater Development Project; Velika Kladusa Water <strong>and</strong> Wastewater Development<br />
Project; Orasje Water <strong>and</strong> Wastewater Development Project; Soroki Brijeg<br />
Water <strong>and</strong> Wastewater Development Project; Posusje Water <strong>and</strong> Wastewater<br />
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TABLE 21: EPPF project pipeline<br />
PROPOSED PROJECT TYPE/ PROJECT COMMENTS BUDGET EXPECTED<br />
BY INVESTMENT PREPARATION FOR FOLLOW-UP<br />
COUNTRY<br />
EBRD<br />
STATUS FEASIBILITY<br />
STUDY<br />
Serbia Belgrade Wastewater Completed A new mayor was elected in May EUR EUR<br />
Development Project – December 2008 <strong>and</strong> key personnel were 343,000 48 million<br />
Batajnica Wastewater 2007 appointed to the city administration.<br />
Development Discussions regarding loan<br />
commitment <strong>for</strong> the proposed<br />
project are under way.<br />
Croatia Pula Wastewater Completed The study made clear EUR EUR 35<br />
Treatment Plant October recommendations <strong>for</strong> a sewerage 90,000 to 40 million<br />
Location Feasibility 2008 <strong>and</strong> sewage treatment strategy <strong>for</strong><br />
EIB<br />
Study the town, which were accepted by<br />
the beneficiary. Loan negotiations<br />
with EBRD are under way.<br />
Republika Banja Luka Hot Water Completed Loan approved by EIB Board. EUR EUR<br />
Srpska, Bos- Leakage Prevention August Loan negotiations under way 198,000 22.8 million<br />
nia <strong>and</strong> <strong>and</strong> <strong>Environmental</strong> 2007 with beneficiaries.<br />
Herzegovina Enhancement Project<br />
Three Small <strong>and</strong> Medium-Sized Completed Loan agreement <strong>for</strong> EUR 60 million EUR EUR<br />
projects Towns Water <strong>and</strong> Waste- April signed by the EIB <strong>and</strong> the govern- 265,000 28 million<br />
<strong>for</strong> the Fede- water Development 2008 ment, <strong>and</strong> final on-lending agreeration<br />
of Project (Cluster 1 Bo- ments with municipalities under way.<br />
Bosnia <strong>and</strong> sanski Petrovac, Velika<br />
Herzegovina Kladusa <strong>and</strong> Orasje)<br />
Montenegro Review of Solid Waste Completed Study submitted <strong>and</strong> ToR out to EUR N/A<br />
<strong>Strategic</strong> Master Plan June tender <strong>for</strong> follow-on studies. 11,000<br />
<strong>and</strong> Preparation of ToR 2008<br />
Four projects Small <strong>and</strong> Medium Completed All project preparation reports EUR EUR<br />
<strong>for</strong> the Fede- Towns Water <strong>and</strong> Waste- December completed, <strong>and</strong> accepted 245,000 20–25<br />
ation of water Development 2008 by beneficiaries. million<br />
Bosnia <strong>and</strong> Project (Cluster 2 Soroki<br />
Herzegovina Birjeg, Posusje, Bosanski<br />
Krupa <strong>and</strong> Tomislavgrad)<br />
Source: EPPF, 2009<br />
S T R AT E G I C M O V E S<br />
Development Project; Bosanska Krupa Wastewater Development Project; <strong>and</strong><br />
Tomislavgrad Water <strong>and</strong> Wastewater Development Project.<br />
A large number of the projects that could not be implemented in the framework<br />
of the EPPF have been transferred to other frameworks, such as the IPF.<br />
The activities carried out by the EPPF during its two-year existence were evaluated<br />
highly by all stakeholders (beneficiary countries, EC <strong>and</strong> IFIs), as it man-
aged to provide significant benefits <strong>for</strong> project proponents, good-quality pre-feasibility<br />
<strong>and</strong> feasibility studies, <strong>and</strong>, as a result, a strong project pipeline <strong>for</strong> future<br />
funding. Factors assessed in project preparation studies included strategic longterm<br />
development needs <strong>and</strong> priority investments; cost effectiveness <strong>and</strong> the efficiency<br />
of investments; pollution reduction objectives; environmental impacts;<br />
consumer af<strong>for</strong>dability; the financial capacity of recipients; <strong>and</strong> the long-term sustainability<br />
of operations (Presentation: Davies, 2008).<br />
In 2008, the European Commission launched the Infrastructure Project Facility<br />
(IPF) with the main aim of providing direct support to the development <strong>and</strong><br />
upgrading of infrastructure in the energy, transportation, environment <strong>and</strong> social<br />
sectors, thus contributing to sustainable development in the region. The facility<br />
ensures continuity with the EPPF <strong>and</strong> carries on the preparatory work initiated.<br />
The IPF comprises two windows: a) the Technical Assistance Window, in<br />
which grants are used to help prepare infrastructure investment projects to be financed<br />
by IFI loans; <strong>and</strong> b) the Municipal Window, implementation support once<br />
the project is <strong>for</strong>mulated, in which grants are used to co-finance infrastructure investments<br />
at municipal level, together with IFI loans (DABLAS, 2008).<br />
The core result of the facility will include the achievement of high-quality investment<br />
proposals <strong>for</strong> projects related to infrastructure remediation <strong>and</strong> upgrading<br />
through the preparation of pre-feasibility studies, feasibility studies <strong>and</strong> financial<br />
af<strong>for</strong>dability analyses, completed designs, budget <strong>and</strong> financial plans, preparation<br />
work <strong>for</strong> the tender process <strong>and</strong> supervision of implementation work. The transfer<br />
of know-how <strong>and</strong> capacity building at national <strong>and</strong> local levels along with enhanced<br />
collaboration with IFIs are also emphasised as intended results (IPF, 2008).<br />
All IPA beneficiaries are, in principle, eligible <strong>for</strong> IPF financing. However, priority<br />
will be given to potential c<strong>and</strong>idate countries, as they are in greatest need of<br />
support <strong>and</strong> are not eligible <strong>for</strong> Component III of the IPA. For potential c<strong>and</strong>idate<br />
countries, the IPF will help to enhance the complementarity between IPA grants<br />
<strong>and</strong> IFI loans (IPF, 2007). The facility is designed on a multi-annual basis in line<br />
with IPA programming <strong>and</strong> provides grants <strong>and</strong> loans <strong>for</strong> infrastructure investments<br />
in the region, particularly in the environmental sector, <strong>for</strong> water supply, wastewater<br />
treatment facilities, sewerage systems, solid waste management, hazardous waste<br />
treatment facilities <strong>and</strong> emission control. All projects submitted to the facility<br />
should be in accordance with national sector strategies <strong>and</strong> the EU environmental<br />
acquis <strong>and</strong> included in the regional pipelines (Presentation: Gofas, 2008). The average<br />
budget per project will be approximately EUR 500,000. Projects <strong>and</strong> project<br />
budgets are reviewed on a case-by-case basis, <strong>and</strong> higher or lower levels of support<br />
will be approved under specific circumstances.<br />
Initially, EUR 16.2 million available from the CARDS programme were allocated<br />
through the facility in 2008 <strong>and</strong> EUR 24 million through the Municipal<br />
Window. In 2009, an additional EUR 16.2 million were channelled to the IPF.<br />
The Specific Kosovo IPF Window received financing of EUR 25 million <strong>for</strong> municipal<br />
infrastructure. In summary, up to 2009 the IPF instrument received funding<br />
of EUR 83 million. In June 2008, the steering committee of the IPF approved<br />
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TABLE 22: <strong>Environmental</strong> projects supported by the IPF in 2008<br />
TITLE COUNTRY SUBSECTOR ESTIMATED ESTIMATED LEAD IFI CO-FINANCING TYPE<br />
IPF TOTAL INVESTORS OF TA<br />
BUDGET INVESTMENT<br />
(MEUR) (MEUR)<br />
Feasibility study Serbia Water 0.5 19.561 IPA, FS<br />
<strong>for</strong> collection,<br />
transport <strong>and</strong><br />
treatment of wastewaters<br />
in the<br />
municipality of<br />
Vranje <strong>and</strong> Uzice<br />
protection state budget<br />
Plava Voda Bosnia <strong>and</strong> Water 0.6 28 EBRD CEB FS<br />
<strong>Regional</strong> Water<br />
Supply Project<br />
Herzegovina supply<br />
<strong>Regional</strong> Kosovo Water 0.3 10 KfW, EAR, TMA, FS<br />
Water (as defined supply Governments of<br />
Company under UNSCR Norway <strong>and</strong><br />
Pristina 1244) Switzerl<strong>and</strong><br />
Podgorica Water<br />
Infrastructure<br />
Project<br />
Montenegro Water 0.3 10 EBRD EIB, WB FS<br />
Podgorica waste- Montenegro Wastewater 35 EIB, EBRD WB, IPA, FS<br />
water project Dexia CCB<br />
Source: EC, DG ENLARG<br />
S T R AT E G I C M O V E S<br />
over EUR 10 million of technical assistance support <strong>for</strong> 18 infrastructure projects,<br />
leading to more than EUR 800 million of investments to be co-financed by three<br />
European banks (EBRD, EIB <strong>and</strong> CEB) in six SEE countries (EU IPF TA 2009).<br />
Five of these projects were in the environment sector, <strong>and</strong> were mainly related to<br />
water, as presented in Table 22. There are currently 19 environmental projects on<br />
the reserve list, covering the areas of water supply <strong>and</strong> wastewater treatment, waste<br />
management, <strong>and</strong> solid <strong>and</strong> hazardous waste treatment (Presentation: Gianfranchi,<br />
2008). In 2009, four environmental projects were selected <strong>for</strong> support under the<br />
IPF TA (EC SEC [2009] 1309).<br />
In 2008, the EC <strong>and</strong> partner IFIs initiated the Western Balkans Investment<br />
Framework (WBIF), to be launched by 2010. The WBIF will widen the scope of<br />
the existing IPF. In addition to infrastructure it will provide support to investments<br />
in other sectors, such as the private sector (including SMEs) <strong>and</strong> energy efficiency,<br />
in order to promote the general socio-economic development of SEE countries.<br />
The aim is to enhance coordination between European financiers <strong>and</strong> donors in<br />
order better to meet the needs of beneficiaries by pooling existing grant resources<br />
from the EC, partner IFIs, member states <strong>and</strong> other donors, <strong>and</strong> by linking these<br />
grant resources with loans from IFIs.
TABLE 23: <strong>Environmental</strong> projects supported by the IPF in 2009<br />
It is intended to be coherent with the IPA planning documents <strong>and</strong> with national<br />
<strong>and</strong> multi-beneficiary programmes. The Western Balkans Infrastructure Initiative,<br />
the intermediate step towards the creation of the WBIF, will be based on the<br />
following components: a) the IPF; b) a joint grant facility receiving grant resources<br />
allocated from the EC IPA through the IPF, grant contributions from the EIB, the<br />
EBRD <strong>and</strong> the CEB, <strong>and</strong> bilateral grant contributions from member states <strong>and</strong><br />
other donors through the European Western Balkans Joint Fund (EWBJF); <strong>and</strong><br />
c) a joint lending facility coordinated by the partner IFIs.<br />
The framework will be consistent with the IPA <strong>and</strong> will enhance the ownership<br />
of the beneficiaries (EC SEC [2009] 1309).<br />
The Western Balkans Investment Coordination Plat<strong>for</strong>m (WBICP) was<br />
launched by the EC <strong>and</strong> partner IFIs (CEB, EBRD, EIB) with the aim of preparing<br />
the ground <strong>for</strong> the WBIF (EC, 2009). The WBICP website currently provides<br />
in<strong>for</strong>mation <strong>and</strong> tools to support infrastructure investment coordination among all<br />
regional donors. The coordination plat<strong>for</strong>m is based on a comprehensive review of<br />
ongoing <strong>and</strong> planned programmes <strong>and</strong> activities implemented by the EC, IFIs <strong>and</strong><br />
bilateral donors in the region in the field of infrastructure (WBICP website). The<br />
general objective is to provide country beneficiaries with a global overview of existing<br />
facilities <strong>and</strong> instruments applied <strong>for</strong> financial assistance both at national<br />
<strong>and</strong> regional levels. The sectors covered will include transport, energy, environment<br />
<strong>and</strong> social. Other programmes, funds <strong>and</strong> initiatives funded from national<br />
sources will also be included. A mapping exercise will address all <strong>for</strong>ms of delivery<br />
methods such as non-reimbursable grants, different types of lending programmes<br />
<strong>and</strong> loans, grant co-financing, soft technical assistance <strong>and</strong> capacity-building measures<br />
associated with the provision of investments.<br />
C H A P T E R 7<br />
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<br />
TITLE COUNTRY/IES SUBSECTOR PROJECT SCOPE<br />
Detailed Designs <strong>for</strong> Lezha Albania Water A wastewater treatment plant is under construction.<br />
City <strong>and</strong> Shengjin protection Scoping mission planned to define design specifications<br />
Sewerage Network <strong>and</strong> implement the detailed design project.<br />
Kamza Water Supply <strong>and</strong> Albania Water Scoping mission planned to complete ToR <strong>and</strong> implement<br />
Sewerage Project Feasibility supply the feasibility study to determine long-term investment needs<br />
Study <strong>and</strong> priority investment programme.<br />
Detailed Designs <strong>for</strong> the Albania Water There is an urgent need to exp<strong>and</strong> the capacity of the existing<br />
Extension of Kavaja protection WWTP in Kavaja to treat sewerage from Golemi beach.<br />
Wastewater Treatment Plant Scoping mission planned to determine design parameters<br />
<strong>and</strong> <strong>for</strong> Golemi Sewerage<br />
Network<br />
<strong>and</strong> implement the detailed design project.<br />
Berane Wastewater Montenegro Water Currently water losses are high <strong>and</strong> the wastewater collection<br />
Treatment Plant Feasibility protection <strong>and</strong> treatment infrastructure is inadequate.<br />
Study Feasibility study planned to prepare long-term strategic<br />
investment plans <strong>and</strong> a bankable priority investment project<br />
in relation to water <strong>and</strong> wastewater.<br />
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S T R AT E G I C M O V E S<br />
General observations<br />
• PPFs are used by the EC <strong>and</strong> IFIs to fund technical assistance <strong>for</strong> the preparation<br />
of a pipeline of sound infrastructure projects <strong>and</strong> to promote them to financiers.<br />
• The activities of the <strong>Environmental</strong> Project Preparation Facility resulted in significant<br />
beneficial impacts <strong>for</strong> project proponents, good-quality pre-feasibility <strong>and</strong><br />
feasibility studies, <strong>and</strong> subsequently a strong project pipeline <strong>for</strong> future funding.<br />
• The Infrastructure Project Facility supports infrastructure project preparation <strong>and</strong><br />
builds project pipelines in the energy, transport, environment <strong>and</strong> social sectors.<br />
• In 2008, the EC <strong>and</strong> partner IFIs initiated the Western Balkans Investment<br />
Framework, to be launched by 2010. In addition to infrastructure, the WBIF<br />
will provide support to investments in other sectors such as the private sector<br />
(including SMEs) <strong>and</strong> energy efficiency.<br />
<strong>Regional</strong> cooperation frameworks<br />
<strong>Regional</strong> cooperation is vital in SEE <strong>for</strong> a number of reasons. Firstly, it is essential<br />
to ensure peace <strong>and</strong> stability <strong>and</strong> to create good relations between neighbours<br />
following the recent history of conflict. Established regional relations are both a tool<br />
<strong>and</strong> a prerequisite <strong>for</strong> moving towards EU integration. Secondly, tackling transboundary<br />
issues such as the mitigation of environmental pollution <strong>and</strong> the development<br />
of infrastructure, as well as the strengthening of disaster preparedness <strong>and</strong><br />
prevention, should inevitably be addressed on a regional level. Thirdly, regional cooperation<br />
is essential in order to create a fruitful climate <strong>for</strong> investments in SEE.<br />
Donors <strong>and</strong> IFIs often follow a regional approach in programming, which exp<strong>and</strong>s<br />
the investment market <strong>and</strong> makes it more interesting <strong>for</strong> investors. In conclusion, cooperation<br />
across the SEE region is an essential element of a successful re<strong>for</strong>m process,<br />
allowing SEE regional actors, such as the <strong>Regional</strong> Cooperation Council (RCC), to<br />
play an important role in creating local ownership of the process. Although regional<br />
cooperation in SEE has improved, the efficiency of regional structures <strong>and</strong> initiatives<br />
also needs improvement (EC COM [2009] 533). Moreover, by facilitating the exchange<br />
of experience <strong>and</strong> best practices <strong>and</strong> by introducing new methodologies, regional<br />
initiatives can promote effective financing <strong>for</strong> the environment.<br />
Some of the major IFIs have developed cooperation frameworks in order to coordinate<br />
activities in project financing as well as to provide technical assistance <strong>for</strong> project<br />
preparation. Key initiatives relevant to the SEE region are presented below. This<br />
section also contains an overview of donor coordination initiatives in the region.<br />
The IFI Advisory Group (IFI-AG) has emerged from the experiences of the Infrastructure<br />
Steering Group (ISG) that was set up in 2007 under the auspices of the<br />
Stability Pact. The AG supports the overall cooperation between IFIs <strong>and</strong> the EC<br />
in the c<strong>and</strong>idate <strong>and</strong> potential c<strong>and</strong>idate countries, including cooperation under<br />
the IPA. In particular, the objectives are to enhance strategic views aligned with<br />
the EU integration objectives of the IPA countries; to address the development of<br />
national infrastructure; <strong>and</strong> to extend participation to include actors present in the
countries. In addition, it aims to identify possibilities <strong>for</strong> improving regional financial<br />
cooperation between the EC <strong>and</strong> IFIs based on the comparative advantages<br />
of each institution in the region 13 . The IFI-AG has four priority areas —<br />
energy; transport; environment <strong>and</strong> human development; <strong>and</strong> employment <strong>and</strong><br />
social protection — <strong>and</strong> working groups have been set up <strong>for</strong> each of them.<br />
The IFI-AG also addresses horizontal issues in relation to fiscal sustainability<br />
<strong>and</strong> the right financing mix; the coherence of IFI support with national public expenditure<br />
programmes; preventive measures against the crowding out of social expenditures;<br />
public private partnerships; transparency in bidding procedures; <strong>and</strong><br />
overall public investment prioritisation.<br />
The organisations making up the IFI-AG are the EC, the EIB, the EBRD,<br />
the IBRD, the International Finance Corporation (IFC), the Nordic Investment<br />
Bank (NIB), the Nordic Environment Finance Corporation, the Council of Europe<br />
Development Bank, the Black Sea Trade <strong>and</strong> Development Bank, Kreditanstalt<br />
fur Wiederaufbau (Kf W) <strong>and</strong> the <strong>Regional</strong> Cooperation Council (EC,<br />
DG Enlargement website).<br />
Commercial banks willing to support environmental investment <strong>and</strong> incorporate<br />
environmental considerations into financing practices are gathered under the<br />
United Nations Environment Programme Finance Initiative (UNEP-FI). The<br />
UNEP-FI is a partnership between UNEP <strong>and</strong> the private financial sector. It was<br />
established with the objective of promoting the integration of environmental considerations<br />
into all aspects of the financial sector’s operations <strong>and</strong> services. The initiative<br />
has over 170 signatory institutions.<br />
<strong>Regional</strong> activities in SEE are structured under the <strong>Central</strong> <strong>and</strong> Eastern European<br />
<strong>Regional</strong> Task Force set up in 2004. The activities of the UNEP-FI strive to raise<br />
awareness of sustainable finance in the region. The majority of activities are currently<br />
directed towards the development of internal risk management procedures to accommodate<br />
risks deriving from environmental projects. After recent changes in September<br />
2009, CEE is now a sub-group under the European Task Force (ETF). This<br />
will not have a significant effect on the way that the CEE Task Force operates, in the<br />
sense that the group will continue to have its own strategy, activities <strong>and</strong> overall<br />
independence. However, it provides the CEE group with an opportunity to be present<br />
<strong>and</strong> influential in the wider European <strong>and</strong> global context, both via the ETF <strong>and</strong> the<br />
EC. The REC plays an advisory role. Major financial members include Bank Austria<br />
Creditanstalt; Emporiki Bank; the EBRD; HVB Group; Komercni Banka; <strong>and</strong> Raiffeisen<br />
Zentralbank Austria AG (UNEP FI website).<br />
The Danube–Black Sea Task Force (DABLAS) was established with the aim<br />
of stimulating water-related investments in the Danube <strong>and</strong> Black Sea regions. It<br />
provides a plat<strong>for</strong>m <strong>for</strong> cooperation between IFIs, donors <strong>and</strong> beneficiaries with the<br />
objective of protecting the water <strong>and</strong> water-related ecosystems of the Danube <strong>and</strong><br />
the Black Sea. The task <strong>for</strong>ce comprises representatives of the Black Sea Commission,<br />
the International Commission <strong>for</strong> the Protection of the River Danube<br />
(ICPDR), IFIs, interested EU member states, other bilateral donors, <strong>and</strong> regional<br />
<strong>and</strong> international organisations with relevant functions.<br />
C H A P T E R 7<br />
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<br />
S T R AT E G I C M O V E S 181
182<br />
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S T R AT E G I C M O V E S<br />
The priority aims of the task <strong>for</strong>ce are to coordinate investment activities by<br />
identifying priority objectives common to the region; <strong>and</strong> to develop concrete approaches<br />
<strong>for</strong> financing shortlisted priority projects. The task <strong>for</strong>ce is also responsible<br />
<strong>for</strong> project screening <strong>and</strong> prioritisation processes. There are currently 24 projects<br />
in the pipeline, at various stages of preparation identified through the Danube Investment<br />
Support Facility (DISF), the Black Sea Project Broker, the PEIP <strong>and</strong> the<br />
<strong>Environmental</strong> Project Preparation Facility (EPPF) (DABLAS, 2008).<br />
From 2009, the European Commission supports a number of DABLAS priority<br />
water investment projects through the DABLAS Phare Facility active in Croatia;<br />
<strong>and</strong> through the DABLAS Balkan Facility, which is planned to operate <strong>for</strong> two<br />
years in Bosnia <strong>and</strong> Herzegovina, the <strong>for</strong>mer Yugoslav Republic of Macedonia,<br />
Montenegro <strong>and</strong> Serbia. The primary objectives of the facilities are to identify <strong>and</strong><br />
prepare new water projects <strong>and</strong> to further develop projects already identified; <strong>and</strong><br />
to increase local capacity in the project preparation process. The scope of the work<br />
is to prepare a minimum of two pilot water sector projects in each of the beneficiary<br />
countries, with one of the projects focusing on basin management. At least two<br />
bankable investment projects should be fully prepared in one or two of the beneficiary<br />
countries as well (DABLAS, 2008).<br />
The <strong>Regional</strong> Cooperation Council (RCC) was launched in February 2008,<br />
as the successor to the Stability Pact <strong>for</strong> South Eastern Europe 14 . The RCC is a regionally<br />
led cooperation facility intended to sustain focused regional cooperation<br />
in South East Europe. A main difference from the Stability Pact is the level of regional<br />
ownership entrusted to the RCC. It is an attempt to encourage the SEE<br />
countries gradually to take greater ownership of the process — politically <strong>and</strong> financially<br />
— in order to ensure the sustainability of the process. The RCC also supports<br />
European <strong>and</strong> Euro-Atlantic integration. The RCC partnership comprises 45<br />
countries, organisations <strong>and</strong> IFIs.<br />
The work of the RCC focuses on six priority areas: economic <strong>and</strong> social development;<br />
energy <strong>and</strong> infrastructure; justice <strong>and</strong> home affairs; security cooperation; building<br />
human capital; <strong>and</strong> parliamentary cooperation as an overarching theme. Close<br />
relations are maintained with all relevant actors in these areas, such as governments, international<br />
organisations, IFIs, civil society <strong>and</strong> the private sector.The RCC also provides<br />
political guidance to initiatives in specific thematic areas of regional cooperation.<br />
<strong>Environmental</strong> issues are mainly addressed in the energy <strong>and</strong> infrastructure priority<br />
area, where one of the activities is the transfer of knowledge about sustainable energy<br />
<strong>and</strong> sustainable transport. Links were established with the <strong>Regional</strong> <strong>Environmental</strong><br />
Reconstruction Programme <strong>for</strong> SEE (REReP) (RCC website).<br />
The <strong>Regional</strong> <strong>Environmental</strong> Network <strong>for</strong> Accession (RENA) will replace<br />
the REReP <strong>and</strong> will be launched by the EC at the end of 2009. The RENA will<br />
strategically enhance the pre-accession element in regional cooperation among the<br />
potential c<strong>and</strong>idate countries, including Turkey. The objectives are to improve the<br />
environmental situation in the region <strong>and</strong> to reestablish <strong>and</strong> facilitate environmental<br />
dialogue among SEE countries. Activities will focus on strategic planning,<br />
public participation, climate change, cross-border cooperation <strong>and</strong> environmental
BOX 23: DABLAS — Criteria <strong>for</strong> project prioritisation<br />
investment project preparation. The RENA will build on the achievements of the<br />
REReP (EC SEC [2009] 1309).<br />
The EU Water Initiative (EUWI) is an international political initiative creating<br />
partnerships with national governments, donors, the water industry, NGOs <strong>and</strong><br />
other stakeholders. It was launched to contribute to the Millennium Development<br />
Goals in relation to drinking water <strong>and</strong> sanitation. The Mediterranean regional<br />
component comprises partners in SEE <strong>and</strong> Mediterranean countries that are willing<br />
to commit to the objectives, targets <strong>and</strong> guiding principles, <strong>and</strong> that have a genuine<br />
willingness to work with others in finding practical solutions (EUWI website).<br />
The Horizon 2020 Initiative (H2020) was launched by Euro-Mediterranean<br />
partners with the objective of reducing levels of pollution in the Mediterranean<br />
Sea. Among the issues tackled are municipal waste, urban wastewater <strong>and</strong> industrial<br />
emissions, which are responsible <strong>for</strong> up to 80 percent of the pollution in the<br />
Mediterranean Sea. The initiative focuses on facilitating the implementation of infrastructure<br />
projects, capacity building, monitoring, research <strong>and</strong> the exchange of<br />
experiences (H2020 website).<br />
The Union <strong>for</strong> the Mediterranean, launched by France in 2008, replaces the Euro-<br />
Mediterranean partnership (Barcelona Process) <strong>and</strong> focuses on regional cooperation<br />
<strong>and</strong> on increasing the potential <strong>for</strong> regional integration <strong>and</strong> cohesion. The union has<br />
the depollution of the Mediterranean Sea as core objective. The Mediterranean Water<br />
Strategy will be adopted in 2010. The union comprises all EU states <strong>and</strong> the 21<br />
Mediterranean basin countries, including all SEE countries (EC SEC [2009] 1309).<br />
C H A P T E R 7<br />
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<br />
• Level of reduction of pollution per investment cost<br />
• <strong>Environmental</strong> impact on water-related ecosystems/sensitivity of area<br />
• Compliance obligations of the country: timing issues<br />
• Ability to pay back loans/af<strong>for</strong>dability/financial sustainability<br />
• Ability of recipient to co-finance<br />
• Readiness to guarantee loans (may differ between government <strong>and</strong> municipality)<br />
• Commitment of local authority/investor<br />
• National priorities have to fit with regional priorities (health <strong>and</strong> drinking water issues are covered by national<br />
priorities as well as regional priorities)<br />
Projects that have partial financing ensured have a high priority. The list is based on hotspot databases. Projects<br />
on hazardous substances <strong>and</strong> diffuse sources are exempt from the first screening of projects. The pipeline divides<br />
projects into four different categories, from pre-feasibility stage to nearly approved or approved financing <strong>for</strong> investments<br />
contributing to improvements in wastewater. In line with the new Water Framework Directive, emphasis<br />
is given to river basin management projects.<br />
Source: DABLAS website<br />
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S T R AT E G I C M O V E S<br />
Donor coordination frameworks<br />
Donor coordination can broadly be defined as joint support by donors to improve<br />
aid effectiveness <strong>and</strong> to foster capacity building in the c<strong>and</strong>idate <strong>and</strong> potential<br />
c<strong>and</strong>idate countries with a view to helping them to align to EU st<strong>and</strong>ards <strong>and</strong><br />
to prepare <strong>for</strong> future accession (EC, DG Enlargement). Donor coordination is key<br />
to improving the effectiveness of aid. Maintaining well-organised coordination<br />
helps to ensure adequate <strong>and</strong> targeted financial assistance <strong>and</strong> prevents the overlapping<br />
of activities. This section provides an overview of existing donor coordination<br />
ef<strong>for</strong>ts, both regional <strong>and</strong> in country systems.<br />
Donor coordination conferences are organised by the European Commission,<br />
DG Enlargement <strong>Regional</strong> Programmes Unit in order to increase the visibility of<br />
donor coordination in SEE countries <strong>and</strong> Turkey. Two conferences on SEE <strong>and</strong><br />
Turkey have been organised to date, in 2008 <strong>and</strong> 2009.<br />
A separate donor conference on Kosovo (as defined under UNSCR 1244) was<br />
held in July 2008. It brought together representatives from 37 countries <strong>and</strong> 16 international<br />
organisations. The meeting was called by the EC <strong>and</strong> the aim was to<br />
support socio-economic development in Kosovo (as defined under UNSCR<br />
1244). During the conference, participants pledged EUR 1.2 billion, of which the<br />
EU contributed EUR 508 million. Several projects on the PEIP lists were presented<br />
(DG Enlargement website; EC, 2008).<br />
General observations<br />
• <strong>Regional</strong> cooperation is important <strong>for</strong> a number of reasons, including peace<br />
<strong>and</strong> stability. It is also a tool, <strong>and</strong> a prerequisite, <strong>for</strong> moving towards EU integration;<br />
tackling transboundary environmental pollution <strong>and</strong> infrastructure<br />
development; <strong>and</strong> creating a fruitful climate <strong>for</strong> investments in SEE.<br />
• <strong>Regional</strong> cooperation provides an opportunity <strong>for</strong> the cross-border sharing of<br />
knowledge <strong>and</strong> good practice.<br />
• IFIs <strong>and</strong> donors often take a regional approach in programming, which exp<strong>and</strong>s<br />
the investment market making it more interesting <strong>for</strong> investments.
TABLE 24: Tools <strong>and</strong> instruments available <strong>for</strong> donor coordination in SEE countries<br />
C H A P T E R 7<br />
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<br />
COUNTRY TOOLS AND INSTRUMENTS FOR COORDINATION COMMENTS<br />
Albania Integrated Planning System (IPS) All donors concerned. Ongoing<br />
National Strategy <strong>for</strong> Development <strong>and</strong> Integration (NSDI) system accessible online<br />
http://www.aidharmonisation.org.al (DFID-funded initiative).<br />
Bosnia <strong>and</strong> Donor mapping report <strong>and</strong> database All donors concerned. Updated<br />
Herzegovina http://www.donormapping.ba annually.<br />
Croatia Competencies are spread between several ministries. The EC, An appropriate source of<br />
jointly with the World Bank, still plays an active <strong>and</strong> important<br />
role in the field of donor coordination.<br />
in<strong>for</strong>mation is the EC Delegation.<br />
Kosovo (as defined A new agency <strong>for</strong> donor coordination <strong>and</strong> European integration The EC liaison office is a major<br />
under UNSCR 1244) is to be created following the donor conferences<br />
in 2008 <strong>and</strong> 2009.<br />
source of in<strong>for</strong>mation.<br />
The <strong>for</strong>mer Yugoslav <strong>Central</strong> donor database — software application <strong>for</strong> the All donors concerned, minor<br />
Republic of registration of projects aimed at reducing the overlapping problems in updating <strong>and</strong> <strong>for</strong>mat.<br />
Macedonia of assistance; analytical reports from the <strong>Central</strong> Donor<br />
Assistance Database.<br />
http://www.sea.gov.mk/Default.aspx<br />
http://cdad.sep.gov.mk/EN/search.aspx<br />
Montenegro Secretariat <strong>for</strong> European Integration Database containing<br />
in<strong>for</strong>mation about donors (under development).<br />
Operation expected after 2009.<br />
Serbia Ministry of Finance ISDACON (database of donor projects) Difficulties when sorting<br />
http://www.evropa.sr.gov.yu/Evropa/PublicSite/index.Aspx in<strong>for</strong>mation in the database due to<br />
the size of the database.<br />
Source: Adapted from the Western Balkans Investment Cooperation Plat<strong>for</strong>m,<br />
http://balkan-prototyp.test.yellow-lab.pl/Chapter+VI+-+Donor+coordination/VI_2_+In+Country+Systems+of+Coordination<br />
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Chapter 8<br />
Prioritisation of infrastructure projects —<br />
The PEIP lists<br />
S T R AT E G I C M O V E S 187
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S T R AT E G I C M O V E S
Dynamics of the PEIP lists of priority projects<br />
From its launch in late 2001, the core of the PEIP was the set of lists of priority<br />
environmental investment projects <strong>for</strong> each country. The first national PEIP<br />
lists were created in 2002, based on consultations with PEIP focal points from national<br />
ministries responsible <strong>for</strong> environmental protection. In each PEIP period<br />
(2001–2003, 2003–2005, <strong>and</strong> 2007–2009) the lists have been updated biannually,<br />
based on in<strong>for</strong>mation provided by project proponents <strong>and</strong> national PEIP focal<br />
points. New priority projects have been added <strong>and</strong> some of the existing projects<br />
were removed from the lists — because of successful financing <strong>and</strong>/or implementation,<br />
because no progress was made, <strong>and</strong>/or because high-priority status was lost<br />
in the context of overall national environmentally related policies.<br />
Creating lists of projects that present a harmonised approach to investment<br />
planning is an important task <strong>for</strong> SEE countries. The absence of such an approach<br />
was one of the key barriers keeping the donor community from delivering<br />
assistance targeted to real environmental priorities, rather than r<strong>and</strong>omly<br />
proposed project ideas. This harmonised approach provides SEE countries with<br />
guidelines on developing national lists of projects <strong>for</strong> compliance with the key<br />
investment-heavy directives.<br />
Drawing up <strong>and</strong> efficiently managing the project lists in order to obtain financing<br />
<strong>for</strong> priority projects is a complex process requiring high levels of skill <strong>and</strong><br />
expertise among the national authorities. The exercise of developing a regional<br />
list of environmental priority projects was seen as an important step towards starting<br />
this process. The PEIP lists of priority environmental infrastructure investment<br />
projects are the response of SEE countries to the need to comply with the<br />
EU key investment-heavy directives. The role of the PEIP project lists is also to<br />
stimulate the process of implementing more infrastructure projects in the region.<br />
One practical result of the project lists is that priority project concepts can be<br />
shown to the donor community; on the other h<strong>and</strong>, the process launched <strong>and</strong> implemented<br />
by the PEIP, through the active participation of the SEE stakeholders,<br />
allowed <strong>for</strong> the transfer of expertise on developing <strong>and</strong> managing lists of projects<br />
<strong>for</strong> compliance.<br />
Officials from SEE ministries of environment were actively involved in all stages<br />
of developing the methodology <strong>and</strong> are responsible <strong>for</strong> the updating of the lists, in<br />
cooperation with the project team. The active involvement of SEE officials, <strong>and</strong><br />
their approval of the lists, are indicative of their commitment to the process.<br />
The lists contain project concepts that:<br />
• have a regional impact on the environment in SEE;<br />
• are directly linked to the implementation of the EU environmental acquis; <strong>and</strong><br />
• are sufficiently mature (there is adequate in<strong>for</strong>mation available about the project)<br />
to be assessed <strong>for</strong> bankability <strong>and</strong>/or grant assistance.<br />
The total costs of projects should be regarded with a certain degree of caution,<br />
as there is no unified method <strong>for</strong> calculating investment costs in the region.<br />
S T R AT E G I C M O V E S 189
190<br />
C H A P T E R 8<br />
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<br />
FIGURE 25: Number of priority projects per country in 2007 <strong>and</strong> in 2009<br />
30<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0<br />
S T R AT E G I C M O V E S<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
2007 2009<br />
Source: REC national PEIP lists<br />
Croatia FYR<br />
Macedonia<br />
Kosovo (under<br />
UNSCR 1244)<br />
Montenegro<br />
Serbia<br />
This chapter presents the dynamics <strong>and</strong> trends of the national PEIP lists in the<br />
period 2007 to 2009 <strong>and</strong> explains the status of the lists <strong>and</strong> the reasons <strong>for</strong> projects<br />
being added or removed. The priority lists can be found in Annex 5.<br />
Project list dynamics<br />
Projects have been classified according to three sectors: waste, water <strong>and</strong> air.<br />
During the first two programme periods, there was a general decline in the number<br />
of air sector projects. This can be explained by the general assumption that such<br />
investment projects are primarily the responsibility of the industrial sector, where<br />
ownership issues have not been resolved due to the as yet incomplete privatisation<br />
process in the region; <strong>and</strong> also by the fact that national legislation in relation to<br />
IPPC <strong>and</strong> air quality has not yet been fully implemented. In most SEE countries,<br />
the relevant ministries <strong>and</strong>/or funds have project implementation units that usually<br />
specialise in either the waste or water sector, rather than air projects. Moreover,<br />
EU support is significantly stronger in the waste <strong>and</strong> water sectors, which<br />
belong to the public domain. In rare cases of fully privatised companies, in the <strong>for</strong>m<br />
of multinational company takeovers, new owners implement air quality measures
FIGURE 26: Number of projects on the PEIP lists in 2007 <strong>and</strong> 2009 by sector<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
2007 2009<br />
Source: REC national PEIP lists<br />
at their own expense <strong>and</strong> do not there<strong>for</strong>e require assistance from national or international<br />
environmental institutions <strong>and</strong> funds. In the waste sector, the number<br />
of projects on the priority lists related to the remediation of hotspots also declined.<br />
These projects had a high level of national importance <strong>and</strong>, in many cases, have already<br />
been successfully implemented.<br />
Croatia moved <strong>for</strong>ward in terms of both the number of projects with significant<br />
progress <strong>and</strong> the total funds secured <strong>for</strong> these projects. As an EU c<strong>and</strong>idate country,<br />
most of the funds <strong>for</strong> project preparation came from the IPA. Funds <strong>for</strong> actual<br />
implementation came from the earlier Phare <strong>and</strong> CARDS programmes. These were<br />
supplemented mostly by earmarked state funds. The IPA accreditation process was<br />
challenging but provided experience that enhanced capacities <strong>for</strong> project preparation<br />
at national, regional <strong>and</strong> local level.<br />
Other countries relied mainly on bilateral donors <strong>and</strong> IFI funding, as national<br />
funds available <strong>for</strong> environmental investments are generally scarce. Among the IFIs,<br />
Kf W applied the practical <strong>and</strong> stimulative approach of the benchmarking <strong>and</strong> selfassessment<br />
of PUCs as a precondition <strong>for</strong> loans, which proved beneficial <strong>for</strong> project<br />
preparation <strong>and</strong> <strong>for</strong> increasing re<strong>for</strong>m capacities, especially at the local level.<br />
Figure 25 shows that the biggest decrease in the net number of projects took<br />
place in Albania in the 2007 to 2009 period. During this period, six projects were<br />
C H A P T E R 8<br />
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<br />
Waste Water Air<br />
S T R AT E G I C M O V E S 191
192<br />
C H A P T E R 8<br />
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FIGURE 27: Projects added to <strong>and</strong> removed from the national PEIP lists between 2007 <strong>and</strong> 2009<br />
35<br />
30<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0<br />
S T R AT E G I C M O V E S<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
Removed Added<br />
Source: REC national PEIP lists<br />
Croatia FYR<br />
Macedonia<br />
Kosovo (under<br />
UNSCR 1244)<br />
Montenegro<br />
Serbia<br />
merged due to new regional concepts; <strong>and</strong> a relatively high number of projects were<br />
removed as not feasible. Two projects secured funding <strong>for</strong> implementation <strong>and</strong><br />
were there<strong>for</strong>e removed from the list. Bosnia <strong>and</strong> Herzegovina <strong>and</strong> Serbia show<br />
the highest net increase in the number of projects on the lists due to the fact that,<br />
in this period, the respective governmental units increased their activities in the<br />
area of technical assistance <strong>for</strong> the preparation of project documentation <strong>and</strong> prefeasibility<br />
studies <strong>for</strong> water sector projects. In the case of Croatia, the number of<br />
projects remained constant. A large number of projects were added, while an<br />
equally large number of projects were removed due to the streamlining of projects<br />
according to the Croatian <strong>Environmental</strong> Protection Operational Programme<br />
(EPOP 2007–2009). In Serbia, many projects were added but very few were removed<br />
in the 2007–2009 period.<br />
Figure 26 illustrates how the air sector, which was already less significant in <strong>and</strong><br />
prior to 2007, had almost completely disappeared from the priority lists by 2009.<br />
The role of air sector projects is discussed above.<br />
The highest net increase in the number of projects between 2007 <strong>and</strong> 2009 is<br />
in the water sector. However, this does not imply that water has a higher priority<br />
than waste. All countries in the region are striving to achieve compliance in both
FIGURE 28: Number of projects showing major <strong>and</strong> minor progress between 2007 <strong>and</strong> 2009<br />
14<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
sectors equally. The reason lies in the fact that a high number of hotspot remediation<br />
projects (belonging to the waste sector) were removed in this period, <strong>and</strong> many<br />
municipal l<strong>and</strong>fill projects were replaced by a smaller number of regional l<strong>and</strong>fill<br />
projects, while the water sector is lagging behind in terms of regionalisation.<br />
Figure 27 illustrates that the highest “turnover” of projects was in Croatia. This<br />
is due to the fact that the EPOP <strong>for</strong> the 2007–2009 period was adopted in 2007<br />
<strong>and</strong> included two lists, one with 14 water sector projects <strong>and</strong> the second with 12<br />
waste sector projects. In consultation with the Croatian Ministry of <strong>Environmental</strong><br />
Protection, Physical Planning <strong>and</strong> Construction it was decided to consolidate<br />
the PEIP lists with the EPOP list. As a result, the PEIP lists now contain all the<br />
projects on the EPOP list, as well as three additional projects on hazardous waste<br />
remediation.<br />
The highest number of additions was made in Serbia, followed by Bosnia <strong>and</strong><br />
Herzegovina <strong>and</strong> Croatia. Bosnia <strong>and</strong> Herzegovina added almost exclusively water<br />
sector projects to the lists, while the additions were relatively balanced in Croatia<br />
<strong>and</strong> Serbia. There were slightly more additions in the water sector, due to the<br />
progress made in the waste sector in terms of regionalisation resulting in mergers<br />
of a number of waste projects.<br />
C H A P T E R 8<br />
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Some progress Significant funding secured there<strong>for</strong>e removed from lists<br />
Source: REC national PEIP lists<br />
Croatia FYR<br />
Macedonia<br />
Kosovo (under<br />
UNSCR 1244)<br />
Montenegro<br />
Serbia<br />
S T R AT E G I C M O V E S 193
194<br />
C H A P T E R 8<br />
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FIGURE 29: Complete or significant funds secured by PEIP projects between 2007 <strong>and</strong> 2009<br />
EUR<br />
million<br />
250<br />
200<br />
150<br />
100<br />
50<br />
0<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
Source: REC national PEIP lists<br />
S T R AT E G I C M O V E S<br />
Croatia FYR<br />
Macedonia<br />
Kosovo (under<br />
UNSCR 1244)<br />
Montenegro<br />
Serbia<br />
Project progress<br />
Figure 28 shows the number of successful projects that secured complete funding<br />
or funding sufficient to start project implementation <strong>and</strong> that were consequently<br />
removed from the lists. Projects that saw some progress in terms of the<br />
development of project documentation <strong>and</strong>/or that secured some additional funding,<br />
are also shown. In Croatia, the priority environmental infrastructure projects<br />
made the biggest progress in terms of securing full or significant financing, followed<br />
by Montenegro, Serbia <strong>and</strong> Albania.<br />
All projects that successfully secured complete funding were removed from the<br />
PEIP lists. Of the projects that received sufficient (in some cases conditional) funding,<br />
some were removed from the lists while others remained. Sufficient funding<br />
refers to adequate funds to start the construction/implementation of the project,<br />
or at least to start/complete one of the main phases of a project. Some countries applied<br />
the principle that a project should stay on the PEIP lists until 100 percent<br />
funds were secured. Other countries decided to remove projects that had secured<br />
suffient funding <strong>for</strong> a particular phase.<br />
Figures 28 <strong>and</strong> 29 show that Croatia made the biggest progress in completing<br />
project documentation <strong>and</strong> securing funds <strong>for</strong> priority environmental infrastructure<br />
projects. In terms of total funds secured per country, Montenegro <strong>and</strong> Bosnia
FIGURE 30: Number of projects removed from priority lists due to lack of development<br />
14<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
Source: REC national PEIP lists<br />
Croatia FYR<br />
Macedonia<br />
<strong>and</strong> Herzegovina follow after Croatia. However, in Bosnia <strong>and</strong> Herzegovina none<br />
of the projects secured total or sufficient funds. Instead, a large number of projects<br />
(seven) saw small increases in funding. In Montenegro, there were three projects<br />
that secured sufficient funding, <strong>and</strong> a relatively high number of projects (nine) that<br />
secured minor additional funding.<br />
In Bosnia <strong>and</strong> Herzegovina <strong>and</strong> the <strong>for</strong>mer Yugoslav Republic of Macedonia,<br />
none of the priority projects received complete funds <strong>for</strong> implementation <strong>and</strong> none<br />
made sufficient progress to be removed from the list. However, these two countries<br />
secured significant funds — Bosnia <strong>and</strong> Herzegovina EUR 78.1 million, <strong>and</strong><br />
the <strong>for</strong>mer Yugoslav Republic of Macedonia EUR 53 million. In terms of total secured<br />
funds, the figures <strong>for</strong> Albania <strong>and</strong> Kosovo (as defined under UNSCR 1244)<br />
are EUR 25.8 million <strong>and</strong> EUR 18.6 million respectively. Figure 29 indicates actual<br />
progress in project maturity, which is directly reflected by the funds approved<br />
by donors <strong>and</strong> IFIs (<strong>and</strong>, to a lesser extent, by national governments).<br />
Figure 30 illustrates the number of projects excluded from the lists due to longterm<br />
lack of progress or as a result of losing their relative strategic importance from<br />
the government’s point of view. The largest number of projects removed from the<br />
priority lists as non-feasible or as no longer a priority can be observed <strong>for</strong> the <strong>for</strong>mer<br />
Yugoslav Republic of Macedonia <strong>and</strong> Croatia. In the case of Croatia, this was<br />
due to the consolidation of the PEIP lists with the EPOP list, where the idea was<br />
C H A P T E R 8<br />
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Kosovo (under<br />
UNSCR 1244)<br />
Montenegro<br />
Serbia<br />
S T R AT E G I C M O V E S 195
196<br />
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FIGURE 31: Relative PEIP project dynamics (percentage of total PEIP projects in each country, 2007–2009)<br />
%<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
S T R AT E G I C M O V E S<br />
Albania Bosnia <strong>and</strong><br />
Herzegovina<br />
Setback Neutral Progress<br />
Source: REC national PEIP lists<br />
Croatia FYR<br />
Macedonia<br />
Kosovo (under<br />
UNSCR 1244)<br />
Montenegro<br />
Serbia<br />
to focus on a smaller number of top-priority projects rather than a large number of<br />
relatively important projects.<br />
While Figures 28, 29 <strong>and</strong> 30 show absolute numbers, Figure 31 shows the relative<br />
number of projects that saw some (minor or major) advancement, projects<br />
that saw no change (except occasional merges between projects) <strong>and</strong> projects that<br />
experienced setbacks, expressed in percentages. 15 Judging from the absolute numbers<br />
<strong>and</strong> relative dynamics, Croatia <strong>and</strong> Montenegro recorded the biggest net<br />
progress, while Kosovo (as defined under UNSCR 1244) <strong>and</strong> the <strong>for</strong>mer Yugoslav<br />
Republic of Macedonia made the least progress in the preparation <strong>and</strong> financing of<br />
priority environmental infrastructure projects. The <strong>for</strong>mer Yugoslav Republic of<br />
Macedonia also had the biggest absolute <strong>and</strong> relative number of projects with setbacks<br />
during the 2007–2009 period. Project setbacks in different countries included<br />
the removal of previously allocated national funds due to financial<br />
difficulties; the pending completion of negotiations between municipalities in the<br />
case of regional waste management centres; <strong>and</strong> unresolved location disputes, hence<br />
the need to find new locations <strong>and</strong> rework parts of project documentation.<br />
Figure 32 shows total funds only <strong>for</strong> projects that secured complete funding in<br />
the 2007–2009 period.
Geographical breakdown<br />
The successful PEIP projects are described in greater detail in this section.<br />
In Albania, the project “Management Plan <strong>for</strong> Urban Solid Waste of Shkodra<br />
City <strong>and</strong> the Construction of a Sanitary L<strong>and</strong>fill” received funds of EUR 4 million<br />
from the state budget in 2008. For the construction of the sanitary l<strong>and</strong>fills in five<br />
municipalities, funds have been allocated from the national budget. Budget funds<br />
have also been directed to the construction of two wastewater treatments plants, in<br />
Tirana <strong>and</strong> Shkodra. For the Shkodra project, the development of a drinking water<br />
supply is included in the project fiche. The JICA financed the initial phase of the<br />
project, up to the detailed design phase. The Italian Cooperation Investment Fund<br />
is supporting the rehabilitation work <strong>for</strong> the Tirana network between 2001 <strong>and</strong><br />
2010 with a soft loan of EUR 44.3 million. The Austrian Development Agency<br />
(ADA), Kf W <strong>and</strong> the Swiss State Secretariat <strong>for</strong> Economic Affairs (SECO) are financing<br />
<strong>for</strong> the first component, the development of a wastewater treatment plant<br />
in Shkodra, to the amount of EUR 15 million. Funding has not yet been received<br />
<strong>for</strong> the second phase that includes the wastewater treatment plant in Shkodra <strong>and</strong><br />
the Shkodra-Zogaj area (EUR 25 million).<br />
C H A P T E R 8<br />
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FIGURE 32: Total value of projects removed from the PEIP lists in 2007–2009 due to securing complete financing<br />
EUR<br />
million<br />
180<br />
150<br />
120<br />
90<br />
60<br />
30<br />
0<br />
Albania Bosnia Croatia FYR Kosovo (under<br />
<strong>and</strong><br />
Macedonia UNSCR 1244)<br />
Herzegovina<br />
Source: REC national PEIP lists<br />
Montenegro<br />
Serbia<br />
S T R AT E G I C M O V E S 197
198<br />
C H A P T E R 8<br />
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TABLE 25: Summary of PEIP projects that secured complete financing in the 2007–2009 period<br />
COUNTRY PROJECT VALUE PROJECT SUMMARY<br />
(MILLION EUR)<br />
Albania<br />
Croatia<br />
S T R AT E G I C M O V E S<br />
4.0 Waste management plan <strong>and</strong> l<strong>and</strong>fill construction <strong>for</strong> the city of Shkodra<br />
51.1 Mariscina county waste management centre (near Rijeka)<br />
57.8 Kastijun regional waste management centre (near Pula)<br />
13.5 Remediation of the red sludge lagoon of the <strong>for</strong>mer alumina factory (near Obrovac)<br />
5.2 Remediation <strong>and</strong> expansion of the Sagulje-Ivik municipal waste l<strong>and</strong>fill<br />
(near Nova Gradiska)<br />
4.0 Establishment of the national network <strong>for</strong> permanent air quality monitoring<br />
in the Republic of Croatia<br />
31.1 Wastewater treatment plant in Slavonski Brod<br />
Kosovo (as defined under UNSCR 1244)<br />
1.5 Wastewater treatment of Trepca Arana lead zinc mine<br />
3.5 Rehabilitation of the ash l<strong>and</strong>fills of the Kosova A <strong>and</strong> B power plants: Transportation<br />
of ashes from existing l<strong>and</strong>fills to the Mirash <strong>and</strong> Bardh mining sites<br />
1.5 Rehabilitation of the ash l<strong>and</strong>fills of the Kosova A <strong>and</strong> B power plants:<br />
Complete recultivation of existing ash l<strong>and</strong>fills<br />
1.5 Rehabilitation of the ash l<strong>and</strong>fills of the Kosova A <strong>and</strong> B power plants:<br />
Hydroseeding method<br />
Montenegro<br />
7.5 Remediation measures <strong>for</strong> Mojkovac mining waste disposal site<br />
11.8 Closure <strong>and</strong> remediation of the existing waste disposal site <strong>and</strong> construction<br />
of a new Podgorica l<strong>and</strong>fill, along with a recycling centre<br />
Serbia<br />
18.6 Upgrade <strong>and</strong> extension of wastewater treatment plant in Subotica<br />
2.0 Equipment supply <strong>for</strong> the recultivation <strong>and</strong> preservation of the ash<br />
<strong>and</strong> slag deposit in Kolubara<br />
In Bosnia <strong>and</strong> Herzegovina, four projects received significant amounts of<br />
funding, although not sufficient to begin the construction phase, thus they are still<br />
included on the PEIP lists. However, the overall amounts committed to projects on<br />
the PEIP lists in the 2007–2009 period are significant (at around EUR 78 million).<br />
For the water supply <strong>and</strong> wastewater treatment project of the city of Mostar<br />
<strong>and</strong> surrounding settlements, the conceptual design <strong>and</strong> feasibility study were completed.<br />
The preparation of the design <strong>for</strong> the main collector of the sewerage system<br />
was contracted thanks to a World Bank (GEF) grant of USD 2.8 million. Subject<br />
to the finalisation of the detailed design, the EIB will provide a loan to the amount
BOX 24: Upgrade <strong>and</strong> extension of the wastewater treatment plant in Subotica, Serbia<br />
of EUR 7.6 million. Three other projects advanced significantly. Technical assistance<br />
<strong>for</strong> water sector projects in 13 FBiH municipalities <strong>and</strong> technical assistance<br />
<strong>for</strong> water sector projects in 16 RS municipalities both secured conditional EIB<br />
loans (i.e. <strong>for</strong> those municipalities that can secure 50 percent from own funds).<br />
The project “Protection of the Drinking Water Reservoir <strong>for</strong> Tuzla Canton” secured<br />
an IPA grant <strong>and</strong> an EIB loan subject to 50 percent secured from own funds.<br />
In Croatia, total funds of EUR 164 million were secured <strong>for</strong> 12 projects, six of<br />
which secured sufficient funds to complete detailed project designs <strong>and</strong>/or commence<br />
with the construction phase (EUR 162.7 million). These six projects were<br />
there<strong>for</strong>e removed from the list. Four of the projects were from the waste sector<br />
<strong>and</strong> two from the water sector. At the same time, another six projects were removed<br />
from the PEIP lists as they were no longer considered as high-priority projects (following<br />
consolidation with the EPOP list discussed at the beginning of this chapter).<br />
The project <strong>for</strong> the waste management centre <strong>for</strong> Eastern Slavonia was<br />
dropped from the list as negotiations about <strong>for</strong>ming a regional utility company<br />
failed <strong>and</strong> the project came to a st<strong>and</strong>still. The projects secured funding from different<br />
sources. Projects previously on the list secured the remainder of funding in<br />
the <strong>for</strong>m of grants from Phare <strong>and</strong> CARDS, as well as various national <strong>and</strong> own<br />
funds (e.g. through Croatian Waters, the EPEEF, municipal budgets, <strong>and</strong> publicprivate<br />
partnerships) supplemented by loans (mainly from the EBRD). Six projects<br />
entered the IPA pipeline in the 2007–2009 period, three of which were approved<br />
(by September 2009) <strong>for</strong> regional/county waste management centres <strong>for</strong> Zadar<br />
county, <strong>for</strong> the Istria region, <strong>and</strong> <strong>for</strong> Sisacko-Moslovacka county.<br />
C H A P T E R 8<br />
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The upgrading <strong>and</strong> extension of the wastewater treatment plant will have significant regional benefits. Project implementation<br />
will significantly improve the ecological status of Lake Palic <strong>and</strong> that of Lake Ludos <strong>and</strong> the Tisa River,<br />
which receive waters from Lake Palic. The project will contribute to the prevention of groundwater pollution <strong>and</strong><br />
to the improvement of cleaning technology with de-nitrification <strong>and</strong> de-phosphorisation.<br />
Financial setup:<br />
The total cost of the project is EUR 18.6 million. The project secured total funding through the following financial<br />
setup:<br />
• Own sources: EUR 3.9 million provided by the municipality of Subotica<br />
• Grants: EUR 5,670,159 provided by the European Agency <strong>for</strong> Reconstruction <strong>and</strong> the EBRD<br />
• Loans: EUR 9 million provided by the EBRD with subsidised interest<br />
Success factors:<br />
Good project documentation was provided, including financial <strong>and</strong> management plans. The PUC was managed<br />
properly <strong>and</strong> its project preparation capability was developed. A tariff policy <strong>and</strong> plan was developed, envisaging<br />
a gradual increase in tariffs.<br />
S T R AT E G I C M O V E S 199
200<br />
C H A P T E R 8<br />
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S T R AT E G I C M O V E S<br />
In Kosovo (as defined under UNSCR 1244), four projects were removed as<br />
a result of securing sufficient funds to complete their respective feasibility studies<br />
(EUR 8 million in total) <strong>and</strong> additional funds to start implementation (EUR 10.6<br />
million in total). Three of the projects were from the waste sector <strong>and</strong> one from the<br />
water sector, although a common denominator in all four projects was hazardous<br />
waste (ash l<strong>and</strong>fills <strong>and</strong> mine waters). The three projects from the waste sector are<br />
components of one larger project <strong>for</strong> the rehabilitation of the ash l<strong>and</strong>fills of the<br />
Kosovo A <strong>and</strong> B power plants. The project was added to the PEIP lists in 2005 as<br />
a set of three projects that included the transportation of ashes from the existing<br />
l<strong>and</strong>fills to the Mirash <strong>and</strong> Bardh mining sites; the complete recultivation of the existing<br />
ash l<strong>and</strong>fills; <strong>and</strong> the installation of an ash wetting system (hydroseeding).<br />
Since the pre-feasibility studies <strong>for</strong> the whole set of projects were completed <strong>and</strong><br />
adopted (at a total cost of EUR 5.5 million), the World Bank allocated an additional<br />
EUR 9 million <strong>and</strong> the projects are now in the implementation phase <strong>and</strong><br />
have there<strong>for</strong>e been removed from the PEIP lists. A total of 700,000 inhabitants<br />
will benefit from the project. The water sector project on wastewater treatment at<br />
the Trepca Artana lead <strong>and</strong> zinc mine was introduced to the PEIP lists in 2005.<br />
Polluted wastewater from the mine is being discharged directly into the river Marec<br />
(<strong>and</strong> consequently into the rivers Sitnica, Ibar <strong>and</strong> Danube <strong>and</strong> the Black Sea).<br />
After the completion of the feasibility study (EUR 1.5 million), UNEP allocated<br />
an additional EUR 1.6 million <strong>for</strong> this project, which is now in the implementation<br />
phase <strong>and</strong> has thus been removed from the PEIP lists. A total of around<br />
100,000 inhabitants will benefit directly from project implementation.<br />
In the <strong>for</strong>mer Yugoslav Republic of Macedonia, as in Bosnia <strong>and</strong> Herzegovina,<br />
even though none of the projects are deemed to have made sufficient progress<br />
to be removed from the PEIP lists, significant funds have been committed <strong>for</strong> PEIP<br />
projects in the 2007–2009 period overall (around EUR 53 million), although none<br />
of the projects have been fully financed. For the project <strong>for</strong> the construction of a<br />
wastewater treatment plant <strong>for</strong> the town of Prilep, EUR 6 million were committed<br />
by the IPA <strong>and</strong> EUR 4.5 million from the state budget. The remaining EUR 11<br />
million should be secured from loans. The feasibility study <strong>for</strong> the project was completed<br />
in the 2007–2009 period. A full tendering procedure (second step) is currently<br />
in place <strong>for</strong> developing the detailed project design. The project <strong>for</strong> a sewerage<br />
network <strong>and</strong> wastewater treatment plant in Skopje has also progressed significantly<br />
in terms of project documentation <strong>and</strong> the securing of funds, as has the project <strong>for</strong><br />
the modernisation of the municipal l<strong>and</strong>fill through degasification <strong>and</strong> the utilisation<br />
of l<strong>and</strong>fill gas in the Skopje (Drisla) l<strong>and</strong>fill.<br />
In Montenegro, two waste projects successfully secured complete funding. The<br />
first phase of the project <strong>for</strong> remediation measures <strong>for</strong> Mojkovac mining waste disposal<br />
site has been completed, <strong>and</strong> the EUR 7.5 million second phase has secured<br />
sufficient funds from the state budget <strong>and</strong> assistance from the Government of the<br />
Netherl<strong>and</strong>s. The remaining EUR 5.55 million are expected to be financed from<br />
the 2009 state budget. The first two phases of the EUR 11.78 million project <strong>for</strong><br />
the closure <strong>and</strong> remediation of the existing waste disposal site <strong>and</strong> the construc-
tion of a new Podgorica l<strong>and</strong>fill <strong>and</strong> recycling centre have been completed <strong>and</strong> the<br />
third phase (recycling centre) has secured significant financing from local <strong>and</strong> state<br />
funds <strong>and</strong> from the Spanish Government. The remaining EUR 4.3 million are expected<br />
to be financed from the state budget. For the project <strong>for</strong> the construction of<br />
a hazardous waste l<strong>and</strong>fill in Montenegro (EUR 9.17 million), an application <strong>for</strong> IPA<br />
financing has been completed <strong>and</strong> submitted, thus it is highly likely to receive sufficient<br />
financing. Many projects that are still on the list also recorded progress between<br />
2007 <strong>and</strong> 2009. Four of these projects are from the waste sector <strong>and</strong> 10 from the<br />
water sector. These projects have secured a total of EUR 64.55 million to date.<br />
In Serbia, a total of EUR 22.7 million was secured <strong>for</strong> PEIP projects in the period<br />
2007–2009. In total, four projects saw progress, two of which were removed<br />
from the lists having successfully secured funding (EUR 20.6 million in total). The<br />
project <strong>for</strong> equipment supply <strong>for</strong> the recultivation <strong>and</strong> preservation of the ash <strong>and</strong> slag<br />
deposit at Kolubara (EUR 2 million from own funds) is a relatively small but environmentally<br />
important waste project. The other project removed from the lists was<br />
a major project in the water sector: the project <strong>for</strong> the upgrade <strong>and</strong> extension of the<br />
wastewater treatment plant in Subotica. A total of EUR 17.7 million was secured<br />
from EAR, the EBRD <strong>and</strong> municipal funds, <strong>and</strong> construction started in June 2009.<br />
The remaining EUR 0.9 million will be secured through PUC tariff collection. The<br />
project included the design of a new tariff system. The other two projects that saw improvements<br />
but remained on the lists are both from the waste sector: a project <strong>for</strong> the<br />
remediation of the Nis l<strong>and</strong>fill, where additional funds were secured from the city<br />
budget; <strong>and</strong> a relatively new project on the PEIP lists, <strong>for</strong> a hazardous waste management<br />
facility (phase 1), <strong>for</strong> which EUR 3 million of the EUR 14 million required<br />
in total have been secured through the IPA to prepare a feasibility study.<br />
General observations<br />
• Developing <strong>and</strong> updating the PEIP priority lists of projects has been a major<br />
learning exercise <strong>for</strong> the SEE countries. However, <strong>for</strong> many of the projects it is<br />
still difficult to obtain adequate data.<br />
• Those projects that made more rapid progress had good-quality project documentation<br />
from the outset, <strong>and</strong> PUC staff had actively participated in the<br />
preparation of the documents.<br />
• At national level, strong project preparation units are a driving <strong>for</strong>ce, as demonstrated<br />
in Croatia, Montenegro <strong>and</strong> Serbia.<br />
• The benchmarking <strong>and</strong> self-assessment of PUCs in order to improve their operational<br />
efficiency has proved to have a beneficial effect on project preparation<br />
<strong>and</strong> re<strong>for</strong>m capacities.<br />
• The IPA application process provided project preparation capacity building at<br />
both local <strong>and</strong> national level. The proper inclusion of stakeholders from the<br />
beginning of the process ensured that any potential problems in relation to location<br />
or similar issues were resolved in time.<br />
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Chapter 9<br />
The way <strong>for</strong>ward<br />
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Introduction<br />
The aim of this chapter is to summarise some of the main issues addressed in the<br />
report <strong>and</strong> to outline possible ways <strong>for</strong>ward. The recommendations provide suggestions<br />
<strong>for</strong> possible directions. The precise modalities of actions <strong>and</strong> interventions<br />
are to be developed by the countries.<br />
Overall challenges <strong>for</strong> national governments<br />
Political<br />
The insufficient level of political support potentially jeopardises or delays the<br />
timely <strong>and</strong> efficient implementation of environmental infrastructure investments.<br />
In a context of competing priorities, the importance of environmental investments<br />
<strong>and</strong> their impact on quality of life may be overlooked.<br />
Way <strong>for</strong>ward<br />
• There is a need <strong>for</strong> strong <strong>and</strong> persistent political will to re<strong>for</strong>m the government<br />
systems <strong>and</strong> institutions responsible <strong>for</strong> environmental financing. Persistent<br />
ef<strong>for</strong>ts are needed <strong>for</strong> the whole spectrum of re<strong>for</strong>ms, from institutional<br />
to legal <strong>and</strong> financial.<br />
• It is vital that governments realise, <strong>and</strong> capitalise on, the political <strong>and</strong> financial<br />
opportunities presented during the pre-accession period. During this period<br />
political will <strong>for</strong> accession is strong <strong>and</strong> there are many resources available <strong>for</strong><br />
financial <strong>and</strong> technical assistance.<br />
Economic <strong>and</strong> financial<br />
The countries of SEE have relatively low levels of GDP per capita, <strong>and</strong> the proportion<br />
of GDP directed to environmental infastructure investments is far lower<br />
than the respective amounts spent in new member states. As a result, the overall<br />
available funds <strong>for</strong> environmental investments are insufficient <strong>and</strong> fall significantly<br />
below the amounts needed. In addition, the global economic crisis has affected investments<br />
in environmental infrastructure, <strong>and</strong> some infrastructure projects have<br />
been suspended. Low income levels also explain the high rates of bill non-payment<br />
<strong>and</strong> the low level of af<strong>for</strong>dability of major infrastructure investments. The serious<br />
structural re<strong>for</strong>ms needed to increase national income are not feasible.<br />
Way <strong>for</strong>ward<br />
• The capacity of society to af<strong>for</strong>d environmental investments <strong>and</strong> the priority<br />
given to quality-of-life needs must be clearly analysed, <strong>and</strong> environmental investments<br />
must be structured accordingly.<br />
• A higher proportion of the budget could appropriately be earmarked <strong>for</strong> environmental<br />
infrastructure investments in order to reach the levels of new member<br />
states, which have secured tangible flows of domestic financial resources.<br />
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• Domestic budgetary funds are also of huge importance <strong>for</strong> providing national<br />
co-financing <strong>for</strong> projects, <strong>for</strong> which a big share is financed from EU or bilateral<br />
grants <strong>and</strong>/or IFIs.<br />
• Planning <strong>for</strong> approximation, including accompanying investments, should become<br />
even more important.<br />
• In a situation in which budgets are tight <strong>and</strong> needs are big, there is a need to<br />
streamline available resources in order to avoid overlapping <strong>and</strong> wasting resources<br />
between institutions <strong>and</strong> on low-priority projects.<br />
• Advantage should also be taken of the subsidies available, particularly from EU<br />
programmes <strong>and</strong> bilateral donors, which can ease af<strong>for</strong>dability problems.<br />
Legal<br />
Although progress has been made during the last four years there is still a relatively<br />
low level of transposition of many of the key investment-heavy directives,<br />
<strong>and</strong> the level of transposition varies significantly between the c<strong>and</strong>idate countries<br />
<strong>and</strong> the others. Some of the countries still lack approximation strategies.<br />
Way <strong>for</strong>ward<br />
• Rushing transposition may lead to low-quality national legislation without<br />
proper planning of the necessary human <strong>and</strong> financial resources. The availability<br />
of approximation strategies is of great importance. These should define<br />
feasible transposition <strong>and</strong> implementation dates that are linked to the real legal<br />
<strong>and</strong> political situation.<br />
• It is important to adopt high-quality, functional legislation that will not require<br />
too much modification in the future.<br />
• The EU environmental acquis has significant financial, institutional <strong>and</strong> en<strong>for</strong>cement<br />
implications that must be planned <strong>for</strong> in advance in order to guarantee<br />
en<strong>for</strong>cement.<br />
• It is beneficial <strong>for</strong> countries to use existing guidance documents, such as the EC<br />
guidance document <strong>and</strong> the EC H<strong>and</strong>book on the Implementation of EU <strong>Environmental</strong><br />
Legislation.<br />
En<strong>for</strong>cement<br />
The level of en<strong>for</strong>cement of environmental legislation in the region is low due to the<br />
weak capacity of the inspectorates <strong>and</strong> long years of a legal vacuum in the field of environment.<br />
En<strong>for</strong>cement is no less important than transposition, as some of the new water<br />
or waste management systems would not function properly without a sufficient level of<br />
en<strong>for</strong>cement of the legislation. The links between different inspectorates <strong>and</strong> between<br />
the inspectorates, police <strong>and</strong> prosecution are weak. There is little awareness on the part<br />
of companies <strong>and</strong> citizens of the importance of compliance with environmental legislation,<br />
which makes the inspectors’ obligations even more difficult to implement.
Way <strong>for</strong>ward<br />
• Inspectorates should be strengthened in terms of numbers, knowledge <strong>and</strong><br />
equipment. Increased human resources capacity should be accompanied by increased<br />
financial resources <strong>and</strong> the provision of targeted training.<br />
• To increase efficiency, the re<strong>for</strong>m of the inspectorates should be linked with<br />
overall judiciary re<strong>for</strong>m, including improved cooperation with police, prosecution<br />
<strong>and</strong> the courts <strong>and</strong> improved knowledge of environmental issues on the<br />
part of these institutions.<br />
• Establishing a policy <strong>for</strong> strengthening the monitoring <strong>and</strong> reporting of enterprises<br />
(e.g. wastewater treatment plants <strong>and</strong> l<strong>and</strong>fills) will facilitate the en<strong>for</strong>cement<br />
of <strong>and</strong> compliance with regulations.<br />
• Increased awareness on the part of citizens <strong>and</strong> businesses of the importance<br />
<strong>and</strong> benefits of en<strong>for</strong>cement would reduce resistance to change <strong>and</strong> increase<br />
overall compliance.<br />
Institutional development <strong>and</strong> capacity<br />
<strong>Environmental</strong> institutions in the region suffer from a number of weaknesses,<br />
including shortage of human capacity; lack of operational transparency <strong>and</strong> accountability;<br />
poor inter-institutional cooperation etc. One of the main weaknesses<br />
of SEE institutions is their relative fragmentation, which leads to scattered, <strong>and</strong><br />
very often overlapping, responsibilities. Communication <strong>and</strong> coordination between<br />
institutions are also issues of concern, as are the relationships between central<br />
<strong>and</strong> local levels of governance.<br />
Way <strong>for</strong>ward<br />
• The EU environmental acquis will require the overall strengthening of institutions.<br />
Human resources <strong>and</strong> expertise planning need to be improved <strong>and</strong><br />
aligned to the newly acquired environmental obligations.<br />
• There is a need to streamline institutions <strong>and</strong> reduce their fragmentation in<br />
order to improve synergies <strong>and</strong> avoid overlapping. Simultaneously, it would be<br />
beneficial to improve mechanisms <strong>for</strong> coordination <strong>and</strong> communication between<br />
institutions at central level, <strong>and</strong> also between different administrative<br />
levels of government.<br />
• It would be beneficial to the countries to introduce a clear separation between<br />
policy <strong>and</strong> regulatory functions where it is missing, <strong>and</strong> to improve the transparency<br />
<strong>and</strong> accountability of institutions at national <strong>and</strong> local levels.<br />
• Countries may choose the option to establish environmental funds, if needed,<br />
but it should be clear that this should be done following the principles of transparency,<br />
autonomy <strong>and</strong> accountability.<br />
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<strong>Strategic</strong> planning <strong>and</strong> investment planning<br />
Although significant progress has been made in SEE countries in terms of drafting<br />
strategies <strong>and</strong> plans, in some countries approximation strategies, including investment<br />
planning, national environmental investment strategies <strong>and</strong> sectoral<br />
investment strategies are still missing, even though they are key to the absorption<br />
of IPA funding. A strategic <strong>and</strong> priority-based approach is essential in a context of<br />
limited available funding <strong>and</strong> competing priorities.<br />
Way <strong>for</strong>ward<br />
• Creating a full strategic framework is of the utmost importance as it reflects<br />
the vision of the government, its approach <strong>and</strong> its priorities.<br />
• During the drafting of the framework it is essential to engage in wide stakeholder<br />
dialogue to ensure that the views of the different stakeholders are taken<br />
into consideration <strong>and</strong> balanced.<br />
• Project identification capacities have improved significantly, partly due to programmes<br />
<strong>and</strong> initiatives such as PEIP <strong>and</strong> DABLAS. Approaches to project<br />
identification need to be defined <strong>for</strong> any given sector.<br />
• Adopting lists of priority projects based on wide stakeholder consultation <strong>and</strong><br />
transparent prioritisation, <strong>and</strong> thus creating a pipeline of projects, should be an<br />
integral part of planning, mainly because it limits opportunities <strong>for</strong> political<br />
interference <strong>and</strong> gives financers a clear signal as to the country’s priorities, allowing<br />
<strong>for</strong> optimal use of their funds.<br />
• Planning should also include an overview of the status of existing infrastructure<br />
<strong>and</strong> environmental investment needs; an overview of available <strong>and</strong> <strong>for</strong>ecast<br />
national spending, IPA spending, <strong>and</strong> bilateral donor <strong>and</strong> IFI spending;<br />
an analysis of the institutional capacity <strong>for</strong> carrying out environmental investments;<br />
<strong>and</strong> a list of improvement measures. All relevant stakeholders should be<br />
involved in the process. The prioritisation of projects constitutes one part of<br />
the process.<br />
Coordination <strong>and</strong> communication<br />
The Infrastructure Project Facility provides technical assistance to the preparation<br />
of projects <strong>and</strong> directly supports municipal infrastructure investments<br />
through the grants channelled by the Municipal Window of the IPF. The<br />
DABLAS Task Force also provides support to project preparation <strong>and</strong> financing by<br />
managing a pipeline of water projects.<br />
Way <strong>for</strong>ward<br />
• <strong>Regional</strong> cooperation is essential <strong>for</strong> a successful re<strong>for</strong>m process <strong>and</strong> developing<br />
environmental infrastructure in the region. Transboundary issues need regional<br />
responses.
• Countries should take full advantage of the available regional cooperation<br />
frameworks <strong>and</strong> make full use of the opportunities presented through them.<br />
They offer a unique chance to improve project preparation capacities <strong>and</strong> to<br />
tackle transboundary environmental pollution.<br />
• <strong>Regional</strong> cooperation should not to be underestimated, since IFIs <strong>and</strong> donors<br />
often have a regional approach to programming. In addition, by adopting a regional<br />
approach the investment market exp<strong>and</strong>s <strong>and</strong> becomes more interesting<br />
<strong>for</strong> investments.<br />
Overall challenges at local <strong>and</strong> regional level<br />
Institutional setup <strong>and</strong> functioning<br />
Utilities in SEE are usually fragmented, overstaffed <strong>and</strong> underfinanced, as well as<br />
being highly dependent on the political context. The utilities in the region are caught<br />
up in a vicious circle of poor operational efficiency <strong>and</strong> service per<strong>for</strong>mance problems,<br />
which lead to inadequate cost recovery <strong>and</strong> a lack of own funds <strong>for</strong> infrastructure<br />
<strong>and</strong> service modernisation. Public utility companies are subsidised by the<br />
municipalities, <strong>and</strong> cross-subsidisation between different sectors is also common.<br />
Way <strong>for</strong>ward<br />
• Institutional re<strong>for</strong>ms of utilities are necessary in order to improve their efficiency<br />
by clarifying ownership <strong>and</strong> management responsibilities. In addition,<br />
increasing the autonomy of utilities would allow <strong>for</strong> more efficient operation,<br />
improved per<strong>for</strong>mance <strong>and</strong> access to market capital.<br />
• Corporatisation <strong>and</strong> more advanced types of re<strong>for</strong>m such as public-private partnerships<br />
<strong>and</strong> partial or full privatisation could bring in the necessary expertise<br />
<strong>and</strong> capital to achieve the desired service quality <strong>and</strong> economic sustainability.<br />
• Utilities’ chances of success increase the more flexible they are <strong>and</strong> the more<br />
open they are to cooperating with other utilities through regionalisation <strong>and</strong> cooperation<br />
with the private sector. This is valid <strong>for</strong> both the public <strong>and</strong> private<br />
sectors. <strong>Regional</strong>isation requires an appropriate institutional <strong>for</strong>m to bring<br />
those who intend to use the regional facilities under one umbrella. It represents<br />
a serious challenge to municipalities that are traditionally used to solving their<br />
problems on their own. They should be assisted in this process <strong>and</strong> active mediation<br />
should be offered by national authorities.<br />
Investment planning <strong>and</strong> preparation<br />
As a result of decentralisation, local governments have legal obligations with<br />
respect to water <strong>and</strong> waste management that far exceed their financial capacities.<br />
The weak financial capacity of local governments is also due to the poor financial<br />
per<strong>for</strong>mance of water <strong>and</strong> waste utilities, which are far from achieving cost recov-<br />
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ery. Municipalities are also debt averse, as there are strict limitations on the amount<br />
of debt they can incur. Issues of af<strong>for</strong>dability <strong>and</strong> willingness to pay also arise, as a<br />
result of relatively low income levels in some cases. Weak capacities <strong>for</strong> project<br />
preparation <strong>and</strong> a lack of local consultants also delay <strong>and</strong> hinder environmental infrastructure<br />
investments.<br />
Way <strong>for</strong>ward<br />
• Local governments should focus on providing a clear, effective analysis of their<br />
needs; <strong>and</strong> on obtaining support, through available grants <strong>and</strong> soft loans, <strong>for</strong><br />
what they (<strong>and</strong> the state) cannot af<strong>for</strong>d.<br />
• There is a need to improve underst<strong>and</strong>ing of the principles behind marketbased<br />
economically efficient environmental investment projects.<br />
• Local authorities should embark on the fundamental re<strong>for</strong>m of water <strong>and</strong> waste<br />
utilities to make them <strong>and</strong> their investment projects more attractive to sources<br />
of financing, particularly IFIs <strong>and</strong> other lenders.<br />
• There should be an ongoing ef<strong>for</strong>t to increase capacities <strong>for</strong> project preparation.<br />
This should be done by in<strong>for</strong>ming <strong>and</strong> training project proponents<br />
(mainly local governments, utilities <strong>and</strong> regional institutions) on key aspects of<br />
presenting environmental projects as af<strong>for</strong>dable, credible investment projects.<br />
• It would be beneficial to local governments to take advantage of external project<br />
preparation assistance. All key stakeholders (local governments <strong>and</strong> utilities<br />
as well as non-governmental organisations <strong>and</strong> citizens) need to be involved<br />
to the appropriate extent in project planning.
Annexes<br />
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Annex 1<br />
<strong>Environmental</strong> institutions in SEE<br />
<strong>and</strong> their responsibilities<br />
Albania<br />
INSTITUTION RESPONSIBILITY<br />
National authorities<br />
Ministry of Environment, Forestry Develops strategies, drafts laws, sets basic tariffs in the waste,<br />
<strong>and</strong> Water Administration water <strong>and</strong> air sectors.<br />
(MoEFWA)<br />
Ministry of Public Works, Transport Manages a waste infrastructure investment programme. Defines the sites <strong>for</strong><br />
<strong>and</strong> Telecommunications collection <strong>and</strong> treatment of waste. Collects statistics on the generation of urban <strong>and</strong><br />
(MoPWTT) inert waste. Serves as competent authority <strong>for</strong> the implementation <strong>and</strong> en<strong>for</strong>cement<br />
of the Urban Waste Water Treatment Directive in collaboration with MoEFWA.<br />
Ministry of Economy, Trade <strong>and</strong> Drafts industrial waste management policy <strong>and</strong> collects statistics on generation,<br />
Energy (MoETE) recycling <strong>and</strong> disposal of industrial waste.<br />
Ministry of Health En<strong>for</strong>ces water-related directives <strong>and</strong> ensures drinking water quality in<br />
accordance with st<strong>and</strong>ards applied. Also provides in<strong>for</strong>mation to the public.<br />
Institutes <strong>and</strong> agencies<br />
Institute of Public Health (IPH) <strong>and</strong> Monitors <strong>and</strong> controls quality of drinking water <strong>and</strong> air quality.<br />
State Sanitary Inspectorate (SSI)<br />
Institute of Environment <strong>and</strong> Fo- Provides technical support, services <strong>and</strong> consultation to the MoEFWA.<br />
restry National Council Secretariat Collects monitoring data.<br />
<strong>Regional</strong> <strong>and</strong> local institutions<br />
Municipalities Municipal waste management (collection, transport, treatment <strong>and</strong> final disposal)<br />
<strong>and</strong> water services. Prepare local <strong>and</strong> regional plans on waste management, suggest<br />
the appropriate location <strong>for</strong> l<strong>and</strong>fills <strong>and</strong> define waste collection <strong>and</strong> l<strong>and</strong>fill fees.<br />
Water supply enterprises Delivery <strong>and</strong> treatment of drinking water.<br />
Bosnia <strong>and</strong> Herzegovina<br />
INSTITUTION RESPONSIBILITY<br />
National authorities<br />
Ministry of Foreign Trade <strong>and</strong> Coordination of waste <strong>and</strong> water management activities <strong>and</strong> en<strong>for</strong>cement<br />
Economic Relations (MoFTER) of investment-heavy waste directives of both entities <strong>and</strong> of Brcko District.<br />
Federal Ministry of Physical River basin management.<br />
Planning <strong>and</strong> Environment<br />
Federal Ministry of Agriculture, River basin management.<br />
Water Management <strong>and</strong> Forestry<br />
Ministry of Environment <strong>and</strong> Waste management at entity level, including hazardous waste.<br />
Tourism, FBIH <strong>and</strong> cantonal<br />
environment ministries<br />
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A N N E X E S<br />
A N N E X 1<br />
Bosnia <strong>and</strong> Herzegovina (continued)<br />
INSTITUTION RESPONSIBILITY<br />
Ministry of Physical Planning, Civil Waste management at entity level, including hazardous waste.<br />
Engineering <strong>and</strong> Ecology of<br />
Republika Srpska <strong>and</strong> Utility<br />
Department within the<br />
Government of Brcko District<br />
Ministry of Agriculture, Forestry River basin management.<br />
<strong>and</strong> Water Management of Republika<br />
Srpska, Directorate <strong>for</strong> Water<br />
Institutes <strong>and</strong> agencies<br />
Institute <strong>for</strong> Public Health En<strong>for</strong>cement <strong>and</strong> implementation of Drinking Water Directive, including monitoring<br />
(Ministry of Health) <strong>and</strong> control of drinking water quality.<br />
Hydro-meteorological Institute in Air quality monitoring in BiH<br />
FBiH <strong>and</strong> Republika Srpska<br />
Statistical agencies Collect <strong>and</strong> manage waste-related statistics, including waste indicators.<br />
Water agencies River basin management, in cooperation with the ministries.<br />
<strong>Environmental</strong> inspectorates Waste management, collection, recycling <strong>and</strong> l<strong>and</strong>fill inspection.<br />
<strong>Regional</strong> <strong>and</strong> local institutions<br />
Municipalities Organise waste management services, particularly through the departments<br />
of communal affairs/utilities.<br />
Municipalities’ PUCs or cantons’ Meeting requirements of Drinking Water Directive as well as provision of drinking<br />
PUCs <strong>and</strong> local health institutions water supply <strong>and</strong> control of drinking water quality.<br />
Croatia<br />
INSTITUTION RESPONSIBILITY<br />
National authorities<br />
Ministry <strong>for</strong> <strong>Environmental</strong> River basin management <strong>and</strong> waste management at national level, including<br />
Protection, Physical Planning <strong>and</strong> hazardous waste. Collects waste management <strong>and</strong> collection data, prepares waste<br />
Construction (MoEPPC) management reports, develops waste-related indicators. Responsible authority <strong>for</strong><br />
assessing air quality at the state level <strong>and</strong> LCP. Assistance to project preparation<br />
<strong>and</strong> IPA applications.<br />
Ministry of <strong>Regional</strong> Development, River basin management. Issues concessions <strong>for</strong> water intake <strong>and</strong> use.<br />
Forestry <strong>and</strong> Water Management,<br />
State Water Directorate<br />
(MoRDFWM)<br />
Ministry of Agriculture, Fisheries Plans <strong>for</strong> Nitrates Directive.<br />
<strong>and</strong> Rural Development<br />
S T R AT E G I C M O V E S
Croatia (continued)<br />
INSTITUTION RESPONSIBILITY<br />
Institutes <strong>and</strong> agencies<br />
<strong>Environmental</strong> Protection Agency Assists the waste sector in the preparation of technical documentation <strong>and</strong> IPA<br />
applications. Responsible <strong>for</strong> inventory of l<strong>and</strong>fills <strong>and</strong> dumpsites with names,<br />
location, type of l<strong>and</strong>fill, priority <strong>for</strong> closing <strong>and</strong> planned date. Responsible authority<br />
<strong>for</strong> assessing air quality at the state level <strong>and</strong> LCP.<br />
<strong>Environmental</strong> Inspectorate Inspection <strong>and</strong> control of waste management practices.<br />
Croatian Waters (CW) State agency responsible <strong>for</strong> water management <strong>and</strong> assisting water sector<br />
in project preparation <strong>and</strong> IPA applications.<br />
Ministry of Health <strong>and</strong> Social Monitoring drinking water quality.<br />
Welfare (MHSW) through CNIPH<br />
(licensed laboratories)<br />
<strong>Environmental</strong> Protection <strong>and</strong> Encouragement of waste prevention <strong>and</strong> reduction, waste treatment <strong>and</strong> use of<br />
Energy Efficiency Fund valuable properties of waste. Assistance to project preparation <strong>and</strong> IPA applications.<br />
<strong>Regional</strong> <strong>and</strong> local institutions<br />
Municipalities Organise waste <strong>and</strong> water management services at local level. Assess air quality.<br />
Public water utilities Drinking water supply, sewerage <strong>and</strong> water treatment <strong>and</strong> control of drinking<br />
water quality.<br />
Kosovo (as defined under UNSCR 1244)<br />
INSTITUTION RESPONSIBILITY<br />
National authorities<br />
Ministry of Environment <strong>and</strong> Development of sectoral policies <strong>and</strong> strategies. Monitoring of l<strong>and</strong>fills. Deals with<br />
Spatial Planning (MESP), issues related to IPPC permits.<br />
Department of Environment,<br />
Division of Waste<br />
Ministry of Health Drinking water quality.<br />
Ministry of Economy <strong>and</strong> Finance Monitors publicly owned enterprises in order to ensure accountability <strong>and</strong> trans<br />
parency in their operations.<br />
Institutes <strong>and</strong> agencies<br />
Kosovo <strong>Environmental</strong> Protection Creation <strong>and</strong> maintenance of database <strong>and</strong> in<strong>for</strong>mation system on environment.<br />
Agency<br />
Water <strong>and</strong> Waste Regulatory Serves as independent economic regulator <strong>for</strong> water <strong>and</strong> solid waste services,<br />
Office including setting <strong>and</strong> approving service tariffs.<br />
<strong>Environmental</strong> Inspectorate (MESP) En<strong>for</strong>cement of environmental <strong>and</strong> waste-related legislation.<br />
National Institute of Public Health Drinking water quality <strong>and</strong> implementation of the Drinking Water Directive.<br />
of Kosovo<br />
<strong>Regional</strong> <strong>and</strong> local institutions<br />
Municipalities Provide waste <strong>and</strong> water services. Responsibility is to be implemented through<br />
service agreements.<br />
SHUKOS, association of regional SHUKOS unites its member companies, promotes their joint interests <strong>and</strong> provides<br />
companies responsible <strong>for</strong> water member companies with advice relating to their work.<br />
supply <strong>and</strong> sewage in Kosovo<br />
A N N E X E S<br />
A N N E X 1<br />
S T R AT E G I C M O V E S 215
216<br />
A N N E X E S<br />
A N N E X 1<br />
The <strong>for</strong>mer Yugoslav Republic of Macedonia<br />
INSTITUTION RESPONSIBILITY<br />
National authorities<br />
Ministry of Environment <strong>and</strong> Overall process of environmental approximation. In particular, it develops strategies,<br />
Physical Planning drafts laws, sets basic tariffs <strong>and</strong> controls en<strong>for</strong>cement of investment-heavy directives.<br />
From 2010, it will be responsible <strong>for</strong> water protection issues <strong>and</strong> water inspection<br />
services in line with the new Water Act. Holds overall competence regarding air quality<br />
policy <strong>and</strong> measures.<br />
Ministry <strong>for</strong> Agriculture, Forestry River basin management.<br />
<strong>and</strong> Water Management<br />
Ministry of Economy Hazardous waste management <strong>and</strong> utilisation.<br />
Ministry of Health Health aspects associated with air quality.<br />
Ministry of Transport <strong>and</strong> Overall responsibility <strong>for</strong> the maintenance <strong>and</strong> rehabilitation of water delivery<br />
Communication infrastructure.<br />
<strong>Regional</strong> <strong>and</strong> local institutions<br />
Municipalities <strong>Environmental</strong> services management <strong>and</strong> inspection activities. Municipalities are<br />
entitled to establish public enterprises to provide these services.<br />
Local self-government units Deal with implementation of certain parts of the law, such as developing annual programmes<br />
<strong>for</strong> air quality management at local level in most polluted agglomerations.<br />
<strong>Regional</strong> public water supply Responsibility <strong>for</strong> managing regional systems <strong>for</strong> extraction, delivery <strong>and</strong> treatment<br />
enterprises (RPWSE) of drinking water.<br />
Montenegro<br />
INSTITUTION RESPONSIBILITY<br />
National authorities<br />
Ministry of <strong>Environmental</strong> Protec- Main institution responsible <strong>for</strong> waste management activities in Montenegro.<br />
tion <strong>and</strong> Spatial Planning (MoSPESP) Communal infrastructure <strong>and</strong> provision of public funding <strong>for</strong> water infrastructure<br />
improvement. Has overall responsibility <strong>for</strong> air policy.<br />
Ministry of Agriculture, Forestry River basin management.<br />
<strong>and</strong> Water Management <strong>and</strong> State<br />
Hydro-meteorological Service<br />
Ministry of Health <strong>and</strong> Social Drinking water quality <strong>and</strong> compliance with the requirements of investment-heavy<br />
Welfare water directives.<br />
Project Implementation Unit Established in 2008 with the goal of providing support to local self-governments <strong>for</strong><br />
the preparation of project documentation, <strong>and</strong> to assist in securing financing from<br />
international organisations <strong>and</strong> financial institutions.<br />
Institutes <strong>and</strong> agencies<br />
<strong>Environmental</strong> Protection Agency In 2008, took over from the MoSPESP the functions related to permit issuing,<br />
inspection supervision, monitoring <strong>and</strong> reporting.<br />
<strong>Regional</strong> or local institutions<br />
Municipalities <strong>and</strong> public utility Local self-governments are in charge of developing <strong>and</strong> applying the waste<br />
companies management policy at local level. Waste collection, transportation <strong>and</strong> disposal<br />
activities are organised within municipal public utility companies.<br />
Vodacom <strong>Regional</strong> joint service company established by the municipalities of Herceg Novi,<br />
Kotor, Tivat, Budva, Cetinje <strong>and</strong> Bar in cooperation with the <strong>for</strong>mer Ministry<br />
of Tourism <strong>and</strong> <strong>Environmental</strong> Protection.<br />
S T R AT E G I C M O V E S
Serbia<br />
INSTITUTION RESPONSIBILITY<br />
National authorities<br />
Ministry of <strong>Environmental</strong> <strong>and</strong> Policy making in the field of waste management.<br />
Spatial Planning (MoESP)<br />
Ministry of Agriculture, Forestry Overall responsibility <strong>for</strong> the water sector.<br />
<strong>and</strong> Water Management<br />
(MoAFWM)<br />
Water Directorate (WD, Assists the water sector in project preparation <strong>and</strong> IPA applications. Finances technical<br />
within MoAFWM) assistance <strong>for</strong> project preparation <strong>and</strong> (partly) actual construction of infrastructure.<br />
Project Implementation Unit Designed to assist the waste sector in project preparation <strong>and</strong> IPA applications.<br />
(PIU, within MoESP)<br />
Directorate <strong>for</strong> Protection of Overall responsibility <strong>for</strong> air quality <strong>and</strong> <strong>for</strong> the en<strong>for</strong>cement <strong>and</strong> implementation of<br />
Resources, Unit <strong>for</strong> Air certain parts of the law.<br />
Protection (MoESP)<br />
Ministry of Health Ensures quality of drinking water consistent with water st<strong>and</strong>ards applied <strong>and</strong> takes<br />
overall responsibility <strong>for</strong> drinking water quality control <strong>and</strong> monitoring.<br />
Institutes <strong>and</strong> agencies<br />
<strong>Environmental</strong> Protection Agency Development of the <strong>Environmental</strong> In<strong>for</strong>mation System.<br />
(SEPA)<br />
Recycling Agency Currently in trans<strong>for</strong>mation process (will become part of different units of the MoESP).<br />
Jaroslav Cerni Institute <strong>for</strong> the Assists the WD by preparing baseline studies.<br />
Development of Water Resources<br />
Environment Protection Fund Assists the waste sector in project preparation <strong>and</strong> IPA applications. Finances technical<br />
assistance <strong>for</strong> project preparation <strong>and</strong> (partly) actual construction of infrastructure.<br />
<strong>Regional</strong> or local institutions<br />
Municipalities <strong>Environmental</strong> management <strong>and</strong> inspection responsibilities.<br />
Secretariat <strong>for</strong> <strong>Environmental</strong> Bears the same responsibilities as MoESP but <strong>for</strong> the province of Vojvodina.<br />
Protection <strong>and</strong> Sustainable<br />
Development of Vojvodina Province<br />
Public utility companies Waste <strong>and</strong> water management at municipal level.<br />
Srbija Vode public company Maintenance of regional water infrastructure (flood management etc., not municipal<br />
infrastructure).<br />
Vojvodina Vode public company Maintenance of regional water infrastructure (flood management etc., not municipal<br />
infrastructure) <strong>for</strong> the Vojvodina region.<br />
A N N E X E S<br />
A N N E X 1<br />
S T R AT E G I C M O V E S 217
218<br />
A N N E X E S<br />
A N N E X 2<br />
Annex 2<br />
Key government functions<br />
under the water acquis<br />
POLICY WATER ACQUIS<br />
Develop laws, regulations Harmonise national laws, regulations<br />
<strong>and</strong> policy instruments <strong>and</strong> policies with the Water Framework Directive<br />
Develop environment-related Prepare National Water Strategy <strong>and</strong><br />
plans <strong>and</strong> strategies municipal finance strategies<br />
Consolidate environmental Report on water utility coverage, treatment quality; costs; per<strong>for</strong>mance; competing<br />
in<strong>for</strong>mation <strong>and</strong> data <strong>for</strong><br />
government decisions<br />
uses in water basin; <strong>and</strong> aggregated water basin monitoring data.<br />
Lead environmental coordination Establish water basin committee membership; convene stakeholders to consider new<br />
across other government functions laws <strong>and</strong> policies<br />
Lead coordination of government Represent the government on international river basin commissions; ensure fulfilment<br />
actions under international<br />
environment treaties<br />
of cooperative agreements.<br />
Develop programmes to promote Publish water quality data <strong>and</strong> water permit violations; initiate beach blue flag<br />
environmental awareness programmes.<br />
Regulatory (as decentralised as possible)<br />
Assess environmental impacts<br />
(administrative level determined<br />
through scoping <strong>and</strong> legal<br />
provisions)<br />
Assess impacts on waters within EIA process<br />
Issue environment-related permits E.g. water aspects of IPPC permit; water use/abstraction permits;<br />
water discharge permits.<br />
Monitor (ambient environment Monitor (regular <strong>and</strong> spot checks) surface water <strong>and</strong> groundwater quality, biological<br />
<strong>and</strong> facilities) stress indicators, <strong>and</strong> water levels.<br />
Carry out inspections (administ- Conduct site visits to verify construction permit compliance in waterways <strong>and</strong> facility<br />
rative level typically corresponds<br />
to the same level of issued permit)<br />
discharges; water extraction. Respond to complaints/spot check permits.<br />
<strong>Environmental</strong> en<strong>for</strong>cement Prosecute or pursue corrective action<br />
(administrative level determined <strong>for</strong> toxic waste discharge to waters; excessive sediments from work in waterways;<br />
according to classification of the<br />
facility involved <strong>and</strong> severity of<br />
the issue)<br />
un-permitted extraction or discharge.<br />
Consolidate environmental<br />
in<strong>for</strong>mation/reporting<br />
Aggregate <strong>and</strong> report water data to meet EU reporting <strong>and</strong> in<strong>for</strong>mation policies<br />
Source: World Bank, 2007<br />
S T R AT E G I C M O V E S
Albania<br />
Annex 3<br />
<strong>Strategic</strong> documents providing guidance<br />
<strong>for</strong> infrastructure investment in the water<br />
<strong>and</strong> waste sectors in SEE countries<br />
General<br />
Environment Sector <strong>and</strong> Cross-Cutting Strategy (2007)<br />
National Strategy <strong>for</strong> Development <strong>and</strong> Integration<br />
Waste Sector<br />
National Waste Management Plan (1996)<br />
In process:<br />
Amendment of National Waste Management Plan (EU CARDS support)<br />
Water Sector<br />
National Water Strategy (1997)<br />
Water Supply <strong>and</strong> Wastewater Sector Strategy (2003)<br />
Rural Water Supply <strong>and</strong> Sewage Strategy (2004)<br />
Code <strong>for</strong> Drinking Water Supply <strong>and</strong> Sewage (regulates legal relations between consumers <strong>and</strong> service providers)<br />
Bosnia <strong>and</strong> Herzegovina<br />
General<br />
Federal Strategy <strong>for</strong> Environment Protection<br />
National <strong>Environmental</strong> Action Plan (2003)<br />
Priority Action Plan with project abstracts (2004)<br />
Public Investment Programme (PIP)<br />
Poverty Reduction Strategy Paper (PRSP) 2004–2007 (2004)<br />
Waste Sector<br />
Solid Waste Management Strategy (2000)<br />
In process:<br />
Strategy <strong>for</strong> Water Management (FBiH <strong>and</strong> RS) expected in 2010<br />
Water Sector<br />
Water Protection Plan, strategic plan <strong>for</strong> the implementation of the EU UWWT Directive<br />
In process:<br />
Water Management Plan<br />
A N N E X E S<br />
A N N E X 3<br />
S T R AT E G I C M O V E S 219
220<br />
A N N E X E S<br />
A N N E X 3<br />
Croatia<br />
General<br />
National <strong>Environmental</strong> Strategy <strong>and</strong> National <strong>Environmental</strong> Action Plan (2002)<br />
National Strategy <strong>for</strong> Sustainable Development (2009)<br />
National Programme <strong>for</strong> the Adoption of the Acquis (2006)<br />
Plan <strong>for</strong> Setting up Necessary Administrative Capacities at <strong>Regional</strong> <strong>and</strong> Local Level <strong>for</strong> Implementing the <strong>Environmental</strong><br />
Acquis (2008)<br />
<strong>Environmental</strong> Protection Operational Programme (IPA) 2007–2009<br />
Waste Sector<br />
National Waste Management Strategy (2005)<br />
National Waste Management Plan <strong>for</strong> the period 2007–2015 (2007)<br />
County waste management plans<br />
In process:<br />
Waste Management Implementation Plan<br />
Water Sector<br />
National Water Management Strategy (2008)<br />
Air Sector<br />
Air Quality Protection <strong>and</strong> Improvement Plan <strong>for</strong> the period 2008–2011<br />
The <strong>for</strong>mer Yugoslav Republic of Macedonia<br />
General<br />
National <strong>Environmental</strong> Action Plan (2006)<br />
National Strategy on <strong>Environmental</strong> Investments (2009)<br />
National <strong>Environmental</strong> Approximation Strategy (2008)<br />
National Programme <strong>for</strong> the Adoption of the Acquis (2005)<br />
National Strategy <strong>for</strong> <strong>Regional</strong> Development (2009)<br />
Public Investment Programme (annually updated)<br />
Plan <strong>for</strong> Institutional Development <strong>for</strong> Strengthening Capacities of <strong>Environmental</strong> Institutions (2009)<br />
In process:<br />
National Strategy <strong>for</strong> Sustainable Development (expected to be adopted by the end of June 2009)<br />
<strong>Strategic</strong> Coherence Framework (2007–2009) approved by the EC<br />
Operational Plan <strong>for</strong> the Environment as part of the IPA (2009–2013) under negotiation with the EC<br />
Waste Sector<br />
National Waste Management Strategy (2008)<br />
National Waste Management Plan (2008–2014)<br />
Water Sector<br />
In process:<br />
Water Master Strategy<br />
S T R AT E G I C M O V E S
Montenegro<br />
General<br />
National <strong>Environmental</strong> Policy (defines framework policy <strong>for</strong> overall aims in the field of environment) (2008)<br />
National Programme <strong>for</strong> the Integration of Montenegro into the EU <strong>for</strong> 2008–2012<br />
Waste Sector<br />
Waste Management National Policy (2004)<br />
<strong>Strategic</strong> Master Plan <strong>for</strong> Waste Management (2005)<br />
Waste Management Plan <strong>for</strong> 2008–2012 period (2007)<br />
Water Sector<br />
<strong>Strategic</strong> Master Plan <strong>for</strong> Sewerage <strong>and</strong> Wastewater in <strong>Central</strong> <strong>and</strong> Northern Region (2005)<br />
<strong>Strategic</strong> Master Plan <strong>for</strong> Wastewater Collection <strong>and</strong> Treatment in Coastal Regions <strong>and</strong> the Municipality of Cetinje (2005)<br />
Coastal Region Wastewater Management Study<br />
National Sustainable Development Strategy <strong>and</strong> Action Plan (2006)<br />
Serbia<br />
General<br />
National <strong>Environmental</strong> Strategy (2004)<br />
National Sustainable Development Strategy (2008) <strong>and</strong> sectoral policies<br />
National Investment Programme (2006)<br />
In process:<br />
National Environment Protection Programme<br />
National Strategy on the Sustainable Use of Natural Resources <strong>and</strong> Goods (starting phase)<br />
Waste Sector<br />
Waste Management National Policy (2004)<br />
<strong>Strategic</strong> Master Plan <strong>for</strong> Waste Management (2005)<br />
Waste Management Plan <strong>for</strong> 2008–2012 period (2007)<br />
Kosovo (as defined under UNSCR 1244)<br />
General<br />
<strong>Environmental</strong> <strong>and</strong> Sustainable Development Strategy (2004)<br />
<strong>Environmental</strong> Action Plan 2006–2010 (2006)<br />
<strong>Environmental</strong> Action Plan <strong>for</strong> Approximation with EU St<strong>and</strong>ards (2007)<br />
In process:<br />
New National Waste Management Strategy (revision phase) is being drafted <strong>and</strong> will be submitted <strong>for</strong> adoption procedure<br />
in 2009<br />
Strategy <strong>and</strong> Action Plan <strong>for</strong> Nature Protection (2006–2010)<br />
Waste Sector<br />
In process:<br />
National Waste Management Strategy (to be finalised in 2009)<br />
Action Plan <strong>for</strong> Waste Management<br />
Water Sector<br />
Wastewater Treatment Strategy (2004)<br />
A N N E X E S<br />
A N N E X 3<br />
S T R AT E G I C M O V E S 221
222<br />
A N N E X E S<br />
A N N E X 4<br />
S T R AT E G I C M O V E S<br />
Annex 4<br />
Selected REC publications in the field<br />
of environmental infrastructure investments<br />
<strong>and</strong> financing<br />
• Municipal investments in water <strong>and</strong> waste infrastructure in South Eastern Europe<br />
(2007)<br />
The report analyses the progress achieved by SEE countries in the process of<br />
municipal infrastructure development <strong>for</strong> the period 2001 to 2005. It outlines<br />
the key issues faced by the local <strong>and</strong> national actors <strong>and</strong> proposes recommendations<br />
<strong>for</strong> overcoming these obstacles.<br />
• Investing in the Environment as a Way to Stimulate Economic Growth <strong>and</strong> Employment.<br />
How <strong>Environmental</strong> Projects Contribute to Achieving Lisbon Agenda<br />
Goals (2007)<br />
The report collects, analyses <strong>and</strong> discusses existing evidence of the contribution<br />
made by environmental projects to the two objectives of the Lisbon Strategy:<br />
economic growth <strong>and</strong> employment. It is also intended to help member<br />
states in designing Cohesion Policy–funded projects that achieve the Lisbon<br />
Strategy objectives <strong>and</strong>, at the same time, ensure environmental sustainability.<br />
• <strong>Environmental</strong> Financing Trends in South Eastern Europe: 2001–2005 (2007)<br />
The report presents trends in environmental financing in SEE between 2001<br />
<strong>and</strong> 2005 <strong>and</strong> proposes recommendations <strong>for</strong> decision makers in the region <strong>for</strong><br />
improving the effectiveness of environmental financing from domestic <strong>and</strong> external<br />
financing sources.<br />
• Financial mechanisms providing co- <strong>and</strong> pre-financing <strong>for</strong> EU funded environmental<br />
projects (2007)<br />
The publication provides an overview of co- <strong>and</strong> pre-financing sources <strong>for</strong> EUfunded<br />
environmental projects in EU-27 countries. It gives an overview of public<br />
pre- <strong>and</strong> co-financing schemes; the role of international financing<br />
institutions (IFIs) in providing co-financing <strong>and</strong> bridging funds; <strong>and</strong> includes<br />
a review of the involvement of the commercial banking sector in financing environmental<br />
projects.<br />
• <strong>Environmental</strong> Infrastructure Investment Project Preparation in the Water Sector.<br />
Available Sources of Finance <strong>for</strong> Water Infrastructure Projects in the <strong>for</strong>mer Yugoslav<br />
Republic of Macedonia (2006)<br />
The publication is based on the specific needs <strong>and</strong> experience of the <strong>for</strong>mer Yugoslav<br />
Republic of Macedonia in preparing wastewater-related environmental<br />
investment projects. It covers issues such as the strategic planning of investments,<br />
feasibility studies, project development <strong>and</strong> funding.<br />
• Establishing an <strong>Environmental</strong> Fund, Practical Aspects <strong>for</strong> Decision Makers <strong>and</strong><br />
Fund Managers (2006)
The publication is based on key themes discussed at a training on the establishment<br />
of an environmental fund in Montenegro. The report reviews all the<br />
key aspects of environmental fund operations that should be taken into account<br />
when establishing an environmental fund or any other environmental expenditure<br />
programme.<br />
• <strong>Environmental</strong> Projects Financed by EU Funds. Selected Experiences <strong>and</strong> Challenges<br />
(2006)<br />
The aim of this report is to provide environmental authorities with an overview<br />
of best practices from old member states on preparing environmental projects<br />
financed by EU funds <strong>and</strong> to provide an overview of the first experiences <strong>and</strong><br />
challenges of the new EU member states in programming <strong>and</strong> implementing<br />
EU-funded projects.<br />
• Investing in the Local Environment: Assisting Municipalities in South Eastern<br />
Europe to Access <strong>Environmental</strong> Financing (2003)<br />
This report is the final outcome of a two-year pilot project undertaken to support<br />
capacity in South Eastern Europe (SEE) to prepare environmental investment<br />
projects. The project was a unique ef<strong>for</strong>t, as it targeted simultaneously<br />
local governments <strong>and</strong> local consulting firms, who must cooperate if environmental<br />
investments are to succeed.<br />
A N N E X E S<br />
A N N E X 4<br />
S T R AT E G I C M O V E S 223
224<br />
A N N E X E S<br />
A N N E X 5<br />
Annex 5<br />
PEIP priority project lists<br />
Albania<br />
PROJECT TITLE PROJECT DESCRIPTION TOTAL COST OF<br />
PROJECT (EUR)<br />
Waste projects<br />
Management plan <strong>and</strong> construction of l<strong>and</strong>fill Reduction of pollution of river Shkumbini <strong>and</strong> Adriatic 2.5 million<br />
<strong>for</strong> urban solid waste in Elbasan Sea. Decrease of transboundary air pollution.<br />
Population benefiting directly from project<br />
implementation: 102,265.<br />
Urban waste management <strong>and</strong> construction of Reduction of pollution of groundwater <strong>and</strong> surface 2.5 million<br />
sanitary l<strong>and</strong>fill in the city of Fier waters <strong>and</strong> of the Adriatic Sea.<br />
Population benefiting directly from project<br />
implementation: 123,000.<br />
Works <strong>for</strong> the construction of the sanitary Reduction of water pollution of the Adriatic Sea. 6 million<br />
l<strong>and</strong>fill <strong>for</strong> Vlora Population benefiting directly from project<br />
implementation: 85,000.<br />
Feasibility study <strong>and</strong> environmental rehabilitation 1.1 million<br />
of the historic hotspot of the <strong>for</strong>mer Rubik<br />
Metallurgical Plant<br />
Urban waste management <strong>and</strong> construction Reduction of water pollution of Ohrid Lake 5 million<br />
of sanitary l<strong>and</strong>fill in Korca Region <strong>and</strong> Devolli River.<br />
Urban waste management <strong>and</strong> construction Reduction of pollution of River Osumi. 2.5 million<br />
of sanitary l<strong>and</strong>fill in city of Berat<br />
Urban waste management <strong>and</strong> construction Reduction of pollution of River Drino. 2.5 million<br />
of sanitary l<strong>and</strong>fill in city of Gjirokastra<br />
Management plan <strong>and</strong> the closure of the Protection of the soil, surface waters <strong>and</strong> groundwater, 2.5 million<br />
existing l<strong>and</strong>fill <strong>for</strong> urban solid waste in Durres l<strong>and</strong>scape restoration in the area of Durres.<br />
Population benefiting from project<br />
implementation: 220,000.<br />
S T R AT E G I C M O V E S
FUNDING PROJECT PROGRESS<br />
NEEDS (EUR)<br />
0.3 million Detailed engineering design completed.<br />
Feasibility study financed by the state budget to a cost of EUR 0.52 million. To be started in 2009.<br />
The project is included in the Mid-term Budget Plan 2009–2011 <strong>and</strong> planned to start in 2011.<br />
EUR 2.2 million is secured from the state budget.<br />
0.3 million Detailed engineering design completed.<br />
Feasibility study financed in 2009 by the state budget (EUR 0.5 million)<br />
The project is included in the Mid-term Budget Plan 2009–2011 <strong>and</strong> planned to start in 2011.<br />
EUR 2.2 million secured from the state budget.<br />
5.83 million Project is listed in the priorities of the Mid-Term Budget Plan 2009–2011<br />
<strong>and</strong> is part of the 2008 IPA/EU investment funds.<br />
EUR 0.164 million secured from state budget <strong>for</strong> feasibility study.<br />
Another EUR 1.5 million budget support is under discussion.<br />
The MPTWW is in discussions with the <strong>Regional</strong> Council of Vlora about the location of the l<strong>and</strong>fill.<br />
N/A Listed as a high-priority project of the Ministry of Environment.<br />
Project is funded by CARDS 2005.<br />
Feasibility study is completed.<br />
Implementation works were started.<br />
Project deadline is November 2009.<br />
3.6 million Negotiations under way with KfW <strong>for</strong> the design of the project.<br />
Project is included in the Mid-Term Budget Plan 2009–2011.<br />
EUR 1.4 million secured from state budget <strong>for</strong> the first phase<br />
Waste management project implemented in Korca region with SIDA support.<br />
0.3 million Project is part of the Mid-Term Budget Plan 2009–2011.<br />
Feasibility study planned in 2009.<br />
EUR 2.2 million <strong>for</strong> the first phase secured from the state budget.<br />
0.3 million Project is part of the Mid-Term Budget Plan 2009–2011.<br />
Feasibility study planned in 2009.<br />
EUR 2.2. million <strong>for</strong> the first phase secured from the state budget.<br />
0.3 million The project is included in the Cross-Cutting Strategy on Environment (2007).<br />
The project is planned to enter into the implementation phase by 2011 <strong>and</strong> to be completed by 2013.<br />
EUR 2.2 million secured from the state budget.<br />
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A N N E X E S<br />
A N N E X 5<br />
Albania (continued)<br />
PROJECT TITLE PROJECT DESCRIPTION TOTAL COST OF<br />
PROJECT (EUR)<br />
Water projects<br />
Construction of a common sewerage water Reduction of pollution of Tirana River <strong>and</strong> the 246 million<br />
treatment plant <strong>for</strong> Tirana <strong>and</strong> surroundings Adriatic Sea. Currently sewage is directly discharged<br />
into the Tirana River.<br />
Drinking water <strong>and</strong> wastewater <strong>for</strong> Shkodra The project will solve/mitigate the pollution of Lake<br />
Shkodra, the Buna River <strong>and</strong> the Adriatic Sea; protect<br />
biodiversity in the area; <strong>and</strong> develop tourism.<br />
40 million<br />
Improvement of the wastewater system <strong>and</strong><br />
construction of a WWTP in Vlora (phase II)<br />
Reduction of pollution in the Adriatic Sea. 7 million<br />
Bosnia <strong>and</strong> Herzegovina<br />
PROJECT TITLE<br />
Waste projects<br />
PROJECT DESCRIPTION TOTAL COST OF<br />
PROJECT (EUR)<br />
Construction of l<strong>and</strong>fill site <strong>for</strong> a group of Reduction of pollution of water systems through 5 million<br />
municipalities in Zvornik elimination of illegal dumpsites.<br />
Water projects<br />
Water supply <strong>and</strong> sewerage system in FBiH Reduction of pollution of the Adriatic Sea <strong>and</strong> USD 10.5 million<br />
(city of Mostar) transboundary pollution of the River Neretva.<br />
Population benefiting directly from project<br />
implementation: 100,000.<br />
Construction of wastewater treatment system Reduction of transboundary pollution of the river 3.6 million<br />
<strong>for</strong> the city of Bileca Trebisnica, the source of drinking water <strong>for</strong> parts<br />
of BiH, Croatia <strong>and</strong> Montenegro.<br />
(2.5 million secured)<br />
Protection of Modrac water reservoir as the main Decreased pollution of the lake <strong>and</strong> improvement of 43.1 million<br />
source of water <strong>for</strong> the population <strong>and</strong> industry its recreation <strong>and</strong> tourism characteristics. (10.5 million<br />
of Tuzla Canton Population directly benefiting from the project: 150,000. secured)<br />
Construction of sewerage system <strong>and</strong> wastewater Reduction of downstream pollution <strong>and</strong> improvement 1 million<br />
treatment plant <strong>for</strong> Kljuc municipality of water quality. (0.38 million<br />
Estimated population covered: 6,000. secured)<br />
S T R AT E G I C M O V E S
FUNDING PROJECT PROGRESS<br />
NEEDS (EUR)<br />
85.8 million The detailed design <strong>for</strong> the project is completed.<br />
In October 2009, the MoPWWT signed a contract <strong>for</strong> a EUR 115.9 million investment<br />
from the Japanese investment fund of JICA. The project design<br />
<strong>and</strong> feasibility study (app. EUR 9.9 million) will be implemented in 12 months.<br />
The remaining EUR 106 million will allocated <strong>for</strong> the construction of the wastewater collection system<br />
<strong>for</strong> the whole city of Tirana.<br />
EUR 44.3 million is given <strong>for</strong> the rehabilitation works <strong>and</strong> support to the Tirana network 2001–2010<br />
through the Italian Cooperation Investment Fund in the <strong>for</strong>m of a soft loan by the Italian Government.<br />
25 million The project is progressing <strong>and</strong> financial support <strong>for</strong> the WWTP is a high priority.<br />
The feasibility study has been completed.<br />
Based on the FS, the project is being supported by KfW, ADA <strong>and</strong> SECO Swiss with EUR 15 million.<br />
7 million The project was submitted to IPA 2009.<br />
FUNDING PROJECT PROGRESS<br />
NEEDS EUR)<br />
0.937 million Project design <strong>and</strong> feasibility study completed.<br />
Currently seeking international assistance (loans) <strong>for</strong> planned EIA study. A combination of grant<br />
<strong>and</strong> loan is <strong>for</strong>eseen.<br />
Main project <strong>for</strong> the location of Crni Vrh has been prepared, financed by the Municipality of Zvornik.<br />
7.6 million Feasibility study, detailed design <strong>and</strong> tender procedure <strong>for</strong> construction activities were finalised in 2008.<br />
+ USD 2.8 million Contracted preparation of the main design <strong>for</strong> the main collector of the sewerage system<br />
from the GEF grant.<br />
The EIB will provide EUR 7.6 million. The WB provides USD 2.8 million through the GEF funds.<br />
0.3 million Feasibility study is prepared. It envisages upgrading <strong>and</strong> extension of water supply network<br />
<strong>and</strong> strengthening of utility company.<br />
GEF financing secured <strong>for</strong> the WWTP. The expected GEF grant is EUR 0.84 million.<br />
32.6 million A combination of grant <strong>and</strong> loan is <strong>for</strong>eseen. Negotiation on EIB loan<br />
<strong>and</strong> financing is ongoing. 50 percent will be secured through local contribution.<br />
Financing of the main collector <strong>for</strong> the city of Zivinice is ensured through IPA 2008. Remaining funding<br />
needs will be provided by EIB.<br />
Funds are secured from EIB <strong>for</strong> consulting services <strong>for</strong> the preparation of a programme of measures<br />
<strong>for</strong> integrated water resources management around Modrac reservoir.<br />
0.62 million The feasibility study has been completed.<br />
A N N E X E S<br />
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228<br />
A N N E X E S<br />
A N N E X 5<br />
Bosnia <strong>and</strong> Herzegovina (continued)<br />
PROJECT TITLE PROJECT DESCRIPTION TOTAL COST OF<br />
PROJECT (EUR)<br />
Water projects (continued)<br />
Water <strong>and</strong> sanitation FBiH (includes 16 Reduction of water pollution, improvement in water 2.75 million<br />
municipalities). IPF technical assistance. quality in 16 municipalities.<br />
Water <strong>and</strong> sanitation FiBH Reduction of water pollution, improvement of water 121 million<br />
(includes 16 municipalities) quality in 16 municipalities<br />
Collection, treatment <strong>and</strong> disposal of Protection of the water resources in municipalities of 60 million<br />
wastewaters in Banja Luka Laktasi, Gradiska <strong>and</strong> Srbac, <strong>and</strong> reduction of pollution<br />
of the river Sava. Treatment facility will serve<br />
200,000 inhabitants.<br />
Collection, treatment <strong>and</strong> disposal of waste Protection of the water resources of the municipality 5 million<br />
waters in Bjeljina. Phase II – Collector <strong>and</strong><br />
treatment facility<br />
of Bjeljina <strong>and</strong> reduction of pollution of the river Sava.<br />
Collection, treatment <strong>and</strong> disposal of waste Protection of water resources of the municipality of 9 million<br />
waters in Prijedor Prijedor <strong>and</strong> of Novi Grad <strong>and</strong> pollution reduction<br />
of the rivers Sana, Una <strong>and</strong> Sava. Treatment facility will<br />
serve 70,000 inhabitants.<br />
Protection of the Bocac reservoir <strong>and</strong> the source Protection of the water supply source of Banja Luka 12 million<br />
of Banja Luka water supply system <strong>and</strong> municipalities of Laktasi <strong>and</strong> Celinac.<br />
Population benefiting directly from project<br />
implementation: 220,000.<br />
Collection, treatment <strong>and</strong> disposal of wastewaters Protection of the water supply source in the coastal 3 million<br />
in Trebinje area of Dubrovnik <strong>and</strong> settlements in lower Neretva.<br />
Extension <strong>and</strong> enlargement of capacity<br />
of the existing WWTP.<br />
Collection, treatment <strong>and</strong> disposal of waste Intermediate pollution reduction in the Visegrad 4 million<br />
waters in Sokolac reservoir. WWTP will serve app. 10,000 inhabitants.<br />
Collection, treatment <strong>and</strong> disposal of waste Treatment facility <strong>and</strong> collector will serve 5 million<br />
waters in Rogatica app. 10,000 inhabitants.<br />
Plava voda water supply project Water supply <strong>for</strong> cities of Travnik, Novi Travnik, 35 million<br />
Vitez, Busovaca <strong>and</strong> Zenica (5 million from IPF<br />
Municipal Window)<br />
Sarajevo sewerage network <strong>and</strong> WWTP Reduction of water pollution, improvement of the 64.26 million<br />
reconstruction <strong>and</strong> upgrading water quality in Bosna River.<br />
Konjic municipality WWTP construction Reduction of water pollution <strong>and</strong> improvement of the 1.2 million<br />
(within the GEF project “Neretva <strong>and</strong> Trebisnjica<br />
Water Management Project”)<br />
water quality in Neretva River.<br />
Ljubuski municipality WWTP reconstruction Reduction of water pollution <strong>and</strong> improvement 0.56 million<br />
(within GEF project “Neretva <strong>and</strong> Trebisnjica<br />
Water Management Project”)<br />
Air projects<br />
of the water quality in Neretva River.<br />
National air quality monitoring Recognition of air quality problems <strong>and</strong> improved<br />
monitoring of air pollution sources.<br />
1.244 million<br />
S T R AT E G I C M O V E S
FUNDING PROJECT PROGRESS<br />
NEEDS (EUR)<br />
EIB finance contract signed in August 2008, implementation is ready to start.<br />
The EIB loan also represents TA support <strong>for</strong> implementation <strong>for</strong> the 16 municipalities.<br />
60 million Some municipalities from the list have secured funds, others will try to find support from other IFIs.<br />
When funds are provided <strong>for</strong> an individual municipality the project implementation will start.<br />
50 percent of financing will be EIB loan <strong>and</strong> 50 percent local contribution.<br />
60 million Financing is not secured.<br />
5 million Financing is not secured.<br />
9 million Financing is not secured.<br />
12 million Financing is not secured.<br />
3 million Financing is not secured.<br />
4 million Financing is not secured.<br />
5 million Financing not secured.<br />
5 million Special-purpose company established as a public company by the municipalities of Travnik <strong>and</strong> Zenica.<br />
EUR 5 million has been allocated from the IPF Municipal Window<br />
50 million This project is listed on the water quality management (WQM) project list (EC CARDS).<br />
20 percent of financing will be provided through the long-term local contribution.<br />
0.6 million 50 percent will be provided through the GEF funds (WB) <strong>and</strong> 50 percent will be local contribution.<br />
0.25million 50 percent will be provided through GEF funds (WB) <strong>and</strong> 50 percent will be local contribution.<br />
1.174 million Combination of grant <strong>and</strong> loan is <strong>for</strong>eseen.<br />
Involvement of private sector is <strong>for</strong>eseen.<br />
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A N N E X E S<br />
A N N E X 5<br />
Croatia<br />
PROJECT TITLE PROJECT DESCRIPTION TOTAL COST OF<br />
PROJECT (EUR)<br />
Waste projects<br />
<strong>Regional</strong> waste management centre <strong>for</strong> county Population benefiting directly from project 31.4 million<br />
of Zadar implementation: 160,000. (19.4 million secured)<br />
Waste management centre Population benefiting directly from project 30 million<br />
<strong>for</strong> Sisak-Moslavina county implementation: 185,000. (18 million secured)<br />
Remediation <strong>and</strong> closure of the Sovjak pit, Population benefiting directly from project 25 million<br />
Primorje-Gorski Kotar county implementation: 200.000. (5 million secured)<br />
Remediation of the asbestos-polluted Population benefiting directly from project 2,526 million<br />
Mravinacka kava site implementation: 80,000. (2.5 million secured)<br />
Waste management centre <strong>for</strong> the county of Population directly benefiting from project 28 million<br />
Dubrovnik-Neretva implementation: 123.000. (16 million secured)<br />
Waste management centre <strong>for</strong> North West The project integrates municipalities in four counties. 73.3 million<br />
Croatia Population benefiting from project (49.8 million secured)<br />
implementation: 573,300.<br />
<strong>Regional</strong> waste management centre <strong>for</strong> the Population benefiting from project 58.7 million<br />
county of Split, Dalmatia implementation: 465,000. (31.5 million secured)<br />
Remediation of Botovo hazardous waste 8.5 million<br />
disposal site (7.4 million secured)<br />
Remediation of Kastelanski zaljev hazardous 10 million<br />
waste disposal site<br />
Development of regional waste management Population benefiting directly from project 26 million<br />
centre <strong>for</strong> Karlovacka county implementation: 141,000. (14 million)<br />
Development of regional waste management Population benefiting directly from project 28 million<br />
centre <strong>for</strong> Brodsko-Posavska county implementation: 276,000. (16 million secured)<br />
Development of regional waste management Population benefiting directly from project 23.9 million<br />
centre <strong>for</strong> Viroviticko-Podravska county implementation: 93,000. (11.9 million secured)<br />
S T R AT E G I C M O V E S
FUNDING PROJECT PROGRESS<br />
NEEDS (EUR)<br />
12 million Project is co-financed by local budget, <strong>Environmental</strong> Protection <strong>and</strong> Energy Efficiency Fund <strong>and</strong> Phare 2006.<br />
Construction is envisaged through IPA 2010–2011.<br />
12 million Project was added to this list in November 2007.<br />
Location of the WMC has not yet been defined.<br />
20 million Included in EPOP 2007–2009.<br />
Priority of the National Action Plan (NAP) <strong>for</strong> the Protection of the Mediterranean Sea<br />
against Pollution from L<strong>and</strong>-Based Sources.<br />
Remediation <strong>and</strong> closure plan is completed.<br />
EPEEF co-financed project with EUR 2.4 million.<br />
Funds <strong>for</strong> project preparation planned to be secured through IPA OP 2007–2009<br />
<strong>and</strong> IPA OP 2010–2011. Funds <strong>for</strong> co-financing of remediation will be secured through SF OP 2011–2013.<br />
0,026 million Preparation of project documentation <strong>and</strong> permits is tendered out <strong>and</strong> all permits were due to<br />
be issued by September 2009.<br />
Additional co-financing is <strong>for</strong>eseen from EPEEF. Funds secured <strong>for</strong> preparation of project documentation.<br />
12 million Included in EPOP 2007–2009.<br />
Project is awaiting necessary permits.<br />
Location of WMC has not yet been defined.<br />
Investment value was re-estimated.<br />
24 million (loan) Included in EPOP 2007–2009 <strong>and</strong> IPA project pipeline. Construction is envisaged<br />
through IPA 2010–2011.<br />
Feasibility study completed. Building permit issued. Other project documentation is in preparation.<br />
Project is co-financed by Phare 2006, local budget <strong>and</strong> EPEEF.<br />
Investment value approximated.<br />
27.2 million Included in EPOP 2007–2009.<br />
Project is co-financed by EPEEF <strong>and</strong> CARDS 2002 TA (FS).<br />
IPA application is submitted.<br />
L<strong>and</strong> acquisition process is ongoing.<br />
1.1 million The project is on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline.<br />
The project is co-financed by EPEEF (EUR 1.1 million).<br />
Preparation works are in progress.<br />
The project is on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline.<br />
12 million The project is on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline. Project preparation<br />
is envisaged through IPA 2010–2011, <strong>and</strong> construction through SF OP 2011–2013.<br />
Start-up of project technical documentation design.<br />
12 million The project is on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline. Project preparation<br />
is envisaged through IPA 2010–2011, <strong>and</strong> construction through SF OP 2011–2013.<br />
Start-up of project technical documentation design.<br />
12 million The project is on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline. Project preparation<br />
is envisaged through IPA 2010–2011, <strong>and</strong> construction through SF OP 2011–2013.<br />
The project is co-financed by EPEEF <strong>for</strong> investigation works on WMC locations.<br />
Start-up of project technical documentation design.<br />
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A N N E X E S<br />
A N N E X 5<br />
Croatia (continued)<br />
PROJECT TITLE PROJECT DESCRIPTION TOTAL COST OF<br />
PROJECT (EUR)<br />
Waste projects (continued)<br />
County waste management centre <strong>for</strong> the Population benefiting directly from project 53.5 million<br />
county of Osijek-Baranja implementation: 330,000. (31.5 million secured)<br />
County waste management centre <strong>for</strong> the Population benefiting directly from project 25.7 million<br />
county of Bjelovar-Bilogora implementation: 133,000. (13.7 million secured)<br />
County waste management centre <strong>for</strong> the Population benefiting directly from project 27.4 million<br />
county of Vukovar-Srijem<br />
Water projects<br />
implementation: 204,000. (15.4 million secured)<br />
Wastewater treatment plant <strong>for</strong> Bjelovar city Upgrade of existing WWTP. Population benefiting 6.1 million<br />
directly from project implementation: 98,000. (all funds secured)<br />
Wastewater treatment plant <strong>for</strong> the city of Osijek Population benefiting directly from project 23 million<br />
implementation: 150,000. (all funds secured)<br />
Wastewater disposal system <strong>and</strong> treatment plant Population benefiting directly from project 31 million<br />
of the town of Sisak implementation: 52,000. (all funds secured)<br />
Wastewater disposal system <strong>and</strong> treatment plant Population benefiting from project directly: 16,000. 5.8 million<br />
of the town of Krapina (all funds secured)<br />
Wastewater disposal system <strong>and</strong> treatment plant Population benefiting from project 6 million<br />
of the town of Vrbovec implementation: 15,000. (5.6 million secured)<br />
Main collectors <strong>and</strong> WWTP<br />
in the town of Vukovar<br />
18.5 million<br />
Construction of the county of Bjelovar-Bilogora’s<br />
regional water supply system<br />
55 million<br />
Construction of the county of<br />
Koprivnica-Krizevci’s regional water supply system<br />
52 million<br />
Wastewater disposal system <strong>and</strong> treatment plant<br />
of the town of Nova Gradiska<br />
Wastewater treatment <strong>for</strong> 31,000 people. 10 million<br />
Wastewater disposal system <strong>and</strong> treatment plant 16.5 million<br />
of the town of Djakovo<br />
Wastewater treatment plant of the town 16 million<br />
of Velika Gorica<br />
Wastewater infrastructure improvement in the 10 million<br />
town of Samobor<br />
Wastewater treatment plant of the town 14.8 million<br />
of Dugo Selo<br />
S T R AT E G I C M O V E S
FUNDING PROJECT PROGRESS<br />
NEEDS (EUR)<br />
22 million The project is on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline. Project preparation<br />
is envisaged through IPA 2010–2011, <strong>and</strong> construction through SF OP 2011–2013.<br />
L<strong>and</strong> acquisition process is ongoing.<br />
12 million The project is on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline. Project preparation<br />
is envisaged through IPA 2010–2011, <strong>and</strong> construction through SF OP 2011–2013.<br />
L<strong>and</strong> acquisition process is ongoing.<br />
12 million The project is on the EPOP 2007–2009 list.<br />
Project preparation <strong>and</strong> construction are envisaged through PPP.<br />
- Project co-financed by Futureprofit <strong>and</strong> Croatian Waters.<br />
- The project is on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline. TA<br />
<strong>for</strong> completing IPA application is assured.<br />
DABLAS/DIF is supporting the feasibility study, including cost benefit analysis.<br />
Project pre-appraisal from EC done in June 2005.<br />
- The project is on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline. TA <strong>for</strong> preparing IPA<br />
application assured (EBRD).<br />
Pre-feasibility study is completed.<br />
Co-financing is coming from project’s own sources.<br />
- The project is on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline.<br />
0.4 million The project is on the EPOP 2007-2009 list <strong>and</strong> in the IPA project pipeline.<br />
The project is on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline.<br />
The project is on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline. IPA application<br />
<strong>and</strong> feasibility study will be developed through IPA technical assistance pipeline.<br />
The project is on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline. IPA application<br />
<strong>and</strong> feasibility study will be developed through IPA TA pipeline.<br />
The project is on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline. IPA application<br />
<strong>and</strong> feasibility study will be developed through IPA TA pipeline,<br />
There is no funding <strong>for</strong> the project available yet, but IPA TA is expected.<br />
The project is on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline. IPA application<br />
<strong>and</strong> feasibility study will be developed through IPA TA pipeline.<br />
The project is included on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline.<br />
The project is included on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline.<br />
Location permit issued, the technical documentation <strong>for</strong> the first phase<br />
will be co-financed 50 percent from Croatian Waters <strong>and</strong> 50 percent from the town of Samobor.<br />
The project is included on the EPOP 2007–2009 list <strong>and</strong> in the IPA project pipeline.<br />
Conceptual design <strong>and</strong> EIA developed. Part of collector obtained location<br />
<strong>and</strong> part of collector obtained building permit.<br />
A N N E X E S<br />
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A N N E X 5<br />
Kosovo (as defined under UNSCR 1244)<br />
PROJECT TITLE PROJECT DESCRIPTION TOTAL COST OF<br />
PROJECT (EUR)<br />
Waste projects<br />
Rehabilitation <strong>and</strong> closure of tailing area Reduction of cross-border water pollution 4.5 million<br />
in MIP-Trepca (rivers Sitnica, Ibar, Danube <strong>and</strong> the Black Sea).<br />
Expansion of the infrastructure <strong>for</strong> rural Reduction of waste pollution, developed system 10 million<br />
household waste collection <strong>for</strong> collection <strong>and</strong> waste transportation in rural areas.<br />
Rehabilitation of the bottom of the River Reduction <strong>and</strong> minimisation of cross-border pollution 2 million<br />
Lepenc/Lepenac <strong>for</strong> reduction of pollution from<br />
asbestos-contaminated waste<br />
Water projects<br />
caused from asbestos waste deposited in the past.<br />
Construction of a regional WWTP Reduction of cross-border pollution (Black Sea, 41.96 million<br />
in Ferizaj/Urosevac Aegean Sea). Population covered: 175,000. (10% co-financing)<br />
Construction of a regional WWTP Reduction of cross-border pollution of water (rivers 104.104 million<br />
in Mitrovica/Mitrvice Iber, Setnica, Danube <strong>and</strong> the Black Sea). (10%<br />
Population covered: 452,000. co-financing)<br />
Construction of a regional WWTP Population covered: 760,000. 142.1 million<br />
in Pristina/Prishtina (10% co-financing)<br />
Construction of a regional WWTP in Prizren Reduction of cross-border pollution of water bodies 82.697 million<br />
(river Drini i Bardh <strong>and</strong> the Adriatic Sea) Population covered: 381,000. (10% co-financing)<br />
Construction of a regional WWTP Reduction of cross-border pollution of water bodies 50.314 million<br />
in Gnjilan/Gjilan (rivers Kriva Reka Morava e Binces, Danube <strong>and</strong><br />
Black Sea). Population covered: 204,000.<br />
(10% co-financing)<br />
Construction of a regional WWTP Reduction of cross-border pollution of water bodies 63.103 million<br />
in Djakovo/Gjakova (river Drini i Bardh/Drim <strong>and</strong> the Adriatic Sea).<br />
Population covered: 258,000.<br />
(10% co-financing)<br />
Construction of a regional WWTP Reduction of cross-border pollution of water (river 68.963<br />
in Peja/Pec Drini i Bardh/Drim <strong>and</strong> Adriatic Sea). Population<br />
covered: 323,000.<br />
(10% co-financing)<br />
Further support to water <strong>and</strong> environment sector Construction of treatment plant in Vucitrn/Vushtrri,<br />
Mitrovica. Network improvements in Pristina <strong>and</strong><br />
closing of dumpsites <strong>and</strong> improvements in l<strong>and</strong>fills.<br />
Population covered: 550,000.<br />
24 million<br />
S T R AT E G I C M O V E S
FUNDING PROJECT PROGRESS<br />
NEEDS (EUR)<br />
4.5 million Included in NEAP.<br />
Project developed in collaboration with UNDP.<br />
The project is in the initial preparation of the project fiche/scope.<br />
Pre-feasibility study <strong>and</strong> EIA exist.<br />
10 million Included in NEAP.<br />
The Kosovo <strong>Environmental</strong> Action Plan 2006–2010 lists this project.<br />
2 million Included in NEAP.<br />
In collaboration with the municipality of Hani i Elezit <strong>and</strong> MESP the project proposal is in its initial preparation stage.<br />
The project is in the process of tendering <strong>and</strong> expression of interest.<br />
37.77 million Project is listed in the development strategy <strong>for</strong> Kosovo 2007–2013, the NEAP<br />
<strong>and</strong> the National Strategy <strong>for</strong> Wastewater.<br />
Project was presented to the donor conference <strong>for</strong> Kosovo (as defined under UNSCR) in July 2008.<br />
93.694 million Included in NEAP.<br />
Project was presented to the donor conference <strong>for</strong> Kosovo (as defined under UNSCR 1244) in July 2008.<br />
Ownership issues are not settled.<br />
127.89 million Project included in the draft development strategy <strong>for</strong> Kosovo (as defined<br />
under UNSCR 1244) 2007–2013 <strong>and</strong> the NEAP.<br />
Project was presented to the donor conference <strong>for</strong> Kosovo (as defined under UNSCR 1244) in July 2008.<br />
73.872 million Included in NEAP.<br />
Project was presented to the donor conference <strong>for</strong> Kosovo (as defined under UNSCR 1244) in July 2008.<br />
The feasibility study, financed by KfW, has been completed.<br />
45.283 million Included in draft development strategy <strong>for</strong> Kosovo (as defined under UNSCR 1244) 2007–2013 <strong>and</strong> NEAP.<br />
Pre-feasibility study is completed.<br />
The project was presented to the donor conference <strong>for</strong> Kosovo (as defined under UNSCR 1244) in July 2008.<br />
56.793 million Included in draft development strategy <strong>for</strong> Kosovo 2007-2013 <strong>and</strong> NEAP.<br />
Pre-feasibility study completed.<br />
The project was presented to the donor conference <strong>for</strong> Kosovo in July 2008.<br />
62.067 million Included in draft development strategy <strong>for</strong> Kosovo (as defined under UNSCR 1244) 2007–2013 <strong>and</strong> NEAP.<br />
The project was presented to the donor conference <strong>for</strong> Kosovo (as defined under UNSCR 1244) in July 2008.<br />
Implemented by the Pristina water company.<br />
Feasibility study completed in 2007.<br />
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Kosovo (as defined under UNSCR 1244) (continued)<br />
PROJECT TITLE PROJECT DESCRIPTION TOTAL COST OF<br />
PROJECT (EUR)<br />
Air projects<br />
Improvement of air quality in Kosovo/Kosova A Reduction of cross-border air pollution. 47 million<br />
<strong>and</strong> B thermal power plants Population covered: 700,000. (6 million secured)<br />
Establishment of the national network <strong>for</strong> Improved air quality management influencing the 2.5 million<br />
permanent air quality monitoring whole region. Population covered: 2.5 million.<br />
The <strong>for</strong>mer Yugoslav Republic of Macedonia<br />
PROJECT TITLE<br />
Waste projects<br />
PROJECT DESCRIPTION TOTAL COST OF<br />
PROJECT (EUR)<br />
Treatment of HCH waste from <strong>for</strong>mer lindane Population benefiting from project 1.5 million<br />
production plant in organo-chemical industry,<br />
AD OHIS, Skopje<br />
implementation: 50,000.<br />
Modernisation of municipal l<strong>and</strong>fill through<br />
degasification <strong>and</strong> utilisation of l<strong>and</strong>fill gas<br />
in Skopje (Drisla)<br />
<strong>Regional</strong> GHG emissions reduction. 1.8 million<br />
Remediation of MHK Zletovo plant Veles Remediation of industrial hotspot in an environmentally 22.6 million<br />
(lead <strong>and</strong> zinc smelter) <strong>and</strong> financially sustainable manner.<br />
Healthcare waste management 4.2 million<br />
Polog regional l<strong>and</strong>fill Not estimated<br />
Remediation of illegal hazardous waste 4.3 million<br />
l<strong>and</strong>fill Lojane in Kumarovo<br />
Water projects<br />
Wastewater management in Skopje <strong>and</strong> Decrease of pollution <strong>and</strong> improvement of water 100 million<br />
construction of WWTP quality of Vardar River <strong>and</strong> Thessaloniki Bay.<br />
S T R AT E G I C M O V E S
FUNDING PROJECT PROGRESS<br />
NEEDS (EUR)<br />
41 million Included in the NEAP.<br />
In 2006 the budget of Kosovo (as defined under UNSCR 1244) allocated EUR 2 million <strong>for</strong> electro-filters<br />
<strong>for</strong> Kosovo B plant. Reparation of electro-filters in TC Kosovo B.<br />
Reparation undertaken in TC A3 <strong>and</strong> A4.<br />
A tender process has just been completed <strong>for</strong> repair works on unit A3 to the value<br />
of EUR 6 million. Works are expected to commence in 2009.<br />
2 million Included in NEAP<br />
Project is in tendering procedure.<br />
In total <strong>for</strong> three years (2008–2010) investments of EUR 965,000 are <strong>for</strong>eseen <strong>for</strong> the project in the draft budget<br />
of the Government of Kosovo (as defined under UNSCR 1244) (EUR 190,000 is <strong>for</strong>eseen in 2008 as the first part<br />
of investment in this project, <strong>for</strong> 2009. EUR 500,000 are planned <strong>and</strong> <strong>for</strong> 2010 EUR 275,000).<br />
FUNDING PROJECT PROGRESS<br />
NEEDS (EUR)<br />
1.5 million Ministry of Environment <strong>and</strong> Physical Planning provided financial support <strong>for</strong> “Research<br />
on hazardous waste — Lindane l<strong>and</strong>fill at the organo-chemical industrial site, AD OHIS, Skopje” in 2007.<br />
Feasibility study of Ohis plant was finalised in 2007 with financial support from the European Agency <strong>for</strong> Re<br />
construction.<br />
1.8 million Pre-feasibility study available <strong>and</strong> a CDM project.<br />
Feasibility study is under preparation with financial support from the Ministry of Environment,<br />
L<strong>and</strong> <strong>and</strong> Sea of Italy <strong>and</strong> MoEPP.<br />
22.6 million Feasibility study was developed under EU CARDS 2006.<br />
MHK is taken as a priority at national level.<br />
Donor coordination meeting was held in 2008 <strong>and</strong> bilateral donors expressed great interest due<br />
to demonstrated revenue return.<br />
Plant has recently been sold to <strong>for</strong>eign investor.<br />
4.2 million Feasibility study on healthcare waste management was prepared under EU CARDS 2006.<br />
Some financial allocations <strong>for</strong> establishing a healthcare waste management system are envisaged<br />
in the NEI Strategy. Funding will be used <strong>for</strong> the preparation of detailed project technical documentation.<br />
Feasibility study is prepared.<br />
75 percent of the initial investment to be covered by IPA donation <strong>and</strong> the residual investment<br />
by revenues generated on the basis of the initial waste tariff.<br />
Feasibility study <strong>and</strong> technical documentation <strong>for</strong> remediation prepared.<br />
UNDP Project Implementation Unit established in January 2008.<br />
EUR 200,000 is secured from UNDP budget <strong>and</strong> EUR 100,000 is co-financed by MoEPP.<br />
The process of remediation started in 2009.<br />
100 million A number of stakeholder meetings were held to disseminate the approach <strong>and</strong> the preliminary EIA <strong>for</strong> the WWTP.<br />
Feasibility study <strong>and</strong> EIA of the WWTP were finalised in May 2009 using USD 2 million grant from JICA.<br />
Bank loan is required to secure the funds.<br />
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A N N E X 5<br />
The <strong>for</strong>mer Yugoslav Republic of Macedonia (continued)<br />
PROJECT TITLE PROJECT DESCRIPTION TOTAL COST OF<br />
PROJECT (EUR)<br />
Water projects (continued)<br />
Wastewater management in Skopje <strong>and</strong> Decrease of pollution <strong>and</strong> improvement of water 100 million<br />
construction of WWTP quality of river Vardar <strong>and</strong> Thessaloniki Bay.<br />
Rehabilitation of the WWTP at organo-chemical<br />
industry, AD OHIS, Skopje<br />
Reduction of pollution of river Vardar. 11.4 million<br />
WWTP <strong>for</strong> the city of Veles Population benefiting from project<br />
implementation: 50,000.<br />
13.8 million<br />
WWTP <strong>for</strong> the town of Prilep Population benefiting from project 21.5 million<br />
implementation: 77,000. (17 million secured)<br />
WWTP <strong>for</strong> the city of Bitola Population benefiting from project<br />
implementation: 10,000.<br />
7.32 million<br />
Tetovo drinking water supply, urban wastewater<br />
collection <strong>and</strong> treatment project<br />
Air projects<br />
75 million<br />
Monitoring of air quality 16 monitoring stations will be created 7.9 million<br />
Montenegro<br />
PROJECT TITLE<br />
Waste projects<br />
PROJECT DESCRIPTION TOTAL COST OF<br />
PROJECT (EUR)<br />
Construction of regional l<strong>and</strong>fill in Bar Population directly benefiting from project<br />
implementation: 60,000.<br />
11.367 million<br />
Construction of regional l<strong>and</strong>fill in Berane Population benefiting from project 6.943 million<br />
implementation: 77,000.<br />
Construction of regional l<strong>and</strong>ifll in Niksic Reduction of transboundary pollution. Population 12.604 million<br />
benefiting from project implementation: 83,000.<br />
Construction of regional l<strong>and</strong>fill in Pljevlja Population benefiting from project 9.8 million<br />
implementation: 40,000. (4.9 million secured<br />
from EIB loan)<br />
S T R AT E G I C M O V E S
FUNDING PROJECT PROGRESS<br />
NEEDS (EUR)<br />
100 million A number of stakeholder meetings were held to disseminate the approach <strong>and</strong> the preliminary EIA <strong>for</strong> the WWTP.<br />
Feasibility study <strong>and</strong> EIA of the WWTP were finalised in May 2009 using USD 2 million grant from JICA.<br />
Bank loan is required to secure the funds.<br />
11.4 million<br />
13.8 million Pre-feasibility study <strong>and</strong> feasibility study exist but need to be updated.<br />
4.5 million Master plan, FS including EIA, financial <strong>and</strong> technical documentation completed.<br />
National co-financing has been secured through central budget.<br />
IPA application is accepted. On-going preparation of necessary technical documentation is in process.<br />
Tendering procedure <strong>for</strong> subcontractor is finished. Construction work is planned to start in the near future.<br />
7.32 million Feasibility study is from 1999 <strong>and</strong> needs to be updated.<br />
75 million Project is stated as a priority according to the NEIS.<br />
Feasibility study is from 2004 <strong>and</strong> needs to be updated.<br />
7.9 million The main prerequisite <strong>for</strong> the implementation of the project (determination of the exact locations<br />
of monitoring stations) is the development of the National Plan <strong>for</strong> Air Quality Management. Funding<br />
is <strong>for</strong>eseen under the IPA Components I <strong>and</strong> IV.<br />
FUNDING PROJECT PROGRESS<br />
NEEDS (EUR)<br />
2.277 million Negotiations are ongoing <strong>for</strong> establishment of joint company responsible <strong>for</strong> waste collection <strong>and</strong> l<strong>and</strong>fill<br />
<strong>for</strong> the municipalities of Bar <strong>and</strong> Ulcinj.<br />
FS <strong>and</strong> EIA are under preparation.<br />
Some funds have been secured from WB <strong>and</strong> EIB.<br />
4.76 million Negotiations are ongoing <strong>for</strong> establishment of joint company responsible <strong>for</strong> waste collection<br />
<strong>and</strong> l<strong>and</strong>fill <strong>for</strong> the municipalities of Berane, Plav, Andrijevica <strong>and</strong> Rozaje.<br />
EIA <strong>and</strong> FS were completed in 2008. Technical documentation planned to be finalised in 2009.<br />
Financing comes from own sources of the municipality <strong>and</strong> expected IEB loan.<br />
5.622 million Negotiations are ongoing <strong>for</strong> establishment of joint company responsible <strong>for</strong> waste collection <strong>and</strong> l<strong>and</strong>fill<br />
<strong>for</strong> the municipalities of Niksic, Pluzine <strong>and</strong> Savnik.<br />
Technical documentation is expected to be finalised in 2009. FS <strong>and</strong> EIA were finalised in 2008.<br />
Financing will come from own municipality sources (EUR 2 million [Phase II] <strong>and</strong> credit<br />
(EIB – EUR 3,75 million [Phase I], EBRD – EUR 334.040 [Phase I] <strong>and</strong> EUR 934.040 [Phase II].<br />
4.9 million Negotiations are ongoing <strong>for</strong> establishment of a joint company dealing with waste collection<br />
<strong>and</strong> l<strong>and</strong>fill <strong>for</strong> Pljevlja <strong>and</strong> Zabljak municipalities.<br />
FS is under finalisation. Preparation of EIA started in 2008.<br />
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A N N E X 5<br />
Montenegro (continued)<br />
PROJECT TITLE PROJECT DESCRIPTION TOTAL COST OF<br />
PROJECT (EUR)<br />
Water projects<br />
Emergency rehabilitation of the Podgorica Reduction of water pollution to the Moraca River <strong>and</strong> 40 million<br />
WWTP <strong>and</strong> construction of a new plant Skadar Lake. Population benefiting from project<br />
implementation: 150,000.<br />
Construction of sewerage system in the town Reduction of Adriatic Sea pollution. Population 16 million<br />
of Tivat, <strong>and</strong> expansion <strong>and</strong> reconstruction<br />
of sewerage system in the town of Kotor<br />
benefiting from project implementation: 70,000.<br />
Construction of new wastewater facility <strong>and</strong> Project activities focus on the construction of the 12.8 million<br />
reconstruction of the existing sewerage system WWTP <strong>and</strong> network reconstruction. Improved quality<br />
in Niksic of Zeta River <strong>and</strong> positive effects on Lake Skadar.<br />
Construction of WWTP in the municipality of The project has a regional character as it reduces the 17.6 million<br />
Berane <strong>and</strong> part of town communal system pollution of the river Lim, part of the Danube<br />
catchment area. Population benefiting from project<br />
implementation: 40,800.<br />
Construction of WWTP <strong>and</strong> part of the sewarage Reduction of Adriatic Sea pollution. Population 24.6 million<br />
system in the municipality of Herceg Novi benefiting from project implementation: 71,000.<br />
Construction of WWTP <strong>and</strong> part of the sewarage Reduction of pollution of the river Tara, part of the 4.01 million<br />
system in the municipality of Kolasin Danube River Basin. Population benefiting from<br />
project implementation: 10,000.<br />
Construction of WWTP <strong>and</strong> part of the sewerage Reduction of Adriatic Sea pollution. Population 9 million<br />
system in the municipalities of Kotor <strong>and</strong> Tivat benefiting from project implementation: 25 000<br />
permanent residents plus tourists in the summer.<br />
Construction of WWTP <strong>and</strong> part of the sewarage Reduction of pollution of the river Cehotina, part of 7.35 million<br />
system in the municipality of Pljevlja the Danube River Basin. Population benefiting from<br />
project implementation: 36,000.<br />
Construction of sewerage system of the Reduction of Adriatic Sea pollution. Population 29 million<br />
municipality of Ulcinj benefiting from project implementation: 23,000 plus<br />
tourists in the summer.<br />
Serbia<br />
PROJECT TITLE<br />
Waste projects<br />
PROJECT DESCRIPTION TOTAL COST OF<br />
PROJECT (EUR)<br />
Hazardous waste management facility: Phase 1 Will deal with hazardous waste on national level 14 million<br />
Waste management system <strong>for</strong> Kragujevac Population benefiting directly from project 5 million<br />
(component B: Construction of waste recycling implementation: 180,000.<br />
centre)<br />
Sustainable integrated solid waste management Population benefiting directly from project 5.34 million<br />
in Krusevac implementation: 80,000.<br />
S T R AT E G I C M O V E S
FUNDING PROJECT PROGRESS<br />
NEEDS (EUR)<br />
39.3 million First phase of the project, including reconstruction of existing WWTP, is completed.<br />
Phase II, development of new feasibility study <strong>and</strong> construction of new WWTP, is in the preparation stage.<br />
The project was approved <strong>for</strong> financing the project documentation by IPF.<br />
3.1 million Both municipalities signed a contract with KfW in Dec 2007. EUR 2.5 million is secured <strong>for</strong> Kotor<br />
(Kotor: 1.3 <strong>and</strong> <strong>and</strong> 1.2 million is secured <strong>for</strong> Tivat.<br />
Tivat: 1.8 Phase I is in the final stage.<br />
(5,9 million The preparatory stage of Phase II is completed <strong>and</strong> will be followed by developing project<br />
<strong>for</strong> Phase III) <strong>and</strong> tender documentation.<br />
For Phase III, an additional 10 million will be needed<br />
3.1 million Municipality of Niksic signed a contract with the Niksic brewery, which will be obliged<br />
to build a pre-treatment WW facility.<br />
The preparation of tender documentation is currently in progress.<br />
EUR 7 million secured from EIB <strong>and</strong> EUR 2.7 million municipal co-financing)<br />
Application <strong>for</strong> IPA financing was made.<br />
4.8 million EUR 11.3 million is expected as EIB loan.<br />
11.37 million Project implementation is envisaged in three phases, with an overall duration of five years (Phase I:<br />
preparation of FS (ongoing); Phase II: technical documentation <strong>and</strong> tender; Phase III: construction).<br />
EUR 9.1 million secured from KfW bank; EUR 4.2 million from Government of Montenegro<br />
FS was prepared.<br />
2 million EUR 1.5 million secured from EIB <strong>and</strong> EUR 0.5 million local contribution.<br />
5 million Project implementation is envisaged in three phases with an overall duration of five years (Phase I:<br />
preparation of FS (ongoing); Phase II: technical documentation <strong>and</strong> tender; Phase III: construction).<br />
2 million FS <strong>and</strong> EIA are prepared.<br />
EUR 1.84 million secured from Municipal Window <strong>and</strong> EUR 3.67 million from EIB<br />
24 million Project implementation is envisaged in three phases with an overall duration of five years (Phase I:<br />
preparation of FS (ongoing); Phase II: technical documentation <strong>and</strong> tender; Phase III: construction).<br />
FS was finalised in 2009.<br />
FUNDING PROJECT PROGRESS<br />
NEEDS (EUR)<br />
11 million EUR 3 million secured from IPA 2009, <strong>for</strong> all necessary documentation (l<strong>and</strong>-use plans, location<br />
<strong>and</strong> hydrogeological studies, conceptual <strong>and</strong> detailed design, FS, EIA study <strong>and</strong> all necessary permits).<br />
After Phase 1, the remaining EUR 11 million <strong>for</strong> construction will be submitted <strong>for</strong> IPA 2011.<br />
4.4 million Pre-feasibility study, urban plan <strong>and</strong> strategic assessment of financial resources were completed in 2008.<br />
EUR 0.585 million were secured from the NIP <strong>and</strong> an application made <strong>for</strong> additional IPA funds<br />
of EUR 0.585 million <strong>for</strong> the feasibility study.<br />
Negotiations started between the municipality <strong>and</strong> private sector about the recycling technology used.<br />
3.57 million Feasibility study is available.<br />
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Serbia (continued)<br />
PROJECT TITLE PROJECT DESCRIPTION TOTAL COST OF<br />
PROJECT (EUR)<br />
Waste projects (continued)<br />
Investment into technical systems <strong>for</strong> environmen- Improvement of environmental conditions in the 6 million<br />
tal protection from the existing trash dump in Nis region. Population benefiting from project (0.236 million secured<br />
implementation: 257,341. from city budget)<br />
Recultivation <strong>and</strong> upgrading of the existing Badra Improvement of environmental conditions in the 0.994 million<br />
l<strong>and</strong>fill in Svilajnac region. Population benefiting directly from project<br />
implementation: 38,000.<br />
Plant <strong>for</strong> briquette production in Kolubara Population benefiting from project 6 million<br />
implementation: 100,000.<br />
<strong>Regional</strong> l<strong>and</strong>fill — Valjevo Up to 30 percent of regional waste will be recycled 19.5 million<br />
<strong>Regional</strong> l<strong>and</strong>fill — Zajecar Development of regional waste management <strong>for</strong><br />
seven municipalities. Population benefiting from<br />
project implementation: 250,000.<br />
15 million<br />
Smederevo sanitary l<strong>and</strong>fill 9.7 million<br />
<strong>Regional</strong> l<strong>and</strong>fill — Nova Varos 5 million<br />
Protection of the Raska River — Sanitation of<br />
exis ting l<strong>and</strong>fills <strong>and</strong> feasibility study<br />
<strong>for</strong> the regional l<strong>and</strong>fill<br />
Water projects<br />
6.12 million<br />
Upgrade <strong>and</strong> extension of the “Kolubara-Prerada” Improvement of water quality of the Kolubara <strong>and</strong> 4.76 million<br />
industrial facility WWTP Sava Rivers. Population benefiting directly from project<br />
implementation: 64,000.<br />
Rejuvenation of Lake Ludas Improved water resources management <strong>for</strong> the region. 3.861 million<br />
Population benefiting directly from project: 150,000.<br />
Improving the sewerage system of the oil Reducing pollution of river Danube. Population directly 3.7 million<br />
refinery in Novi Sad benefiting from project implementation: 350,000.<br />
Collection <strong>and</strong> treatment of wastewater in Reduced transboundary water pollution. Population 5.54 million<br />
Vladicin Han municipality directly benefiting from project implementation: 24,000. (0.55 million secured)<br />
Water utilities in technological park zone in Vrsac 2.3 million<br />
Reconstruction of the water source of “Setonje”<br />
<strong>and</strong> transport pipeline — Petrovac(Branicevo district)<br />
3.2 million<br />
Feasibility study <strong>for</strong> collection, transportation <strong>and</strong><br />
treatment of wastewater in 10 municipalities<br />
Reduction of transboundary water pollution 1.6 million<br />
S T R AT E G I C M O V E S
FUNDING PROJECT PROGRESS<br />
NEEDS (EUR)<br />
5.674 million Feasibility study developed.<br />
0.828 million Feasibility study developed.<br />
GTZ provided technical assistance <strong>and</strong> secured additional funding in cooperation with Svilajnac<br />
municipality <strong>for</strong> waste selection <strong>and</strong> the recultivation of the existing l<strong>and</strong>fill (total costs EUR 0.1656 million).<br />
Inclusion of future investment costs into the tariff policy is expected to cover Svilajnac municipality contribution.<br />
5.7 million Feasibility study, conceptual project <strong>and</strong> justification study have been developed.<br />
Public research on project relevance was conducted in 2008.<br />
Development of tender documentation <strong>and</strong> securing of financing was started in 2008.<br />
18.9 million Project applied <strong>for</strong> NIP but, due to rebalance of the budget, funding is not going to be realised.<br />
The Ministry of Environment <strong>and</strong> Spatial Planning plans to propose the project <strong>for</strong> donation<br />
from the Japanese Government.<br />
Construction is planned to start in 2009.<br />
14.71 million Smaller grant <strong>for</strong> feasibility study was provided from NIP than initially negotiated (EUR 0.29 million instead<br />
of EUR 0.60 million).<br />
The project is stopped at the moment due to delay in funding from NIP.<br />
6 million EUR 1.2 million will be provided from Serbian EKO fund <strong>and</strong> EUR 2.5 million will be received<br />
from municipality of Smederevo <strong>for</strong> co-financing <strong>for</strong> preparatory documents <strong>and</strong> Phase I.<br />
3.27 million IPPC permit requirements made necessary modification of the project documentation: 1 metre protective layer<br />
instead of 30 centimetres. As the result, a new tender <strong>for</strong> construction needs to be made. At the moment,<br />
work is temporarily stopped.<br />
5.88 million Project supported by UNDP PRO programme<br />
4.76 million General plan, feasibility study <strong>and</strong> EIA completed in 2008.<br />
Technical documentation <strong>and</strong> economic <strong>and</strong> financial analysis are in the stage of finalisation.<br />
Phase I requires investment of EUR 1.8 million; Phase 2 of EUR 2.96 million.<br />
3.861 million<br />
3.7 million Feasibility study completed<br />
Due to changes in ownership status, it is unclear what is going to happen<br />
with current Serbian Oil Industry (NIS) projects. Internal prioritisation of the projects is in progress.<br />
4.99 million Municipality has applied <strong>for</strong> NIP with this project, now final decision regarding financing is expected.<br />
2.3 million Funding is expected from municipality of Vrsac (EUR 0.2 million), NIP (EUR 0.3 million) <strong>and</strong> EAR (EUR 1.8 million).<br />
3.2 million<br />
1.6 million<br />
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A N N E X 5<br />
Serbia (continued)<br />
PROJECT TITLE PROJECT DESCRIPTION TOTAL COST OF<br />
PROJECT (EUR)<br />
Water projects (continued)<br />
Feasibility studies <strong>for</strong> collection, transportation<br />
<strong>and</strong> treatment of wastewaters in the<br />
municipalities of Vranje <strong>and</strong> Uzice<br />
Reduction of transboundary water pollution. 365,000<br />
Protection of the Lim River: Wastewater<br />
collection <strong>and</strong> treatment in Prijepolje, Priboj,<br />
Nova Varos <strong>and</strong> Sjenica municipalities<br />
22.5 million<br />
Construction of WWTP(s) <strong>for</strong> the Ibar River 9.5 million<br />
Protection of the Raska River – Wastewater<br />
collection <strong>and</strong> treatment in Novi Pazar<br />
<strong>and</strong> Raska municipalities<br />
12 million<br />
Protection of the Raska River (flood protection) 1.124 million<br />
Air Projects<br />
Decreasing of air pollution from “Energetika” Reduction of transboundary air pollution. Population 0.235 million<br />
(installation of electro-filter), Kragujevac benefiting directly from project<br />
implementation: 175,800.<br />
S T R AT E G I C M O V E S
FUNDING PROJECT PROGRESS<br />
NEEDS (EUR)<br />
365,000 Pre-feasibility study completed.<br />
IPA funding is expected <strong>for</strong> Uzice part.<br />
22.14 million<br />
9.325 million<br />
11.66 million Project supported by UNDP PRO programme<br />
1.059 million The project is linked with the project <strong>for</strong> the regional l<strong>and</strong>fill <strong>for</strong> Nova Varos.<br />
Financing of EUR 65,000 <strong>for</strong> Batnjik sanitary l<strong>and</strong>fill design is secured from UNDP PRO programme.<br />
0.235 million<br />
A N N E X E S<br />
A N N E X 5<br />
S T R AT E G I C M O V E S 245
246<br />
A N N E X E S<br />
S T R AT E G I C M O V E S<br />
Notes<br />
1 http://www.rec.org/REC/Programs/REREP/PEIP/documents.html<br />
2. http://www.rec.org/REC/Programs/REREP/PEIP/donor_contacts.html<br />
3 http://ec.europa.eu/enlargement/enlargement_process/<br />
accession_process/how_does_a_country_join_the_eu/sap/index_en.htm<br />
4 http://ec.europa.eu/enlargement/enlargement_process/<br />
accession_process/how_does_a_country_join_the_eu/sap/index_en.htm<br />
5 Council Regulation 1085/2006, adopted on July 17, 2006. More detailed implementing rules<br />
are laid down in Commission Regulation 718/2007<br />
6 The Hazardous Waste Directive (94/31/EC) will be repealed by the WFD on December<br />
12, 2010<br />
7 Framework Directive 96/62/EC, daughter directives 1999/30/EC, 2000/69/EC, 2002/3/EC,<br />
<strong>and</strong> Decision on Exchange of In<strong>for</strong>mation 97/101/EC<br />
8 Directive 2008/1/EC of the European Parliament <strong>and</strong> of the Council of January 15, 2008,<br />
concerning integrated pollution prevention <strong>and</strong> control. Replaces Council Directive<br />
96/61/EC of September 24, 1996 on the same subject<br />
9 The EC 2008 progress reports <strong>for</strong> c<strong>and</strong>idate <strong>and</strong> potential c<strong>and</strong>idate countires, accompanying<br />
the EC Communication “Enlargement Strategy <strong>and</strong> Main Challenges 2009-2010” are<br />
available on the EC, DG Enlargement website http://ec.europa.eu/enlargement<br />
10 For further insights on environmental funds, see the REC publication Establishing an <strong>Environmental</strong><br />
Fund: Practical Aspects <strong>for</strong> Decision Makers <strong>and</strong> Fund Managers. REC working paper,<br />
June 2006<br />
11 Albania <strong>and</strong> Montenegro in the water sector, <strong>and</strong> Kosovo (as defined under UNSCR 1244)<br />
in both sectors<br />
12 The average payment collection figure was 57 percent in 2006, but lower <strong>for</strong> households<br />
(at around 48 percent) <strong>and</strong> higher <strong>for</strong> industry. The collection rate of individual utilities<br />
ranges between 45 percent <strong>and</strong> 67 percent.<br />
13 http://www.stabilitypact.org/wt2/energy/IFIADVISORYGROUP.asp <strong>and</strong><br />
http://ec.europa.eu/enlargement/projects-in-focus/cooperation_with_the_international_<br />
financial_institutions/index_en.htm<br />
14 The Stability Pact <strong>for</strong> South Eastern Europe was an institution aimed at strengthening peace,<br />
democracy, human rights <strong>and</strong> economy in the countries of SEE in the period 1999 to 2008.<br />
Over the years, the focus of the Stability Pact shifted from confidence building among the<br />
countries <strong>and</strong> infrastructure reconstruction to a framework <strong>for</strong> regional cooperation in SEE.<br />
The Stability Pact also took on the role of supporting the integration of SEE countries into<br />
European <strong>and</strong> Euro-Atlantic structures by helping the countries of the region to meet EU <strong>and</strong><br />
NATO membership criteria.<br />
15 Please note that, in the case of projects <strong>for</strong> which progress was made in funding between<br />
2007 <strong>and</strong> 2009, the total amount of committed/secured funds was taken into account — that<br />
is, where funds were already committed/secured prior to 2007, these are included. In some<br />
cases, the newly secured funds are conditional.<br />
16 This graph takes into account both large <strong>and</strong> small improvements <strong>and</strong> setbacks, <strong>and</strong> takes into<br />
account all projects that were present on the lists at any point in time from 2007 to 2009.
References<br />
Publications<br />
Albanian Business <strong>and</strong> Investment Agency (Albinvest). “Basic Economic Indicators”, factsheet no.<br />
2, March 2008.<br />
Arcadis Ecolas NV <strong>and</strong> IEEP, 2007. Benefits <strong>for</strong> the <strong>for</strong>mer Yugoslav Republic of Macedonia <strong>and</strong><br />
other countries of SEE of compliance with the environmental acquis, 06/11347/AL, Belgium.<br />
Austrian Development Agency (ADA), 2008. Institutional profiles prepared on behalf of AEquilibrium<br />
Consulting GmbH <strong>and</strong> the Austrian Development Agency:<br />
• 2008a. The Ministry of Public Works, Transport <strong>and</strong> Telecommunications, Albania:<br />
http://www.eco-finance.org/images/ALB_MPWTT_profile.pdf<br />
• 2008b. Hrvatska banka za obnovu i razvitak (HBOR), Republic of Croatia: http://www.ecofinance.org/images/CRO_HBOR_profile.pdf<br />
• 2008c. The Ministry of Transport <strong>and</strong> Communincations, the <strong>for</strong>mer Yugoslav Republic<br />
of Macedonia: http://www.eco-finance.org/images/MAC_MTC_profile.pdf<br />
• 2008d. The MOEPP <strong>Environmental</strong> Investment Programme, the <strong>for</strong>mer Yugoslav Republic<br />
of Macedonia: http://www.eco-finance.org/images/MAC_MOEPP_profile.pdf<br />
• 2008e. The Ministry of Finance, Montenegro: http://www.ecofinance.org/images/MON_MF_profile.pdf<br />
• 2008f. The National Investment Plan, Serbia: http://www.ecofinance.org/images/SER_NIP_profile.pdf<br />
• 2008g. The Ministry of Agriculture, Forestry <strong>and</strong> Water Management, Water Directorate,<br />
Serbia: http://www.eco-finance.org/images/SER_MAFWM_profile.pdf<br />
• 2008h. The Environment Protection Fund, Serbia: http://www.ecofinance.org/images/SER_EPF_profile.pdf<br />
• 2008i. The Environment Protection Fund of the Federation of Bosnia <strong>and</strong> Herzegovina:<br />
http://www.eco-finance.org/images/BiH_EFFBiH_profile.pdf<br />
• 2008j. The Environment Protection Fund of Republika Srpska, Bosnia <strong>and</strong> Herzegovina:<br />
http://www.eco-finance.org/images/BiH_EFRS_profile.pdf<br />
• 2008k. The <strong>Environmental</strong> Protection <strong>and</strong> Energy Efficiency Fund, Croatia: http://www.ecofinance.org/images/CRO_EPEEF_profile.pdf<br />
• 2008l. The proposed Eco-Revolving Fund, Montenegro: http://www.eco-finance.org/<br />
images/MON_EcoFUND_profile.pdf<br />
<strong>Central</strong> Bank of the Republic of Kosovo, 2009. Annual report 2008, Pristina.<br />
CEB, 2009. Press release, “Increased CEB support <strong>for</strong> public social infrastructure in <strong>Central</strong><br />
<strong>and</strong> South Eastern European countries”, March 3, Paris.<br />
CEB, 2007a. The CEB <strong>and</strong> the Management of the Environment, http://www.coebank.org/<br />
Upload/infocentre/brochure/en/managementenvironment.pdf.<br />
CEB, 2005, 2006, 2007b <strong>and</strong> 2008. Report of the Governor.<br />
DABLAS 2008. Terms of Reference of the Dablas Phare Facility.<br />
Dax, Paul, 2008. “Draft Position Paper on Public Utility Company Tariffs in Serbia.”<br />
EBRD, 2006, 2007, 2008 <strong>and</strong> 2009. Donor Report.<br />
EBRD, “Doboko Solid Waste, Project Summary Document”,<br />
http://www.ebrd.com/projects/psd/psd2006/37033.htm.<br />
EC, 2007. DG Enlargement. “Infrastructure Preparation Facility <strong>for</strong> the Western Balkans”,<br />
Concept Paper, Brussels.<br />
A N N E X E S<br />
S T R AT E G I C M O V E S 247
248<br />
A N N E X E S<br />
S T R AT E G I C M O V E S<br />
EC, 2008a. Press release IP/08/1134. “The international community pledges EUR 1.2 billion<br />
to Kosovo”, July 11, 2008, Brussels.<br />
EC, 2008b. Progress reports <strong>and</strong> staff working documents of c<strong>and</strong>idate countries <strong>and</strong> potential<br />
c<strong>and</strong>idate countries, 2008, accompanying COM(2008) 674 “Enlargement Strategy <strong>and</strong> Main<br />
Challenges 2008–2009”, November 5.<br />
• SEC (2008) 2692, Albania.<br />
• SEC (2008) 2693, Bosnia <strong>and</strong> Herzegovina.<br />
• SEC (2008) 2694, Croatia.<br />
• SEC (2008) 2695, the <strong>for</strong>mer Yugoslav Republic of Macedonia.<br />
• SEC (2008) 2696, Montenegro.<br />
• SEC (2008) 2697, Kosovo (under UNSCR 1244).<br />
• SEC (2008) 2698, Serbia.<br />
EC, 2009. Progress reports accompanying the communication from the Commission to the European<br />
Parliament <strong>and</strong> the Council COM (2009) 533 final “Enlargement Strategy <strong>and</strong> Main Challenges<br />
2009–2010”, Brussels, October 14:<br />
• SEC (2009) 1333, Croatia.<br />
• SEC (2009) 1335, the <strong>for</strong>mer Yugoslav Republic of Macedonia.<br />
• SEC (2009) 1336, Montenegro.<br />
• SEC (2009) 1337, Albania.<br />
• SEC (2009) 1338, Bosnia <strong>and</strong> Herzegovina.<br />
• SEC (2009) 1339, Serbia.<br />
EC, 2008c. Rapid press release, MEMO/08/144, “Financial Assistance to the Western Balkans –<br />
Donor Cooperation”, March 5, 2008 http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/08/144&<strong>for</strong>mat=HTML&aged=1&language=EN&guiLanguage=en<br />
- fn1<br />
EC, 2008d. Rapid press release, IP/09/204, “Western Balkans: Enhancing the European Perspective”,<br />
Brussels, March 5.<br />
EC, 2009. “Stocktaking of Commission <strong>and</strong> IFI Activities <strong>and</strong> Programmes in Support to Investments<br />
in the Western Balkans.” Draft report, June (preparation of September workshop). Request<br />
N 2008/162297.<br />
EC, COM (2001) 304, “The Challenge of <strong>Environmental</strong> Financing in the C<strong>and</strong>idate Countries”,<br />
June 8, 2001, Brussels.<br />
EC, COM (2006) 27 final, “The Western Balkans on the Road to the EU: Consolidating Stability<br />
<strong>and</strong> Raising Prosperity”, January 27, 2008, Brussels, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2006:0027:FIN:EN:PDF.<br />
EC, COM (2008) 127 final, “Western Balkans: Enhancing the European Perspective”, Brussels,<br />
March 5, 2008,<br />
http://ec.europa.eu/enlargement/pdf/balkans_communication/western_balkans_communication_050308_en.pdf<br />
EC, COM (2008) 705 final, “Instrument <strong>for</strong> Pre-accession Assistance (IPA), Multi-annual Indicative<br />
Financial Framework <strong>for</strong> 2010–2012”, November 5, 2008, Brussels.<br />
EC, COM (2009) 533, “Enlargement Strategy <strong>and</strong> Main Challenges 2009–2010.” Brussels, October<br />
14, 2009.<br />
EC, SEC (2009) 1309 final, Promoting effective financing <strong>for</strong> the environment in regions covered<br />
by the enlargement process <strong>and</strong> the European Neighbourhood Policy. Brussels, September 30,<br />
2009.<br />
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<br />
EIB, 2008. “EIB supports water supply <strong>and</strong> wastewater treatment in Bosnia <strong>and</strong> Herzegovina”,<br />
August 2, http://www.eib.org/projects/press/2008/2008-072-eib-supports-water-supply-<strong>and</strong>wastewater-treatment-in-bosnia-<strong>and</strong>-herzegovina.htm<br />
EPPC 2009. Final Report, February.<br />
European Parliament, Recommendation 2001/331/EC of the European Parliament <strong>and</strong> of the<br />
Council of April 4, 2001 providing <strong>for</strong> minimum criteria <strong>for</strong> environmental inspections in the<br />
member states<br />
Gjinali, Enkelejda <strong>and</strong> Sokol Olldashi, 2008. “Re<strong>for</strong>m of the Water Supply <strong>and</strong> Sewage Sector<br />
after the Transfer Process of Water Supply <strong>and</strong> Sewerage Companies to Local Government Authorities.”<br />
Two-Year Plan, Albania.<br />
IPA <strong>Central</strong>ised Programme 2008, Project Fiche Kosovo, Infrastructure Projects Facility – Kosovo<br />
Window.<br />
IPA, <strong>Central</strong>ised Programme <strong>for</strong> Serbia, St<strong>and</strong>ard Summary Project Fiche – Project number 14:<br />
Project Preparation Facility.<br />
IPA, <strong>Central</strong>ised, National <strong>and</strong> CBC Programmes <strong>for</strong> Montenegro, St<strong>and</strong>ard Summary Project<br />
Fiche – Technical Assistance <strong>and</strong> Project Preparation Facility <strong>and</strong> Programme Reserve<br />
IPA, 2007a. <strong>Environmental</strong> Operational Programme 2007–2009 in Croatia, September:<br />
http://ec.europa.eu/regional_policy/funds/ipa/croatia_environment_en.htm<br />
IPA, Multi-annual Indicative Planning Documents 2007–2009 <strong>for</strong> Albania, Bosnia <strong>and</strong> Herzegovina,<br />
Croatia, Kosovo (as defined under UNSCR 1244), the <strong>for</strong>mer Yugoslav Republic of Macedonia,<br />
Montenegro <strong>and</strong> Serbia.<br />
IPA, Multi-annual Indicative Planning Documents 2009–2011 <strong>for</strong> Albania, Bosnia <strong>and</strong> Herzegovina,<br />
Croatia, Kosovo (as defined under UNSCR 1244), the <strong>for</strong>mer Yugoslav Republic of Macedonia,<br />
Montenegro <strong>and</strong> Serbia.<br />
IPA, 2008a. National Programme 2008, Albania, Project Preparation Facility.<br />
IPA 2008b. National Programme 2008, Part I – Bosnia <strong>and</strong> Herzegovina, Project Fiche 4: Project<br />
Preparation Facility<br />
IPA, 2008c. National Programme 2008 <strong>for</strong> the <strong>for</strong>mer Yugoslav Republic of Macedonia, Project<br />
Fiche 4.1: Project Preparation <strong>and</strong> Support Facility<br />
IPA, “St<strong>and</strong>ard Summary Project Fiche – IPA centralised programmes”, Project number 13:<br />
Municipal Infrastructure Support Programme — MISP.<br />
IPF, 2007. “IPF <strong>for</strong> the Western Balkans.” Concept paper.<br />
IPF, 2008. Infrastructure Preparation Facility, Terms of Reference.<br />
Kosovo <strong>Environmental</strong> Action Plan 2006-2010, Pristina 2009.<br />
National <strong>Environmental</strong> Investment Strategy, 2009, the <strong>for</strong>mer Yugoslav Republic of Macedonia.<br />
National Strategy <strong>for</strong> <strong>Environmental</strong> Approximation, 2007, the <strong>for</strong>mer Yugoslav Republic of<br />
Macedonia.<br />
National <strong>and</strong> federal statistical offices, WB, NCB, EIU, ministries of finance.<br />
OECD, ODA database on environmental infrastructure allocations between 2005 <strong>and</strong> 2007.<br />
Official Gazette of the <strong>for</strong>mer Yugoslav Republic of Macedonia (OGRM) No. 146/2007. “Regulation<br />
on the Manner of H<strong>and</strong>ling HCW, Labelling <strong>and</strong> Forms <strong>for</strong> H<strong>and</strong>ling HCW <strong>and</strong> on Types of<br />
HCW <strong>for</strong> which Processing is Prohibited”.<br />
REC, 2003. Developing a Priority <strong>Environmental</strong> Investment Programme <strong>for</strong> SEE.<br />
REC, 2005. Targeting the Investment Challenge in South Eastern Europe.<br />
REC, 2006. “Establishing an <strong>Environmental</strong> Fund: Practical Aspects <strong>for</strong> Decision Makers <strong>and</strong> Fund<br />
Managers”, Working paper, June.<br />
A N N E X E S<br />
S T R AT E G I C M O V E S 249
250<br />
A N N E X E S<br />
S T R AT E G I C M O V E S<br />
REC, 2007. Final report <strong>for</strong> the project “Cross-Border Cooperation through <strong>Environmental</strong> Planning<br />
<strong>and</strong> Investments”.<br />
REC. PEIP Analytical Reports 2007–2009. Available at:<br />
http://www.rec.org/REC/Programs/REREP/PEIP/peip2007.html<br />
REC. PEIP surveys, 2008 <strong>and</strong> 2009.<br />
REC. PEIP Updated Priority Project Lists 2007–2009. Available at: http://www.rec.org/REC/Programs/REREP/PEIP/peip2007.html<br />
REC, 2009a. Strategies <strong>for</strong> Re<strong>for</strong>m: A Manual <strong>for</strong> Water Utilities in South Eastern Europe.<br />
REC, 2009b. Speeding up Investments in the Waste Sector: A Manual <strong>for</strong> Waste Utilities in South<br />
Eastern Europe.<br />
REC <strong>and</strong> Umweltbundesamt GmbH, 2008. H<strong>and</strong>book on the implementation of EC <strong>Environmental</strong><br />
Legislation, December.<br />
UNDP/GEF, 2004. Hungarian <strong>Environmental</strong> Economics Centre, Hydro-engineering Institute,<br />
Sarajevo, Danube <strong>Regional</strong> Project. Assessment <strong>and</strong> development of municipal water <strong>and</strong> wastewater<br />
tariffs <strong>and</strong> effluent charges in the Danube River basin, Volume 2: “Country-Specific Issues<br />
<strong>and</strong> Proposed Tariff <strong>and</strong> Charge Re<strong>for</strong>ms: Bosnia i Herzegovina – National Profile”.<br />
Water Utility Re<strong>for</strong>m Programme Working Group (WURP WG), 2007. Water Utility Re<strong>for</strong>m Plan<br />
<strong>for</strong> the Government of the Republic of Montenegro.<br />
World Bank, 2007. Journey to a Cleaner Future.<br />
Water <strong>and</strong> Waste Regulatory Office (WWRO) of Kosovo, 2009. Annual Report 2008, “Per<strong>for</strong>mance<br />
of the water <strong>and</strong> waste companies in Kosovo.” July.<br />
Presentations:<br />
Davies, 2008. “Review of EC investment support facilities.” Craig Davies, PPC Executive Secretary.<br />
PEIP <strong>Regional</strong> Meeting, Brussels, November 28.<br />
Fiedler, 2008. “IPA 2008 — Support to environment.” Joanna Fiedler, Desk Officer, Unit <strong>for</strong><br />
Enlargement <strong>and</strong> Neighbouring Countries, European Commission – DG Environment. PEIP<br />
<strong>Regional</strong> Meeting, Brussels, November 28.<br />
Fiedler, 2009a. “Update on financing environment <strong>and</strong> cooperation with IFIs.” Joanna Fiedler,<br />
Desk Officer, Unit <strong>for</strong> Enlargement <strong>and</strong> Neighbouring Countries, European Commission — DG<br />
Environment. PEIP <strong>Regional</strong> Meeting, Sarajevo, June 18–19.<br />
Fiedler, 2009b. “Update on environmental financing.” Joanna Fiedler, Desk Officer, Unit <strong>for</strong> Enlargement<br />
<strong>and</strong> Neighbouring Countries, European Commission, DG Environment. PEIP <strong>Regional</strong><br />
Meeting, Sarajevo, June 18–19.<br />
Gianfranchi, 2008. “Infrastructure Projects Facility, Project Preparation in the <strong>Environmental</strong><br />
Sector.” Rachele Gianfranchi, DG Enlargement. PEIP <strong>Regional</strong> Meeting, Brussels, November 28.<br />
Glavocevic, 2009. “Experience in the Implementation of IPA projects in Croatia.” Mladen Glavocevic,<br />
Head of Section <strong>for</strong> Control of Project Implementation, Ministry of <strong>Environmental</strong> Protection,<br />
Physical Planning <strong>and</strong> Construction. PEIP <strong>Regional</strong> Meeting, Sarajevo, June 18–19.<br />
Gofas, 2008. “Western Balkans Infrastructure Preparation Facility.” Christos Gofas, Team Leader,<br />
Infrastructure <strong>and</strong> International Financing Institutions, European Commission, DG Enlargement.<br />
National Workshop: “Developing <strong>Environmental</strong> Infrastructure Projects in the Water Sector in<br />
Albania”, Tirana, September 25.<br />
Ozdemir, 2009. “Experiences of financing priority environmental investment projects in Turkey.”<br />
Sermin Bozan Ozdemir, IPA Coordination <strong>and</strong> Implementation <strong>Center</strong>, Ministry of Environment<br />
<strong>and</strong> Forestry. PEIP <strong>Regional</strong> Meeting, Sarajevo, June 18–19.<br />
Sohail, 2008. “Infrastructure Projects Facility in the Western Balkans.” Hasan Sohail. PEIP<br />
<strong>Regional</strong> Meeting, Brussels, November 28.<br />
Unterwurzacher, 2008. “Update on IPA Component III — Environment.” Erich Unterwurzacher,<br />
REGIO.I4 – IPA/ISPA, EC, <strong>Regional</strong> Policy. PEIP <strong>Regional</strong> Meeting, Brussels, November 28.
Websites:<br />
Croatian Waters: http://www.voda.hr/<br />
DABLAS Task Force: http://ec.europa.eu/environment/enlarg/dablas/index_en.htm<br />
EBRD: Albania overview: http://www.ebrd.com/country/country/albania/index.htm; Bosnia <strong>and</strong><br />
Herzegovina economic overview: http://www.ebrd.com/country/country/bosnherz/econo.htm<br />
EC, Economic <strong>and</strong> Financial Affairs, http://ec.europa.eu/economy_finance/int_economic_issues/country_page9172_en.htm<br />
EC, DG Enlargement: http://ec.europa.eu/enlargement/index_en.htm<br />
EC, DG Environment: http://ec.europa.eu/environment/index_en.htm<br />
EC, DG <strong>Regional</strong> Policy: http://ec.europa.eu/regional_policy/index_en.htm<br />
EC, DG Enlargement, Instrument <strong>for</strong> Pre-Accession Assistance: http://ec.europa.eu/enlargement/how-does-it-work/financial-assistance/instrument-pre-accession_en.htm<br />
EC, <strong>Regional</strong> Policy, Instrument <strong>for</strong> Pre-Accession Assistance: http://ec.europa.eu/regional_policy/funds/ipa/index_en.htm<br />
ECENA: www.ecena.org<br />
Eurostat: http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/<br />
EU Water Initiative: www.euwi.net<br />
Horizon 2020 initiative: http://ec.europa.eu/environment/enlarg/med/horizon_2020_en.htm<br />
International Economic Issues, Non-EU economies, Western Balkan countries:<br />
http://ec.europa.eu/economy_finance/int_economic_issues/country_page9161_en.htm<br />
PEIP website: http://www.rec.org/REC/Programs/REREP/PEIP/default.html<br />
<strong>Regional</strong> Cooperation Council: www.rcc.int/index.php<br />
Stability Pact <strong>for</strong> South Eastern Europe: www.stabilitypact.org/wt2/energy/IFIADVISORY-<br />
GROUP.asp<br />
UNEP-FI, http://www.unepfi.org/<br />
World Bank: www.worldbank.org<br />
A N N E X E S<br />
S T R AT E G I C M O V E S 251
THE REGIONAL ENVIRONMENTAL CENTER FOR CENTRAL AND EASTERN EUROPE (REC) is an<br />
international organisation with a mission to assist in solving environmental problems. The REC fulfils this<br />
mission by promoting cooperation among governments, non-governmental organisations, businesses <strong>and</strong><br />
other environmental stakeholders, <strong>and</strong> by supporting the free exchange of in<strong>for</strong>mation <strong>and</strong> public<br />
participation in environmental decision making.<br />
The REC was established in 1990 by the United States, the European Commission <strong>and</strong> Hungary. Today, the<br />
REC is legally based on a charter signed by the governments of 29 countries <strong>and</strong> the European<br />
Commission. The REC has its head office in Szentendre, Hungary, <strong>and</strong> country offices <strong>and</strong> field offices in<br />
17 beneficiary countries: Albania, Bosnia <strong>and</strong> Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia,<br />
Hungary, Latvia, Lithuania, the <strong>for</strong>mer Yugoslav Republic of Macedonia, Montenegro, Pol<strong>and</strong>, Romania,<br />
Serbia, Slovakia, Slovenia <strong>and</strong> Turkey.<br />
The REC actively participates in key global, regional <strong>and</strong> local processes <strong>and</strong> contributes to environmental<br />
<strong>and</strong> sustainability solutions within <strong>and</strong> beyond its country office network, transferring transitional<br />
knowledge <strong>and</strong> experience to countries <strong>and</strong> regions.<br />
Recent donors are the European Commission <strong>and</strong> the governments of Albania, Austria, Belgium, Bosnia<br />
<strong>and</strong> Herzegovina, Bulgaria, Canada, Croatia, the Czech Republic, Estonia, Finl<strong>and</strong>, Germany, Hungary,<br />
Italy, Japan, Latvia, Lithuania, Luxembourg, the <strong>for</strong>mer Yugoslav Republic of Macedonia, Montenegro,<br />
the Netherl<strong>and</strong>s, Norway, Pol<strong>and</strong>, Romania, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerl<strong>and</strong>,<br />
the United Kingdom <strong>and</strong> the United States, as well as other intergovernmental <strong>and</strong> private institutions.<br />
This document has been produced with the financial assistance of the European Union.<br />
The views expressed herein can in no way be taken to reflect the official opinion of the European Union.