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

tus of the country regarding EU accession. A certain political stability is needed to
fulfil the obligations taken on with the Stabilisation and Association Agreement
(SAA). Political will is needed for the whole spectrum of reforms, from institutional
restructuring (administration and utilities) to the alignment of the legal
framework and the enforcement of commitments undertaken.
Economic
Low levels of GDP
With the exception of Croatia, the SEE countries have relatively low levels
of per capita GDP. Croatia has relatively higher GDP, at a level comparable to
that in the new EU member states in CEE. The SEE countries are all countries
in transition, requiring serious reforms in all sectors of society, including road
infrastructure, education and health care. The proportion of the state budget
earmarked for the environment is still relatively low, although it is growing (Eurostat
website). The amounts in the budget dedicated to environmental infrastructure
investment are therefore extremely low compared to the overall
investment needs. (For further details see Chapter 4.)
The global economic recession
In the past year, the global economic recession has deepened, affecting almost all
areas of life, including investments in environmental infrastructure. National budgets
are feeling the pressure of decreasing revenues, and as a result some infrastructure
projects have been suspended for the time being in order to balance national budgets.
One of the reasons for this is the lack of clarity regarding the link between environmental
infrastructure investments and regional economic development. In
addition, due to the financial and economic crisis some of the problems faced by
the water and waste utilities even in good economic times are escalating — for example
the non-payment of bills, difficulties in accessing loans etc. Many banks and
investors have less capital, and where capital is available, borrowing terms are far less
favourable, making the requirements of project proponents themselves far stricter.
Consequently, financiers are less inclined to take big risks and would rather invest
in solid and well-managed operations. Funding that is relatively stable and that only
slightly decreases becomes even more valuable. (For further details on the economic
situation see Chapter 4, and on utility reforms see Chapter 6.)
Affordability of environmental investments and availability of subsidies
Due to low GDP and low levels of development, most SEE communities will
have difficulty affording the investments that are required in order to ensure the
protection of their environment and their quality of life, and compliance with
new legislative requirements. In particular, users of the new infrastructure will be
unable to afford the user charges that are required in order to ensure the operation
and maintenance of that infrastructure, let alone to secure capital investment.
(For further details on affordability see Chapter 6.)
C H A P T E R 3
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
S T R AT E G I C M O V E S 59