SEETAC South East European Transport Axis Cooperation

Transcription

1 SEETAC South East European Transport Axis Cooperation WP5 IDENTIFICATION OF NECESSARY FINANCIAL RESOURCES AND FINANCING MECHANISMS Report Dissemination level: PPs WP: WP5 Author: A.U.Th. (ERDF PP9) Status: Final Date: March 2012 File name: 2012_03_Financial_Instruments_Report.doc SEETAC Project Central European Initiative - CEI Via Genova 9, Trieste (Italy) Tel: ; Fax: info@seetac.eu

2 DISCLAIMER This document is property of the SEETAC project and its partners. In any case if you are interested to extract some pages from this Publication you have to mention the source: SEE/A/071/3.3/X SEETAC project, Transnational Cooperation Programme South East Europe. The publication/document reflects the author s views and the Managing Authority is not liable for any use that may be made of the information contained therein. Without derogation from the generality of the information of this document, the Managing Authority, the project partners, their officers, employees, agents and contractors shall not be liable for any direct or indirect or consequential loss or damage caused by or arising from any information or inaccuracy or omission herein and shall be not liable for any use of the information contained in this document. I

3 TABLE OF CONTENTS TABLE OF CONTENTS... 2 TABLE OF TABLES... 8 TABLE OF FIGURES Introduction Purpose and objective Methodology activities Financial Institutions and Instruments active in the South East Europe European Commission TEN-T budget Legal basis, mission, history Topics and regions of activity Strategy and guidelines generally and per mode of transport Offered services, type and terms of financing European Regional Development Fund and Cohesion Fund Legal basis, mission, history Topics and regions of activity Strategy and guidelines generally and per mode of transport Offered services, type and terms of financing Instrument for Pre-Accession Assistance and European Neighbourhood and Partnership Instrument Legal basis, mission, history Topics and regions of activity Strategy and guidelines generally and per mode of transport Offered services, type and terms of financing Community Funding Programmes II

4 Marco Polo Legal basis, mission, history Topics and regions of activity Strategy and guidelines generally and per mode of transport Offered services, type and terms of financing Seventh Framework Programme -FP Legal basis, mission, history Topics and regions of activity Strategy and guidelines generally and per mode of transport Offered services, type and terms of financing Connecting Europe Facility Legal basis, mission, history Topics and regions of activity Strategy and guidelines generally and per mode of transport Offered services, type and terms of financing Europe 2020 Project Bond Initiative Legal basis, mission, history Topics and regions of activity Strategy and guidelines generally and per mode of transport Offered services, type and terms of financing International Financial Institutions European Investment Bank Legal basis, mission, history Topics and regions of activity Strategy and guidelines generally and per mode of transport Offered services, type and terms of financing III

5 European Bank for Reconstruction and Development Legal basis, mission, history Topics and regions of activity Strategy and guidelines generally and per mode of transport Offered services, type and terms of financing World Bank Legal basis, mission, history Topics and regions of activity Strategy and guidelines generally and per mode of transport Offered services, type and terms of financing JASPERS (Joint Assistance to Support Projects in European Regions) Legal basis, mission, history Topics and regions of activity Strategy and guidelines generally and per mode of transport Offered services, type and terms of financing Western Balkans Investment Framework (WBIF) - Infrastructure Project Facility (IPF) Legal basis, mission, history Topics and regions of activity Strategy and guidelines generally and per mode of transport Offered services, type and terms of financing Financing per country with focus on Transport projects Member States of the European Union Austria Bulgaria Greece IV

6 Hungary Italy Romania Slovenia Slovakia European Union Acceding, Candidate and Potential Candidate countries Croatia The former Yugoslav Republic of Macedonia Montenegro Albania Bosnia and Herzegovina Kosovo under UN Security Council Resolution Serbia Third countries Moldova Ukraine Private Sector Participation in the Development of Transport General Issues Types of Private Sector Partnership Models Private Sector Partnership Advantages and Benefits Guidelines for successful Public-Private Partnership Lessons from Recent Experience in Central Eastern and Southeastern Europe Private Sector Partnership experience at the Member States involved in SEETAC project Austria Bulgaria V

7 Greece Hungary Italy Romania Slovenia Slovakia Private Sector Partnership experience at the Candidate and Potential Candidate countries involved in SEETAC project Croatia The former Yugoslav Republic of Macedonia Montenegro Albania Bosnia and Herzegovina Kosovo under UN Security Council Resolution Serbia Ukraine Moldova Active Agencies for Public-Private Partnerships European PPP Expertise Centre (EPEC) South East European Public-Private Partnership Network (SEEPN) Bibliography ANNEXES... i ANNEX I... ii Grant application form 2011 (Western Balkans Investment Framework)... ii ANNEX II... x Recent, ongoing and pending projects in the countries in the SEETAC project area... x VI

8 ANNEX III... xix Project list set out by country for the European and Global infrastructure communities (DLA Piper, European PPP Expertise Centre, 2009)... xix VII

9 TABLE OF TABLES Table 1 TEN-T funding provided by the MAP Project Portfolio since 2007 (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010)... 7 Table 2 Cohesion Fund for the four eligible Member States in average, (million EUR commitments in 2004 price) Table 3 Cohesion Fund for the ten new eligible Member States in average, (million EUR commitments in 2004 price) Table 4 Annual breakdown of commitment appropriations for 2007 to 2013 in million EUR (European Commission - Regional Policy, 2006) Table 5 Ceilings applicable to co-financing rates (European Commission - Regional Policy, 2006) Table 7 Delivery of Commitments under the Joint IFI Action Plan, up to end-2010 (in billions of Euros) (Thomas Mirow - EBRD; Philippe Maystadt - EIB; Robert B. Zoellick - World Bank Group, 2011) Table 8 WBIF Final approvals up to 31/12/2010 by Beneficiary (Western Balkans Investment Framework, 2010) Table 9: Breakdown of EU finances by priority axis (Galina Vassileva - Bulgarian Ministry of Transport, Coordination of Programmes and Projects Directorate, 2007) Table 10 JASPERS activities in Hungary (European Commission; European Investment Bank; European Bank for Reconstruction and Development; Kreditanstalt für Wiederaufbau, 2012) Table 11 JASPERS activities in Romania (European Commission; European Investment Bank; European Bank for Reconstruction and Development; Kreditanstalt für Wiederaufbau, 2012) Table 12 JASPERS activities in Slovenia (European Commission; European Investment Bank; European Bank for Reconstruction and Development; Kreditanstalt für Wiederaufbau, 2012) Table 13 JASPERS activities in Slovakia (European Commission; European Investment Bank; European Bank for Reconstruction and Development; Kreditanstalt für Wiederaufbau, 2012) Table 14 IPA funds to Croatia per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2012) Table 15 Indicative financial table for expenditure on Transport Investments in Croatia (European Commission - Instrument for Pre-Accession Assistance, 2007) VIII

10 Table 16 IPA funds to the former Yugoslav Republic of Macedonia per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) Table 17 Indicative financial table for expenditure on Transport Investments in the former Yugoslav Republic of Macedonia (European Commission - Instrument for Pre-Accession Assistance) Table 18 IPA funds to Montenegro per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) Table 19 IPA funds to Montenegro per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) Table 20 IPA funds to Albania per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) Table 21 IPA funds to Bosnia and Herzegovina per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) Table 22 IPA funds to Kosovo per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) Table 23 IPA funds to Serbia per year and Component (European Commission - Instrument for Pre- Accession Assistance, 2012) Table 24 Priority listof PPP-type projects in Hungary (DLA Piper, European PPP Expertise Centre, 2009) Table 25 Recent, ongoing and pending projects in Austria... x Table 26 Recent, ongoing and pending projects in Bulgaria... x Table 27 Recent, ongoing and pending projects in Greece... xi Table 28 Recent, ongoing and pending projects in Hungary... xi Table 29 Recent, ongoing and pending projects in Italy... xii Table 30 Recent, ongoing and pending projects in Romania... xii Table 31 Recent, ongoing and pending projects in Slovenia... xiii Table 32 Recent, ongoing and pending projects in Slovakia... xiii Table 33 Recent, ongoing and pending projects in Croatia... xiv Table 34 Recent, ongoing and pending projects in FYROM... xiv Table 35 Recent, ongoing and pending projects in Montenegro... xv IX

11 Table 36 Recent, ongoing and pending projects in Albania... xv Table 37 Recent, ongoing and pending projects in Bosnia and Herzegovina... xvi Table 38 Recent, ongoing and pending projects in Kosovo... xvi Table 39 Recent, ongoing and pending projects in Serbia... xvii Table 40 Recent, ongoing and pending projects in Ukraine... xvii Table 41 Recent, ongoing and pending projects in Moldova... xviii X

12 TABLE OF FIGURES Figure 1 Breakdown of the total Community contribution to the TEN-T Comprehensive Network for the period (European Commission - Mobility and Transport, 2011)... 4 Figure 2 Breakdown of the total Community contribution to the TEN-T Comprehensive Network for the period (European Commission - Mobility and Transport, 2011)... 4 Figure 3 Breakdown of the total Community contribution to the TEN-T Comprehensive Network for the period (European Commission - Mobility and Transport, 2011)... 4 Figure 4 Breakdown of the invested funds into Community contribution and other sources for the period (European Commission - Mobility and Transport, 2011)... 4 Figure 5 Breakdown of the invested funds into Community contribution and other sources for the period (European Commission - Mobility and Transport, 2011)... 5 Figure 6 Breakdown of the invested funds into Community contribution and other sources for the period (European Commission - Mobility and Transport, 2011)... 5 Figure 7 Overall investment in TEN-T Priority Projects (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010)... 5 Figure 8 Overall cumulative investment in TEN-T Priority Projects (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010)... 6 Figure 9 Projects by mode (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010) Figure 10 Share of cross-border projects (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans- European Transport Network Executive Agency, 2010) Figure 11 Projects by project type (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010) Figure 12 Projects by initially estimated total budgeted cost (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010) XI

13 Figure 13 Projects by TEN-T co-financing rate (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010) Figure 14 Projects by planned duration (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans- European Transport Network Executive Agency, 2010) Figure 15 IPA funds to Croatia per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2012) Figure 16 IPA funds to the former Yugoslav Republic of Macedonia per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) Figure 17 IPA funds to Albania per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) Figure 18 Bosnia and Herzegovina (European Commission - Instrument for Pre-Accession Assistance, 2011) Figure 19 IPA funds to Kosovo per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) Figure 20 IPA funds to Serbia per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2012) Figure 21 PPP Investment in Transport in and (V. Cuttaree; M. Humphreys; S. Muzira; J-P Strand - World Bank, 2009) Figure 22 PPP Investment by Sub-sector in the CEE/SEE Countries ( ) (V. Cuttaree; M. Humphreys; S. Muzira; J-P Strand - World Bank, 2009) XII

14 SEETAC WP5 Identification of necessary financial resources 1. Introduction In the framework of the Work Package 5 Identification of necessary financial resources and financing mechanisms of the South East European Transport Axis Cooperation (SEETAC) project the Aristotle University of Thessaloniki, Leader of this Work Package, prepared this report on the financial instruments that are, or shall be made, available to implement the priority transport infrastructures of SEE, as identified by SEETAC project Purpose and objective The purpose of the present report is to investigate the active financing institutions and the financing mechanisms on the transport sector at the countries involved in the SEETAC project, to collect and present information and guidelines for applying for financing of transport projects in the area under study. The structure of the report is shaped as follows: In the first chapter are mentioned some introductory information on the report, its purpose and objective and the followed methodology and related activities for its preparation. In the second chapter are presented the Financial Institutions and Instruments active in the South East Europe. For the European Commission (EC) financing mechanisms and instruments and for the International Financial Institutions (IFIs) are presented the legal basis under which they are functioning, a short history of their function and their mission. In the same chapter there are described the topics and regions of activity for each one of them, their strategy and the guidelines under which they offer financial and technical assistance. Finally, there are described ongoing or recent offered services and the type and terms of financing transport related projects. In the third chapter, there is described the financing activities per country generally on the transport sector and per mode. The countries referred in this part of report are the involved countries in the SEETAC project, which are Member States of the European Union (EU), Candidate and Potential Candidate countries and Third countries. In the last, the fourth, chapter there is described the participation of the private sector in the development of transport projects generally, the recent experience in the region under research on that topic and the active agencies and organisations, which support the private sector involvement in transport projects. After the Bibliography of the report, there are following three Annexes, presenting a) the Grant Application Form 2011 for applying to the Western Balkans Investment Framework, b) the recent, ongoing and pending projects in the SEETAC participating countries and c) a list of transport projects implemented with the private sector participation, according to the European Public Private Partnerships (PPP) Report of Methodology activities The followed methodology for the development of this report was initially the exploitation of all the official documents of the Financial Institutions, Instruments and Agencies active in the South East Europe, which describe their transport policy/strategy and their guidelines generally on the transport sector and all the transport sub-sectors. Apart from the official documents, an investigation took place on programme summaries and success stories and other publications on the official websites of all the organisations. 1

15 SEETAC WP5 Identification of necessary financial resources Additionally, there was made research on the official documents of every Financial Instrument and Institution specifically for every one of the involved countries in the SEETAC project, the country snapshots and all the related documents to the ongoing, recent and scheduled transport projects. In this content, there were explored the potential financial differences for the countries. Last but not least, the report took into account information which arised from the meetings with the representatives of the European Commission and of the International Financial Institutions at the recent related international meetings and conferences, such as the SEETAC Ministerial, Steering Committee and technical meetings, the SEETO Transport Investment Conference TRINCON 2011 (Sarajevo, 19 April 2011), the Rail Investment in SEE (RISEE) Conference (Belgrade, June 2011), and the 7 th Annual Ministerial Meeting of SEETO participants and the Trans-European Transport Networks (TEN-T) Days 2011 Connecting Europe: Putting Europe's economy on the move (Antwerp, November 2011). 2

16 2. Financial Institutions and Instruments active in the South East Europe 2.1. European Commission According to the official publications of the EU, enhancing accessibility is of key importance to strengthen regional economies and to achieve cohesion and competitiveness. The EU Transport Policy promotes sustainable mobility for people and goods, ensuring efficiency, safety and minimising the negative effects on the environment. There are a number of actions covering Trans- European Transport Networks, road, rail, maritime, inland waterways, air, urban transport, multimodal transport, intelligent transport systems, safety and state aid rules. Therefore, transport infrastructure is one of the most visible examples of what can be achieved with aid from the financial means and the instruments. The several available funds for this purpose are the TENs budget line and the EU Structural and Cohesion Funds for the Member Countries and funding via the Instrument for Pre-Accession Assistance (IPA) and the European Neighbourhood and Partnership Instrument (ENPI) for candidate and potential candidate countries and for third countries, respectively. More specifically, TEN-T are co-financed by the following EU instruments, which are described detailed below: Grants from the TEN-T budget; Grants from the Cohesion Fund budget, in the countries eligible for its intervention; Grants from the European Regional Development Fund (ERDF), prioritarily on Convergence objective regions; and Loans and guarantees from the European Investment Bank (EIB). The Commission launched on 28 February 2011 a public consultation on the "Europe 2020 Project Bond Initiative" which aims at boosting the funding of projects with long-term revenue potential in line with the Europe 2020 Strategy priorities. The figures below present the breakdown of the total Community contribution to the Comprehensive Network for the periods , and to all the Member States. The total Community contribution is consisting of funds from the Programme TEN-T, the Cohesion Fund, the ERDF and EIB loans and guarantees. The amount of the funds from EIB loans and guarantees is the biggest offered for all the periods as it overcomes the half of the total contribution (50% during up to 60% during ). Then, the biggest amounts are offered from the Cohesion Fund (18 % during 1996 up to 1999 up to 33% during ) and the European Regional Development Fund (9% during up to 17% during ) and the Programme TEN-T (5% during up to 8% during ). 3

17 Figure 1 Breakdown of the total Community contribution to the TEN-T Comprehensive Network for the period (European Commission - Mobility and Transport, 2011) Figure 2 Breakdown of the total Community contribution to the TEN-T Comprehensive Network for the period (European Commission - Mobility and Transport, 2011) Figure 3 Breakdown of the total Community contribution to the TEN-T Comprehensive Network for the period (European Commission - Mobility and Transport, 2011) However, the following figures show that the majority of the funds for the implementation of the 30 priority projects (excluding Galileo) originates from other and national resources and the total Community contribution covers between 23% (during ) and 41% (during ) of the total cost (European Commission - Mobility and Transport, 2011). Figure 4 Breakdown of the invested funds into Community contribution and other sources for the period (European Commission - Mobility and Transport, 2011) 4

18 Figure 5 Breakdown of the invested funds into Community contribution and other sources for the period (European Commission - Mobility and Transport, 2011) Figure 6 Breakdown of the invested funds into Community contribution and other sources for the period (European Commission - Mobility and Transport, 2011) Concerning the overall investment provided by the European Commission in TEN-T priority projects, excluding the priority project 21(Motorways of the Sea), the figures below present the already provided and the foreseen investments until the next financial framework for The available in the region financial resources in the terms of the Community Contribution are Member State investments, TEN-T budget, EIB support, Structural/Cohesion Funds and other sources. A total investment of the EUR ,5 million will be provided until 2020, as it is presented in the Figures 7 and 8. Figure 7 Overall investment in TEN-T Priority Projects (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans- European Transport Network Executive Agency, 2010) 5

19 Figure 8 Overall cumulative investment in TEN-T Priority Projects (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010) TEN-T budget Legal basis, mission, history The legal basis of the TEN-T budget is defined by the Regulation (EC) No 680/2007 of the European Parliament and of the Council of 20 June There are laid down general rules for the granting of Community financial aid in the field of the trans-european Transport and Energy Networks in all Member States. The mission of the Community aid through the TEN-T budget is the financing of projects of common interest identified within the framework of the guidelines referred to in Article 155 (1) of the Treaty in the field of trans-european Networks for Transport and to the Decision No 661/2010/EU on Union guidelines for the development of the TEN-T 1. Parts of projects shall also be eligible in so far as they form technically and financially independent units (European Commission - Mobility and Transport, 2007). The financial framework for the period 2000 to 2006 was EUR 4.874,88 million (European Parliament, Council Regulation, 2009). As set out in Article 18 of Regulation (EC) No 680/2007, the TEN-T Programme is funded from a budgetary envelope of EUR 8,013 billion for the current financial perspective ( ). Multiannual and annual work programmes set the specific objectives and priorities to be met, while the allocation of this budget is implemented through calls for proposals in line with the TEN Regulation. An amount of EUR 500 million of the TEN-T budget is provided to the Loan Guarantee Instrument (LGTT) 2 and another EUR 80 million is provided to the Marguerite Fund 3 to support projects utilising PPPs. 1 Decision No 661/2010/EU of the European Parliament and of the Council of 7 July 2010 on Union guidelines for the development of the trans-european transport network - Text with EEA relevance, recast of the initial Decision No 1692/96/EC and its amendments. 2 The LGTT is a loan guarantee product specifically designed and administered by the EIB for TEN-T projects. It mitigates the risk in the early stage of a project when user-generated revenues experience significant fluctuations that can hamper access to competitively-priced private funding. 6

20 The project selection mechanism currently allowed by the TEN Regulation is by publishing calls for project proposals. The first call under the TEN-T Multi-Annual Work Programme (MAP) Project Portfolio was launched in 2007 and resulted in the selection of 95 projects for TEN-T funding totalling EUR 5,9 billion. Information on all calls which have been published so far under the MAP and the respective TEN-T funding are provided in the following table: Table 1 TEN-T funding provided by the MAP Project Portfolio since 2007 (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010) Year Mode Budget (EUR) Priority Projects Air Traffic Management/SESAR Intelligent Transport Systems for roads European Rail Traffic Management System Motorways of the Sea River Information Services Air Traffic Management / Functional Airspace Blocks Motorways of the Sea Intelligent Transport Systems for roads European Rail Traffic Management System Air Traffic Management / Functional Airspace Blocks River Information Services Motorways of the Sea 4,9 5,3 billion 350 million 100 million 260 million 20 million 15 million 10 million 30 million 100 million 240 million 20 million 10 million 85 million Furthermore, in response to the financial crisis in 2008, it was decided, under the European Economic Recovery Plan (EERP), to bring forward EUR 500 million of TEN-T funding. Therefore, an ad hoc call was launched in A significant proportion of the projects selected under the EERP call are sections of Priority Projects. These projects was intended to be reviewed in 2011 within the EERP review and are therefore were excluded from the specific exercise (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010). 3 Commission Decision C(2010)0941 on Community participation in the 2020 European Fund for Energy, Climate Change and Infrastructure (the Marguerite Fund). 7

21 In the multi-annual financial framework the nature of the TEN-T is changing. Although during the current period ( ) the TEN-T budget is one of the main financing resources for a network focused on 30 priority projects (with almost EUR 8 billion, as it was mentioned above), in the next financial framework ( ) the central network, that will be much broader than the 30 old priority projects, will be financed to the sum of EUR 32 billion by the Connecting Europe Facility and the Cohesion Fund and the transport sector will claim EUR 14 billion over and above, reaching the amount of EUR 22 billion Topics and regions of activity According to the TEN-T Guidelines, which identify the TEN-T, for the providing of the TEN-T funding special attention is given to priority projects; projects to eliminate bottlenecks, in particular in the framework of priority projects; projects submitted or supported jointly by at least two Member States, in particular those involving cross-border sections; projects contributing to the continuity of the network and the optimisation of its capacity; projects contributing to the improvement of the quality of service offered on TEN-T and which promote, inter alia through action relating to infrastructure, the safety and security of users and ensure interoperability between national networks; projects relating to the development and deployment of traffic management systems in rail, road, air, maritime, inland waterway and coastal transport which ensure interoperability between national networks; projects contributing to the completion of the internal market; and projects contributing to the re-balancing of transport modes in favour of the most environmentally-friendly ones, such as inland waterways (European Parliament, Council Regulation, 2009). Therefore, the eligible projects for financing from the TEN-T budget include road, rail and inland waterway networks, seaports and inland waterway ports, airports and other interconnection points between modal networks. Integration and smooth operation of the system is ensured through efficient traffic management systems comprising systems for road (Intelligent Transport Services - ITS), rail (European Rail Traffic Management System - ERTMS), air (in the context of the Single European Sky policy and aligned with technology innovation through SESAR) and waterborne transport on inland waterways (River Information Systems - RIS) as well as the European positioning and navigation systems GNSS/Galileo (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010). The eligible regions of activity of the TEN-T budget are all the Member States, which are covered in the TEN-T (Core and Comprehensive). More specifically, the EU members of SEETAC beneficiaries of TEN-T financing are Austria, Bulgaria, Greece, Italy, Romania and Slovenia. Concerning both the eligible topics and the beneficiary countries the main terms for the TEN-T budget are set as follows: Projects of common interest co-financed by Member States and identified within the framework of the guidelines referred to under Article 155(1) of the Treaty and to the Decision No 661/2010/EU. Applications for Community financial aid shall be submitted to the Commission by one or more Member States or, with the agreement of the Member States concerned, by international organisations, joint undertakings, or public or private undertakings or bodies. 8

22 The concept of "project" includes parts of projects that are technically and financially independent and form a whole designed to fulfil an economic and technical function (European Commission - Mobility and Transport, 2011) Strategy and guidelines generally and per mode of transport The TEN-T policy revision process addresses issues linked to infrastructure financing. The shortage of funding for the TEN-T infrastructure is one of the major limitations for the ambitions of the TEN-T programme. There is a risk that situation can aggravate if the revised infrastructure programme is not equipped with adequate instruments for its delivery. The TEN-T policy review, which aims at promoting the efficiency of infrastructure use and at increasing the self-financing potential of infrastructure, foresees to reduce financing limitations. The dedicated Expert Group of the EC (TEN-T Policy Review Expert Group 5, 2011) took stock of the current situation, identified major setbacks and debated how the TEN-T revision process could lead to improvements in the existing infrastructure funding schemes. In particular the Group looked into and debated the following issues: The cost of the TEN-T; Rules and modalities of Community support; level of support required; TEN-T programme budgetary requirements in the next financial perspective ; EU support to projects; Community guarantees and other new instruments alternative to direct subsidies; Raising funds for transport infrastructures; Efficient combination of the Community support; improving synergies between the objectives of cohesion policy and the priorities adopted for the trans-european networks; increased role for the EIB Group; Financing mechanisms for non-traditional infrastructures e.g. SESAR, ERTMS; Options to improve self-financing of TEN-T projects; new roles for private sector; revenue generating and fair risk sharing schemes; Higher involvement of financial markets in providing financing for infrastructure; bond and long term debt financing; attracting attention of pension funds; and Long term programming and ensuring commitment to individual infrastructure projects. Despite the mentioned guidelines and selection criteria, the decision to grant aid via the TEN-T Programme also takes account of the maturity of the project; the stimulative effect of community intervention on public and private finance; the soundness of the financial package; direct or indirect socio-economic effects in particular on employment and the environmental consequences. In the case of cross-border projects, coordination of the timing of different parts of the project shall also be taken into account (European Parliament, Council Regulation, 2009). The general rules for the granting of financial aid from the TEN-T budget are defined by the Regulation (EC) No 67/2010, of 30 November The conditions should follow the regulations above: 1. Financial aid shall be granted, in principle, only if achievement of a project meets financial obstacles. 2. Financial aid shall not exceed the minimum considered necessary for the launch of a project. 9

23 3. Regardless of the form of intervention chosen, the total amount of financial aid under this Regulation shall not exceed 10% of the total investment cost. However, the total amount of financial aid may exceptionally reach 20% of the total investment cost in the following cases: a. projects concerning satellite positioning and navigation systems, as provided for in Article 17 of Decision No 1692/96/EC of the European Parliament and of the Council of 23 July 1996 on Community guidelines for the development of the TEN-T; b. sections of the projects of European interest, provided that the projects are started before 2010, identified in Annex III to Decision No 1692/96/EC with the aim of eliminating bottlenecks and/or filling in missing sections, if such sections are cross border or cross natural barriers, and contribute to the integration of the internal market in an enlarged Community, promote safety, ensure the interoperability of the national networks and/or strongly contribute to the reduction of imbalances between modes of transport, in favour of the most environment-friendly modes. This rate shall be differentiated according to the benefits to other countries, in particular neighbouring Member States. 4. The financial resources provided for under this Regulation shall not, in principle, be assigned to projects or stages of projects which benefit from other sources of Community funding. (European Parliament, Council Regulation, 2009) The specific guidelines for the financial aid from the TEN-T budget in relation to their contribution to the objectives and priorities defined in the framework of Decisions No 1692/ 96/EC and No 1364/2006/EC vary in proportion with the form of the eligible projects. The amount of Community financial aid granted shall not exceed the following rates: 1. Studies: 50% of the eligible cost, irrespective of the project of common interest concerned; 2. Works: 2.1. Priority projects: a maximum of 20% of the eligible cost, a maximum of 30% of the eligible cost for cross-border sections, provided that the Member States concerned have given the Commission all necessary guarantees regarding the financial viability of the project and the timetable for carrying it out; 2.2. Projects other than priority projects: a maximum of 10% of the eligible cost; 3. The European Rail Traffic Management System (ERTMS): 3.1. Track-side equipment: a maximum of 50% of the eligible cost of studies and works; 3.2. On-board equipment: a maximum of 50% of the eligible cost of developing and making prototypes for the installation of ERTMS on existing rolling stock, provided that the prototype is certified in at least two Member States, a maximum of 50% of the eligible cost of series equipment for the installation of ERTMS on rolling stock; however, the Commission shall set in the framework of the multiannual programme a maximum amount of aid per traction unit; 4. Road, air, inland waterway, maritime traffic and coastal traffic management systems: a maximum of 20% of the eligible cost of works. 10

24 The amount of the financial envelope shall lie within a range of 80 to 85% of the budgetary resources of the EUR million available for transport for the period (European Commission - Mobility and Transport, 2007) Offered services, type and terms of financing TEN-T funding for transport projects of common interest can take one or more of the following forms: co-financing of studies related to projects, including preparatory, feasibility and evaluation studies, and other technical support measures for these studies; direct grants to works in duly justifies cases; grants for works in the framework of availability payment schemes; interest rate rebates on loans given by the EIB or other public or private financial institutions; a financial contribution to the provisioning and capital allocation for guarantees to be issued by the EIB on its own resources under the loan guarantee instrument; risk capital participation for investment funds or comparable financial undertakings with a priority focus on providing risk capital for trans-european network projects and involving substantial private sector investment; such risk-capital participation shall not exceed 1% of the budgetary resources set out in Article 18; and a financial contribution to the project-related activities of joint undertakings. (European Parliament, Council Regulation, 2009) According to the overview of MAP project portfolio, which consists of 92 projects selected under the 2007 multi-annual calls for proposals, the TEN-T budget finance EUR 5,3 billion of a total sum budgeted of total eligible costs of EUR 32,6 billion. Almost 70% (63 projects) of the project portfolio consists of rail projects with a financial weighting, as measured by the TEN-T funding share of the total portfolio s funding of 81%. Out of these 63 rail projects 36 are conventional rail projects with a funding share of 37% of the total rail funding in the portfolio. High speed rail lines and their related infrastructures and facilities account for 26 projects, with a funding share of 55% of the total rail funding. The rail portfolio also includes one multimodal project consisting of both rail and road links. The MAP portfolio includes 17 ERTMS projects with a funding share of 5% of the total TEN-T funding. The portfolio also includes 8 inland waterways (IWW) projects (with a funding share of 12%) and 4 road projects with a funding share of close to 3%. Figure 9 shows that the rail and IWW projects are, on average, bigger (measured by the amount of TEN-T funding) than the road and ERTMS projects. We can also conclude that within the rail portfolio the biggest projects can be found in the group of projects for high speed lines. 11

25 Figure 9 Projects by mode (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010) Almost one-quarter of the projects are cross-border projects with a total TEN-T funding of EUR 3,190 billion, representing 60% of the EUR 5,3 billion funding allocated to the MAP portfolio (Figure 10). Figure 10 Share of cross-border projects (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010) The biggest share (49%) of the portfolio s TEN-T funding budget is allocated to 19 composite projects combining study and works phases. Works-only projects comprise 48% of the portfolio and represent 42% of the funding budget. Almost one-third of the projects are studies-only. These projects tend to be small, representing only 10% of the funding budget despite a 50% co-financing rate (Figure 11). 12

26 Figure 11 Projects by project type (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010) One-quarter of the project portfolio consists of projects with an initially estimated total budgeted cost of less than EUR 20 million. The share of TEN-T funding to these projects is only 2%. As expected, 70% of the TEN-T funding goes to 19 projects with an initially estimated total budgeted cost of more than EUR 500 million (Figure 12). Figure 12 Projects by initially estimated total budgeted cost4 (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans- European Transport Network Executive Agency, 2010) The biggest funding share (39%) is allocated to 19 projects with a co-financing rate between 20-30%. Almost half of the projects receive a 50% co-financing rate, although their share of the TEN-T funding is only 15%. This is due to the fact that this group of projects consists of studies-only and ERTMS projects which normally tend to be small projects as measured by the initial estimated total budgeted cost (Figure 13). 4 Total eligible cost according to the Regulation (EC) No 680/2007 of the European Parliament and of the Council of 20 June 2007 laying down general rules for the granting of Community financial aid in the field of trans-european transport and energy networks (OJ L 162, ) i.e. the part of the project cost taken into consideration by the Commission for the calculation of Community financial aid. 13

27 Figure 13 Projects by TEN-T co-financing rate (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010) Fifty-six projects (60%) were originally planned to be implemented within 5 to 7 years. These projects represent almost 80% of the TEN-T funding allocated to the portfolio. Of the 56 projects, two-thirds were planned to be implemented within 6 to 7 years and they receive almost 60% of the total TEN-T funding allocated to the portfolio (Figure 14). Figure 14 Projects by planned duration (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010) Given the long term planning involved in most projects of the MAP portfolio, an extension of the TEN-T financial support until 2015 seems to be the optimal way to deal with the needs of key projects. At the same time, this extension is accompanied by detailed implementing conditions that will be closely observed, in order to ensure better use of resources while fulfilling the objectives of the Programme. In this respect, the extension to 2015 will enable an additional EUR 1,3 billion of the allocated EUR 5,3 billion in TEN-T funding to be absorbed and a further 29 projects to reach completion. By providing the necessary long term vision and certainty of the TEN-T support, this approach is expected to improve performance and assure the expected impact of funding in order to maximise the implementation of the current portfolio in line with policy objectives (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010). 14

28 European Regional Development Fund and Cohesion Fund The Structural Funds and the Cohesion Fund are the financial instruments of EU Regional Policy, which is intended to narrow the development gap between regions. For the transport sector the relevant funds are the European Regional Development Fund (ERDF - Structural) and the Cohesion Fund Legal basis, mission, history The Regulation (EC) No 1083/2006 of 11 July 2006 lays down the general rules governing the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Fund, without prejudice of the specific provisions laid down in Regulations (EC) No 1080/2006, (EC) No 1081/2006 and (EC) No 1084/2006. To this end, this Regulation lays down the principles and rules on partnership, programming, evaluation, management, including financial management, monitoring and control on the basis of responsibilities shared between the Member States and the Commission. The action taken by the Community under Article 158 of the Treaty shall be designed to strengthen the economic and social cohesion of the enlarged EU in order to promote the harmonious, balanced and sustainable development of the Community. The action taken under the Funds shall incorporate, at national and regional level, the Community's priorities in favour of sustainable development by strengthening growth, competitiveness, employment and social inclusion and by protecting and improving the quality of the environment (European Commission - Regional Policy, 2006). Especially about the ERDF, pursuant to Article 160 of the Treaty and Regulation (EC) No 1083/2006, it shall contribute to the financing of assistance which aims to reinforce economic and social cohesion by redressing the main regional imbalances through support for the development and structural adjustment of regional economies, including the conversion of declining industrial regions and regions lagging behind, and support for cross-border, transnational and interregional cooperation. In so doing, the ERDF shall give effect to the priorities of the Community, and in particular the need to strengthen competitiveness and innovation, create and safeguard sustainable jobs, and ensure sustainable development. The ERDF shall focus its assistance on thematic priorities. The type and range of actions to be financed within each priority shall reflect the different nature of the Convergence, Regional competitiveness and employment and European territorial cooperation objectives. The ERDF shall contribute towards the financing of: a. productive investment which contributes to creating and safeguarding sustainable jobs, primarily through direct aid to investment primarily in small and medium-sized enterprises (SMEs); b. investment in infrastructure; c. development of endogenous potential by measures which support regional and local development; and d. technical assistance at the initiative of the Commission and Technical assistance of the Member States (European Commission - Regional Policy, 2006) 15

29 The previous ERDF programming periods were the and programming periods and the ERDF resources were mainly used to co-finance productive investment leading to the creation or maintenance of jobs, infrastructure, local development initiatives and the business activities of small and medium-sized enterprises. Regarding the Cohesion Fund, assistance shall be given to actions in the following areas, ensuring an appropriate balance, and according to the investment and infrastructure needs of each Member State receiving assistance: a. TEN-T, in particular priority projects of common interest; and b. the environment within the priorities assigned to the Community environmental protection policy under the policy and action programme on the environment. In this context, the Fund may also intervene in areas related to sustainable development which clearly present environmental benefits, namely energy efficiency and renewable energy and, in the transport sector outside the trans-european networks, rail, river and sea transport, intermodal transport systems and their interoperability, management of road, sea and air traffic, clean urban transport and public transport. The appropriate balance of assistance shall be agreed in partnership between Member States and the Commission (European Commission - Regional Policy, 2006). For the years the European Union provided over EUR million (in 2004 prices) for the Cohesion Fund. The funds available for the four eligible Member States are as follows: Table 2 Cohesion Fund for the four eligible Member States in average, (million EUR commitments in 2004 price) Greece Spain Ireland 5 Portugal The funds available for the ten new eligible Member States, are as follows: Table 3 Cohesion Fund for the ten new eligible Member States in average, (million EUR commitments in 2004 price) Czech Republic Estonia Cyprus Latvia Lithuania Hungary Malta Poland Slovenia Slovak Republic 936,05 309,03 53,94 515,43 608, ,67 21, ,60 188,71 570,50 5 Ireland only until the end of the year 2003 (million EUR commitments in 2004 price). 16

30 Topics and regions of activity The Regulation (EC) No 1083/2006 defines the objectives to which the Structural Funds and the Cohesion Fund are to contribute and the criteria for Member States and regions to be eligible under those Funds. As mentioned above, the ERDF contributes to the financing of assistance towards the reinforcement of economic, social and territorial cohesion by reducing regional disparities and supporting the structural development and adjustment of regional economies, including the conversion of declining industrial regions. The ERDF will focus on financing in the following areas: Productive investment; Infrastructure; Other development initiatives including services to enterprises, creation and development of financing instruments such as venture capital, loan and guarantee funds and local development funds, interest subsidies, neighbourhood services, and exchange of experience between regions, towns, and relevant social, economic and environmental actors; and Technical assistance. The type and range of actions to be financed within each priority shall reflect the different nature of the Convergence, Regional competitiveness and Employment and European Territorial Cooperation objectives. Under the Convergence objective, the ERDF shall focus its assistance on supporting sustainable integrated regional and local economic development by mobilising and strengthening endogenous capacity through programmes aimed at the modernisation and diversification of regional economic structures, primarily in the following areas: R&D in technology, innovation and entrepreneurship; Information technology; Environment; Risk prevention; Tourism; Investment in transport; Energy; Education; Health; and Direct assistance for investment in small businesses. Under the Regional Competitiveness and Employment objective, the ERDF shall focus its assistance, in the context of regional sustainable development strategies, on the following priorities: Innovation and the knowledge economy, through support to the design and implementation of regional innovation strategies conducive to efficient regional innovation systems; Environment and risk prevention; and 17

31 Access, outside major urban centres, to transport and telecommunication services of general economic interest. ERDF assistance under the European Territorial Cooperation objective also targets three key areas: Developing cross-border economic and social activities through joint strategies. This mainly involves encouraging entrepreneurship, collaboration in the field of environmental protection, and reducing isolation. The Fund can also help promote the integration of cross-border labour markets, local employment initiatives, equal opportunities, training and measures to combat social exclusion, as well as the sharing of human resources and facilities for technology R&D; Establishing and developing transnational cooperation, including bilateral cooperation between maritime regions. Priorities will be managing water resources, improving accessibility, risk prevention and creating science and technology networks; and Making regional policy more effective, i.e. encouraging regional and local authorities to form networks and share know-how. The eligible countries for funding under ERDF are the EU Member States (EU 27). Concerning the Cohesion Fund, it is a structural instrument that helps the less developed Member States to reduce economic and social disparities and to stabilise their economies. The assistance is focused to cover major transport and environmental protection infrastructures. The Cohesion Fund supports the following types of projects: a. Environment projects helping to achieve the objectives of the EC treaty and in particular projects in line with the priorities conferred on Community Environmental policy by the relevant Environment and Sustainable Development action plans. The Fund gives priority to drinking-water supply, treatment of wastewater and disposal of solid waste. Reforestation, erosion control and nature conservation measures are also eligible. In this context, the Fund may also intervene in areas related to sustainable development which clearly present environmental benefits, namely energy efficiency and renewable energy and, in the transport sector outside the trans-european networks, rail, river and sea transport, intermodal transport systems and their interoperability, management of road, sea and air traffic, clean urban transport and public transport. b. Transport infrastructure projects establishing or developing transport infrastructure as identified in the Trans-European Transport Network (TEN-T) guidelines (railways, road traffic, inland waterways, civil air transport, etc.). The priority measures concern: Completion of the connections needed to facilitate transport Optimization of the efficiency of existing infrastructure Achievement of interoperability of network components Integration of the environmental dimension in the network The eligible countries for Cohesion Fund are the least prosperous Member States of the Union whose gross national product (GNP) per capita is below 90% of the EU-average. This currently includes the 12 new Member States as well as Greece and Portugal (EUROPA MEDIA Public Service Corporation). 18

32 Strategy and guidelines generally and per mode of transport The Regulation (EC) No 1083/2006 defines the context for cohesion policy, including the method for establishing the Community strategic guidelines on cohesion, the national strategic reference framework and the process for examination at Community level. To this context, operational programmes shall receive financing from only one Fund. In the Member States receiving support from the ERDF and the Cohesion Fund is jointly provided assistance for operational programmes on transport infrastructure including for major projects and they are contained priority axis specific to each Fund and a specific commitment by Fund. Consequently, one of the priority themes among the categories of expenditure is transport and the transport projects that are cofinanced concern investments on all modes of transport and on the horizontal issues (Railways, Motorways, Multimodal transport, Intelligent transport systems, Airports, Ports and Inland waterways). However, specific guidelines for the provided financial aid, financial resources available and the criteria for their allocation for every distinct mode of transport aren t clear through the mentioned Regulation 6 or through the particular Regulations on the ERDF 7 and the Cohesion Fund 8 and generally through the research that took place Offered services, type and terms of financing The resources available for commitment from the Funds for the period 2007 to 2013 come up to EUR million at 2004 prices. The annual breakdown of commitment appropriations for 2007 to 2013 is presented below. Table 4 Annual breakdown of commitment appropriations for 2007 to 2013 in million EUR (European Commission - Regional Policy, 2006) As part of an operational programme, the ERDF and the Cohesion Fund may finance expenditure in respect of an operation comprising a series of works, activities or services intended in itself to accomplish an indivisible task of a precise economic or technical nature, which has clearly identified goals and whose total cost exceeds EUR 50 million in the case of major projects. The Commission appraises the major project, if necessary consulting outside experts, including the EIB, its consistency with the priorities of the operational programme, its contribution to achieving the goals of those priorities and its consistency with other Community policies. After the necessary information submitted to the Commission about a major project by the Member State or the managing authority the Commission adopts a decision as soon as possible but no later than three months, which defines the physical object, the amount to which the co-financing rate for the priority axis applies, and the annual plan of financial contribution from the ERDF or the Cohesion Fund. 6 Council Regulation (EC) No 1083/2006 of 11 July Regulation (EC) No 1080/2006 of the European Parliament and of the Council of 5 July Council Regulation (EC) No 1084/2006 of 11 July

33 If a Member State decides to undertake technical assistance actions in the framework of an operational programme, the proportion of the total amount of expenditure for technical assistance in respect of each operational programme would not exceed the following limits: i. 4% of the total amount allocated under the Convergence and Regional competitiveness and employment objectives; and ii. 6% of the total amount allocated under the European territorial cooperation objective. The contribution from the Funds, at the level of operational programmes, are calculated with reference to either the total eligible expenditure including public and private expenditure or the public eligible expenditure. Regarding the operational programmes under the Convergence and Regional competitiveness and employment objectives, where also transport projects are included, for the countries participants at the SEETAC project the contribution from the Funds are within the limits that are presented at the following table: Table 5 Ceilings applicable to co-financing rates (European Commission - Regional Policy, 2006) Criteria Member States ERDF and ESF Percentage of eligible expenditure Cohesion Fund Percentage of eligible expenditure Member States whose average GDP per capita for the period 2001 to 2003 was below 85 % of the EU-25 average during the same period and new Memeber States. Bulgaria, Greece, Hungary, Romania, Slovenia and Slovakia 85% for the Convergence and Regional competitiveness and employment objectives 85% Member States other than those referred above. Member States other than those referred above. Italy and Austria 75% for the Convergence objective Italy and Austria 50% for the Regional competitiveness and employment objective For operational programmes under the European territorial cooperation objective in which at least one participant belongs to a Member State whose average GDP per capita for the period 2001 to 2003 was below 85% of the EU-27 average during the same period, the contribution from the ERDF comes up to 85% of the eligible expenditure. For all other operational programmes, the contribution from the ERDF shall not be higher than 75% of the eligible expenditure co-financed by the ERDF. However, apart from the limits mentioned above, the Commission's decision adopting an operational programme shall fix the maximum rate and the maximum amount of the contribution 20

34 from Fund for each operational programme and for each priority axis. The decision shall show separately the appropriations for regions receiving transitional support. In any case, the contribution from the Funds for each priority axis shall not be less than 20% of the eligible public expenditure, while technical assistance measures implemented at the initiative of or on behalf of the Commission may be financed at the rate of 100%. According to the Regulations, the contribution from the Funds shall be paid into a single account to the beneficiaries with no national sub-accounts. The total amount of eligible expenditure shall take the form of pre-financing, interim payments and payment of the final balance. They shall be made to the body designated by the Member State (European Commission - Regional Policy, 2006). On June 29, 2011, the European Commission submitted to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions, the Communication on the proposals for Europe 2020 Budget. Thus, the EU budget proposal for the financial period includes a 4,8% growth than the budget for , from EUR 975 billion to EUR 1025 billion. In Cohesion Policy instruments concerning solidarity and investment for sustainable growth and employment, the amount of EUR 376 billion is proposed for the period. This amount comprises EUR 162,6 billion for convergence regions, EUR 38,9 billion for transition regions, EUR 53,1 billion for competitiveness, 11,7 billion for territorial cooperation and EUR 68,7 billion for the Cohesion Fund, EUR 0,926 billion extra allocation for outermost and sparsely populated regions. Compared to the previous budget, in the budget, the EC stresses the importance of infrastructure by allocating an additional EUR 40 Billion for energy, transport and ICT. The welldevelopment of a single market demands a performing infrastructure to contribute to the European connections, especially through transport infrastructure, energy, information technology and communications. Thus, in transports, the costs of infrastructure development in conformity with the demand, is estimated at EUR 1,5 trillion for For finalising the TEN-T network, an investment of EUR 500 billion is necessary by 2020, EUR 250 billion of which should be directed towards projects aimed at eliminating bottlenecks. In the new budget, the proposal for the instrument concerning the European interconnection, for energy infrastructure, transport and ICT, stipulates a EUR 40 billion fund, of which EUR 9,1 billion for energy, EUR 9,2 billion for ICT and EUR 21,7 billion for transport, plus an additional EUR 10% through the Cohesion Fund. EC s priorities will remain focusing on innovating management and services and traffic management systems for railway, road and inland waterways transport (ITS, ERTMS and RIS), as well as on the main network of ports and airports (European Commission - Regional Policy, 2011). The Commission's proposal has established, with the aim of enhancing the contribution of the funds in delivering on the headline targets of the Europe 2020 strategy, minimum shares for the European Social Fund (ESF) for each category of regions. The application of the shares result in a minimum overall share for the ESF of 25% of the budget allocated to cohesion policy, i.e. EUR 84 billion. This implies that a maximum of EUR 183,3 billion remains available for the ERDF for the period (European Commission - Regional Policy, 2011). 21

35 Instrument for Pre-Accession Assistance and European Neighbourhood and Partnership Instrument Legal basis, mission, history The EU provides financial aid for all types of organisations situated mainly in the Member States; however certain programmes target also Non-Member States. Small, medium and large sized projects can be financed by the EU in various fields from agriculture to education, from environment to transport. This section introduces the funding opportunities of the EU for the financial period structured in these categories for the Non-Member countries participants at the SEETAC project. Regarding the Pre-Accession Assistance, since 2007 EU provides funding for candidate countries and potential candidate countries in order to support their efforts to enhance political, economic and institutional reforms. This comprises a broad range of financial support for various types of projects in the fields of agriculture, environment, transport, IT, human rights, civil society, media, etc. Assistance under the Council Regulation (EC) No 1085/2006 of 17 July 2006 establishing an Instrument for Pre-Accession Assistance (IPA) shall be provided in accordance with the general policy framework for pre-accession, defined by the European and Accession Partnerships, and taking due account of the Reports and the Strategy Paper comprised in the annual Enlargement package of the Commission. More detailed implementing rules are laid down in Commission Regulation (EC) No 718/2007 of 12 June 2007 and in Commission Regulation (EU) No 80/2010 of 28 January 2010 amending Regulation (EC) No 718/2007 (European Commission - Regional Policy, 2006). IPA replaces the pre-accession financial instruments PHARE, ISPA, SAPARD, the Turkish pre-accession instrument, and CARDS and the European Agency for Reconstruction (EAR), economic assistance instruments for the Western Balkans. Apart from the Pre-Accession Assistance, EU's external assistance targets other countries than the Member States and aims to support various types of reforms, political and economic stability, as well as countries or regions in crisis. The Regulation (EC) No 1638/2006 of the European Parliament and of the Council of 24 October 2006 laying down general provisions establishes a European Neighbourhood and Partnership Instrument (ENPI) to provide Community assistance for the development of an area of prosperity and good neighbourliness involving the European Union, and the MEDA and the NIS countries. Community assistance shall be used for the benefit of partner countries. Community assistance may be used for the common benefit of Member States and partner countries and their regions, for the purpose of promoting cross-border and trans-regional cooperation. The European Union is founded on the values of liberty, democracy, respect for human rights and fundamental freedoms and the rule of law and seeks to promote commitment to these values in partner countries through dialogue and cooperation. The mission of the Community assistance is to promote enhanced cooperation and progressive economic integration between the European Union and the partner countries and, in particular, the implementation of partnership and cooperation agreements, association agreements or other existing and future agreements. The scope is also to encourage partner countries efforts aimed at promoting good governance and equitable social and economic development (European Commission - European Neighbourhood Policy, 2006). 22

36 From 1 January 2007 the ENPI replaces MEDA (for Southern Mediterranean neighbours) and TACIS (for Eastern neighbours and Russia) and other existing instruments such as the European Initiative for Democracy and Human Rights (EIDHR). For the Financial Framework , approximately EUR 12 billion in EU funding are available to support the partners' reforms, an increase of 32% in real terms as compared to Financial Framework. For the budgetary period , the funds available were approximately EUR 5,3 billion for MEDA and EUR 3,1 billion for TACIS, as well as approximately EUR 2 billion in European Investment Bank lending for MEDA beneficiary countries and EUR 500 million for TACIS beneficiary countries (European Commission - European Neighbourhood Policy, 2011). During the next multi-annual financial framework , the EU will continue its support to enlargement countries through a renewed Instrument for Pre-accession Assistance (IPA), building on the positive experience from the current instrument. IPA will help these countries implement the comprehensive reform strategies needed to prepare for future membership, with emphasis on regional cooperation, implementation of EU laws and standards, capacity to manage the Union's internal policies upon accession, and delivery of tangible socio-economic benefits in the beneficiary countries. More use will be made of innovative financing arrangements set up with international financial institutions, with EU funds acting as a catalyst for leveraging investment in infrastructure. The total amount proposed is EUR million over the period In the context of the renewed approach to the European Neighbourhood Policy (ENP), the new ENI Instrument will provide streamlined support to the same 16 partner countries as the previous European Neighbourhood and Partnership Instrument (ENPI). In line with the principles of differentiation and more for more, the ENI will support the strengthening of relations with partner countries and bring tangible benefits to both the EU and its partners in areas such as democracy and human rights, the rule of law, good governance, sustainable economic and social development and progressive economic integration in the EU single market. The total amount proposed is EUR million (European Commission - Development and Cooperation - EuropeAid, 2012) Topics and regions of activity As mentioned above, IPA is designed to create a single framework and to unite under the same instrument both Candidate and Potential Candidate Countries, thus, facilitating the transfer from one status to another. The main objectives of IPA are: Strengthening democratic institutions; Promotion and protection of human rights and fundamental freedoms and enhanced respect for minority rights; Development of civil society; and Regional and cross-border cooperation. In accordance with its objectives, IPA comprises five components: I. Transition Assistance and Institution Building; provides financing for institution-building and associated investments. It supports measures to drive stabilisation and the transition to a democratic society and market economy. Component I is managed by Directorate-General Enlargement. 23

37 II. III. IV. Cross-Border and Regional Co-operation; supports cross-border cooperation between candidates and potential candidates and with EU Member States. It may also fund participation in transnational cooperation programmes (under the Structural Funds) and Sea Basin programmes (under the European Neighbourhood and Partnership Instrument or ENPI). Component II is managed by DG Enlargement and DG Regional Policy. Regional Development Component; finances investments and associated technical assistance in areas such as transport, environment and economic cohesion. It is managed by Directorate- General Regional Policy. Human Resources Development Component; aims to strengthen human capital through education and training and to help combat exclusion. It is managed by Directorate-General Employment, Social Affairs and Equal Opportunities. V. Rural Development Component; contributes to sustainable rural development. It provides assistance for the restructuring of agriculture and its adaptation to EU standards in the areas of environmental protection, public health, animal and plant health, animal welfare and occupational safety. It is managed by Directorate-General Agriculture and Rural Development. The candidate countries participants in the study area of the SEETAC project where the IPA is activate Montenegro and the former Yugoslav Republic of Macedonia. Croatia as an accessing country still benefits form IPA, until full accession in mid These countries benefit from all the five components, the last three of which aim at preparing them to manage EU funds after accession. The potential candidate countries participants in the SEETAC project where the IPA is active are Albania, Bosnia and Herzegovina and Serbia. IPA is also active in Kosovo under UN Security Council Resolution 1244/99 and Turkey, which are not participating in the SEETAC project but they are of interest due to their geographic position. All these countries are eligible for the first two components of IPA, which concentrate on institution building, in particular to strengthen the Copenhagen political criteria, enhance administrative and judicial capacity and encourage some alignment with the acquis communautaire (European Commission - Enlargement, 2012). Under the European Neighbourhood Policy, a set of priorities are defined together by the European Union and the partner countries, to be incorporated in a series of jointly agreed Action Plans, covering a number of key areas for specific action, including political dialogue and reform, trade and economic reform, equitable social and economic development, justice and home affairs, energy, transport, information society, environment, research and innovation, the development of civil society and people-to-people contacts. Progress towards meeting these priorities will contribute to realising the full potential of the Partnership and Cooperation Agreements and the Association Agreements. To that term, Community assistance through ENPI shall be used to support measures within several areas of cooperation, one of which is promoting cooperation in the sectors of energy, telecommunication and transport, including on interconnections, networks and their operations, enhancing the security and safety of international transport and energy operations and promoting renewable energy sources, energy efficiency and clean transport. An integrated transport system between the EU and its neighbourhood is vital to further integration, and hence the ENPI assistance sets as a major topic of activity the close cooperation between the 24

38 Member States and third countries to complete the extension of TEN transport axes to neighbouring countries. Both Member States and ENPI partner countries are adopting regional action plans to develop sustainable transport systems, the implementation of which would benefit from Member States contributions. Under that flag, the Neighbourhood Investment Facility (NIF) has been established with the first EUR 50 million contribution from the Community budget, and started to support lending to ENP partners in Overall, the Commission allocates to the Facility an indicative amount of EUR 250 million over the next four years and plans to devote a further EUR 450 million over the period (in total EUR 700 million over 7 years). Discussions are ongoing with Member States on the establishment of a NIF Trust Fund. Matching the Community contribution with those of Member States would generate a substantial leverage effect. NIF operations, focusing primarily on projects of common interest in the energy, environment and transport sectors, will be fully compatible with a strengthened FEMIP (Mediterranean partner countries). Within all the countries that are concerned by funding from ENPI 9, there are two countries in the proximity area of the SEETAC project; Ukraine (SEETAC Observer) and Moldova Strategy and guidelines generally and per mode of transport As mentioned above, the Regulations laying down general provisions establishing the Instruments for the financial aid (IPA and ENPI) to the non EU member countries related to the SEETAC project define the strategy and the guidelines for the general areas and forms of assistance. Within them, there are defined the guidelines for the assistance for transport infrastructure, which generally are in accordance to the Community guidelines for the development of the TEN-T. More particularly, within the IPA priorities for transport infrastructure are the TEN-T and the interconnection and interoperability between national networks and between national networks and TEN-T. Some of the principals that are followed are the compliance with EC Directives and the Coherent strategy; the investment of transport infrastructure providing economic growth for the beneficiary countries and the Member States; the combination with alternative financial sources (IFIs); synergies with other Community policies; focus on TEN-T and access thereto; focus on rail transport and, for both sectors technical assistance for preparation and capacity building (Erich Unterwurzacher - European Commission, Regional Policy, 2007). Under the component of Regional development, apart from the support to operations under the priority of transport infrastructure, technical assistance may be granted for preliminary studies and technical support related to eligible activities, including those necessary for their implementation. Technical assistance may also finance preparatory, management, monitoring, evaluation, information and control activities and activities to reinforce the administrative capacity for implementing the assistance under the IPA Regulation provided through this component. Expenditure under this component is eligible if it has actually been paid after the signature of the financing agreement following the adoption of the relevant programme. In the case of major projects, expenditure is not eligible before the Commission Decision approving the major project has been adopted. 9 All the countries eligible for funding from ENPI are Algeria, Armenia, Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, Lebanon, Libya, Moldova, Morocco, Palestinian Authority of the West Bank and Gaza Strip, Russian Federation, Syria, Tunisia, Ukraine. 25

39 As part of an operational programme, assistance under the regional development component may finance major projects, as the transport projects related to SEETAC project. A major project comprises a series of works, activities or services and is intended, in itself, to accomplish a definite and indivisible task of a precise economic or technical nature, which has clearly identified goals and whose total cost exceeds EUR 10 million. Major projects shall be submitted to the Commission for approval by the relevant operating structure. The Decision approving the project will define the physical object and the eligible expenditure to which the co-financing rate for the priority axis applies. It will be followed by a bilateral agreement with the beneficiary country, laying down those elements. When submitting a major project to the Commission, the operating structure will provide the information as information on the body to be responsible for implementation; information on the nature of the investment and a description of its financial volume and location; results of feasibility studies; a timetable for the implementation of the project before the closure of the related operational programme; an assessment of the overall socio-economic balance of the operation; an analysis of the environmental impact and the financing plan (European Commission Regulation, 2007). Regarding ENPI, according to the related Regulation (EC) No 1638/2006, the programmes and projects financed under this are consistent with European Union policies. They comply with the agreements concluded by the Community and its Member States with the partner countries and respect commitments under multilateral agreements and international conventions to which they are parties, including transport investments. Efficient, multimodal and sustainable transport systems are necessary to generate more trade and tourism between the Union and its neighbours. Only if the transport sectors of partner countries are able to handle today s complex transport flows will they be able to take full advantage of closer relations and improved market access. Operational changes to the way the transport sector is structured (e.g., introduction of competition in port services and air transport, modern regulatory frameworks, more efficient road haulage operations, inter-operability of railway systems etc.) can have a major impact on the efficiency of transport. Another important task is to step up aviation relations with partner countries with the aim to open up markets and to co-operate on safety and security issues. The Action Plans will contain specific provisions to address these issues. It is essential to improve the physical transport networks connecting the Union with neighbouring countries. In view of the costs involved, it will be crucial to co-ordinate closely in drawing up investment plans for these networks. Existing initiatives such as the Pan-European Transport Network Concept, various Pan-European Transport Conferences, or the Commission s proposals of June 2003 for a Euro-Mediterranean transport network provide a sound basis to move forward. Concrete needs will be explored on a case-by-case basis. The Action Plans will also contain specific provisions to address the vulnerability of transport networks and services vis-à-vis terrorist attacks. The highest attention will be paid to enhance the security of air and maritime transport (Commission of the European Communities, 2004). Despite the general guidelines for the transport investments eligible for the IPA and the ENPI Assistance, the research that took place has not come up to any specific rules for the granting infrastructure in every distinct mode of transport. Thereby, the strategy and the guidelines remain the same as they are defined by Union guidelines for the development and the granting of Community financial aid in the field of the TEN-T. 26

40 Offered services, type and terms of financing The Community contribution, the specific offered services, the type and the terms of financing by the IPA assistance are calculated in relation to the eligible expenditure as defined by the specific provisions for each IPA component. So, the Community contribution for the transport investments is defined by the eligible expenditure under the the component of Regional development. Financing decisions adopting the annual or multi-annual programmes for this IPA component set the maximum indicative amount of the Community contribution and the subsequent maximum rate for each priority axis. In particular, the Community contribution does not exceed the ceiling of 75% of the eligible expenditure at the level at the priority axis. In exceptional and duly justified cases, with regard to the scope of the priority axis, this ceiling may reach 85%. No operation benefits from a higher cofinancing rate than the one relating to the priority axis concerned. Infrastructure projects can be concerned as revenue-generating projects because their operation is subject to charges borne directly by users and they generate revenues. Public expenditure for revenue-generating projects, used for calculating the Community contribution in accordance with the related Regulation, is equal to the discounted value of the investment cost of the proposed project less the discounted value of the net revenue, calculated by deducting the operating costs from the global revenues from the investment over the appropriate reference period, depending on the project's financial features. Where not all the investment cost is eligible for co-financing the net revenue is allocated pro rata to the eligible and non-eligible parts of the investment cost. In the calculation, the operating structure takes account of the reference period appropriate to the category of investment concerned, the category of project, the profitability normally expected of the category of investment concerned and of the application of the polluter-pays principle, and, if appropriate, of considerations of affordability, in particular in the environment sector. Payment by the Commission of the Community contribution is made within the limits of the funds available. In the case of multi-annual programmes, each payment is posted to the earliest open budget commitments of the IPA component concerned. Payments take the form of pre-financing, interim payments and payment of the final balance. By 28 February each year, the beneficiary country should send to the Commission a forecast of its likely payment applications for the financial year concerned and for the subsequent financial year, in relation to each IPA component or programme. The Commission may ask for an update of the forecast as appropriate. The combined total of pre-financing and interim payments shall not exceed 95% of the Community contribution as set out in the financial table of each programme. When this ceiling is reached, the national authorising officer continues transmitting to the Commission any certified statement of expenditure, as well as information about the amounts recovered. The expenditure may be covered by Community financing only if it has been incurred and paid by the final beneficiary. Expenditure paid by final beneficiaries should be substantiated by receipted invoices or accounting documents of equivalent probative value or other relevant documents, where, according to the programme, assistance is not a function of expenditure. Expenditure must have been certified by the national authorizing officer (European Commission Regulation, 2007). The financial reference amount for the implementation of this Regulation for the period from 2007 to 2013 is EUR million. The annual appropriations shall be authorised by the budgetary authority within the limits of the financial framework (European Commission - Regional Policy, 2006). 27

41 Regarding the Community assistance under ENPI funding, it is implemented through either country, multi-country and cross-border strategy papers and multi-annual indicative programmes or joint operational programmes for cross-border cooperation. The financial envelope for implementation over the period 2007 to 2013 is EUR million. A minimum of 95% of the financial envelope is allocated to the country and multi-country programmes and up to 5% of the financial envelope shall be allocated to the cross-border cooperation programmes. Annual appropriations shall be authorised by the budgetary authority within the limits of the financial framework (European Commission - European Neighbourhood Policy, 2006). Since 2004 an amount of EUR 35 million has been allocated to Transport, with an additional EUR 7 million coming from the Central Asia Indicative Programme, bringing the total amount of funds committed and spent by the EU on transport projects since 1993 to EUR 163 million. These funds were spent through the TRACECA framework. EU funding for transport has centred on the financing of feasibility studies for road, maritime and rail infrastructure projects across the ENPI Eastern and Central Asian regions. The Indicative Programme will mainly support multilateral cooperation to further the objectives of the Eastern Partnership, notably to create the necessary conditions to accelerate political association and further economic integration between the EU and interested partner countries, and the objectives of the Black Sea Synergy, which are to promote and support cooperative approaches to regional challenges around the Black Sea. The programme will also contribute to advancing the Northern Dimension and the Baku Initiative. Finally, it will complement the support to the objectives of the respective National Indicative Programmes. For the period , a total of EUR million has been allocated to the Regional East Programme. Within this Programme, there is defined the priority area of Economic Development, where is included the sub-priority of transport investments. The indicative allocation for this priority will be EUR 72 million for the period or the 20,7% of the Indicative Allocations. Under the sub-priority of the transport projects investments some of the main objectives related to the SEETAC project is the putting in place of a modern, compatible and interoperable physical infrastructure network across the various TRACECA countries, which links partner countries to the TEN-T; the provision of regional-level assistance for the gradual integration of the transport markets of the ENPI Eastern countries and the Central Asian countries and the gradual regional convergence of policies and approximation to EU norms and standards; and the improvement of the performance and services of transport operations, in particular in the areas of maritime and aviation safety, by inter alia aligning air traffic management and maritime and aviation security with international standards (European Commission - European Neighbourhood Policy) Community Funding Programmes EU provides financial assistance through various community programmes in a broad range of fields, transport included. Different organisations, bodies and companies from all Member States can participate, as well as participants from non-member States according to their agreements with the EU. The Community Programmes are a series of integrated measures accepted by the European Commission aiming to strengthen the co-operation among the Member States regarding Community policies for a period of time. The Community Programmes are financed from the general budget of 28

42 the Community. All Acceding and Candidate countries participants at the SEETAC project have the opportunity to participate in the programmes, although, as a main condition of participation, an annual fee has to be paid to the budget. Community Programmes are tied to the Community Transport Policy. The Community decides on the type of programmes, their budgets and their durations. Any legal entity (sometimes individuals, too) can submit a proposal. The submission, evaluation and settlement of the accounts along with the full administration belong to the Administration of the Directorate-General for Mobility and Transport (DG MOVE) of the European Commission. The proposals can be submitted in a consortium with the participation of minimum two or more organisations from the EU Member States (specified in the Calls for Proposals). The applicants are directly in contact with EC officers, from the submission till the closure of the project. However, each participating country opens a national programme office or agency (either within a competent Ministry or within a separate organisation) whose task is the collection of information and mediation in order to assist the national applicants. In some cases the national programme coordinators have higher responsibility and competence Marco Polo Legal basis, mission, history Marco Polo II is an instrument for financial assistance that stimulates combined transport competitiveness. The first Marco Polo programme entered into force in August 2003 with a budget of EUR 102 million and it ran to The legal basis for the first phase of the programme was Regulation 1382/2003 adopted on 22 July It was replaced on 24 October 2006 by Regulation 1692/2006, which launched Marco Polo II with a significantly modified set of rules. These were updated by Regulation 923/2009 of 16 September 2009 which amended the 2006 legislation by simplifying procedures and raising benefits. The current Marco Polo II programme runs from 2007 to The total amount available for funding under Marco Polo II is EUR 450 million. Attentive to the needs of users and potential users, Marco Polo II is considered more client-friendly than its predecessor. The overall objective of the programme is to ease road congestion and its attendant pollution by promoting a switch to greener transport modes for European freight traffic; railways, sea-routes and inland waterways. The Marco Polo funds can only support projects that include international routes. Companies with viable projects to shift freight from roads to greener modes can turn to Marco Polo for financial support. More than 500 companies have already done so successfully since the programme was launched in Every year, the Marco Polo work programme outlines the main themes, priorities and criteria and consequently a new batch of projects are qualified for funding. The SEETAC projects could be among them. The Marco Polo Work Programme 2011 was adopted by the EC on 31 March 2011 and the Marco Polo II Call for Proposals 2011 was published in October 2011 and closed in January 2012 (European Commission - Marco Polo Work Programme, 2012). 29

43 Topics and regions of activity Five types of projects which shift freight from Europe's congested roads onto rail, short-sea shipping routes and inland waterways, or which avoid road transport, are eligible for Marco Polo grants. The main category concerns direct modal-shift projects (switching to another mode of transport such as rail or sea). The other four include catalyst actions which promote modal shift, motorways of the sea actions between major ports, traffic avoidance actions which reduce transport volumes, and common learning actions. To qualify for funding, projects must involve international traffic. Passenger transport projects do not qualify. For mixed projects, like ferry services, only the freight segment is eligible. Marco Polo does not cover air transport. Pure infrastructure projects, research or study projects also fall outside its scope (European Commission - Marco Polo Work Programme, 2012). According to the Marco Polo Work Programme 2011there are five distinct types of supported action: Modal shift actions, which focus on shifting as much freight as economically meaningful under current market conditions from road to short sea shipping, rail and inland waterways. They may be proposing start-up of new services or significantly enhance existing services. They shall be robust, but not necessarily innovative: just shift freight off the road. Catalyst actions change the way non-road freight transport is conducted in the Union. Under this type of action, structural market barriers in European freight transport are overcome through a highly innovative concept: causing a real break-through. This is essentially done in three steps by applicants: first the barrier must be clearly defined, then a highly innovative solution presented, and finally a modal shift service of great growth potential for freight transport is proposed for timely implementation. Dissemination of results must be ensured within the duration of the EU grant. Motorways of the sea actions change achieving a door-to-door service, which shift freight from long road distances to a combination of short sea shipping and other modes of transport. Actions of this kind are innovative at a European level in terms of logistics, equipment, products and services rendered, imply high quality and frequent transport services, move frequently very large volumes of freight and include, preferably, the use of the most environmentally friendly transport modes, such as inland waterways and rail for hinterland freight transport and integrated door-to-door services. Dissemination of results must be ensured within the duration of the EU grant. The Motorways of the Sea actions shall be consistent with the features of the Motorways of the Sea priority project defined in the TEN-T guidelines. Traffic avoidance actions integrate transport into production logistics: reducing freight transport demand by road with a direct impact on emissions. Actions of this type shall be 30

44 innovative and shall not adversely affect production output and production workforce. Dissemination of results must be ensured within the duration of the EU grant. Common learning actions enhance knowledge in the freight logistics sector and foster advanced methods and procedures of co-operation in the freight market, with an overall objective of promoting intermodal solutions. Under this type of action, improvement of cooperation and sharing of know-how is encouraged: training on how to cope efficiently and in a sustainable manner with increasingly complex transport and logistics solutions. Dissemination of results must be ensured within the duration of the EU grant (European Commission - Marco Polo Work Programme, 2011). Commercial undertakings from the current 27 EU Member States and close third countries such as all Candidate States, EFTA Countries as well as others due to their geographical proximity can fully participate in Marco Polo II upon signing bilateral agreements. Projects carried out by a single commercial undertaking as well as consortia, established in an EU Member State or coming from EFTA/EEA countries or Croatia, may receive support. The companies need to be established legal entities. The commercial undertakings involved in a consortium can be linked or subsidiaries, so that undertaking A controls more than 50% of undertaking B. From the beginning of the activity of the programme undertakings from EU Member States and "close third countries", such as all Candidate States, EFTA Countries as well as others due to their geographical proximity are eligible to participate in Marco Polo projects. However, only costs incurred on the territories of EU Member States or countries which have concluded Special Agreements (e.g. Memorandum of Understanding) with the EU are eligible for Marco Polo funding. The practical consequence for calculating the lengths of the transport routes is that only route sections going through participating countries which are eligible for funding are to be used. Such countries are considered as "fully participating countries". This is important when calculating the tonne-kms figure (modal shift volume), but also to estimate the environmental benefit of the modal shift realised by the freight transport service proposed in the project. Commercial undertakings from candidate countries States, which are scheduled to join the EU in the years to come, are eligible to participate in the Marco Polo programme. However, according to financial arrangements required for a full participation of undertakings from these countries, the conclusion of a Special Agreement between the EC and the respective country is needed. Croatia has signed a Memorandum of Understanding with the EC which enables Croatian undertakings to take part in the programme as of the Call Nevertheless, undertakings from other candidate countries may participate in the programme without a special agreement. However, project costs arising on the territory of these candidate countries are not eligible for funding under Marco Polo and the environmental benefits generated on 31

45 their territory cannot be included in the project's key figures. Undertakings from third countries not fully participating to the Marco Polo II programme cannot be lead partners of a project; they therefore need to be part of a wider consortium, headed by an undertaking from an EU Member State or a fully participating country. Administrations cannot participate in Marco Polo II projects. However, administrations may be up to 100% owners of a participating commercial undertaking. Associations can participate as long as they are a separate legal entity and they have a Value Added Tax (VAT) number or a commercial registration number. Airports can participate as partners if the objective of the project is in line with Marco Polo's objectives, e.g. moving freight off the road. An airport can for example be an origin or destination point in a transport chain supported by the programme. Concerning the ports, the eligibility criteria for Motorways of the Sea actions foresee that only "category A" ports (i.e. ports with a total annual traffic volume of not less than 1,5 million tonnes of freight or passengers) may apply for funding. This is in conformity with the revised Marco Polo II Regulation (Article 5), which foresees that all actions shall be consistent with the features of the Motorways of the Sea priority project defined in the framework of Decision No 1692/96 EC and where in Article 12(2) the ports of "Category A" are defined (European Commission - Marco Polo Work Programme, 2012) Strategy and guidelines generally and per mode of transport The general strategy for Marco Polo funding is defined by the eligibility and selection criteria and the political priority targets. The following eligibility criteria define the scope of the call and apply to five types of actions: Uniqueness: the type of action for which a project is proposed must be clearly specified by the applicant. Transport Services: the proposal must dominantly concern transport services or logistics concepts in the market place, i.e. infrastructure, research or study projects are not eligible. European Dimension - Undertakings: an action can be submitted by either a single undertaking or by a consortium of undertakings established in any EU Member State or fully participating country. In case of actions submitted by consortia, one undertaking should be identified as the lead partner. An undertaking from a close third country may also be involved as an associated partner (not as a lead partner) to a project. European Dimension - Cost: the budget will only finance costs arising on the territories of the European Union or fully participating countries. Legal or natural persons established outside these countries cannot be the recipients of European Union funds under this call in a capacity of project partner. Their costs shall not be eligible. Furthermore, subcontracting to legal or natural persons established outside these countries shall be duly justified in view of the 32

46 technical and economic necessity and may not be used to circumvent the eligibility rules applicable to project partners. Type of Legal Entity: all project participants must be legal persons. They must be privately or publicly owned commercial undertakings. Public law entities engaged in economic activities in accordance with their national laws are entitled to participate. Natural persons are not eligible. Project partners must prove the status of being a commercial undertaking, for instance by providing a Value Added Tax (VAT) number or being listed in the commercial register. Start-up of action: the action must start the proposed service or activity between 1 July 2010 and 1 July No grant may be awarded retrospectively for actions already completed. All projects submitted for financing will have to comply simultaneously with all the corresponding eligibility criteria per type of action mentioned below and they must be in compliance to the political priority targets for every distinct type of supported action and consequently for every mode of transport funded are the following: 1. Inland Waterway Transport: Positively evaluated proposals presented with the objective of shifting freight transport from roads to Inland Waterways will have a preference over the rest of successful proposals for up to 10% of the available budget for the year. 2. Short sea shipping (SSS)-based projects which implement innovative technologies or operational practices which significantly reduce polluting emissions of maritime transport: In order to address the environmental challenges faced by the short sea shipping sector, a political priority is established to encourage the sector to use services which implement innovative technologies or operational practices which significantly reduce polluting emissions of maritime transport. 3. Single Wagonload Traffic (SLW): In order to address the emerging problem of decreasing support for SWL traffic in the market, encourage Single Wagonload Traffic, defined as less-than-trainload rail traffic not using intermodal load-units. 4. Modal shift actions, Motorways of the Sea and Traffic avoidance actions: Reinforce interconnections between modes of transport and the integration of freight services at terminals; Reduce road congestion especially in the main traffic bottlenecks in the European Union and improve the environmental performance of the freight transport system within the European Union; Support actions in the freight transport, logistics and other relevant markets, taking into account the needs of SMEs; 33

47 The envisaged route, from which transport is shifted by the action, must be situated on the territory of at least two EU Member States or on the territory of at least one EU Member State and a close third country. The action achieves its objectives within a period of a maximum of 36 months. The minimum modal shift proposed by the action shall be an average of 60 million tonne-kilometres, or its volumetric equivalent, per year. In the specific cases of projects aiming at: a. modal shift from road to inland waterways, the minimum modal shift proposed by the action shall be an average of 13 million tonne-kilometres, or its volumetric equivalent, per year; and b. modal shift from road to Single Wagonload Traffic, the minimum modal shift proposed by the action shall be an average of 30 million tonne-kilometres, or its volumetric equivalent, per year. Concerning the Motorways of the Sea, the envisaged route from which freight is shifted by the action is situated on the territory of at least two EU Member States or on the territory of at least one EU Member State and a close third country. The Motorways of the Sea actions shall be consistent with the features of the Motorways of the Sea priority project defined in the TEN-T guidelines. The action achieves its objectives within a period of a minimum of 36 months and a maximum of 60 months. Therefore, regarding projects within the EU, only those relating to the category A ports as defined in Article 12(2) of the said Decision will be eligible to Marco Polo funding under the Motorways of the Sea actions. The minimum modal shift proposed by the action shall be an average of 200 million tonne-kilometres, or its volumetric equivalent, per year. Regarding the Traffic avoidance actions, the envisaged routes on which freight is avoided by the action are situated on the territory of at least two EU Member States or on the territory of at least one EU Member State and a close third country. The action achieves its objectives within a period of a minimum of 36 months and a maximum of 60 months. The minimum traffic avoidance proposed by the action shall be an average of 4 million vehicle-kilometres or 80 million tonne-kilometres per year. 5. Catalyst actions: Intra-European maritime freight services, meeting at least one of the conditions below: Roadcompetitive quality of service; Central integrated control of the services and offer of a doorto-door concept; High-quality in terms of punctuality, client information and transhipment concepts. Interoperable rail services, meeting at least one of the conditions below: Road-competitive quality of service; Central integrated control of the services and offer of a door-to-door concept; Guaranteed departures and arrival times; Compensation system for quality deficiencies; Applied international interoperability of equipment, safety or information systems. 34

48 Transport services that shift road freight traffic to a combination of rail and inland waterways modes of transport in which road journeys are as short as possible, meeting at least one of the conditions below: Road-competitive quality of service; Central integrated control of the services and offer of a door-to-door concept; Optimisation of transhipment with other modes in terms of cost efficiency, handling speed and information technology. The envisaged route from which freight is shifted by the action is situated on the territory of at least two EU Member States or on the territory of at least one EU Member State and a close third country. The action achieves its objectives within a period of a minimum of 36 months and a maximum of 60 months. The minimum modal shift proposed by the action shall be an average of 30 million tonne-kilometres, or its volumetric equivalent, per year. 6. Common learning actions: Common learning actions related to intermodal transport including training, addressing at least one of the following topics: Adapting procedures and methods in transport systems to meet today s logistics requirements; Improving procedures and methods in sea and inland ports; Sharing knowledge, learning, exchanging experience for the stakeholders of existing or potential Motorways of the Sea actions; The action achieves its objectives within a period of a maximum of 24 months. The minimum indicative grant threshold per action is EUR Applicants submitting SSS-based projects under the modal shift, Motorways of the Sea and catalyst actions must demonstrate that for the achievements of the projects' objectives they use innovative technologies or operational practices which significantly reduce polluting emissions of maritime transport (European Commission - Marco Polo Work Programme, 2011). According to the general strategy about the eligible projects and costs to be funded under Marco Polo, national routes are not eligible for funding, based on the subsidiarity principle the Marco Polo II Regulation and only projects with international routes can be supported. Air transport is not covered by Marco Polo because this mode of transport is not deemed to generate less external costs than road transport. Pure infrastructure projects are not eligible for funding under the Marco Polo programme. However, for all actions with the exception of Common Learning Actions, ancillary infrastructure costs may be included as eligible costs - up to a maximum of 20% of the total eligible costs. Ancillary infrastructure is considered as "the necessary infrastructure to achieve the goals of the actions, including freight-passenger installations". Pursuant to the Marco Polo II Regulation (EC) No. 1692/2006, the Work Programme 2011 covers additional accompanying measures reacting for emerging policy needs and focusing on preparation of future actions in the general context of the programme. The actions to be financed by the programme in 2011 embrace: Impact assessment on evaluation and possible revision of the EU intermodal policy to be realised through open tender for service contract with estimated budget of EUR The 35

49 procurement procedure is expected to be launched in the second quarter of 2011; Study on Establishment of a Single Transport Document and Liability Regime for Multimodal Transport to be realised through open tender for service contract with estimated budget of EUR The procurement procedure is expected to be launched in the second quarter of 2011; Study on Single Wagonload Traffic in Europe to be realised through open tender procedure for service contract with estimated budget of EUR The procurement procedure is expected to be launched in the second quarter of Organisation and implementation of a 'Promotion Vessel Tour' on inland waterways to be realised through open tender procedure for service contract with an estimated budget of EUR The objectives of the action are raising awareness for inland waterway transport (IWT), showing the potential of IWT, promote (inland) ports as the nodal interface between IWT and the logistic chain and industrial sites, attracting young people to the profession and addressing the multipurpose usage of inland waterways. The action would cover, in collaboration with and taking into consideration possible similar events, the running of an inland vessel(s) on selected European inland waterways (e.g. the Rhine and/or Danube) and dissemination events at a number of ports/cities. Examples of events would be exhibitions onboard in combination with 'open days in ports' and specific events for local industries and the IWT sector. Target groups are the general public living along the river, young people, industry and logistic organisations. The procurement procedure is expected to be launched in the second quarter of Contribution to European programme for the support of Short Sea Shipping (budgetary line ) to be realised through a grant under Article 168(1)(f) of the Implementing rules to European Shortsea Network (ESN) composed of Short Sea Promotion Centres (SPCs). The priority and the objective of the action are to provide neutral and objective information to shippers and freight forwarders on transport solutions including a Short Sea Shipping leg. The foreseen results are the realisation of a programme of actions for the promotion of short sea shipping. The estimated contribution is of EUR The reception of application is expected in the second quarter of The maximum co-financing rate shall be 50% (European Commission - Marco Polo Work Programme, 2012) Offered services, type and terms of financing The EC-subsidy may be given in addition to other public funding, as long as this does not constitute illegal state aid, and as long as the combined public subsidy does not surpass the maximum subsidy rate of eligible costs. This rate is action type dependent: 35% for Modal shift actions, Catalyst actions, Motorways of the sea actions and Traffic avoidance actions; and 50% for Common Learning actions. However, requesting a Marco Polo grant for eligible costs of an action already funded by another EC scheme is not permitted. Neither can a second EC-subsidy from another ECscheme concerning eligible costs of an action funded under the Marco Polo Programme be granted (no double financing). 36

50 The key guidelines for the different actions supported by the current Marco Polo programme as they were mentioned above are the followings: Modal Shift Actions: Aid to start-up services; Robust, but not innovative: - just shift freight off road; Subsidy of EUR 2 per 500 tkm shifted; at least 60 million tkm shifted on average per year per contract (13 million tkm per year on average for pure inland waterway projects); Subsidy rate up to 35% of eligible costs; Ancillary infrastructure costs eligible up to 20% of total eligible costs; Subsidy up to 36 months funding period; No undue distortions of competition; and Viable after subsidy ends Catalyst Actions: Overcome structural market barriers; Highly innovative: causing a real breakthrough; at least 30 million tkm shifted on average per year per contract; Subsidy rate up to 35% of eligible costs; Ancillary infrastructure costs eligible up to 20% of total eligible costs; Subsidy up to maximum 60 months funding period and minimum 36 months; Dissemination of results; No undue distortions of competition; and Viable after subsidy ends Common Learning Actions: Improve co-operation and sharing of know-how; Mutual training: coping with an increasingly complex transport and logistics market; Minimum subsidy threshold EUR ; 37

51 Subsidy rate up to 50% of eligible costs; Subsidy up to 24 months funding period; No undue distortions of competition; and Dissemination of results Motorways of the Sea Actions: Modal shift by introducing a door-to-door service of short sea shipping and other modes of transport; Subsidy of EUR 2 per 500 tkm shifted; Subsidy rate up to 35% of eligible costs; at least 200 million tkm shifted on average per year per contract; Ancillary infrastructure costs eligible up to 20% of total eligible costs; Subsidy up to maximum 60 months funding period and minimum 36 months; Only projects relating to category A ports within the TEN-T; No undue distortions of competition; Viable after subsidy ends; and Dissemination of results Traffic Avoidance Actions: Integrating transport into production logistics to avoid a large percentage of freight transport by road without adversely affecting production output or workforce; Subsidy of EUR 2 per 500 tkm shifted or EUR 2 per 25 vehicle-kilometres of road freight; Subsidy rate up to 35% of eligible costs; at least 80 million tkm or 4 million vkm avoided on average per year per contract; Ancillary infrastructure costs eligible up to 20% of total eligible costs; Subsidy up to maximum 60 months funding period and minimum 36 months; No undue distortions of competition; Not adversely affecting production output or workforce; and Dissemination of results 38

52 The proposed budget for 2011 is approximately EUR 67,5 million with which the Commission envisages to fund around thirty-six (36) projects. This proposed budget also includes foreseen funding in the amount of EUR for certain administrative expenses such as acquiring external expertise, organisation of meetings, dissemination of information, external studies and publications as well as any other administrative expenses that have to be accounted for, including the annual transfer to the Executive Agency for Competitiveness and Innovation (EACI) of EUR 1,592 million to cover the Agency's administrative expenses. Furthermore, the proposed budget includes a maximum of EUR for implementation of the marketing activities aimed at promoting the Programme, which will in 2011 be allocated either through EACI for commitment through its framework contracts or through the framework contracts of the Commission. Finally, the proposed Programme's budget for 2011 also includes the amount of EUR million which will be used to finance the accompanying measures as referred above (European Commission - Marco Polo Work Programme, 2011) Seventh Framework Programme -FP Legal basis, mission, history The legal basis of the Seventh Framework Programme of the European Community for research, technological development and demonstration activities for the period is defined by the Decision No 1982/2006/EC of the European Parliament and of the Council of 18 December The Framework Programmes are the European Union s main means for funding research in Europe. The primary aim of the Seventh Framework Programme for research and Technological Development is to contribute to the strategic goals of the Lisbon strategy and help Europe to become the most competitive and dynamic knowledge-based economy in the world. The Seventh Framework Programme is organised in four programmes corresponding to four basic components of European research, which will be described below. The Seventh Framework Programme (FP7) began on 1 January 2007 and runs from FP7 has a massive budget of nearly EUR 50 billion. Transport research receives EUR 4,16 billion of this money in order to be injected into transport research during FP7 to create safer, greener and smarter European transport systems and develop European competitiveness in the global market. Concerning the previous Framework Programmes, the Sixth Framework Programme (FP6) for Research, Technological Development and Demonstration Activities ( ) made available a number of instruments for implementing research on selected priority themes, including Sustainable Surface Transport. The Fifth Framework Programme (FP5) set out the priorities for the European Union's research, technological development and demonstration (RTD) activities for the period These priorities were selected on the basis of a set of common criteria reflecting the major concerns of increasing industrial competitiveness and the quality of life for European citizens. During the period , European Union RTD activities were carried out under the Fourth Framework Programme (FP4) and the parallel Euratom Framework Programme covering research and training activities conducted in the nuclear sector. 39

53 Topics and regions of activity The Seventh Framework Programme is organised in four programmes corresponding to four basic components of European research: 1. Cooperation: supporting the whole range of research actions carried out in transnational cooperation in thematic areas as Health; Food, Agriculture and Biotechnology; Information and Communication Technologies; Nanosciences, Nanotechnologies, Materials and new Production Technologies; Energy; Environment (including Climate Change); Transport (including Aeronautics); Socio-economic Sciences and Humanities; Space; and Security. In addition, two themes are covered by the Euratom Framework Programme. These are Fusion energy research and Nuclear fission and radiation protection. In the case of particular subjects of industrial relevance, the topics have been identified relying, among other sources, on the work of different European Technology Platforms. 2. Ideas: supporting investigator-driven research carried out across all fields by individual national or transnational teams in competition at the European level. 3. People: strengthening, quantitatively and qualitatively, the human potential in research and technology in Europe, as well as encouraging mobility. 4. Capacities: supporting key aspects of European research and innovation capacities such as research infrastructures; regional research driven clusters; the development of a full research potential in the Community's convergence and outermost regions; research for the benefit of small and medium sized enterprises (SMEs); Science in Society issues; support to the coherent development of policies; horizontal activities of international cooperation. FP7 also supports the non-nuclear direct scientific and technical actions carried out by the Joint Research Centre (JRC). There are different country categories, which may have varying eligibility for different specific and work programmes of FP7. All Member States, the Associated Countries with science and technology cooperation agreements that involve contributing to the framework programme budget, Candidate Countries currently recognised as candidates for future accession and Third Countries (the participation of organisations or individuals established in countries that are not Member States, candidates or associated and are justified in terms of the enhanced contribution to the objectives of FP7) are eligible for FP7 funding (EUROPA MEDIA Public Service Corporation) Strategy and guidelines generally and per mode of transport As mentioned above, nearly EUR 4,16 billion from the total budget (EUR 50,521 billion) will be injected into transport research during FP7 to create safer, greener and smarter European transport systems and develop European competitiveness in the global market. Research covers all modes of transport of people and goods, divided into two categories; aeronautics and air transport and sustainable surface transport (encompassing rail, road and waterborne forms of transport). 40

54 The work programmes are defined and supported via the annual Work Programmes as well as via the calls with which they are associated. Research priorities outlined in the 2011 Work Programme are based on the overall objectives and research activities defined in the Specific Programme Cooperation of the Seventh Framework Programme, taking into account all the policy objectives of the European Union, such as the Commission Communication Europe 2020 A strategy for smart, sustainable and inclusive growth, the Sustainable Development Strategy, the Marine and Maritime Research Strategy, the European Agenda for Freight Logistics, the establishment of the European Maritime Transport Area without barriers, the EU Maritime Transport Strategy 2018, etc. Based on the above policy context, the strategic objectives of Transport research can be summarized as: Decarbonising and greening the Transport system, by reducing or eliminating CO 2 emission or using carbon neutral fuels, enhancing energy efficiency, and drastic reduction of pollutants such as NOx and particles; Increasing efficiency of the whole Transport system, including all transport modes as well as urban transport planning and mobility, and co-modality, notably by the use of ICT to set up a smart transport system; Improving safety and security of passengers, aircraft, vehicles and vessels, and infrastructures; Strengthening the competitiveness of the European industry, by improving cost efficiency and promoting eco-innovation; Pioneering the Transport of the future (long term perspective), focusing on breakthrough technologies aimed at achieving step changes in the Transport system; Enhancing and strengthening the ERA, by the structuring effect of research projects, joint undertakings and other initiatives, and promoting coordination of MS/AS. The Transport theme takes a holistic transport system approach in addressing the challenges, by considering the interactions of vehicles or vessels, networks or infrastructures and the use of transport services. Such an approach will necessitate the integration of new concepts, knowledge and technologies within a socio-economic and policy context. Generally, the Transport theme covers all four modes of transport: More specifically, in the Road sector the funding priorities are: Creating greener road transport; Encouraging modal shift and decongesting transport corridors; Ensuring sustainable urban mobility; Improving safety and security; and Strengthening competitiveness. In the Rail sector, the funding priorities are: Interoperability; Intelligent mobility; 41

55 Safety and security; Environment; and SEETAC WP5 Identification of necessary financial resources Innovative materials and production methods. Concerning Waterborne transport, the funding priorities are: Safe, sustainable and efficient waterborne operations; A competitive European maritime industry; and Managing and facilitating growth and changing trade patterns. In the Aeronautics and air transport sector, the funding priorities are: The greening of air transport; Increasing time efficiency; Customer satisfaction and safety; Improving cost efficiency; Protection of aircraft and passengers; and Air transport of the future. Finally, regarding the Multimodal transportation: Research undertaken under the Seventh Framework Programme will also seek more efficient use and greater integration of all four modes by funding research in multimodal transport. In addition, transport research under FP7 will provide support to the European global satellite navigation system Galileo and EGNOS. Concerning the aeronautics and air transport, a long-term vision for what aeronautics should look like in 2020 feeds the research priorities, and therefore determines which projects get funding. Thus the following areas are priorities for aeronautics and air transport in FP7: the greening of air transport; increasing time efficiency; ensuring customer satisfaction and safety; improving cost efficiency; and protecting the aircraft and passengers. 42

56 The programme for Aeronautics and Air transport in FP7 includes the full range of research and technology development from basic research to large scale technologies integration and validation activities in support of research as well as policy related activities, in particular in the area of airport capacity. The scope of the research covers the entire Surface Transport System and embraces all its elements: products (vehicles, vessels and infrastructures), services, operations and users integrating organizational, legal and policy frameworks. The policy dimension of the Work Programme is derived from the objectives and priorities described in the White Paper on Transport European Transport Policy for 2010 and its midterm review Keep Europe moving and takes into account major policy initiates that may impact on transport, in particular energy and environment. The industrial dimension of the Work Programme has benefited from inputs provided by the relevant stakeholders, in particular through the contribution of the various Surface Transport Technology Platforms: ERTRAC (road transport), ERRAC (rail transport) and WATERBORNETP (waterborne transport) and the EGCI Ad-Hoc Industrial Advisory Group. Inputs from other discussion forums have equally been taken into account. The 2011 work programme is divided into two major action lines: 1. Six activities are addressed, reflecting the strategic and policy challenges facing Europe: The greening of surface transport; Encouraging modal shift and decongesting transport corridors (co-modality); Ensuring sustainable urban mobility; Improving safety and security; and Strengthening competitiveness. These five activities are complemented with cross-cutting actions addressing several activities. 2. Actions supported under the European Green Cars Initiative The European Green Cars Initiative belongs to the European Economic Recovery Plan, an initiative to coordinate efforts and implement joint actions to contain the scale of the economic downtown and to stimulate demand and confidence. Within the Recovery Plan, the European Green Cars Initiative is a series of measures boosting research and innovation aiming at facilitating the deployment of a new generation of passenger cars, trucks and buses that will spare our environment and lives and ensure jobs, economic activity and competitive advantage to car industries in the global market. 43

57 The activity of encouraging modal shift and decongesting transport corridors, for which the SEETAC project is mostly concerned, support developing and demonstrating seamless door-to-door transport for people and goods as well as technologies and systems to ensure effective intermodality, including in the context of rail and waterborne transport competitiveness. This includes activities addressing the interoperability and operational optimization of local, regional, national and European transport networks, systems and services and their intermodal integration in an integrated approach. The activities will aim at European-wide strategies, optimized use of infrastructure including terminals and specialized networks, improved transport, traffic and information management, enhanced freight logistics, passenger intermodality and modal shift strategies to encourage energy efficient means of transport. Intelligent systems, new vehicle/vessel concepts and technologies including loading and unloading operations as well as user interfaces will be developed. Knowledge for policy making will include infrastructure pricing and charging, assessments of European Union transport policy measures and trans-european networks policy and projects (European Commission - Seventh Framework Programme, 2010) Offered services, type and terms of financing Actions implemented on the basis of decisions by the Council and the European Parliament (or by the Council in consultation with the European Parliament), based on a proposal from the Commission, the Community will provide financial support to multi-financed large-scale initiatives. Such actions could be: A financial contribution from the Community to the joint implementation of well identified national research programmes, on the basis of Article 169 of the Treaty; A financial contribution from the Community to the implementation of Joint Technology Initiatives to realise objectives that cannot be achieved through the funding schemes identified in point calls for proposals for Collaborative projects; and A financial contribution from the Community to the development of new infrastructures of European interest The FP7 Rules for Participation propose three potential forms of grant for the Community financial contribution: reimbursement of eligible costs, flat rate financing including scale of unit costs, and lump sum financing. In the 2011 Transport Work Programme, for all funding schemes, the reimbursement of eligible costs (including the different options for flat rates on indirect costs) will be the only form of grant used. Three exceptions to this apply. Pursuant to the Rules for Participation and Commission Decision C(2007)2287 of 4 June 2007, participants from International Cooperation Partner Countries may choose to opt for lump sum financing. In accordance with the Commission Decision of 23 March 2009 under reference C(2009)1942, the present work programme provides for the possibility to use flat rates to cover subsistence costs incurred by beneficiaries during travel carried out within grants for indirect actions. 44

58 The calls will be implemented by the following funding schemes: Collaborative Projects (CP), which can be subdivided in small or medium-scale focused research projects (CP-FP), large scale integrating projects (CP-IP), and collaborative projects for Specific International Cooperation Actions (CP-SICA) dedicated to international cooperation partner countries. Coordination and Support Actions (CSA), which can be aiming at coordinating (CSA-CA) or at supporting (CSA-SA). Research for the Benefit of Specific Groups Civil Society Organizations (BSG-CSO) aimed at developing scientific knowledge related to CSOs activities in order to contribute to public debate. The funding schemes applicable to each topic are indicated in the Work Programme as well as in the call fiches, along with guidance on the expected level of ambition and other relevant information. Limits on the EU financial contribution apply where indicated. These limits are additional eligibility criteria. They are indicated in the call fiches. The proposals not fulfilling these criteria will be considered as ineligible (European Commission, 2010) Connecting Europe Facility Legal basis, mission, history On 19 October, the European Commission adopted a Proposal for a Regulation of the European Parliament and of the Council establishing the Connecting Europe Facility 10. European Union level intervention, through grants and financial instruments, will focus on initiatives that eliminate or reduce market fragmentation, increase European security, have considerable growth enhancement potential and/or socio-economic benefits which cannot be captured or monetised at project level. The Connecting Europe Facility package tables a plan which will fund EUR 50 billion worth of investment to improve Europe's transport, energy and digital networks, by financing projects which fill the missing links. It aims at making Europe's economy greener by promoting cleaner transport modes, high speed broadband connections and facilitating the use of renewable energy in line with the Europe 2020 Strategy. The Commission expects Connecting Europe Facility investments to act as a catalyst for further funding from the private and public sector by giving infrastructure projects credibility and lowering their risk profiles. To assist with the financing of the Connecting Europe Facility, the Commission has also adopted the terms for the Europe 2020 Project Bond Initiative which will be one of a number of risk-sharing instruments upon which the facility may draw in order to attract private finance in projects. It is the first time the Commission is proposing a single funding instrument for the three network sectors, true to its commitment to create synergies and simplification of rules and it is expected to contribute to complete the European single market. The Connecting Europe Facility aims to better mobilise private financing and allow for innovative financial instruments such as guarantees and project bonds to gain maximum leverage from this EU 10 COM(2011) 665, Brussels,

59 funding injection. The European Commission will work closely with the EIB to take advantage of capital market investors' interest in long-term investment opportunities with stable revenues. In particular concerning the new European Union core transport network, the proposal aims to transform the existing patchwork of European roads, railways, airports and canals into a unified transport network (TEN-T). The new core network will remove bottlenecks, upgrade infrastructure and streamline cross border transport operations for passengers and businesses throughout the EU. It will improve connections between different modes of transport and contribute to the EU's climate change objectives (European Commission - Mobility and Transport, 2011) Topics and regions of activity Through the Connecting Europe Facility, the Commission adopts a plan for EUR 50 billion boost to European networks focusing on smart, sustainable and fully interconnected transport, energy and digital networks. The Commission has singled put the projects where additional EU investment can have the most impact. The Connecting Europe Facility will invest EUR 31,7 billion to upgrade Europe's transport infrastructure, build missing links and remove bottlenecks. This includes EUR 10 billion ring fenced in the Cohesion Fund for transport projects in the cohesion countries, with the remaining EUR 21,7 billion available for all Member States for investing in transport infrastructure. The idea is to improve links between different parts of the EU, to ease the passenger mobility and the freight transportation between different countries. By focusing on transport modes that are less polluting, the Connecting Europe Facility will push the transport system to become more sustainable. It will also give consumers more choice about how they want to travel. The EU has a crucial role to play in coordinating between Member States when planning, managing and funding cross-border projects, while traditionally transport systems in Europe have developed along national lines. A well-functioning network is essential to the smooth operation of the single market and will boost competitiveness. The Commission proposed to create corridors to cover the most important cross-border projects. It has estimated that by 2020, EUR 500 billion will be needed to realise a real European network, including EUR 250 billion for removing bottlenecks and completing missing links in the core network. The energy sector will ingest EUR 9,1 billion being invested in trans-european infrastructure, helping to meet the EU 2020 energy and climate objectives. The CEF will also help to remove financial gaps and network bottlenecks. The internal market for energy will be further developed through better interconnections, leading to security of supply and the possibility to transport renewable energy in a cost effective manner across the EU. The money from Connecting Europe will act as leverage for more funding from other private and public investors. Finally, the "Connecting Europe Facility" foresees almost EUR 9,2 billion to support investment in fast and very fast broadband networks and pan-european digital services. The CEF finance will leverage other private and public money, by giving infrastructure projects credibility and lowering their risk profiles. On the basis of conservative estimates, the Commission considers that the network infrastructure finance could stimulate investment worth more than EUR 50 billion (European Commission - Multiannual Financial Framework , 2011). 46

60 Strategy and guidelines generally and per mode of transport The new policy supported by the Connecting Europe Facility follows a two-year consultation process and establishes a core transport network to be established by 2030 to act as the backbone for transportation within the Single Market. The financing proposals published on 19 of October 2011 for the period also tightly focus EU transport funding on this core transport network, filling in cross-border missing links, removing bottlenecks and making the network smarter. The new core TEN-T network will be supported by a comprehensive network of routes, feeding into the core network at regional and national level. This will largely be financed by Member States, with some EU transport and regional funding possibilities, including with new innovative financing instruments. The aim is to ensure that progressively, and by 2050, the new transport network, taken as a whole, will deliver safer and less congested travel as well as smoother and quicker journeys. The new policy sets out a much smaller and more tightly defined transport network for Europe. Its aim is to focus spending on a smaller number of projects where real EU added value can be realised. Member States will also face more rigorous requirements in terms of common specifications which will work cross-border, and legal obligations actually to complete the project. The comprehensive network will ensure full coverage of the EU and accessibility of all regions. The core network will prioritize the most important links and nodes of the TEN-T. Both layers include all transport modes: road, rail, air, inland waterways and maritime transport, as well as intermodal platforms. The TEN-T guidelines set common requirements for the TEN-T infrastructure with tougher requirements for the core network. This will ensure fluent transport operations throughout the network. The policy also fosters the implementation of traffic management systems which will allow optimising the use of infrastructure and by increasing efficiency, to reduce CO 2 emissions. The implementation of the core network will be facilitated using a corridor approach. Ten corridors will provide the basis for the co-ordinated development of infrastructure within the core network. Covering at least three modes, three Member States and two cross-border sections, these corridors will bring together the Member States concerned, as well as the relevant stakeholders, for example infrastructure managers and users. European co-ordinators will chair "corridor platforms" that will bring together all the stakeholders these will be a major instrument to guarantee co-ordination, cooperation and transparency. It is estimated that the cost of implementing the first financing phase for the core network for will cost 250 billion and it is to be completed by The 80% of the amount of money the Connecting Europe Facility makes available for transport infrastructure for the next financial period will be used to support: Core network projects priority projects along the 10 implementing corridors on the core network. Funding will also be available for a limited number of other sections projects of high European added value on the core network. Funding for horizontal projects these are IT related such as funding for SESAR (the technological dimension of the Single European Sky Air Traffic Management System), or ERTMS the European Rail Traffic Management System which must be used throughout the major transport corridors. This is a particular priority as another innovation on the new core network is that there are tougher obligations for transport systems to "join up", i.e. to 47

61 invest in meeting mainly existing EU standards, for example on common rail signalling systems. The remaining funding can be made available for ad hoc projects, including for projects on the comprehensive network. The overall priority is to re-focus EU transport funding to create a genuine European network not to just tackle bottlenecks in a more scattered way but to really have a network. In this aspect, a new methodology was drafted on the basis of extensive consultations with Member States and stakeholders. The aim was create a European network, linking the major social and economic centre and gateways to third countries (ports, airports and land connections) and to put in place the keep infrastructure necessary to underpin the Single Market, support competitiveness and economic development. The methodology is based on several steps. First, the selection of major nodes meeting certain statistical criteria, eg capital cities and other important social economic centres, major ports (volume and territorial criteria) as well as major airports (volume and territorial criteria) and gateways to third countries. Second, the process of linking up these nodes with land transport modes rail inland waterway and road (some of which already exists some where there are bottlenecks and some where there are missing links.) Third, incorporating a detailed analysis of major traffic flows passenger and freight. This is essential to define priority sections for the core network and to see clearly piority sections where infrastructure needs upgrading, building, or where bottlenecks need to be removed. On this basis a strategic core network was defined, linking strategically important nodes, multi modals routes and well as taking into account major traffic flows. All projects on the core network are a priority for EU co-financing. However, for the financing period ) a particular importance is given to funding cross border projects which have the highest EU added value (European Commission - Mobility and Transport, 2011) Offered services, type and terms of financing The EUR 31,7 billion allocated to transport under the Connecting Europe Facility of the MFF (Multi-Annual Financial Framework) will effectively act as "seed capital" to stimulate further investment by Member States to complete difficult cross-border connections and links which might not otherwise get built. There is a very strong leverage effect from TEN-T funding. Experience in recent years shows that every 1 million euros spent at European level will generate 5 million from Member State governments and 20 million from the private sector. Added to this leveraged money is now the possibility of new private sector money coming in through innovative financing instruments like project bonds. It will be up to the Member States to submit detailed proposals to the Commission and on that basis funding will allocated. This should happen as of early The precise level of EU funding available also depends on the details for the national proposals. Overall, the EU contribution to a major transport infrastructure development will normally be around 20% of the investment costs for any 7-year budget period. Support for individual studies can be up to 50% and for studies and construction work in the case of cross-border projects for rail and inland waterway connection up to 40%. For certain ITS projects, like ERTMS, higher co-financing of up to 50% can be made available to support Member States making the transition. The rest is from Member States, regional authorities or possibly private investors (European Commission - Mobility and Transport, 2011). 48

62 Financial instruments under the Connecting Europe Facility for infrastructure are likely to include a risk-sharing instrument covering loans and bonds (incl. the Europe 2020 Project Bond Initiative) to respond to the requirements of multiple financing models applied across the EU, the size and sector of projects and the stage of development of project finance and capital markets in general and an equity instrument to complement the toolbox of infrastructure instruments with the objective of further developing EU-wide risk capital markets (European Commission - Economic and Financial Affairs, 2011) Europe 2020 Project Bond Initiative Legal basis, mission, history The EU Budget is a key element to support the growth agenda and to achieve the Europe 2020 policy targets. The stronger use of innovative financial instruments is needed to multiply the outreach of the EU Budget. The importance of the Europe 2020 Project Bond Initiative in supporting investments was announced and highlighted in the recent State of the Union (Strasbourg, 7 September 2010). The Initiative has two objectives: to revive project bond markets and to help the promoters of individual infrastructure projects to attract long-term private sector debt financing. The Project Bond Initiative would set up a means to reduce the risk for third party investors seeking long-term investment opportunities. It will thus act as a catalyst to re-open the debt capital market (currently largely unexploited for infrastructure investments following the financial crisis) as a significant source of financing in the infrastructure sector. Therefore, the Commission after the encouraging feed-back received during the public consultation in spring 2011 and the establishment of the Connecting Europe Facility, using both grants and financial instruments, adopted on 19 October 2011 a legislative proposal launching the pilot phase of the Europe 2020 Project Bond Initiative. Among the financial instruments, comprising both equity and risk-sharing instruments, the Europe 2020 Project Bond Initiative will be one of a number of risk-sharing instruments upon which the facility may draw in order to attract private finance to projects with long-term revenue potential in line with the Europe 2020 policy priorities. The scope of this pilot phase is to test the project bond concept during the remaining period ( ) of the current multi-annual financial framework The objectives of the pilot phase of the Initiative are two-fold: to establish debt capital markets as an additional source of financing for infrastructure projects and to stimulate investment in key strategic EU infrastructure in transport, energy and broadband. The Project Bond instrument will be fully integrated in the next Multiannual Financial Framework under the Connecting Europe Facility. The aim is to attract institutional investors to the capital market financing of projects with stable and predictable cash flow generation potential by enhancing the credit quality of project bonds issued by private companies. The intention is to support capital market financing of projects as a form of finance to complement loans, not to replace other sources of financing, such as grants, nor to 49

63 intervene in stages prior to financing, such as feasibility studies, assessments or procurement, where grants are also widely used (European Commission - Economic and Financial Affairs, 2011). The pilot phase would be managed by the EIB Topics and regions of activity Commercially viable infrastructure projects in the EU, which are eligible for funding under the TEN-T or TEN-E policies or under the CIP-Decision on broadband, could benefit from the initiative, as proposed by the Commission and approved by the co-legislators. The Initiative would be available to those projects that are economically and technically sound and cost-effective and that have a real prospect of financial viability. It will need to be determined whether eligibility extends beyond EU-27 to candidate and other pre-accession countries. An important financial characteristic of a suitable project is stable and strong cash flows, whether the revenue is from users/customers or due to availability payments, where the public sector pays the operator for making infrastructure available according to certain performance criteria. A combination of the user and availability payments, even from multiple sources, is also possible. The aim would be to make the maximum number of projects bankable. The intention is to focus on TEN-T, TEN-E and certain ICT-related projects. However, in the initial phases of the Initiative a compromise might need to be found between supporting large EU priority projects and currently available projects that would help build a large, well granulated and diversified portfolio. In principle, the Initiative will be available to brown-field and green-field projects, in particular in the early stages of its implementation. All projects would, of course, be assessed in detail by the EIB to determine the robustness of their financing structure. In addition, the need to foster and maintain a solid project pipeline is also an important consideration. The EIB, in cooperation with the Commission, will be responsible for developing the project portfolio. Furthermore, projects may also require technical and financial advisory services. Where appropriate, technical assistance from JASPERS and other EU schemes could be made available (European Commission - Economic and Financial Affairs, 2011) Strategy and guidelines generally and per mode of transport During the pilot phase, the EIB and the Commission will work on developing a pipeline of projects thus eligible. Once a project moves from the drawing board and closer to implementation, the EIB would use its specialist expertise to appraise the project, carry out the due diligence and financial analysis in the structuring phase and price the guarantee or loan. Projects would need to provide stable and strong cash flows in addition to being economically and technically feasible. Project sponsors would also need to demonstrate ability to run a funding competition and carry out a project successfully. If the project sponsor decides to use the facility, the project would have to be approved by the EIB in line with standard procedures. The detailed selection and structuring tasks could only take place once the project reached an appropriate stage of maturity and projects would be evaluated in the order that they achieve this stage. The application and implementation would have to be compatible with EU policies and comply with all applicable EU law, including in the area of state aid. To conclude, the EIB would subsequently accept and monitor the project in accordance with the EIB s standard policies and procedures including its Credit Risk Policy Guidelines in a manner already agreed in the context of joint EU/EIB instruments such as LGTT or the Risk Sharing Financial Facility (RSFF). 50

64 Finally, the Commission would report on the implementation of the initiative annually following the request laid down in Article 49 of the Interinstitutional Agreement of 17 May It is clear that only a limited number of projects can be supported in the pilot phase, as the budgetary resources available are limited and the remaining time horizon for implementation is very short. Therefore, the project selection would be made with the aim of enhancing up to 10 projects, concentrating on those that are at a relatively developed stage of the bidding and financing process or that require refinancing after the construction phase, in one or more of the three targeted sectors. In this manner, the experience gained would be maximised, while specific projects facing difficulties renewing their short maturity bank loans may be helped. From 2014 onwards, the Europe 2020 Project Bond instrument, like other financial instruments targeting infrastructure projects, may be used in all infrastructure policy sectors with the appropriate financial characteristics of projects, provided the EU is in a position to allocate budgetary funds for this purpose (European Commission - Economic and Financial Affairs, 2011). The Project Bond investors shall look into and debate the following issues concerning the largescale infrastructure projects: good investment-grade credit rating; shield against project risks; diversification; external project due diligence they can rely on; external financial analysis of the project; monitoring and surveillance post financial close; and appropriate well-functioning inter-creditor regime (Gilibert Pierluigi - European Investment Bank, 2011) Offered services, type and terms of financing The pilot phase will be based on an amendment of the Trans-European Networks (TEN) Regulation and the Competitiveness and Innovation Framework Programme (CIP) Decision and will draw on the budget lines of these programmes up to a total of EUR 230 million. EUR 200 million will be reallocated from the TEN-T budget line, specifically from LGTT and EUR 10 million from the TEN- E budget line. EUR 20 million will also be re-allocated from the CIP ICT line. Similar to Risk Sharing Finance Facility and Loan Guarantee instrument for TEN-T projects, the EU budget would be used to provide capital contributions to the EIB in order to cover a portion of the risk the EIB is taking when it finances the eligible projects. While the EU budget will provide some risk cushion for the EIB to finance the underlying projects, the EIB would have to cover the remaining risk. This means that when EU budget funds are combined with the EIB financing, a multiplier effect at this level of around 3 can be achieved. However, the EIB would credit enhance only up to 20% of the project debt. Thus, the final multiplier effect in terms of EU budget compared to the investment amount of around can be achieved. Therefore, the total budget amount of EUR 230 million is expected to mobilise investments of up to EUR 4,6 billion (European Commission - Economic and Financial Affairs, 2011). 51

65 EU risk-sharing does not change the Eurostat assessment of whether the project belongs on the balance sheet of the national general government sector or the private sector. More specifically, if the EU takes up to 20% of the risk, the assessment would simply apply to the remaining 80% of the project. Since the intention is to attract private funding for these 80%, the project should normally be classified as private. However, if the government provides a guarantee higher than 50% the part financed by the private sector partner, this will trigger a classification into the general government sector in the cases where a contract foresees a transfer of the infrastructure to the government in the future. These guarantees should include guarantees for a loan from an International Financial Institution (IFI). In addition, if a national government unit provides minimum revenue guarantees and minimum demand guarantees, such that government would bear a majority of the risks in the project, the debt would be classed as general government debt (European Commission - Economic and Financial Affairs, 2011) International Financial Institutions European Investment Bank Legal basis, mission, history The European Investment Bank (EIB) was established under the treaty of Rome in 1957, was created in 1958 and is the European Union's long-term lending institution. As a policy-driven Bank, the EIB supports EU priority objectives, notably European integration and social cohesion, through its financing operations. The European Investment Bank (EIB) is an international financial institution, a publicly owned bank. Its owners are the Member States of the European Union, who subscribe to the Bank's capital - EUR 232, 4 billion. As shareholders the Member States are represented on the Bank's main independent decision-making bodies - the Board of Governors and the Board of Directors. EIB s mission is to further the objectives of the European Union by being at the service of the Union and by making long-term finance available for sound investment. EIB s mission is also to provide service and value-added through appraisal and follow-up of investment projects and programmes and through financing. There are offered first-class terms and conditions enabling to borrow at the finest terms, which are passed on in the lending conditions. EIB works in partnership with others as the followed policies are established in close coordination with the Member States and the other Institutions of the European Union. Finally, EIB attracts qualified and multi-lingual staff from all the Member States, because it is motivated by a direct participation in the construction of Europe (European Investment Bank, 2012) Topics and regions of activity Within the EU, the EIB defines priority objectives for its lending activity which are set out in the Bank s business plan, the Corporate Operational Plan (COP). The COP is a strategic document, approved by the Board of Directors, for defining medium-term policy and setting operational priorities in the light of the objectives assigned to the Bank by its Governors. It is also an instrument for ex post evaluation of the EIB's activities. The plan spans three years, although the strategic 52

66 projections may be adapted during this period in order to take account of new mandates and changes in the economic climate. The EIB finances projects across most sectors. These projects must contribute to the following EU economic policy objectives: Cohesion and convergence, which promotes developing regions within the EU and is key to the integration objectives of the Union. Support for small and medium sized enterprises (SMEs), which is central to the EU s economy and employment. Environmental projects, which play an important role for the EIB, protecting and improving the natural environment, and promote social well-being in the interest of sustainable development. Innovation, which supports the goal of establishing a competitive, innovative and knowledgebased European economy 11. Trans-European Networks (TENs), which include all the large infrastructure networks of transport, energy and telecommunications underpinning the developmental and integration goals of the European Union. Promoting sustainable, competitive and secure energy sources. Support for human capital, notably health and education. In 2010, some 88% of the total EIB financing of EUR 72 billion went to projects in the EU. Outside the EU, EIB lending is based on EU external cooperation and development policies and thereby is active in over 150 countries (the pre-accession countries of South-East Europe, the Mediterranean partner countries, the African, Caribbean and Pacific countries, Asia and Latin America, Central Asia, Russia and other neighbours to the East), working to implement the financial pillar of EU external cooperation and development policies. According to these EU Mandates, the EIB is active in the Pre-Accession Countries in the Enlargement region, which are related to the SEETAC project. These are within the Candidate countries Croatia, the former Yugoslav Republic of Macedonia and Montenegro and within the Potential Candidate countries Albania, Bosnia and Herzegovina and Serbia 12. Within the European Neighbourhood, the eligible countries regarding the SEETAC project for EIB lending are Ukraine and Moldova. Lending under these mandates focuses on private sector development, infrastructure 11 Implementation of the Innovation 2010 Initiative (i2i) 12 EIB is also active in Kosovo, which is not involved in the SEETAC project and therefore it is not mentioned at this point. 53

67 development, security of energy supply and environmental sustainability (European Investment Bank, 2012) Strategy and guidelines generally and per mode of transport In October 2007, the EIB made public its renewed policy for lending to the transport sector, the basis of which is provided by a number of EU policies; in addition to the environmental and climate change principles applied by the Bank in all its lending, of primary relevance to transport are development of the Trans-European Transport networks (TEN-Ts), cohesion policy, sustainable transport development as well as support to Research Development and Innovation (RDI) in the transport sector. This multidimensional approach integrates environmental considerations in all stages of the Bank s due diligence with the aim to achieve environmentally friendly and sustainable transport systems contributing to a reduction of Green House Gas (GHG) emissions and other local pollutants. The Bank has taken the view, in line with EU policies, that construction of efficient and adapted transport systems in the 21 st century requires a sophisticated combination of all available transport modes. The challenge for EIB support to the transport sector is therefore not to discard one or the other type of intervention, one or the other transport mode, but rather to seek to optimise the strategy for action and to assure an appropriate mix of interventions to serve the complex set of policy objectives. To this end, it was necessary to define guiding principles for Bank intervention and to seek to develop operational selection criteria to assess whether potential projects meet the requirements of the multi-dimensional approach. Therefore, EIB transport lending is currently determined in accordance with a number of guiding principles and some more specific selection criteria: The EIB pursues an approach that strives for the most efficient, most economic and most sustainable way of satisfying transport demand, which is provided by a mix of transport solutions, covering all modes. The EIB continues its strong commitment to the development of TENs by financing longterm investments with an essential role in achieving an efficient and cohesive Communitywide transport system. Priority continues to be given to railways, urban transport, inland waterways and maritime projects as these are intrinsically the most promising in terms of reducing greenhouse gas emissions per transport unit. Further emphasis is given to RDI activities with vehicle manufacturers whatever the sector involved. This focuses primarily on ensuring energy efficiency, emissions reduction and safety enhancement. The Bank seeks to strengthen its assessment of the consequences of its projects in terms of energy consumption. 54

68 Some general guidelines according to the current transport lending policy for the transport infrastructure are the above: Greater emphasis on integration, inter-operability and efficient operation of critical bottlenecks such as cross-border sections, nodes (junctions, cities, ports, logistics platforms) plus the interconnections between modes or between high volume corridors. Infrastructure investment to reduce congestion and associated negative environmental impacts. Enhanced integration of investments with urban and regional development plans. More systematic multi-dimensional assessment and subsequent ranking of projects to ensure limited investment resources are applied optimally to best meet objectives. Comparative preference for upgrading or improving existing infrastructure. Greater use of technology to enhance efficiency in operation of current networks. Identification of a revised core TEN-T network, all parts of which should display European value added, and/or green corridors, a set of inter-modal links specifically designed to optimise the meeting of certain high traffic demand flows. The external dimension, i.e. extension of the TEN-T network to neighbouring countries, is included in this discussion. Greater separation of freight and passenger demand flows. Greater exploitation of the opportunities posed by intra-european short sea shipping, the Motorways of the Sea, greening of the fleet. The issues surrounding links with neighbouring countries and beyond are included in this discussion. Concerning the infrastructure for the different modes of transport, the current transport lending policy defines the guidelines described below: All road projects should demonstrate appropriate economic returns. Road projects with weak economic value are avoided. There has been a reinforcement of the environmental sustainability eligibility of rail and urban transport as well as maritime and inland navigation projects throughout the EU. Lending to sound projects in those sectors, even when they are neither TENs nor located in assisted areas, has been a priority. Similar principles apply outside the EU where the Bank s external mandates allow. Airport projects are supported when they demonstrate high economic value, also taking into account potential future adjustments to demand including those occurring when the emission burden is carried over to consumer prices (e.g. through inclusion of airlines in the EU Emission Trading System). Air Traffic Management investments are a priority where they can show improved safety, efficiency and reduced emissions. 55

69 Regarding the financial support for research on technology of the different means of transport the EIB guidelines are mentioned below: Pursuing the reduction of GHG and other harmful emissions for road vehicles, for the aviation and maritime sectors by increasing investment in research and development to improve the efficiency of internal combustion engines (including biofuels). Development of electric, hybrid and fuel cell powered road vehicles to meet the compelling need for shift towards lower/zero emissions. Launch of a European green car initiative to promote new technologies, setting common standards and developing the necessary infrastructure support. Requirement for pilot projects to demonstrate feasibility and economic viability of new technologies. Deployment of grid infrastructure in support of electrical, such as smart grids or charging stations for battery-electric and hydrogen generation and distribution systems for fuel cell powered vehicles. Intelligent traffic management systems. Consequently from the above, the investment that is supported for the different means of transport is described below: In the automotive sector, the guiding principles define strong support for RDI projects aligned to EU research and environmental policies. Where there is no RDI component, support to manufacturing shall be limited to projects for small, fuel efficient vehicles in convergence regions. In all cases, projects supported should be fully in line with the orientations of EU environmental and energy efficiency policies. In public transport means in general, rail and shipping, financing the manufacture and purchase of vehicles is consistent with climate change goals. Research in these sectors also merits full support. Support is given to aircraft manufacturers RDI focused on improved safety and environmental performance but will be restricted when there is no such RDI element (following the same approach as for car manufacturing financing). In view of the effectiveness of the private sector in this area, financing of aircraft purchase will be limited to exceptional circumstances when very strong value added can be demonstrated. Examples could be connections to convergence regions if air transport is essential to secure the territorial integrity of the EU and fuel efficiency is improved (European Investment Bank, 2010). The EIB adopted on 13 December 2011 a revised transport lending policy. The revised transport lending policy sets the guiding principles and selection criteria that will reinforce the Bank's contribution to this sector, in particular taking into account climate change concerns. The new 56

70 transport lending policy fully takes into account the European Commission White Paper for transport Roadmap to a Single European Transport Area Towards a competitive and resource efficient transport system that was adopted on 28 March However, while the economic and policy context has changed since 2007, the overall EIB s guiding principles remain valid and important in the current environment and this revised 2011 Transport Lending Policy also reflects more recent changes to the European policy context, and in particular the response of the Bank and other EU institutions to the 2008 financial crisis and its continuing aftermath Offered services, type and terms of financing EIB loans may supplement local and national budgetary assistance, as well as EU grants from Structural Funds, for instance, depending on the scope and nature of the individual project. In general terms, the EIB has two main financing facilities for TENs: EIB clients are public and private sector bodies and enterprises. The project promoted by the public or private client must be in line with the lending objectives of the EIB and be economically, financially, technically and environmentally sound. The EIB does not finance the total investment cost of a project, the aim being to capitalise on the Bank s first-rate lending terms to attract other viable sources of financing. The EIB contribution does not normally exceed 50% of the total investment cost, although for trans-european transport schemes funding may amount to as much as 75% in exceptional cases. Restricting EIB financing to 50% enables the borrower to draw up a dynamic and diversified finance plan in partnership with other financial institutions and banks. The EIB adheres to strict environmental and procurement policies. Potential promoters should ensure that their project adheres to these conditions (European Investment Bank, 2009). For TENs, the Bank can make large, long-maturity loans available with fixed and variable interest rates, eminently suited for financing large infrastructure investments. In addition, the EIB offers a number of special products: Public Private Partnerships (PPP) play an important role in investment in transport TENs. The Bank has built up wide experience and expertise in the field of PPP financing and has been entrusted by the European Commission and EU Member States with establishing the European PPP Expertise Centre (EPEC), which aims to facilitate the effective sharing of experience and best practice in PPPs and to provide support for project preparation and advisory services to the public sector promoters (European Investment Bank, 2004). The Structured Finance Facility (SFF) aims to match the types of funding to the requirements of large-scale infrastructure projects. It was established in 2001 to generate substantial value added by providing additional support for priority projects through instruments with a risk profile that is higher than that usually assumed by the Bank. For each operation, capital is booked against the fund allocated to the SFF (SFF Reserve). In 2006, the Board of Governors agreed to consider incremental increases of the SFF Reserve, when required, up to a maximum of EUR million until 2013, to support own resource operations in countries 57

71 in which the Bank is authorised to operate. An immediate additional capital appropriation of EUR 500 million was approved in 2006, bringing the total funded amount of the SFF Reserve to the level of EUR million. In June 2008, the central role of the SFF in risk sharing was acknowledged by the EIB s Governors, who approved an increase of EUR 1,5 billion in the level of the SFF Reserve. This additional allocation is necessary to meet the Bank s capital needs to support its SFF activity through 2009 and The replenishment of the SFF Reserve leaves a balance of EUR 1 billion available for future allocations under the EUR 3,75 billion SFF (European Investment Bank, 2009). The Loan Guarantee Instrument for TEN-T Projects (LGTT) provides cover for lower than expected revenues that might occur because of lower than anticipated traffic volumes in the critical early phases of project operation. It is an innovative financial instrument set up and developed jointly by the European Commission and the EIB which aims at facilitating a larger participation of the private sector involvement in the financing of TEN-T and it is specifically designed to allow greater private sector participation in TEN projects that are exposed to traffic risk. The stand-by liquidity facility guaranteed by the LGTT should not normally exceed 10% of the total amount of the senior debt (up to 20% in exceptional cases e.g. high traffic volatility during the ramp-up period with strong indication of stabilised traffic and acceptable debt service capacity post ramp-up). The amount of the guarantee is subject to a maximum ceiling of EUR 200 million per project pursuant to the EIB Structured Finance Facility rules (SFF) (European Investment Bank; European Commission, 2008). The Marguerite Infrastructure Fund (together with other leading European financial institutions) is a fund specifically designed to provide direct equity for TEN projects. The Marguerite Fund is the first fund of its kind set up by long-term institutional investors from both the public and the private sector with a particular view to financing greenfield projects. The Fund will target that at least 65% of the Fund are invested in greenfield projects. The minimum fund investment size is EUR 10 million, and the maximum size will be 10% of total fund size. The Fund stands as an innovative example in several respects: the approach taken to combining market principles while still supporting public policy objectives; its governance and financial management will comply with the philosophy of long term investors; the advisory team s incentive and remuneration system will be consistent with the general principles of long term performance endorsed by the G20. With a fund-raising target of EUR 1,5 billion by end 2011, the Marguerite Fund will be one of the prime European equity financing vehicles for new infrastructures. It will act as an equity provider for major infrastructure investment projects. The Core Sponsors and other institutions will put in place a Debt co-financing initiative of up to EUR 5 billion, providing a source of long-term debt for the projects Marguerite invests in. The Advisory Team will be sized in such a manner as to be able to deploy the expertise required to invest in the transport sector across the whole of the European Union. The idea is to have a balanced portfolio, in terms of both geographical and sectoral distribution: No more than 20% of the Total Commitments should be invested in investments located in one single EU country; the fund should be invested in Transport 58

72 Sectors for 30% to 40% of the Total Commitments (European Investment Bank - Marguerite, 2010). In general terms, the EIB has two main financing facilities: Individual loans (direct loans): provided to viable and sound projects and programmes costing more than EUR 25 million which are in line with EIB lending objectives. The Bank can offer fixed rates, revisable fixed rates, and convertible rates (allowing for the change of interest rate formula during the life of the loan at predetermined dates or periods). Repayment is normally on a semi-annual or annual basis. Grace periods for capital repayment may be granted for the construction phase of the project. Intermediated loans: (credit lines) to local, regional and national banks to help them to provide finance to projects where the total cost from EUR to EUR 25 million. Microfinance has also been provided by the EIB in some countries. The conditions of financing (interest rate, grace period, loan period etc.) are determined by the respective EIB partner bank. Maturities typically range between 5 and 12 years. The lending decision for EIB loans via credit lines remain with the financial intermediary. Promoters should contact the banks and other intermediaries involved directly with a detailed description of their capital investment together with the prospective financing arrangements. Requirements for application may vary according to the respective intermediary (European Investment Bank, 2009) European Bank for Reconstruction and Development Legal basis, mission, history The European Bank for Reconstruction and Development (EBRD) is the first international financial institution of the post-cold War period. It was established in 1991 in response to major changes in the political and economic climate in Central and Eastern Europe. Inaugurated less than two years after the fall of the Berlin Wall, the Bank was created to support the development of market economies in the region following the widespread collapse of communist regimes. The EBRD today is the largest single investor in the region from Central and Eastern Europe to central Asia. Its investments also mobilise significant foreign direct investment into its countries of operations. The EBRD invests mainly in private enterprises, usually together with commercial partners. It provides project financing for the financial sector and the real economy, both new ventures and investments in existing companies. It also works with publicly owned companies to support privatisation, the restructuring of state owned firms and improvement of municipal services. The Bank is owned by 61 countries and two intergovernmental institutions. It maintains a close political dialogue with governments, authorities and representatives of civil society to promote its goals. 59

73 In its operations the EBRD follows the highest standards in corporate governance and sustainable development. As a public institution the EBRD is committed to a rigorous public information policy. EBRD aims to promote market economies in order to function well where businesses are competitive, innovation is encouraged, household incomes reflect rising employment and productivity, and where environmental and social conditions reflect peoples needs. The EBRD supports the development of efficient, reliable and secure transport systems in its countries of operations in six lines of transport: aviation, ports, railways, roads, shipping and logistics. Financing of transport infrastructure represents 15% of the Bank s total portfolio (European Bank for Reconstruction and Development, 2012) Topics and regions of activity EBRD projects span many business sectors, from Agribusiness to Transport. The Bank provides project financing for the financial sector and the real economy, both new ventures and investments in existing companies. The clients may come from an array of different business sectors and the Bank s commitment to core principles of transparency and sustainability underscores all of the eligible projects. The eligible sectors for financial support by EBRD are mentioned above: Agribusiness: The EBRD is the single biggest investor in this sector in much of the region. Climate Finance: The Bank is dedicated to projects that promote greener energy and energy efficiency. Equity Funds: The EBRD is the region's single largest investor in private equity funds. Financial Institutions: The EBRD promotes development of robust financial sectors. Legal Reform: The Banks programme creates investor-friendly, transparent legal environments. Manufacturing and services: The work in this sector covers heavy/light industry and processing/production of goods. Municipal Infrastructure: The Bank seeks to improve municipal services in the countries of operations. Natural Resources: The Bank finances a range of natural resources industries. Nuclear safety: The EBRD assists in the safe treatment of waste and power plants. Power and Energy: The EBRD is the most active bank in the power sector in much of our region. Property and Tourism: The Bank is a key player in the property markets of Eastern Europe. 60

74 Telecoms: The telecoms team supports information technology, media and telecommunications projects. Transport: The EBRD aims to build efficient, reliable and secure transport systems. The EBRD operates in 29 countries from Central and Eastern Europe to central Asia. These are countries in the Central Europe and the Baltic states (Croatia, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic and Slovenia) 13, in South-Eastern Europe (Albania, Bosnia and Herzegovina, Bulgaria, FYR Macedonia, Romania, Montenegro and Serbia), in Eastern Europe and the Caucasus (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine) in Russia, in Central Asia (Kazakhstan, Kyrgyz Republic, Mongolia, Tajikistan, Turkmenistan and Uzbekistan) and in Turkey. Regarding the countries concerned to the SEETAC project, the EBRD is focusing on the following operations: In Albania the Bank is focusing on small production enterprises, developing natural resources and improving infrastructure. The activities in Bosnia and Herzegovina include key infrastructure projects that are crucial for regional development. In Bulgaria the investments span municipal infrastructure, small and medium-sized enterprises, energy efficiency and renewable energy. In Croatia the support ranges from the financial sector to infrastructure and the regional expansion of local companies. In FYROM the support to local and regional transport networks is promoting economic development and trade. In Hungary the Bank focuses support on financial institutions and PPP financing of infrastructure projects. In Moldova the areas of focus include banking, food processing, manufacturing, ICTs, retail and property. In Montenegro EBRD focuses on developing municipal and environmental infrastructure and transport and boosting small business. In Romania the Bank focuses on the private sector, energy efficiency, infrastructure and stabilization of the banking sector. In Serbia it focuses on developing transport infrastructure, boosting small business and promoting renewable energy. In Slovak Republic the Bank is supporting small business and investing in energy efficiency and renewable energy. The focus in Slovenia is to support the financial, enterprise, infrastructure and environment sectors. Finally, in Ukraine the Bank is restructuring banks, modernising infrastructure and promoting sustainable and efficient energy use. Specifically on the Transport sector, the Bank faces various challenges to achieving transition impact in its countries of operations. In the advanced transition economies there is frequently no longer any financial incentive for the government to borrow from EBRD, given their access to cheaper sources of funds, either commercially or from other non-private sector lenders. These cheaper sources of funds typically do not require the developmental covenants required by EBRD, so may represent a less demanding finance option. The challenge for the EBRD in these countries is to achieve transition impact through the encouragement of commercial behaviour in the state sector. In the advanced countries, the Bank will increasingly undertake projects primarily on the basis of 13 The Czech Republic was the first country to graduate from the EBRD, but as of the end of 2007, the Bank no longer makes investments there. 61

75 demonstration impact. The market will assess the success of these innovative transactions and replicate those which show promise. Those countries in early and intermediate transition with less access to alternative, less demanding finance sources continue to offer opportunities to achieve transition through covenants and borrower undertakings. In the smaller and poorer early transition countries the challenge is to achieve transition impact notwithstanding that larger projects are likely to be scarce and that there will be impediments to borrowings by the sovereign if the sovereign is subject to restrictions imposed by the International Monetary Fund (IMF). In such countries institutional and regulatory development will continue to be the principle focus of transition. For state-owned clients undergoing commercialisation and restructuring, the Bank recognises an ongoing need to reinforce transition over a series of transactions. This is because of the complexity of the reform process, which takes time to achieve, and the consequent need to maintain momentum over time in its reform dialogue with clients and governments (European Bank for Reconstruction and Development, 2012) Strategy and guidelines generally and per mode of transport A well-developed transport network is essential to supporting economic growth, market development and regional integration. Therefore the financing of transport infrastructure at the state, regional and local level is a core activity of the EBRD and in 2010 represented over 14 per cent of the Bank s total portfolio. The Bank s involvement spans all activities in the transport sector and, as a key partner to the private and public sector, the Bank is committed to supporting sector the reform, restructuring and commercialisation of transport operations. The current EBRD Transport Operations Policy sets out the general strategic and operational role of the Bank in this sector and establishes the overall framework for the Bank s activities. Approved by the Board of Directors on 19 April 2005, this is be the third such policy, and replaces the document approved in February The EBRD s operations policy for the transport sector is currently under review and a new strategy will be prepared during An external study, commissioned by the Bank, to take stock of international best practice in energy efficiency measures in the transport sector, review policy mechanisms and investments supporting adaptation and sustainable energy will be used to underpin our focus on energy efficiency issues in this new strategy (Sue Barrett - European Bank for Reconstruction and Development, 2011). Regarding Road infrastructure, EBRD supports rehabilitation, upgrading and construction of new roads, where investment needs have increased in line with economic growth and a move towards greater regional integration. Sovereign transactions are expected to dominate the Bank s activity in this sector, as the economic benefits of roads are difficult to monetise. However, the Bank will continue to support institutional development, reform of road sector financing and increased commercialisation of the sector. The Bank will also support the involvement of the private sector through PPPs, as governments seek to benefit from private sector efficiencies and increase the 62

76 number of projects which can be implemented simultaneously. PPPs will not be limited to construction and operation of road infrastructure, but may also cover the provision of services to road users (catering, rest areas etc.). The Bank will support moves to more transparent road changing, addressing the costs associated with this means of transport. In particular the introduction of vignette schemes and electronic road pricing are seen as useful tools to ensure that road vehicles bear an appropriate cost burden. According to the current EBRD s Transport Operations Policy , up to the end of December 2004, the roads portfolio amounted to a total commitment of EUR 1,8 billion, comprising 33 signed projects in 16 of the Bank s countries of operation. Of those projects, over 70% have involved the rehabilitation of existing roads in poor condition and the provision of town centre by passes providing environmental and health and safety benefits. The average project size has been large, mainly because of the amounts needed to reconstruct and develop the road networks in the Bank s countries of operation. Private sector opportunities have been slow to emerge largely because of the need to develop appropriate legislative and institutional frameworks. As a consequence, the roads portfolio currently is dominated by sovereign financing. These projects involve financing of rehabilitation, upgrading and new construction, typically for roads located on strategic European corridors (i.e. the Trans-European Network) or other major road axes (such as the Silk Road and the Trans Siberian Highway). Railways are at varying stages of transition in the Bank s countries of operation, reflecting the political sensitivity involved in the restructuring process. The Bank supports railway restructuring and commercialisation, including labour restructuring programmes. In this way the Bank can help to ensure that Railways receive the level of funding commensurate with the benefits associated with this mode of transport. There may be opportunities for private sector financing, as freight forwarders seek to fill the gaps in the market for modern freight wagons. These transactions may be asset-based. The drive to optimise the use of railway assets will provide opportunities for the Bank to finance private concessionaires operating public assets, such as railway stations. There may also be interesting equity opportunities given the expanding market. The scale of EBRD involvement up to the end of December 2004 in the railway sector reflects its significance to local economies and international trade: railways carry more than half of longdistance freight in the region and a significant share of the intercity passenger market (typically around a third); the national railway is usually among the six biggest enterprises in any of the Bank s countries of operation. Concerning Ports, the Bank supports the restructuring and commercialisation of ports, encouraging private sector operation of the superstructure. The Bank may continue to undertake sovereign transactions for rehabilitation, upgrading and development of port infrastructure by landlord ports, where there is an emphasis on restructuring and commercialisation. It also develops non-sovereign loans to commercialised state-owned entities and loans to the private sector where it is involved in port operations. 63

77 Regarding Shipping, the Bank supports restructuring, commercialisation and privatisation of stateowned shipping companies. The Bank may undertake operations with privatised or commercially run companies, which need to replace ageing and obsolescent fleets. These transactions may involve asset-based financing to mitigate credit risks. In shipbuilding, the Bank seeks restructuring opportunities, where shipyards potentially have a competitive edge. As the financial robustness of the yard can be an issue, finance may be restricted to specific contract orders or sovereign guaranteed transactions. In the Aviation sector, in many of the Bank s countries of operation airlines are protected under bilateral arrangements. The Bank supports transactions that prepare these airlines for eventual competition. The Bank also supports investment in infrastructure to improve operating efficiency and national and regional safety. This may involve sovereign lending or corporate financing of fully commercialised public entities and airports operated by private concessionaires. Liberalisation of air traffic markets in the new EU Member States will expose the national carriers to greater competition. There may be scope for the Bank to undertake restructuring transactions in these countries to improve the competitiveness of the airlines. There may also be opportunities to support low cost carriers with either equity or debt, subject to satisfactory risk profiles (European Bank for Reconstruction and Development, 2005) Offered services, type and terms of financing The EBRD uses a broad range of financing instruments, tailored to specific projects. The main instruments are loans, equity investments and guarantees. The Bank applies sound banking and investment principles in all its operations. Large private sector projects eligible for financing range from EUR 5 million to EUR 250 million; the average amount is EUR 25 million. The EBRD also supports small projects financial intermediaries, such as local commercial banks, micro business banks, equity funds and leasing facilities. Regarding trade financing, a range of products are offered to facilitate intra-regional and international trade in its countries of operations (Sue Barrett - European Bank for Reconstruction and Development, 2011). According to the current EBRD s Transport Operations Policy , the Bank has undertaken 108 transport projects in the period from 1992 to end December 2004, a further 42 operations since the previous Transport Operations Policy in The average EBRD financing has been EUR 33 million, generating an average of EUR 240 million of transport business for the Bank each year. The average number of projects undertaken each year has typically been 9 with numbers of projects in recent years being 2000: 7 projects; 2001: 10 projects; 2002: 9 projects; 2003: 10 projects; and to end December 2004: 10 projects. In these five years, the average annual volume of transport business was EUR 411 million. At end December 2004, Road projects have accounted for 52% of the business, and rail projects for another 29%; ports 3%; shipping and water transport projects 7%; aviation sector projects accounted for 8% and other support activities for Transport 1%. 64

78 Transport business has been heavily oriented towards the state sector because of the customary involvement of the state in the provision of transport infrastructure, both in the countries of operation and outside them and the issues relating to land acquisition, environmental issues and planning, which militate against a laissez-faire transport system. Out of a total of 108 projects at end December 2004, 77 have been sovereign loans, with a further 4 non-sovereign projects in the state sector. However, the number of private sector projects is increasing: while only 15 private sector projects were signed in the first eight years of operation, 19 such projects have been signed in the period 2000-end December 2004 and private sector projects constitute 43% of an active pipeline. About 39% percent of the lending volume has been in the Central Europe country grouping; 32% in the Southeast Europe and the Caucasus country grouping; 19% in Russia; and 10% in Central Asia (European Bank for Reconstruction and Development, 2005) World Bank Legal basis, mission, history The World Bank is a vital source of financial and technical assistance to developing countries around the world. The mission is to fight poverty for lasting results and to help by providing resources, sharing knowledge, building capacity and forging partnerships in the public and private sectors. It was established in 1944 and is headquartered in Washington, D.C. The World Bank is made up of two unique development institutions owned by 187 member countries: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). Each institution plays a different but collaborative role in advancing the vision of inclusive and sustainable globalization. The IBRD aims to reduce poverty in middle-income and creditworthy poorer countries, while IDA focuses on the world's poorest countries. Together they provide low-interest loans, interest-free credits and grants to developing countries for a wide array of purposes that include investments in education, health, public administration, infrastructure, financial and private sector development, agriculture and environmental and natural resource management (The World Bank, 2012) Topics and regions of activity The World Bank s projects and operations are designed to support low-income and middle-income countries poverty reduction strategies. Countries develop strategies around a range of reforms and investments likely to improve people s lives from universal education to passable roads, from quality health care to improved governance and inclusive economic growth. In parallel, the Bank strives to align its assistance with the country s priorities and harmonize its aid program with other agencies to boost aid effectiveness. The World Bank also strives to tackle global challenges from international trade to climate change and debt relief. It does so within each country s specific socioeconomic context, adapting programs to country capacity and needs. 65

79 More specifically, the sectors of activity in which support from the World Bank is provided are Financial and Private Sector Development; Human Development, including the sub-sectors of Education, Health, Nutrition, Population and Social Protection; Poverty Reduction and Economic Management, including the sub-sectors of Economic Policy, Public Sector, Gender, Development and Economic Management; Sustainable Development Network, including the sub-sectors of Agricultural and Rural Development, Energy and Mining, Environment, Infrastructure, Social Development, Transport, Urban and Water; and Operational Policy and Country Services. Regions and countries are the ground on which any transport strategy must be implemented, and to have a chance of success that strategy must respond to the day-to-day transport problems of developing countries and their demands for assistance. Although countries in the Bank s six regions differ in many ways - both within and across regions - their priorities for transport consistently show some common challenges, albeit in different guises. Examples include the need for better management of road infrastructure, the importance of improved transport and logistics to strengthen trade competitiveness, the need of isolated rural communities for basic connectivity to transport systems, and the pervasive implications of climate change on transport operations and infrastructure. These priorities all point to a strategy that will make transport cleaner, safer, and more affordable (The World Bank Group, 2007). In addressing the following regional priorities, the Bank recognizes the need for support from regional and global partnerships with aid organizations, governments, private sector organizations, and community representatives in the following regions: Sub-Saharan Africa, East Asia and Pacific, Eastern Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, South Asia. In the region of Southeast Europe, the participant countries in the project SEETAC projects where the World Bank is active are Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Hungary, FYROM, Moldova, Romania, Serbia, Montenegro and Ukraine (The World Bank, 2012) Strategy and guidelines generally and per mode of transport The proposed adjustments to the Bank s current transport strategy were presented to the Bank s Committee on Development Effectiveness (CODE) on September 26, 2007, as part of the Sector Strategy Implementation Update: Third Review. This Report offers further elaboration of those strategic adjustments and guidance to staff, partner countries, and other stakeholders. The themes of this transport strategy reflect some of the thinking behind the transport business strategy. Safe acknowledges the prominence of health outcomes within the Millennium Development Goals; it implies safety for transport users, for transport workers, and for the wider community. Clean reflects the contribution that transport can make to the environmental aims of the Millennium Development Goals. Affordable acknowledges that physical supply of infrastructure is not enough. Efficient freight infrastructure, translated through well-functioning markets into affordable transport and logistics services, is critical for trade. Similarly, efficient and affordable transport underpins personal accessibility and mobility in both urban and rural areas. Finally, 66

80 transport for development asserts that, while transport can have many purposes, the Bank Group s focus must be on its contribution to economic development. Roads, railways, wagons, ports, ships, barges, inland waterways, airports, aircraft, and the many combinations of these - all these diverse modes of transport serve particular parts of a wide spectrum of needs that arise in moving freight and passengers. As trade has globalized and incomes have risen in many developing countries, the demand has mounted for all types of transport services and the infrastructure on which they rely. The current World Bank s transport strategy focuses on the comparative advantages and risks of seven major modes or types of transport in meeting that burgeoning demand. It makes the case for balanced multimodal investment to create transport systems that exploit and integrate the best economic, environmental, health, and safety features of different individual modes. The multimodal approach confirms the desirability of broadening Bank transport interventions beyond single-mode solutions to look at transport needs as a whole. This more holistic view of transport, which is reflected in the business strategy, supports efficient freight corridors to serve regional integration and international trade. Balanced investment in different forms of corridor infrastructure (connecting roads, railways, inland waterways, ports and shipping, airports and aviation) may yield better solutions than a focus on individual modes of freight transport and may achieve better coordination between, say, port investments and surface access links. Most important, multimodal integration would enable customers to choose their most cost-effective modes for specific types of freight, which would lower average transport costs and raise environmental acceptability and energy efficiency overall (The World Bank Group, 2007). Regarding all countries in Central, Eastern, and Southeast Europe it is essential to ensure that transport contributes fully to economic growth and poverty reduction. Although the state of transport networks in most countries is poor, governments, with the support from the World Bank, strive to create conditions that would facilitate sustainability of improvements in the sector, integrate national transport systems into regional networks, and develop environmentally friendly systems. More issues specific for the guidelines and the financial assistance on each sub-sector concerning the transport sector for the Southeast European region are mentioned below: Regarding Roads and Road Transportation the Banks s guidelines are as follows: Road administrations must be transformed into commercially operated road management organizations that limit their activities to management, replace force account work with competitively selected private contractors, and let road users oversee their performance. Road networks must be reclassified to better reflect ownership and accountability at the level of central, regional and local governments. 67

81 Road financing systems must be modernized to draw on road user charges, especially to fund road maintenance, and to allocate budgets for investments based on economic viability/evaluation. Connection of national networks to international networks (with cautious/close regard for the Trans-European Networks, Pan-European and Euro-Asian corridors, and economic areas) must be improved. The rapid growth of road freight transport requires immediate strengthening of the bearing capacity of the road network, including bridges, to carry larger vehicles with higher axle loads. Rural roads require significant quality improvements and a restructuring of their management. In road transport operations, vocational and managerial training is essential for transport operators in order to improve market access (according to licensing conditions in Europe) and for increased competitiveness. On the Railways sub-sector the specific guidelines are mentioned below: Basic reforms, such as separation of policy-making, regulatory roles and enterprise functions, have already been introduced in EU member and candidate countries as well as other countries of the region. Redrawing the roles of the government, converting the technical inspectorate into the rail regulator, advancing fiscal decentralization and capacity improvement of regional and municipal governments, and establishing fair competition rules are necessary elements of railway reform but are yet to be undertaken in many countries. Unbundling of operations along business lines and introduction of transparent and modern cost accounting and information systems are essential to improve efficiency and financial sustainability of rail transport. Closure of uneconomic lines and further reductions in staff numbers will be necessary in order to make railway operations financially viable. Redefining the roles of the government, converting the technical inspectorate into the rail regulator, advancing fiscal decentralization and capacity improvement of regional and municipal governments, and establishing fair competition rules, are necessary elements of railway reform but are yet to be undertaken in many countries. Rolling stock renewal, track rehabilitation, and modernization of signalization (signaling) are necessary to improve safety, eliminate speed restrictions and thus increase competitiveness (particularly through eliminating speed restrictions). 68

82 Non-discrimination of track access rights and liberalization of freight tariffs at reasonable, transparent and realistic charges, are necessary to improve competition and service quality. Liberalization of freight tariffs and non-discriminatory track access at reasonable, transparent and realistic charges are also important. Concerning the Maritime Transport sub-sector, the Inland Navigation and Ports the Bank s guidelines are the following: Commercial port management must be introduced. Conversion of traditional ports into landlord ports, where the port authority and commercial operations are clearly separated, is important for the efficient operation of the port. Environmental protection (breakwaters, dredging, dangerous goods delivery policies and enforcement, and technical inspection of vessel registration rules) is urgently required in many countries. Better utilization of inland waterways will offer more environmentally friendly modal split, as well as wider choice for customers. On the Aviation sub-sector, the guidelines to be followed are mentioned below: Improving air safety and security in the region is of paramount importance and will require multi-country cooperation in oversight and investment. Large scale aviation reforms and investments (separation of airlines, airports, and Air Traffic Management operations) are being implemented in many countries of Eastern and Central Europe and Central Asia. Concessioning and privatization should be considered. Phasing out subsidies to airlines and exposing them to increasingly liberal market conditions would lead to improved efficiency and, under competent management, to successful privatization. Fleet renewal is critical for most operators in order to improve safety and to access international markets. Finally, regarding International Trade and Transportation the Bank s guidelines for assistance are mentioned below: Without aggressive trade and transport facilitation, the reform of, and investments in, the transportation sector and the setup of logistical and distribution centers can bring only limited results. Cooperation between the different border agencies, transport authorities, and service suppliers both within and between countries along the same transport corridors is needed in order to 69

83 reduce waiting times at the borders reducing, thereby, overall transport costs and promoting growth of legal trade and transit. Reform of customs policies, particularly the introduction of risk management selectivity approach, is important to reduce further the overall transit time for international transport and increase the competitiveness of the regional transport corridors (The World Bank, 2012) Offered services, type and terms of financing The World Bank provides different types of financing to countries. These include loans from the International Bank of Reconstruction and Development (IBRD) and credits and grants through the International Development Association (IDA) - the concessional lending arm of the World Bank Group. The type of financing provided is determined by the country's level of need. The money that is borrowed by governments has to be used for specific projects and programs. Countries that borrow loans from IBRD have more time to repay than if they borrowed from a commercial bank - 15 to 20 years with a three-to-five-year grace period before repayment of principal begins. IDA s interest-free credits have a year repayment period with a 10-year grace period. Currently, to be eligible for IDA assistance, a country must have a per capita gross national income of United States dollars 875 or less. The Bank has two basic types of lending instruments, Structural Adjustment and Investment Loans. Investment loans are made for a variety of purposes and are handled by government departments (technical assistance, health, education, etc.), autonomous public sector companies (power, telecommunications) or the private sector (for operations supported by the International Finance Corporation - IFC). Development Policy loans provide quick-disbursing assistance to countries to support structural reforms in a sector or in the economy as a whole. They support the policy and institutional changes needed to create an environment conducive to sustained and equitable growth. A number of grant mechanisms also exist. IDA has traditionally provided interest-free credit but it is increasingly providing grants as well. In addition to these IDA grants, the Bank administers about a dozen grant programs as well as some United States dollar 850 donor trust funds disbursing more than United States dollars 1 billion a year (The World Bank, 2012). The World Bank Group, the European Bank for Reconstruction and Development and the European Investment Bank Group launched a Joint IFI Action Plan in support of banking systems and lending to the real economy in Central and Eastern Europe on February 27, 2009, which turned out to be around the peak of the global crisis. The plan s objective was to commit to finance up to EUR 24,5 billion for There were made joint assessments of large bank groups financing needs and deployed rapid assistance in a coordinated manner, according to each institution s geographical and financing remit. The World Bank Group pledged under the Joint IFI Action Plan to make available EUR 7,5 billion over to the region; as of end-december 2010, the World Bank group exceeded this objective by over 20 percent with commitments of EUR 9,6 billion across its various agencies, 70

84 including EUR 5,2 billion from IBRD, EUR 2,0 billion from MIGA (Multilateral Investment Guarantee Agency) and EUR 2,4 billion from the IFC. Under the Joint IFI Action Plan, the financing institutions worked together to ensure that their investments complement each other, especially when all IFIs are working with a single strategic investor. When appropriate, the banks coordinated due diligence and harmonized investment terms and conditions to simplify and accelerate investment packages for strategic banks. Post-crisis, the institutions plan to continue close coordination to benefit from synergies and complement each other s delivery (Thomas Mirow - EBRD; Philippe Maystadt - EIB; Robert B. Zoellick - World Bank Group, 2011). Table 6 Delivery of Commitments under the Joint IFI Action Plan, up to end-2010 (in billions of Euros) (Thomas Mirow - EBRD; Philippe Maystadt - EIB; Robert B. Zoellick - World Bank Group, 2011) Total available Total signed EU ,5 12,0 EBRD 2,6 1,9 EIB 9,1 7,5 World Bank Group 2,8 2,6 Western Balkans and Turkey 15 10,6 9,1 EBRD 1,7 1,1 EIB 5,9 5,3 World Bank Group 2,9 2,6 Eastern Europe and Caucasus 16 4,0 3,6 EBRD 1,4 1,3 EIB 0,4 0,3 World Bank Group 2,2 2,0 14 EU-10 include the 10 new EU member states in Eastern Europe. 15 Western Balkans and Turkey include Albania, Bosnia and Herzegovina, Croatia, FYR Macedonia, Montenegro, Serbia and Turkey 16 Eastern Europe and the Caucasus include Ukraine, Belarus, Moldova, Armenia, Azerbaijan, and Georgia (or Eastern Partnership for EIB). 71

85 Russia and Central Asia 17 3,3 3,1 EBRD 2,3 2,1 EIB World Bank Group 1,0 1,0 TOTAL 33,2 28,6 EBRD 8,1 6,5 EIB 15,5 13,1 World Bank Group 18 9,6 9,0 The International Bank for Reconstruction and Development (IBRD) has implemented nearly three dozen operations during the period of implementation of the Joint IFI Action Plan, for EUR 5,2 billion - largely exceeding its original commitment of EUR 3,5 billion. IBRD operations aimed at assisting in stabilizing the financial sector through budget support for reforms, and credit lines to provide funding security to banks and access to credit, especially for small and medium enterprises. Lending operations have been complemented by technical assistance and analytical work across the region, emphasizing diagnostic work in the financial sector and strengthening of the sector and its regulation and supervision. More recently, efforts have concentrated on dealing with the legacy of the crisis, including the pervasive contraction in credit in many countries, management of non-performing loans, and strengthening of still weak bank balance sheets in several countries. Assistance is being provided for balance sheet restructuring and asset disposal, risk-mitigation, and meeting of new regulatory requirements, and through additional credit lines, particularly for small and medium enterprises and exporters. More broadly, the IBRD strategy for countries in Europe and Central Asia continues to focus on longer developmental needs of the region, with an emphasis on deepened reforms for strengthening competitiveness, support to social sector reforms for inclusive growth, and a renewed focus on climate action for sustainable growth. MIGA delivered EUR 1,4 billion of signed guarantees under the Joint IFI Action Plan. Since the launch of the initiative, MIGA has issued 21 guarantees in support of 17 financial institutions - 14 banks and 3 leasing companies - in 13 countries. MIGA has mobilised EUR 0,5 billion of market capacity in the form of reinsurance and supported the rest from its own balance sheet. Additional 17 Russia and Central Asia include Russia, Mongolia, Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan. 18 Includes amount unallocated to these specific sub-regions for IFC and MIGA. 72

86 guarantee capacity of EUR 0,5 was available as agreed with MIGA s Board under the Financial Sector Initiative, MIGA s framework for implementing the Joint IFI Action Plan. MIGA played an important role in helping parent banks mobilise IFI support as such support was conditional upon shareholders funding a portion of subsidiary needs. While the parent banks were prepared to provide such funding, some of them were constrained by their internal country risk limits, which MIGA coverage has helped them to address. The majority of the coverage was issued to Unicredit Group and Raiffeisen Group (Austria), MIGA s long-time clients which have extensive networks of subsidiary banks and leasing companies in the region. During the crisis, Unicredit and Raiffeisen showed strong support to their subsidiaries, including rolling over of maturing loans and providing long-term stable shareholder funding. In the early phase of the crisis, the majority of funding was provided as liquidity support for asset-liability management, whereas later a portion of the shareholder loans funded lending to the real economy. Under the Joint IFI Action Plan, MIGA was the only IFI that provided political risk guarantees in support of shareholder funding. While MIGA received a large number of requests for coverage early in the initiative, many banks faced with tight and volatile funding environments have ultimately opted for the IFI loan products as opposed to political risk guarantees. MIGA s guarantees were complementary in that they helped banks leverage IFI loans. The International Finance Corporation s (IFC's) pledge under the Joint IFI Action Plan was EUR 2 billion over As of end-december 2010, IFC exceeded this objective by more than 20% with commitments on its own account of EUR 2,4 billion and disbursements of EUR 1,7 billion. IFC's investments were done through the following products: Loans, Quasi-Loans and Risk-Management products: EUR million or 46% of total commitments; Global Trade Finance Program (GTFP) and Global Trade Liquidity Program (GTLP): EUR 940 million or 39% of total commitments; Equity and Quasi-Equity investments: EUR 279 million or 12% of total commitments; Debt and Asset Recovery Program (DARP): EUR 92 million or 4% of total commitments. IFC s investments were focused on its regional priorities to reach more of the region s poor and vulnerable, create jobs, increase access to infrastructure, support agricultural development, and tackle climate change (Thomas Mirow - EBRD; Philippe Maystadt - EIB; Robert B. Zoellick - World Bank Group, 2011). 73

87 JASPERS (Joint Assistance to Support Projects in European Regions) Legal basis, mission, history JASPERS (Joint Assistance to Support Projects in European Regions) is a technical assistance partnership between the European Commission s DG REGIO, the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and Kreditanstalt für Wiederaufbau (KfW). JASPERS was launched at a Conference of the EU Member States held at the end of 2005 by the European Commission, the EIB and the EBRD to assist the ten Member States which had joined the EU in 2004 to make use of EU Structural Funds. The programme was extended to Bulgaria and Romania when they became EU Members in In July 2008, the number of JASPERS partner institutions increased to four following the arrival of Kreditanstalt für Wiederaufbau (KfW). Since its launch, JASPERS has fully developed its infrastructure, comprising the headquarters based in Luxembourg and three regional offices (Vienna, Warsaw and Bucharest), bringing JASPERS services closer to its customers. JASPERS is integrated into the Projects Directorate of the EIB as a separate department. Its structure, based on sectors, reflects the need to ensure consistency in the advice delivered across beneficiary countries. JASPERS has built up its capacity progressively since 2006, and by the end of 2010 it had nearly 90 staff. In 2010 JASPERS was asked by its Steering Committee to start providing support for preparatory work and projects for the next programming period, and it will commence work in Croatia during 2011 to prepare for utilisation of Structural Funds in the future. The main objective of this programme is to provide technical expertise to the twelve EU Member States which joined the EU in 2004 and It is designed to support them to better prepare projects which will be financed by EU Structural Funds. The aim is to increase the quality and timely submission of projects to be approved by national authorities and the Commission. JASPERS assistance, which is provided free of charge, is geared towards accelerating the absorption of the available funds (European Investment Bank, 2011). As of 3 January 2012, 540 assignments completed since start of operations (2006), of which 141 in Among the 352 assignments JASPERS has been working on, 250 JASPERS-supported applications submitted to the EU Commission, of which 172 approved (69 in 2011) (European Commission; European Investment Bank; European Bank for Reconstruction and Development; Kreditanstalt für Wiederaufbau, 2012) Topics and regions of activity JASPERS core focus is support for the preparation of major projects for the current Structural Funds programming period ( ). In anticipation of the next programming period ( ), JASPERS also provides assistance for the preparation of projects to be submitted for funding after 2013 and to support on horizontal and strategic issues, capacity building and implementation of projects. 74

88 JASPERS portfolio is divided among the beneficiary Member States broadly in line with their shares of EU funding and covers the following sectors or groups of sectors: Roads; Ports, Airports and Railways; Water and Wastewater; Solid Waste and Energy; Urban Infrastructure and Services; and The knowledge economy. Some experts work across several sectors or cover more than one field. More specifically, the key areas for JASPERS' assistance include: Trans-European networks (TENs); The transport sector outside of TENs, including road, rail, river, air and sea transport Clean urban and public transport; Environmental remediation; Waste management; Renewable energy; Water and sanitation services; and Water risk management. The eligible countries to obtain the assistance of JASPERS are the twelve Central and Eastern EU Member States which joined the EU in 2004 and 2007 and are eligible for assistance under the EU Structural Funds (European Regional Development Fund and Cohesion Fund). These twelve countries are Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia and Slovenia. Within them, the countries which participate in the SEETAC project are Bulgaria, Romania and Slovenia (European Commission; European Investment Bank; European Bank for Reconstruction and Development; Kreditanstalt für Wiederaufbau, 2012) Strategy and guidelines generally and per mode of transport JASPERS focuses on large projects with total costs exceeding EUR 25 million for environmental projects and EUR 50 million for transport or other sectors - such as roads, rail, water, waste, energy and urban transport projects. However, there is flexibility about these thresholds in the case of small 75

89 countries, where there will not be many projects of this size, or where projects serve as pilot actions to establish best practice. JASPERS' assistance is not limited to individual state projects but is available as well for horizontal studies that cover more than one country or more than one projects. JASPERS operates on the basis of country Action Plans prepared annually for each Member State in cooperation with the beneficiary state concerned and the European Commission. A Managing Authority acts as a central coordinator for each country and it can request assistance from JASPERS. During the process of preparing the annual country Action Plans, JASPERS works in close cooperation with the Commission and the Member States to assist the latter in producing mature project proposals which are capable of meeting EU requirements, as well as to identify potential projects for assistance. JASPERS experts provide assistance for any stage of the project cycle from the early stages of project conception through to the final application for EU funding. In implementing the annual Action Plans, JASPERS works in close cooperation with the beneficiary, the Managing Authority and the relevant ministries or agencies. The Member States remain the owners of the projects; much of the detailed technical work is under their responsibility as well as the grant application process. The decision to provide an EU grant for a project prepared with the assistance of JASPERS remains the responsibility of the European Commission. More specifically, the project cycle to be followed, according to the guidelines of the JASPERS operations and assistance, is as follows: 1. In each beneficiary country, the Managing Authority (MA) identifies potential JASPERS assignments and sends these to JASPERS at the start of the year; 2. JASPERS reviews the proposals and discusses them with DG REGIO and with the MA; 3. Assignments agreed for JASPERS assistance are finalised with the signature of an Action Plan with the MA; 4. JASPERS works actively on the agreed assignments with the beneficiary, MA and relevant intermediate bodies; 5. Member States continue to own the projects; they submit the applications for grants as required by the EU regulations; and 6. JASPERS supports projects after submission, especially helping beneficiaries to address issues arising during the European Commission s appraisal (European Investment Bank, 2011). 76

90 Offered services, type and terms of financing JASPERS provides free independent advice to the EU countries concerned to enable them to better prepare infrastructure projects for all stages of the project cycle - from the initial identification of a project through to the decision to provide EU grant assistance up to the start of the construction phase. There is clear evidence to suggest that projects receiving assistance from JASPERS tend to be approved significantly faster than those which are not. JASPERS' assistance may cover technical, economic and financial aspects and any other preparatory work needed to deliver a fully developed and sound project. It is geared to providing advice, ensuring coordination, developing and reviewing project structures, removing bottlenecks, filling gaps and identifying problems not addressed. JASPERS' work being complementary to the project preparation work carried out by national and local authorities, much of the detailed technical work remains however the responsibility of the respective beneficiary countries. It provides not financial resources, but expert advice in many forms, including: Advice on conceptual development and project structuring; Advice on project preparation, e.g. cost-benefit analysis, financial analysis, environmental issues, procurement planning; Review of documentation: feasibility studies, technical design, grant application; Advice on compliance with EU law (environmental, competition, etc.) and conformity with EU policies; Advice on the setting up of appropriate Project Implementation Units (PIUs); and Review of tender documents. More specifically, JASPERS involvement in the project cycle may take place at three stages: 1. the very beginning of project preparation (normally concept study or prefeasibility): At stage 1 JASPERS support covers the whole preparatory phase. JASPERS may advise on the project concept or prefeasibility study. Typically JASPERS advises the beneficiary and Managing Authority on the terms of reference for the feasibility study, is involved in the clarification of issues impacting the project such as state aid, and oversees revision of the feasibility study, EIA, grant application and accompanying documentation in several iterative steps, e.g. demand analysis, option analysis, financial and economic analysis, environmental assessment. Feasibility studies are usually financed by the Managing Authority or the beneficiary, although in exceptional cases by JASPERS directly. Depending on the sector and the quality of the feasibility study, the preparatory period can take two to four years and additional framework consultants may be engaged by JASPERS. The support can significantly influence the scope and quality of the project itself. During this period, JASPERS typically visits the Managing Authority and the beneficiary four to six times and 77

91 issues several advisory or guidance notes in addition to a final completion note when the application is submitted. Project specific tripartite meetings with DG REGIO may also be organised to tackle complex or strategic issues impacting the project. 2. the feasibility study (i.e. JASPERS is involved during the feasibility study preparation): At stage 2 (involvement during the feasibility study preparation) JASPERS mainly supports the beneficiary and its consultant in the preparation of the feasibility study and the application, but is not involved at the concept/prefeasibility stage nor in developing terms of reference for the feasibility study. Also in this case JASPERS can significantly influence the quality of the project itself (e.g. demand analysis, option analysis, technical design, financial and economic analysis). Bottlenecks in EIA and state aid can be identified in time so that the application can be prepared in a sound and coherent way. JASPERS typically undertakes two to three visits to the final beneficiary and Managing Authority and issues two to three guidance notes and one completion note. Inputs are typically spread over one to three years. 3. the application phase (i.e. JASPERS involvement starts after a feasibility study and draft application have been prepared, prior to submission of the project for approval): At stage 3 JASPERS support focuses on a review of the quality of the existing documentation, improvements to the presentation of information in the application, and the correctness of the calculation of the financing gap. Whilst JASPERS reviews critically the key aspects of project quality, such as demand analysis, option analysis, design, financial analysis, economic CBA and environmental aspects, it can be difficult for beneficiaries to make substantial changes to the project as a result of the JASPERS review, owing to the late stage at which JASPERS involvement starts. That is why JASPERS prefers to begin its involvement earlier in the project preparation process (European Commission; European Investment Bank; European Bank for Reconstruction and Development; Kreditanstalt für Wiederaufbau, 2012). There is no obligation on the beneficiaries of JASPERS to borrow from the EIB, EBRD or KfW, but if they wish the national authorities may turn to the EIB, EBRD or KfW for financial support for the projects prepared with assistance from JASPERS. The decision to provide an EU grant for a project prepared with assistance from JASPERS remains always the responsibility of the European Commission. The assignments completed in 2008 resulted in 42 grant applications benefiting from JASPERS assistance being lodged with DG REGIO for funding about EUR 10 billion under the Structural Funds and Cohesion Funds. Regarding the Road sector, under the umbrella of the Community policy objectives for road transport, which are to promote efficient road freight and passengers transport services, to create fair conditions for competition, to promote safer and more environmental friendly technical standards and fiscal and social harmonization, and to make sure that the rules in road transport are effectively applied without discrimination, JASPERS support in this sector is focused on the enlargement of the TEN-T network and primary roads as well as intermodal centres. 78

92 The scope of JASPERS work can encompass support to the final beneficiaries throughout the preparation of the project for grant application or concern specific assignments only. Experience has shown that it is of advantage to involve JASPERS as early as possible (i.e. first review or screening). According to the JASPERS guidelines the provided assessment on the Road sector could be: Project Screening: Assist stakeholders with project screening to assess their viability and suitability for EU-grant finance; Project development: Support stakeholders from project pre-feasibility and feasibility stages, including option analysis through to final grant application; Project appraisal: Undertake final assessment of projects and relevant documents prior to submission of the grant application to DG-REGIO; Horizontal Support: Provide guidance on horizontal issues including State Aid, CBA and funding gap methodology as well as on EIA; and Training and capacity development: Provide workshops on key project and horizontal issues for project stakeholders, active participation at conferences organised by Ministries of beneficiary countries. Concerning some practical examples, JASPERS is helping to define the scope of feasibility studies, reviews feasibility studies and environmental documents to ensure the adequate justification of the project and compliance with the EU environmental requirements. Further, JASPERS advises on how to calculate the funding gap and assists to prepare the application form. Seventeen assignments were completed in 2010, with a total estimated value of about EUR 6,5 billion. Thirteen were approved by the European Commission. In 2010, the first application was submitted and approved for Bulgaria (Trakia motorway). JASPERS was also active in providing horizontal support on several technical and institutional issues. Examples include a comprehensive study of tolling strategy (Romania) and support on option analysis, demand and CBA (Slovakia). Regarding the Rail, Air and Maritime Transport Sector, the provided assessment according to the JASPERS guidelines could be: Project Screening: Assist stakeholders with project screening to assess their viability and suitability for EU-grant finance. Project development: Support stakeholders from project pre-feasibility and feasibility stages through to final grant application; Project appraisal: Undertake final assessment of projects and relevant documents prior to submission of the grant application to DG-REGIO; 79

93 Horizontal Support: Provide guidance on horizontal issues including State Aid, CBA and funding gap methodology; and Training and capacity development: Provide workshops on key project and horizontal issues for project stakeholders, active participation at conferences organised by Ministries of beneficiary countries. In 2010 JASPERS worked on 130 assignments in the Rail, Air and Port sector, supporting projects with an estimated investment cost of approximately EUR 25 billion. As in previous years, the rail sector provided the largest share of JASPERS assignments (75) with airports (15) and ports (14) representing a similar proportion to Twenty-one assignments were completed, eighteen of them supporting major projects for which grant applications were submitted to the European Commission. Six major rail projects were approved by the Commission during the year (two in the Czech Republic and one each in Romania, Hungary, Slovenia and Slovakia), for a total project cost of EUR 1,3 billion (European Commission; European Investment Bank; European Bank for Reconstruction and Development; Kreditanstalt für Wiederaufbau, 2012) Western Balkans Investment Framework (WBIF) - Infrastructure Project Facility (IPF) Legal basis, mission, history The Western Balkans Investment Framework (WBIF) is increasingly becoming the most important and comprehensive coordination mechanism for external support of countries in the Western Balkans. So far, each partner IFI or bilateral financial institution has contributed to the WBIF. It is an innovative financing initiative which pools grant resources in order to leverage loans for the financing of priority infrastructure in the Western Balkans. Its scope is likely to expand beyond infrastructure into the socio-economic and energy efficiency-related areas. Officially launched in December 2009, the Western Balkans Investment Framework was a joint initiative of the European Commission together with the Council of Europe Development Bank (CEB), the European Bank for Reconstruction and Development (EBRD), and the European Investment Bank (EIB), endorsed by the European Council. The World Bank Group (WBG) has played an active role as an 'observer' in the WBIF structures (in the IFI Advisory Group as well as the Project Financiers Group and the Steering Committee). This active observer status has been regarded as useful by the founding members. At the Steering Committee meeting of December 16, 2010, the founding members tabled a review of the activities of the WBIF. One of the key recommendations was to offer full membership of the World Bank Group to the WBIF under the same terms and conditions, obligations and rights that apply to the already participating partner IFIs (Western Balkans Investment Framework (WBIF), 2011). WBIF was launched integrating the EC-funded IPF pipeline which consisted of 27 grants receiving technical assistance and 12 grants receiving grant co-financing. 80

94 Since 2009, WBIF has approved 42 grant requests from beneficiaries bringing the total grant contribution awarded under the Joint Grant Facility to EUR 139 million. This facility pools resources from the EC with those from three partner International Financial Institutions and bilateral donors. WBIF is supporting a total of 73 projects (through 81 grants) representing a total potential investment of approximately EUR 6 billion. The aim is to achieve cofinancing of these projects under a Joint Lending Facility which will exceed EUR 3 billion. As of June 2011, there have been 5 rounds of project submissions and evaluations under the WBIF. The focus in 2010 was solely on the infrastructure sector (Western Balkans Investment Framework, 2010). In November 2007, the European Commission, the EIB, the EBRD and the Council of Europe Development Bank (CEB) agreed to develop an Infrastructure Projects Facility (IPF) for the Western Balkans. The Infrastructure Projects' Facility is an infrastructure development facility for the Western Balkans funded by the European Union. Today it is considered as part of the WBIF. The IPF, within the framework of the WBIF, is a facility that will ultimately help develop new modern infrastructure and rehabilitate long neglected and too often out-dated existing infrastructure. It is everything that is essential to basic modern living that, in development terms, creates the conditions for sustainable economic growth and social well-being. The IPF Mission is to connect infrastructure projects with investment funding. The main objective of the IPF is to support the development and upgrading of infrastructures in transport, energy, environment and social sectors, contributing to sustainable development in the region. The specific objective is to support the preparation of projects that may be financed by grants and loans provided by beneficiaries themselves, IPA funds, the IFIs and/or other sponsors/donors. The technical assistance provided will leverage investment into the Beneficiaries' infrastructure. The target is EUR 2 billion of investment. The IPF operates by assisting with the preparation of infrastructure projects that have been identified by Beneficiaries as important and a priority so that potential investors (most particularly International Finance Institutions) can make investment decisions that will then enable the project to proceed. As preparation are defined all the reports, documents and studies that are essential to technically, economically and financially appraise the project Topics and regions of activity Investment projects supported by the WBIF and the IPF are distributed across any sector that contributes to the economic, social and environmental development of the Western Balkans. Eligible sectors include infrastructure development within the environment, energy, transport and social sectors. A non exhaustive list of type of projects, which could be supported by the WBIF and the IPF, includes the following: 81

95 Environment: waste water treatment, sewage systems, solid and hazardous waste management, emission control, etc.; Energy: renewable energy, interconnection systems, transmission, energy efficiency and savings, co-generation, hydro, gas pipelines, etc.; Transport: roads, railways, inland waterways, airports; and Social: schools, hospitals and health centers, housing, reclusion centers, etc.. In terms of sector allocation, the environment sector received the highest value of grant (49%) while the transport sector received second (26%) (Western Balkans Investment Framework, 2010). All IPA beneficiaries are in principle eligible for the IPF. Priority will be given to potential candidate countries as they are in highest need for support, and also considering their non-eligibility for the third component of IPA. For potential candidate countries, the IPF will aim at enhancing the complementarity between IPA grants and IFI loans. Therefore, a clear link will be established between the facility and the programming of infrastructure investments under the institution building component of the IPA annual national programs. This should allow identifying investment projects that can be funded by IPA grants combined with IFI loans to increase leverage of assistance and tackle issues related to the limited fiscal space characterizing the economies of some countries in the region. For candidate countries, the IPF may be engaged insofar the need is felt by the beneficiaries and the Commission (ELARG and REGIO) and IPF support is complementary to measures under component III and IV of IPA (European Commission - Enlargement Directorate- General; and Regional Programmes, 2007). More specifically, the seven Beneficiaries include three candidate status countries (Croatia, the former Yugoslav Republic of Macedonia and Montenegro) which have received significantly less projects than the four potential candidate status countries (Albania, Bosnia and Herzegovina, Serbia and Kosovo 19 ). This is partly because the candidate status countries are able to access EC IPA Component III funding, and as such, are not able to qualify for the transport or environment sectors of EC IPF financing. It is also due to the fact that Croatia was not an active participant until the third round launched in December Among the potential candidate status countries, Kosovo has received approximately half the average number of grants awarded to each of the other countries. This is explained by the fact that each project has to be supported by an IFI and only one of the IFIs which are part of WBIF is presently active in Kosovo. Projects receiving a grant contribution from WBIF must be on the territory of one or more of all the seven beneficiaries in the Western Balkans. Priority projects are defined and proposed by the Beneficiaries (Western Balkans Investment Framework, 2011). 19 Under UNSCR 1244/

96 Strategy and guidelines generally and per mode of transport The WBIF is a joint initiative of the European Commission and the partner international financial institutions which provides a collaborative approach towards the financing of investments in the Western Balkans, supporting the advancement of the accession process. Beneficiary ownership, strategic coherence and long-term sustainability are the guiding principles behind the process governing the selection and implementation of the projects. As illustrated by the WBIF strategy, the beneficiaries underline the fact that the WBIF contributions are aligned with their needs and priorities as well as with the EU strategy for enlargement. The Commission has encouraged cooperation among the international financial institutions and worked to promote a harmonised approach by the IFIs towards the beneficiaries (selection process, pooling of resources and co-financing). The WBIF s underlying logic is one of improved donor coordination, division of labour and harmonisation of procedures. The agreement signed between the Commission, the beneficiaries and the partner IFIs clarifies the roles and responsibilities, terms and conditions, obligations and rights of each institution. Grant contributions from different sources are pooled within the Joint Grant Facility to support operations jointly financed by institutions collaborating within the Joint Lending Facility. For each WBIF project, a partner IFI acts as the lead international financial institution, coordinating implementation with the beneficiary on behalf of the others. This innovative approach should significantly reduce transaction costs for the partner country and increase the effectiveness and visibility of joint cooperation. This is fully in line with the objectives of the Paris Declaration, the Accra Agenda for Action and the European Consensus on Development (Western Balkans Investment Framework, 2010). Eligibility for the WBIF is determined by the following criteria: Geographical coverage: Western Balkans; Sectors: All contributing to socio-economic and environmental development; Eligible beneficiary entities: Public, private or mixed capital; Eligible costs: All eligible under respective rules; Type of grant: Technical Assistance, co-financing of investments, incentives, interest rates subsidies, insurance premiums; Beneficiary ownership: by endorsement or submission; Complementary: IPA (Instrument for Pre-Accession) national programmes and other donors initiatives; Blending grants and loans: joint financing with JLF; and 83

97 Consistency with policies, rules and procedures of the contributors (Western Balkans Investment Framework, 2010). Regarding the eligibility conditions, selection criteria and types of projects, national, regional and local entities, including municipalities will be eligible for assistance from the IPF. While detailed criteria are being elaborated, the selection of projects for the support provided should follow some general criteria, notably: A balanced use of resources among the four sectors (between a minimum of 10% and a maximum of 40% of the resources should be devoted to each sector); Within each sector an equitable distribution of resources among sub-sectors in line with socioeconomic needs of the beneficiaries should be pursued; A geographical spread of the resources among countries; Priority will be given to projects with high regional impact and/or a strong social and environmental dimension and to projects identified in the context of regional networks (South Eastern Europe Transport Observatory (SEETO), Regional Environment Reconstruction Program (ReREP), Priority Environmental Investment Projects (PEIP), Energy Community Secretariat (ECS), etc.) (European Commission - Enlargement Directorate-General; Financial Instruments and Regional Programmes, 2007) Offered services, type and terms of financing The WBIF provides grant resources to projects likely to be supported by loans from the partner IFIs and other financing partners. Grants have the objective of preparing projects, accelerating existing loans or enabling projects by bridging a funding gap. The WBIF offers beneficiaries an integrated financial package for investment projects in priority infrastructure. These grant resources originate from: the EC Instrument for Pre-Accession (IPA); grant contributions from the CEB, the EBRD, the EIB and the World Bank; and bilateral grant contributions from bilateral donors through the European Western Balkans Joint Fund (EWBJF). More specifically, the participating Financial Institutions and Donors are divided into Multilateral International Financial Institutions, Bilateral development finance institutions and Bilateral Donors, as it is mentioned above: Multilateral International Financial Institutions: the Council of Europe Development Bank (CEB), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the World Bank and; Bilateral development finance institutions: Czech Export Bank, Hungarian Development Bank, KfW Entwicklungsbank (KfW), Slovenia SID Bank and Austrian Development Bank; 84

98 Bilateral Donors: Austria, Canada, Czech Republic, Denmark, Finland, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, The Netherlands, Norway, Poland, Slovak Republic, Slovenia, Spain, Sweden, and the UK. In these terms, the Western Balkans Investment Framework offers a new approach of addressing the region s extensive and diverse investment needs. It consists of two key components: Joint Grant Facility (JGF), which pools grants from the European Commission s budget, the IFIs and bilateral donors; and Joint Lending Facility (JLF), based on loans provided by the IFIs and increased cooperation with other multilateral development and bilateral financial institutions. The resources of the Joint Grant Facility are intended to be used primarily to support operations jointly financed by the institutions cooperating in the Joint Lending Facility. The Joint Grant Facility s guiding principles are beneficiary demand, ownership and long-term sustainability. It is governed by a Steering Committee, providing strategic guidance on the WBIF operations and deciding on grant allocations. The Project Financiers Group is the single entry point for grant support requests. It screens and assesses the requests received from beneficiaries and international financial institutions involved in the WBIF and submits proposals to the Steering Committee for approval. All project applications can be assessed by the technical services of the cofinancing IFIs and can benefit from Technical Assistance supervised by relevant experts 20. Projects are selected on the basis of regional and/or country needs and their consistency with EU accession priorities. They may be targeted at improving environmental, energy or transport infrastructures, education, healthcare and other social needs. Alternatively, they may involve support to small and medium-sized business (SMEs) or the financial sector. Both private and public entities engaged in projects in the beneficiary countries are eligible for support. The grant approval and implementation process under the Joint Grant Facility has six phases: 1. Project identification, in close cooperation with beneficiary, National IPA Coordinator (NIPAC), Donor Coordination Offices and other relevant local stakeholders; 2. Submission of grant requests to the Project Financiers Group by the beneficiaries via NIPACs or by the partner IFIs in coordination with the NIPACs and Donor Coordination Offices; 3. Screening of submitted grant requests to verify eligibility and consistency of proposed projects with EU pre-accession policies; 4. Assessing the long-term sustainability, technical and financial quality of project requests; 20 Project applications must follow the agreed grant application form, which is presented at the Annex I. 85

99 5. Submission of grant requests by the Project Financiers Group to the Steering Committee for its approval; 6. Implementation of approved projects under the coordination of the Project Financiers Group (Western Balkans Investment Framework, 2010). Particularly on the Transport sector, according to the WBIF final approvals up to the end of 2010, a total of twenty-two transport projects have been approved, accounting for a WBIF contribution of EUR 37 million. These transport projects are contributing to significant regional investments and the total cumulative amount of the potential investment is EUR 4,3 billion. They are equally distributed between railway and road infrastructure projects. The estimated investments and the supported projects on the Transport sector by Beneficiary country are presented in the table below: Table 7 WBIF Final approvals up to 31/12/2010 by Beneficiary (Western Balkans Investment Framework, 2010) Beneficiary country EUR million Number of transport projects Albania 16,5 5 Bosnia and Herzegovina 4,1 5 Croatia 0 0 Former Yugoslav Republic of Macedonia 0 0 Kosovo under UNSCR 1244/99 0,5 1 Montenegro 0,7 2 Serbia 15,2 9 Regional 0 0 Total 37,0 22 Regarding the IPF process and operations to assist on infrastructure projects, the development of a given project towards the goal of achieving a financing commitment from IFIs, or other donors, passes through three stages as follows: 1. Accepting projects into the pipeline The grant approval and implementation process has six phases: Project Identification, in close collaboration with the beneficiary, the National IPA Coordinator (NIPAC), Donor Coordination Offices and other relevant local stakeholders; 86

100 Submission of a grant application to the Project Financiers' Group (PFG) by the beneficiary via NIPACs or by partner IFIs in coordination with NIPACs and Donor Coordination Offices; Screening of the submitted grant requests to verify eligibility and consistency with EU pre-accession policies; Assessing the project's long-term sustainability together with its technical and financial quality; Presentation by the PFG of the grant requests that have passed screening and assessment to the Steering Committee for its approval; and Implementation of the approved projects under the coordination of the PFG. Each approved project has a defined scope of support and budget. The technical assistance (TA) for an approved project's preparation work is provided by technical experts. To enable an adequate supply of experts that can deliver the defined project scope of support the European Commission has awarded two contracts to consulting consortia; IPF1 is TA provided by the WYG International Consortium and IPF2 is TA provided by the Cowi-IPF Consortium. 2. Approval of Terms of Reference To implement the defined scope of support the IPF-TA Consultants prepare terms of reference (ToR) that define the precise work to needs to be done together with an implementation plan and budget. This will require consultation with the project beneficiary and may also need specific technical expertise and advice. Once ToR are completed they are submitted to DG Enlargement for approval by the beneficiary and the IFIs supporting the project. In addition the IPF-TA Consultants are required to obtain approval for the proposed staffing for the project, before being able to commence implementation. 3. Implementation of Project Preparation Implementation of the project proceeds in accordance with the prescriptions of the ToR. A full range of project preparation activities may be carried out ranging from studies such as identification, pre-feasibility study, feasibility study through to design, tender document assistance and preparation of EIAs and Social Impact Assessments. In addition management support to PMUs and PIUs is also possible. At the completion of the specified deliverables comments are invited from the beneficiary and the supporting IFIs. If all stakeholders agree, and budget is available, approval may be granted to proceed to the next stage. The goal during implementation is to provide the documentation required by the beneficiary and the IFI such that financing commitment can be agreed (European Commission - Directorate General for Enlargement). 87

101 3. Financing per country with focus on Transport projects The participants countries in the SEETAC project vary from Member States of the European Union to Candidate and Potential Candidate countries. Therefore, the active financial resources and financing mechanisms may also differ. At this section will be presented some brief notes about the Transport Strategies and Orientations generally and per mode of transport, according to the National Transport Strategies of these countries, and will be mentioned the ongoing and expected financial assistance from the EU funds and the IFIs, which were described at the previous section. More specifically, the Member States of the European Union which are involved in the SEETAC project are Austria, Bulgaria, Greece, Hungary, Italy, Romania, Slovenia and Slovakia; the Candidate countries for the EU enlargement are Croatia, the former Yugoslav Republic of Macedonia and Montenegro; and the Potential Candidate countries are Albania, Bosnia and Herzegovina and Serbia. Finally, there are also mentioned the Transport Strategies and Orientations of the active financial instruments at Kosovo, because it is located in the Southeast Europe area, even if it is not involved in the SEETAC project Member States of the European Union Austria Five of the TEN-T Priority axes and projects pass from the country of Austria and they are supported by TEN-T contribution, including studies: Priority axis No 1: Railway axis Berlin Verona/Milan Bologna Naples Messina Palermo Major improvements to this route, centred on the new transalpine Brenner base tunnel, will enable both people and goods to travel much more quickly between northern Europe and Italy, through the Alps. Priority axis No 17: Railway axis Paris Strasbourg Stuttgart Vienna Bratislava European citizens from west and east alike will benefit from new high-speed railway services on a route crossing heavily populated areas in the core of Europe. Freight operators will benefit from rail services on one of the most congested road axes. Priority axis No 18: Rhine/Meuse Main Danube inland waterway axis Removing bottlenecks on the Rhine Main Danube corridor will improve its navigability, favouring the transfer of freight traffic on this increasingly congested route from road to waterways. Priority axis No 22: Railway axis Athens Sofia Budapest Vienna Prague Nuremberg/Dresden This railway line forms the backbone of the railway network of Eastern Europe, connecting the ports of Athens (Piraeus), Thessaloniki and Constanta to the heart of the enlarged EU. 88

102 Together with a second rail axis (No 23) it will allow connections between the Baltic Sea, the Aegean Sea and the Black Sea. Priority axis No 25: Motorway axis Gdansk Brno/Bratislava Vienna The construction of this motorway will act as a catalyst for economic development in key areas of new Member States and, by offering a new route from the Baltic Sea to central Europe, provides a long-term alternative to the existing saturated north south axes from the North Sea (European Commission - Directorate General for Energy and Transport DG, 2005). Additionally, on 21 October 2009 the European Commission announced the first group of projects that benefited from a total of EUR 500 million worth of investment in vital transport infrastructure projects across the EU. The grants were allocated under the TEN-T programme, in order to fund works to build missing transport links or remove bottlenecks and to enable people and goods to circulate quickly and easily between Member States. The EUR 500 million package constituted a vital part of the Commission's response to the economic crisis. The funding announced would go towards projects in Austria, Belgium, Germany, Spain, France, Hungary, Italy, the Netherlands, Portugal, Sweden and the United Kingdom (European Commission - Mobility and Transport, 2009). Austria is one of the eligible countries to obtain European Regional Development Fund but not eligible for Cohesion Funds, as the country s gross national product (GNP) per capita is not below 90% of the EU-average. For the period, Austria has been allocated a total of EUR 1,461 billion: EUR 177 million under the Convergence objective, EUR 1,027 billion under the Regional Competitiveness and Employment objective, and EUR 257 million under the European Territorial Cooperation (ETC) objective. To complement the EU investment, Austria s contribution would amount to EUR 1,256 billion calculated on the basis of an annual average of EUR 179,5 million at current prices (excluding ETC). The 1,2% of this amount was allocated to investments on Transport sector. Austria already has a well-developed transport system, so the limited financial resources are concentrated on promoting multimodal transport systems and sustainable transport to the tune of EUR 8 million (Österreichische Raumordnungskonferrenz (ÖROK Austrian Conference on Spatial Planning) within the Office of the Federal Chancellor, 2007). On 20 December 2007 the European Commission approved some Operational Programmes in the field of Cross-border, transnational and interregional co-operation, in which Austria participates.the Operational Programmes are co-funded by the European Regional Development Fund: Operational Programme South East Europe (SEE) (concerning Bulgaria, Greece, Italy, Hungary, Austria, Romania, Slovenia, Slovakia, Albania, Bosnia and Herzegovina, Croatia, former Yugoslav Republic of Macedonia, Moldova, Serbia, Ukraine): The main priority axis of the programme is the Improvement of accessibility, which aims at connecting local and regional actors to the European Networks (including road, rail, inland and sea transport). This includes physical infrastructure as well as access to the Information Society. It also promotes 89

103 co-ordinated preparation for the development of accessibility networks and the support of multi-modality. This objective can be achieved through co-ordinating the promotion, planning and operating of primary and secondary transportation networks, the development of strategies tackling the digital divide and the improvement of framework conditions for multi-modal platforms (Joint Technical Secretariat; Hungarian Development Agency Authority for International Cooperation Programmes, 2007). Operational Programme Austria Hungary : The main priority axis of the programme is the Sustainable Development and Accessibility. The objective of this priority axis is to foster sustainable development, enhance the accessibility of the region and improve equality within the region. This requires interventions and activities aimed at improving ecomobility, transport and regional accessibility, enhancing the cross-border governance system and improving natural resource management. There are strong links between environmental quality and economic development, and evidence shows that sustainable development - balanced economic, social and environmental development - is a common feature of regions that use knowledge and (technological) innovation effectively (Regionalmanagement Burgenland GmbH - EU-Verwaltungsbehörde, 2007). Operational Programme Austria Slovakia : The main priority axis of the programme is the Accessibility and the Sustainable Development. This priority axis reflects the Gothenburg objectives of sustainability, and aims to develop the region s natural attractiveness as well as its accessibility and infrastructure based on the principle of environmental sustainability. The areas addressed include: transport and regional accessibility; sustainable spatial development and sound regional governance; cooperation and joint management of protected areas; and energy efficiency, renewable energy sources, environmental protection and risk (Martin Hutter - City of Vienna, Department for EU-Strategy and Economic Development, 2007). Regarding the Marco Polo II Programme, according to the Commission Decision of on the financial assistance for proposals for actions submitted in the 2010 selection procedure in the Union programme improving the environmental performance of the freight transport system (second Marco Polo Programme), within the 32 proposals selected for funding in the 2010 selection procedure under Regulation (EC) No 1692/2006, there are three projects concerning Austria to which is provided Union contribution: Project TIREX: Inland waterway transport and logistics services for Romanian timber (from Turnu Severin and Orsova) to Austria (Enns and Linz) via the Danube River (Modal shift foreseen: tkm). The Companies Benefiting are Forst und Naturmanagement GmbH from Austria and Esterhazy Bardeau Silvicultura SRL from Romania. The Maximum Union contribution EUR Project Koka Train: New scheduled rail service for the transportation of steel coils between Poland, Austria and Slovenia connecting Katowice, Linz and Koper (Modal shift foreseen: tkm). The Companies Benefiting are HHLA Intermodal GmbH from Germany and Logistik Service GmbH from Austria. The Maximum Union contribution EUR

104 Project WETRI: Upgrading the existing rail shuttle service Graz-Neuss to a tri-modal door-todoor transport chain between the markets in Southern Austria, Slovenia, Croatia and Western Germany, the BeNeLux and the United Kingdom. Type of goods: consumers' goods (cosmetics, food etc.), industrial minerals, agricultural products, automotive, bulk materials (Modal shift foreseen: tkm). The Companies Benefiting are Wenzel Logistics GmbH from Austria and Wachem d.o.o. from Croatia. The Maximum Union contribution EUR (European Commission - Marco Polo Work Programme, 2011). In Austria the only active International Financial Institution from these that were described above is the European Investment Bank. From the recently approved and financed projects it is obvious that the EIB s financial assistance is provided mainly on the Rail sector. More specifically, these projects per mode of transport are mentioned below: Rail sector: Acquisition of around 80 new locomotives for leasing to European rail freight service operators (Railway Undertakings for freight in EU terminology) and possibly to a limited extent for passenger transport (Signature date: 31/03/2011, Amount: EUR 15 million); Construction of section of high-speed line on Brenner railway axis (Berlin-Palermo TEN-T) between Kundl/Radfeld and Baumkirchen in Lower Inn Valley in Tyrol (Signature dates: 17/11/2009 and 24/02/2010, Amount: EUR 600 million); Construction of new main railway station in Vienna at junction of TEN-T railway corridors, replacing existing terminal stations (Signature dates: 10/12/2008 and 27/03/2009, Amount: EUR 400 million); Construction of priority TEN railway section between Vienna and St Pölten (Westbahn) (Signature dates: 06/09/2007 and 02/06/2008, Amount: EUR 400 million); and Expansion and upgrading of major rail hub on Salzburg-Linz-Vienna line in priority TEN corridor (Signature date: 05/09/2006, Amount: EUR 140 million). Road sector: Construction and operation of south section of A5 (northern motorway) and sections of S2 (Vienna northern perimeter expressway) and S1 (Vienna outer ring expressway) (Signature date: 21/12/2006, Amount: EUR 350 million); Aviation sector: Airport infrastructure schemes at Vienna International Airport (Signature dates: 09/06/2006 and 22/12/2006, Amount: EUR 400 million) (European Investment Bank, 2012). 91

105 Bulgaria SEETAC WP5 Identification of necessary financial resources As Bulgaria is one of the involved Member States in the Priority Project 22 (Railway axis Athina- Sofia-Budapest-Wien-Praha-Nürnberg/Dresden) with Greece, Romania and Hungary, the country is one of the beneficiaries for funding from the TEN-T budget. For this project, the total cost is EUR 13 million and the EU contribution is EUR 6,5 million, part of which is funded by the TEN-T budget. The study suggesting the technical and operational characteristics in compliance with the Interoperability Technical Standards (TSI) and technical studies for the sub-section Radomir-Kulata are also co-financed by the TEN-T budget (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010). Bulgaria is also eligible for financial assistance from the European Regional Development Fund and the Cohesion Funds, as Bulgaria is one of the 12 new Member States. Under the Convergence objective, the Bulgaria Operational Programme Transport was co-funded by European Regional Development Fund and Cohesion Fund. The European Commission approved the Operational Programme (OP) for Transport in Bulgaria for the period on 7 November This programme involves Community support for all the Bulgarian regions within the framework of the "Convergence" objective, whose rational it is to promote growth-enhancing conditions and factors leading to real convergence for the least-developed Member States and regions. The total budget of the programme is a little over EUR 2 billion, with the Community investment financing on average 81 % through the European Regional Development Fund (ERDF) and Cohesion Fund (CF) amounts to EUR 1,6 billion. The Programme focuses on transport infrastructure investments that contribute most to sustainable economic growth, and thus to more and better jobs. At the same time the programme wants to contribute to reducing congestion, noise and pollution, and promote the use of environment-friendly modes of transport. Priority 1: Railway transport infrastructure along the Trans-European Network for Transport (TEN-T) and other major national transport axes need to be modernised, as well as connections between the main railway network of Republic of Bulgaria with the main railway networks of the neighbouring countries. This should allow rail transport in Bulgaria to provide better services and become more competitive and efficient, e.g. by improving connections and transfer opportunities with other modes of transport. Major rail routes of national, cross-border and EU importance have priority, especially along the TEN-T priority axis 22 (Vidin-Sofia and Sofia-Pernik-Radomir railway lines), TEN-T sections linking to the European Priority Axes (Sofia-Dragoman and Sofia-Plodiv railway lines, renewal of sections along the Mezdra-Gorna Orjahovica railway line) and remaining sections of the TEN-T network (renewal of railway sections along the Plovdiv-Burgas railway line, electrification and reconstruction of the Svilengrad Turkish border railway line, etc.). Priority 2: Road transport infrastructure: The Programme Priority concentrates on development of road infrastructure along the Trans-European and major national transport 92

106 axes. The most important operations under this Priority are: construction of new, and rehabilitation and modernization of existing motorways of nation-wide and EU importance along the TEN-T network (notably the TEN-T priority 7 from Greece via Sofia to Romania), existing I class roads, as well as II class roads of national and EU importance along the TEN- T network, plus road sections connecting the main road network of Bulgaria with the main road networks of neighbouring countries. Examples are the planned upgrading and/or construction of (parts of the) road I-1 (E 79) Vratza-Botevgrad, the Struma Motorway and the Maritza Motorway. Priority 3: Inter-modal facilities for passenger and freight transport: The objective of this priority is making travelling conditions easier and facilitating modal transfers of passengers and freights to more environment friendly transport modes by improving the network of combined transport terminals, notably in the capital region of Sofia. The main projects of this priority is the extension of the Sofia Metro and the development (construction or upgrading) of several inter-modal transfer points inside Sofia s public transport system, such as the Central Railway Station and the Sofia Terminal Airport Station. Elsewhere the development of freight villages receives attention. Priority 4: Improvement of the maritime and inland-waterway navigation: This priority targets the improvement of navigation along inland water-ways, notably the river Danube (TEN-T priority axes 18), removing bottlenecks in the two most critical sections in the joint Bulgarian-Romanian section of the Danube River (between km 530 and 520 Batin and the section between km 576 and km 560 Belene). This includes establishing a Vessel Traffic Management and Information system. Priority 5: Technical assistance: Besides strengthening the administrative capacity, ensuring information and publicity, and managing, monitoring and evaluating the OP, crucial actions planned under this priority are the preparation of a General Transport Master Plan for Bulgaria, and the preparation of a Strategic Business Development Plan for the Development of Railway Transport (Galina Vassileva - Bulgarian Ministry of Transport, Coordination of Programmes and Projects Directorate, 2007). The breakdown of EU Contribution approved on 2007 by priority axis is presented at the following table: 93

107 Table 8: Breakdown of EU finances by priority axis (Galina Vassileva - Bulgarian Ministry of Transport, Coordination of Programmes and Projects Directorate, 2007) Priority Axis EU Contribution Railway infrastructure (TEN & national) Road infrastructure (TEN & national) Inter-modal transport Maritime & inland-waterway navigation Technical assistance Total For the period, Bulgaria has been allocated EUR 6,853 billion in total, EUR 6,674 billion under the Convergence objective and EUR 179 million under the European Territorial Cooperation objective. To complement the EU investment under the National Strategic Reference Framework, Bulgaria s contribution would amount to at least EUR 1,345 billion at current prices. The top priority of cohesion policy in Bulgaria for the years is the improving transport infrastructure and accessibility. Nearly EUR 2 billion (34,9% of the total allocation) will be spent on reducing the country s high infrastructure deficit. Priority projects under the trans-european transport networks (TEN-T) aim to construct 248 km motorways. Over km of roads and 780 km of railways are to be upgraded with the help of the funds (Directorate for Management of EU Funds in the Bulgarian Ministry of Finance, 2007). Other Development programmes under the European Territorial Co-operation Objective, which were co-funded by the European Regional Development Fund (ERDF) are the following: Operational Programme Greece Bulgaria : One of the priorities axis of the programme is the Accessibility, which aims to improve transport and communication networks and to ensure easy and safe circulation of goods, services and people in the cross-border area. Other objectives include: improving road and railway networks as a means of social and economic development in the cross-border area; improving the mobility of goods, services and people in the cross-border area; and coordinating infrastructure initiatives in the crossborder area in an effort to boost its economic activity and ensure balanced spatial development (Greek Ministry of Economy and Finance, 2008). Operational Programme South East Europe (SEE) (Bulgaria, Greece, Italy, Hungary, Austria, Romania, Slovenia, Slovakia, Albania, Bosnia and Herzegovina, Croatia, former Yugoslav Republic of Macedonia, Moldova, Serbia, Ukraine), which was described above ( Active financial resources and financial mechanisms in Austria). 94

108 Operational Programme Romania-Bulgaria : The main priority of the programme aims at improving mobility and access to transport infrastructure in the cross-border area. The specific objectives are to improve cross-border mobility by improving existing conditions and developing new facilities for transport in the eligible area, and to enable efficient regular exchange of information and data of cross-border relevance (Julia Hertzog - Romanian Ministry of Development, Public Works and Housing, 2007). The Marco Polo II Programme is also active in Bulgaria and, according to the Commission Decision of on the financial assistance for proposals for actions submitted in the 2010 selection procedure, although at the moment the proposal for the project BRP-CONT applied by the company Bulgarian River Shipping JSC is not meeting the funding conditions (European Commission - Marco Polo Work Programme, 2011). Regarding the IFIs, Bulgaria is a beneficiary country for financial assistance from the European Investment Bank, the European Bank for Reconstruction and Development, the World Bank and Joint Assistance to Support Projects in European Regions. Some of the recently or ongoing financed projects on transport sector are mentioned below for every distinct financial institution. The EIB financing is provided in the form of a Structural Programme Loan. As well as bigger projects the loan can also finance a large number of relatively small sub-projects which, due to their small size, would not qualify for direct EIB financing. In this framework the EIB can provide prefinancing when needed and offer long-term co-financing on the most attractive terms for projects under the EU programmes across Bulgaria. The project will be implemented by the respective ministries and final beneficiaries of the corresponding programmes. EIB activities in Bulgaria are focused on the following objectives: Improving and upgrading the country's basic infrastructure in areas such as transport, environment and energy in combination where applicable with EU grants and other funding sources. This includes financing at national but also regional and municipal levels; Promoting and strengthening economic growth and development through combination with EU grants and government and private funds; Supporting private sector investment including long-term foreign investment activity; Closely cooperating in the implementation of projects financed by the Bank; providing technical support and expertise for selected EU Cohesion and Structural Fund projects defined in the JASPERS National Action Plan; and Assisting the government in the implementation of a national PPP programme (European Investment Bank, 2012). One recently financed project by EIB in Bulgaria is the Transit Roads V project. The project comprises the rehabilitation and upgrading of about 1500 km of priority transit roads in Bulgaria, grouped in several lots. It is the Bank s seventh road project in Bulgaria, and is an extension of the 95

109 Bank s earlier operations in the Bulgarian road sector (Signature date: 27/08/2007, Amount: up to EUR 380 million) (European Investment Bank, 2007). Although there aren t any recently financed project in Transport, apart from projects on urban transport, EBRD s priority is to support private sector capital in key transport infrastructure projects that will enhance economic development and promote regional links. The Bank will endeavour to introduce private sector practices (in line with best international standards on procurement) within a sector where state management is likely to continue. This could include private maintenance contracting or tolling services on state-owned roads. The Bank will also encourage and facilitate investment through concessions in airports, ports, roads and bridges, in line with the Government s stated objective to expand PPP financing in these sectors. Although the Bank is not currently active in the railways sector, it could support private sector involvement through railway station concessions or provision of railway services under the World Bank-led reform programme in this sector (European Bank for Reconstruction and Development, 2011). In particular, it will seek to improve commercial discipline by the following strategic orientations: Support private sector investment in the road sector through public-private partnerships (PPPs) and otherwise. The Bank will seek to mobilise technical co-operation funding to assist the Bulgarian Government to identify suitable projects and to bring adequately prepared and structured PPP projects to market. Potential projects may include stretches of the HEMUS or Cherno More motorways. The Bank will support commercialisation and possible privatisation within the railway sector. Potential projects which may offer funding opportunities for the Bank to explore include concessions for major railway stations in Sofia and Plovdiv. In addition, where viable, the Bank will offer support to private sector operators with regards to purchasing or leasing of rolling stock. Following the earlier concessioning of Varna and Bourgas airports, further concession opportunities in other areas of increasing tourist activity or logistic centres will be followed. Within port facilities, fuel, container and grain terminal development in Varna and Bourgas will be pursued again with private sector involvement, as well as any commercially sound intermodal development opportunities (European Bank for Reconstruction and Development, 2008). Regarding the World Bank, the ongoing projects in Transport sector are the following: Road infrastructure rehabilitation project: The development objective of the project is to assist Bulgaria to reduce road transport costs by improving the condition and quality of its roads network during the first years of European Union (EU) accession. The major modifications being are: changes to project components by expanding the scope of 'component two: institutional development' and focusing it on the absorption of EU funds, and reducing the scope of 'component one: rehabilitation of selected roads' to reflect the reduced budget for the project which impacts the project's financing plan; extending the loan closing date by 24 96

110 months to enable full completion of the expanded component two and of all ongoing road rehabilitation works under component one; reallocation of loan proceeds between disbursement categories to reflect the changes to project components, and increase the percentage of expenditures to be financed from loan proceeds; and modifications of outcome and impact indicators to reflect the changes. The project was approved on 26/6/2007 and will close on 30/6/2011. The amount offered is EUR 90 million. Second Trade and Transport Facilitation Project: The objective of the project is to facilitate trade by improving the capacity, efficiency and quality of services at selected European Union border crossings with particular focus on the Trans-European Transport Network. The project includes four components: improvement of physical capacity and working conditions at selected European Union external border crossings with particular focus on the Trans-European Transport Network; construction of the access road to Kapitan Andreevo border crossing point; enhancing sharing of relevant border crossing data, and streamlining operational procedures of border crossing agencies; and capacity building and support to project implementation. The project was approved on 21/3/2007 and will close on 30/6/2012. The amount offered is EUR 41 million. The Railway Infrastructure Rehabilitation is under preparation and the estimated amount to be offered is EUR 70 million (The World Bank, 2011). Finally, a break-down of JASPERS activities in Bulgaria is presented below. The mentioned projects are already included in the country Action Plan for which JASPERS activities will start soon, projects on which JASPERS is already working although they are not yet included in a signed Action Plan as well as on-going projects included in the Action Plan. Roads: Upgrading of Road E-79, Vratza-Botevgrad; Kardjali-Podkova Motorway; City of Montana bypasses - Construction of TEN-Tnetwork Phase I; Construction of Trakia Motorway; City of Vratsa bypasses - Construction of TEN-Tnetwork Phase I; Maritza Motorway 5-72 km; Henus Motorway connection to Sofia Ring road; Transit Roads Rehabilitation IV, phase 2; Struma Motorway; and Technical Assistance for elaboration of Transport General Master Plan. 97

111 Ports, Airports and Railways: SEETAC WP5 Identification of necessary financial resources Modernisation of railway line Sofia-Plovdiv; Rehabilitation of railway infrastructure sections along the Mezdra-Gorna Oryahovitza railway line; Modernisation of railway line Sofia-Radomir; Construction of intermodal terminal in Sofia; Navigation improvements (Battin/Belene); Rehabilitation of railway infrastructure sections along the Plovdiv - Burgas Railway Line; Modernisation of railway line Vidin-Sofia; Modernisation of Railway line Sofia- Dragomir; and Assessment of the preparation process for transport projects (European Commission; European Investment Bank; European Bank for Reconstruction and Development; Kreditanstalt für Wiederaufbau, 2012) Greece Greece as a Member State of the EU is a country eligible for funding from all the EU funds. More specifically, by being involved in three Priority Projects of the TEN-T (Priority Project 7 - Motorway Axis Igoumenitsa/Patra-Athina-Sofia-Budapest, Priority Project 22 - Railway axis Athina-Sofia-Budapest-Wien-Praha-Nürnberg/Dresden and Priority Project 29 - Railway axis of the Ioanian/Adriatic intermodal corridor), Greece is one of the beneficiaries for funding from the TEN- T budget. For all these projects, the percentage of the EU contribution of the total project cost and the cost of the required studies cost is 50%, part of which is funded by the TEN-T budget. For the Priority Projects 7 and 29 the planned and revised cumulative TEN-T contribution by the end of the estimated end years, will be EUR 1,1 million (for PP7 by the end of 2011) and EUR 21,5 million (for PP29 by the end of 2015), according to the Implementation schedule. For the Priority Project 22 the planned and revised cumulative TEN-T contribution by the end of 2015 to all the involved countries (Greece, Bulgaria, Romania and Hungary) is EUR 6,5 million (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010). For the period, Greece has been allocated EUR 20,420 billion in total Cohesion Policy funding: EUR 19,575 billion under the Convergence objective, EUR 635 million under the Regional Competitiveness and Employment objective, and EUR 210 million under the European Territorial Cooperation objective. Greece s contribution to complement the EU investment under the National Strategic Reference Frame- work should amount to at least EUR 6,169 billion at current prices. 98

112 One of the main priorities of Cohesion Policy in Greece for the current period ( ) is improving transport infrastructure and accessibility. Therefore, nearly EUR 6 billion will be invested in large investments (EUR 3 billion) to be made in the priority European Trans-European Transport Network (TEN-T) projects. Several railway lines will also be funded. Greece has five regional programmes funded by the ERDF, and eight thematic programmes funded by the ERDF, the Cohesion Fund and the ESF. One other programme covers a national contingency reserve under the Convergence Objective. The total ERDF Community Contribution to Greece for the period is EUR and the biggest part of this (32,7%) is allocated to the transport sector (Greek Ministry of Economy and Finance, General Secretariat for Investments and Development, 2007). On 10 October 2007, the European Commission approved an Operational Programme for Greece for the period The programme Improvement of Accessibility involves Community support for eight Greek regions: Epirus, Thessaly, Eastern Macedonia, Ionian Islands, Western Greece, Peloponnesus, Crete and North Aegean. The Operational Programme falls within the framework laid out for the Convergence objective and has a total budget of around EUR 4,976 billion. Community assistance through the European Regional Development Fund (ERDF) and the Cohesion Fund amounts to some EUR 3,7 billion, which represents approximately 18,45% of the total EU money invested in Greece under Cohesion policy The Operational Programme sets out two strategic objectives: Improvement of accessibility of the country's regions at European, national and regional level through the development of transport infrastructures (road, rail, maritime, air and public transport); and Improvement of the quality of transport services with emphasis on reducing the time and cost of movements, transport safety and the level of service. The Operational Programme is structured along the following priority axes: Priority 1: Road transport infrastructures (approximately 58,8% of total amount of funding): Specific objectives of this priority include: development of Trans-European Networks (TENs); and development of the secondary regional network, including the development of road links with the main gates of entry to the country. Priority 2: Rail and combined transport infrastructures (approximately 19,5 % of total amount of funding) Specific objectives of this priority include: development and modernisation of the rail network; and construction and completion of the Trans-European PATHE/P (Patras-Athens- Thessalonica) corridor offering high speed transport of 160 km/h with double electrified lines and signalling and the development of multimodal transport along this axis. Priority 3: Public urban transport (approximately 11,1 % of total amount of funding) 99

113 The objective of this priority is to develop the public urban transport system in the Athens/Piraeus area with a view to developing mobility, improving the attractiveness of public transport, offering quality of services and promoting a cleaner environment. Priority 4: Air and maritime transport infrastructures (approximately 7,4 % of total amount of funding) Greece has an extensive network of ports (155) and airports (41). The specific objectives of this priority include: improvements in the maritime transport system through the development of appropriate passenger and freight port infrastructures; and development of regional airports. Priority 5: Road safety and safety of transport networks (approximately 1,2% of total amount of funding) The objective of this priority is to improve the quality of transport networks and services. This part of the Operational Programme assigns particular importance to issues of safety and traffic management. Priority 6: Technical assistance (approximately 1,1 % of total amount of funding) In order to implement the programme, financial support is being made available to cover administration, monitoring and controls (Special Managing Service of the Operational Programme "Reinforcement of Accessibility", 2007). Apart from the Operational Programme Improvement of Accessibility, some transport projects co-financed by the Structural Funds in Greece are mentioned above: Harilaos Trikoupis Bridge (or Rion-Antirion bridge): Co-financed by the ERDF (Objective 1) and (Objective 1, operational programme Transport axes, ports and urban development ). The Total Cost was EUR 770 million, the EU Contribution EUR 308 million and the Public Fund EUR 385million (Yannis Freris - Gefyra S.A., 2006). Port of Corfu: Co-financed by the ERDF for the period and the EU Contribution was EUR 4,880 million (Katerina Anagnostidou - Managing Authority of European Territorial Cooperation Programmes, 2010). Port of Igoumenitsa: Co-financed by the Cohesion Fund for the 2000 to 2006 period and the EU Contribution was EUR 33,010 million (Anna Piroti - Port Authority of Igoumenitsa S.A., Port Exploitation and Marketing Department, 2009). Part of Egnatia Odos Highway at the Ipeiros region: Co-financed by the ERDF over the period 2000 to 2006 and the EU Contribution was EUR 84,170 million (Nikos Mpaltogiannis; Dimitra Stavropoulou - EGNATIA MOTORWAY S.A., 2009). 100

114 In Greece the only active International Financial Institution from these that were described above is the European Investment Bank. Beneficiaries of EIB lending in Greece include the public and private sectors, banks and industry. The European Investment Bank is lending a total of EUR 2 billion for key investments in Greece for the year 2010.This is the largest ever EIB loan in Greece.It provides timely support to the real economy.through its multiplying effect, the loan will support the recovery and will accelerate transition to a smart, sustainable and inclusive growth path.it targets to the priority areas that Greece has identified as crucial for its long term development, and is in line with the European Union's strategy for Long Term growth known as EU2020.The strategy emphases on innovation, education, the digital society and the fight against unemployment. The operation is structured as a framework loan and will be used by the Greek state for investments in priority areas identified in the National Strategic Reference Framework. The investments to be financed are grouped around selected priorities of 11 comprehensive Operational Programmes (OPs) of the Hellenic Republic. The schemes implemented within these OPs are expected to contribute primarily to the achievement of the objectives in the four thematic priorities for the Greek economy in line with EU2020 strategy: investments in the productive sector, knowledge society and innovation, employment and social cohesion, and attractiveness of Greece and the regions as places to invest, work and live. They include schemes in railway, environment, energy efficiency and renewable energy, water, waste, RDI, ICT and human capital sectors. The largest single scheme under these investments, for which EUR 1 billion will be allocated, concerns the PATHEP Railway Corridor. This TEN-T priority project includes a number of modernisation works along the rail line Patras-Athens-Thessaloniki-Idomeni/Promahonas, a railway node at Acharnes, a freight complex at Thriassio and its rail link to the Neo Ikonio Container Terminal of the Port of Piraeus. In 2009 the EIB provided a total of EUR 1,6 billion up 33% compared to EUR 1,2 billion in 2008; of this amount, more than EUR 1 billion was to support small and medium-sized enterprises (SMEs) and small and medium infrastructure investments to be carried out by private or public bodies, including the local authorities, as well as beneficiaries of any size. Financing was for investments in the fields of transport, industry, tourism, services, knowledge economy, energy, environmental protection and urban development. From the recently approved and financed projects it is obvious that the EIB s financial assistance is provided mainly on road and ports in Greece. More specifically, the recently projects co-funded by the EIB in transport sector are mentioned below: Road sector: Construction of 2x2 lane motorway (from Korinthos to Patras and from Patras to Tsakona) and maintenance of existing motorway from Elefsina to Korinthos (Signature date: 19/05/2008, Amount: EUR 200 million); 101

115 Construction of three sections of Egnatia trunk road in central eastern Greece (Signature dates: 30/01/2004, 28/07/2005 and 16/11/2007, Amount: EUR 400 million); and Construction of 36 km of motorway on western part of Egnatia axis (Signature dates: 21/12/2005 and 16/11/2007, Amount: EUR 290 million). Maritime sector: Upgrading and expansion of Pier 1 of Piraeus port (Signature date: 25/06/2009, Amount: EUR 55million); and Extension of pier at port of Thessaloniki (Signature date: 31/08/2006, Amount: EUR 50million) (European Investment Bank, 2012) Hungary Hungary as a Member State of the EU is a country eligible for funding from all the EU financing mechanisms. More specifically, by being involved in three Priority Projects of the TEN-T, the Priority Projects 6, 18 and 22, Hungary is one of the beneficiaries for funding from the TEN-T budget. For all these projects, the percentage of the EU contribution of the total project cost and the cost of the required studies cost is 50% and part of this contribution is funded by the TEN-T budget. More specifically, Hungary is involved in the Priority Projects 6 (Railway axis Lyons Trieste Divača/Koper Divača Ljubljana Budapest Ukrainian border) for the railway line section Budapest-Keleti-Miskolc-Nyiregyhaza, for which the planned and revised cumulative TEN-T contribution by the end of 2013 is EUR 8 million. Part of the Priority Project 18 (waterway axis Rhine/Meuse-Main-Danube), involves the study of the elimination of fords and bottlenecks hindering navigation along the Hungarian stretch of the Danube river between the town of Szob and Hungary s southern border. For this part the planned and revised cumulative TEN-T contribution by the end of 2011, will be EUR 4 million. Finally, part of the Priority Project 22 (Athina-Sofia- Budapest-Wien-Praha-Nürnberg-Dresden) aims at upgrading the Biatorbagy to Tata railway section and it includes reconstructing of the stations and the signaling system to enable higher track capacity and provide safety for passengers. For this part the planned and revised cumulative TEN-T contribution for Hungary by the end of 2011 will be EUR 1,25 million (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010). For the period, Hungary has been allocated EUR 25,3 billion in total: EUR 22,9 billion under the Convergence Objective, EUR 2,03 billion under the Regional Competitiveness and Employment Objective and EUR 386 million under the European Territorial Cooperation Objective. Cohesion Policy investment in Hungary focuses on the accessibility of key economic centres. More than EUR 7,2 billion is to be invested in transport infrastructure, with major investments to be made in TEN-T projects (EURO 3,4 billion). The Rehabilitation of the Budapest-Ceglιd-Szolnok-Lőkφshαza railway line, Stage 2, Phase II: Sections Budapest-Vecsιs and Mezőtϊr-Bιkιscsaba is one example of a project financed by the 102

116 Cohesion Fund, with the aim of strengthening rail transport along one of the strategic transport corridors crossing Hungary, i.e. Corridor IV. This rail corridor is the most important transit route towards the Balkans and the Black Sea and therefore, the main continuation of the Budapest- Vienna-Germany international route. Increased speed, safety, reliability and comfort are crucial elements to making rail transport competitive along this strategic link. The EU grant amounts to EUR 103 million. It is expected that in total 500 km of new and reconstructed railways will be built. Hungary has 15 programmes under both the Convergence and the Regional Competitiveness and Employment Objectives. Of these, 13 will receive funding from the ERDF and the Cohesion Fund, with two receiving funding from the ESF. Seven of the programmes are regional and eight are sectoral. The total Cohesion Fund Contribution to Hungary for the period is EUR and the total ERDF is EUR , one big part of which (25,8%) is allocated to the transport sector (Hungarian Development Agency with overall responsibility for Cohesion Policy , 2007). On 1 August 2007, the European Commission approved Hungary s Operational Programme for Transport for the period The Operational Programme falls within the framework laid out for the Convergence Objective and has a total budget of around EUR 7,3 billion. Community assistance through the European Regional Development Fund (ERDF) and the Cohesion Fund amounts to some EUR 6,2 billion, which represents approximately 24.5% of the total EU investment earmarked for Hungary under the Cohesion Policy for The Operational Programme is structured around the following priorities: Priority 1: Improving international accessibility to the country s road network and regional centres (approximately 19,0% of total funding): Increasing international access to Hungary is vital for the country s economic prospects. Access to regional centres via the road network must also be improved. Work to address these issues includes developing Hungarian motorways and expressways that form part of the EU s Trans-European Transport Network (TEN-T). The new expressways, which are to be built using programme funding, will help to improve accessibility, reduce environmental load and increase transport safety. Priority 2: Improving international accessibility to the country s rail and waterway networks (approximately 27,7% of total funding): The objective is to better integrate Hungary into the European economy and to maximise the potential of emerging markets by developing the country s rail and water transport infrastructure. Activities will include: developing Hungarian railways lines that are part of the TEN-T rail network; developing relevant information technology and telematics and investing in safety measures; and developing the Danube as an EU inland waterway corridor. Priority 3: Improving regional accessibility (approximately 24,5% of total funding): 103

117 This priority focuses on improving accessibility to Hungary s regional centres. In practice, this will mean developing main roads to improve links between regions and the TEN-T network. Programme funding will also be used to strengthen the load-bearing capacity of main roads to comply with EU standards. Priority 4: Linking modes of transport and improving the intermodality and transport infrastructure of economic centres (approximately 2,4% of total funding): Improving the intermodality of national and regional transport systems is a key priority. The programme will help to develop infrastructure for intelligent traffic management while improving accessibility in economical and environmentally friendly ways. Plans will be drawn up to develop better infrastructure links between the country s main transport networks and important commercial hubs like ports and industrial estates. Priority 5: Improving urban and sub-urban public transport (approximately 25.0% of total funding): This priority access intends to make it easier for people to get in and out of Hungary s cities. The focus is on tackling overcrowding on urban transport networks, thereby improving conditions and services for users. These changes will be achieved by establishing an efficient and economic urban transport system. Priority 6: Technical assistance (approximately 1,3% of total funding): There is also provision for technical assistance which can be used to implement the programme. Financial support is available to cover administration, monitoring and control (Szilvia Szabo - General Directorate Managing Authority for Transport of the Hungarian Development Agency, 2007). Apart from the approved Hungary s Operational Programme for Transport, the motorway system in southern Hungary is one of the country s transport projects which got co-financed by the EU s Cohesion Fund for the 2007 to 2013 programming period. The total Cost of the project is EUR and the EU Contribution EUR The M43 motorway stretches from Szeged to the Romanian border in the east. On top of smoother traffic flows for local and foreign vehicles, the motorway alignment project will bring benefits in terms of employment and the environment (Flórián Szalóki - NFÜ Közlekedési PRogramok Irányító Hatósága, 2011). Concerning the IFIs, is one of the beneficiaries countries for financial assistance from the EIB, the EBRD and from the JASPERS programme. Concerning the EIB, on 20 June 2011 the EIB decided to provide four loans to co-finance priority projects in Hungary receiving support from EU Funds: EUR 300 million to support projects within the Transport and Energy & Environment Operational Programmes; EUR 300 million to co-finance selected projects under the Rural Development Programme; EUR 80 million to co-finance small scale projects to improve accessibility of regions; and EUR 55 million to co-finance projects in the 104

118 health sector within the Social Infrastructure Operational Programme. The objective in the transport sector is to improve accessibility with a view to increasing economic competitiveness and strengthening social and territorial cohesion improving Hungary s main roads and railways infrastructure with the focus on environmentally friendly and sustainable modes of transport. From the recently approved and financed projects it is obvious that the EIB s financial assistance is provided mainly on the Road and Rail sectors. More specifically, these projects per mode of transport are mentioned below: Road sector: Framework loan for financing small-scale road projects aimed at improving regional accessibility in Hungary (Signature dates: 20/06/2011 and 03/06/2008, Amount: EUR 200 million); Regeneration of priority urban public transport and road infrastructure and facilities (Signature date: 21/12/2009, Amount: EUR 150 million); Construction of motorway between Dunaújváros and Szekszárd on M6 corridor (Signature date: 01/08/2008, Amount: EUR 200 million); Construction of 73 km of motorway linking M3 motorway (TENs Corridor V) to Debrecen and of bypasses around Debrecen and Nyíregyháza (Signature date: 30/11/2006, Amount: EUR 320 million); and Construction of first section of M6 motorway, between Budapest and Dunaújváros south of Budapest (Signature date: 28/03/2006, Amount: EUR 200 million). Rail sector: Acquisition of around 80 new locomotives for leasing to European rail freight service operators (Railway Undertakings for freight in EU terminology) and possibly to a limited extent for passenger transport (Signature date: 31/03/2011, Amount: EUR 5 million); and Acquisition of 25 dual-voltage locomotives for use on domestic and international services of Hungarian railway (Signature date: 03/12/2009, Amount: EUR 38,250 million) (European Investment Bank, 2012). The EBRD in 2008 provided a EUR 75 million loan to Mecsek Autópálya Koncesszios ZRt. (MAK) for the expansion of the Hungarian motorway network (M6-M60 motorway sections) through a private operator. Earlier, in 2006, the EBRD provided a EUR 32 million loan to the original M6 financing and the consortium expressed strong interest in the Bank s continued participation. The EBRD has extensive experience in financing and structuring road PPPs in Hungary, including the financing of the M5 motorway to Szeged in 2004 (European Bank for Reconstruction and Development Press Office, 2008). 105

119 JASPERS assignments completed JASPERS assignments in progress SEETAC WP5 Identification of necessary financial resources The following table contains a break-down of JASPERS activities in Hungary. All projects in which JASPERS has been involved since its launch in 2006 are listed. The projects are sorted according to the status of JASPERS assignment. The projects in progress are already included in the country Action Plan for which JASPERS activities will start soon, projects on which JASPERS is already working although they are not yet included in a signed Action Plan as well as on-going projects included in the Action Plan. At present there are 10 projects in progress on the Transport sector. The list with the completed projects concerns the projects in Transport sector for which JASPERS has completed its assignment. The completion refers only to JASPERS tasks, works on the project may be still in progress or eventually not even started. This category presently contains 8 projects (European Commission; European Investment Bank; European Bank for Reconstruction and Development; Kreditanstalt für Wiederaufbau, 2012). Table 9 JASPERS activities in Hungary (European Commission; European Investment Bank; European Bank for Reconstruction and Development; Kreditanstalt für Wiederaufbau, 2012) Status Transport Projects M3 Motorway Nyiregyhaza-Vasarosnameny M43 Motorway Mako-Csanadpalota/Nagylak M2 Motorway Budapest-Vac Budapest suburban rail system Reconstruction of Óbuda-Esztergom railway line Reconstruction of Szajol-Püspökladány railway line Phase I Rehabilitation of Budapest-Lokösháza railway line III/1 Phase 1 - section Gyoma- Békéscsaba Rehabilitation of Budapest-Lokösháza railway line III/1 Phase 2 - section Békéscsaba North-South Regional Rapid Railway Phase I Improvement of the navigability of river Danube Motorway M43 Motorway M7 Motorway M0 Construction of sections of Trunk Road No. 4 in Pest County Sopron-Szent Gotthard 106

120 Budapest - Szekesfehervar GSM-R Sopron-Szent Gotthard Italy Italy is eligible for all the European Structural funds and beneath them is the TEN-T budget, as Italy is and has been involved in many TEN-T priority axes and projects. More specifically, the Brenner Base Tunnel is the centrepiece project of Priority Project 1 (Railway axis Berlin-Verona/Milano- Bologna-Napoli-Messina-Palermo). The 56 km cross-border tunnel across the Alps between Austria and Italy foresees the construction of two low-gradient parallel tunnels. The planned and revised cumulative TEN-T contribution for the two countries until the estimated end year (2014) is EUR 592,7 million for the works and EUR 193,4 million for the studies. Another part of the same Priority Project concerns the southern access that is the link to complete the Brenner Corridor in Italy. For this part the revised planned TEN-T contribution to Italy until the same year is EUR 45,9 million. Italy is also involved in the Priority Project 6 (Railway axis Lyon-Trieste-Divača/Koper- Divača-Ljubljana-Budapest-Ukrainian border). For the part focusing focused on the new line between Ronchi Sud and Trieste and the studies on this section which connects the new railway station at Ronchi Airport, and continues for 32 km towards Trieste through a series of deep tunnels divided by open zones, the planned TEN-T contribution to Italy until the end of 2012 will be EUR 24 million. For the new freight and passenger rail link between Lyon and Turin (studies and works) and the cross-border railway line section between Trieste and Divača (study and design of the Trieste-Divača-Ljubljana-Budapest-Ukrainian border) the revised planned TEN-T contributions until the end of 2015 is EUR 662,6 million for Italy and France and EUR 50,7 million for Italy and Slovenia respectively (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010). Italy is the third largest beneficiary of the European Union s Cohesion Policy after Poland and Spain. During the programming period, Italy will receive a total of almost EUR 29 billion in European aid (from the ERDF and the ESF) under the Convergence, Regional Competitiveness and Employment and European Territorial Cooperation Objectives. One of the main priorities of Cohesion Policy in Italy for the programming current period is the funding aid to the Transport infrastructure. In particular, this will involve improving modes of sustainable transport (rail, ports and seaways). The Italian axes that are part of the Trans-European Transport Networks (TEN-T) as defined at European level, will be priorities. A minimum portion of European Regional Development Fund (ERDF) resources (set at 8% for the Convergence regions and 12% for the Regional Competitiveness and Employment regions) is specifically allocated to investments in energy, namely in energy efficient and renewable energy sources. In an effort to promote a shift towards sustainable transport, Italy will set aside a minimum 107

121 70% of ERDF resources for investing in transport networks and sustainable transport modes (rail and waterways) (Italian Ministry of Economic Development, 2007). On 7 December 2007, the European Commission approved the Transport Operational Programme Networks and Mobility for Italy under the Convergence Objective for the period The total budget of the Programme is around EUR 2,7 billion and includes Community funding through the European Regional Development Fund (ERDF) of some EUR 1,35 billion, which represents approximately 4,7% of the total EU investment earmarked for Italy under the Cohesion Policy for The Programme is structured along the following priorities: Priority 1: Development of Key Transport Infrastructures and Logistics (approximately 55,2% of total funding): This priority is linked to the development of Trans-European Transport Networks (TEN-T) priority 1 (railway Battipaglia Reggio Calabria, Naples and Palermo) and axis 21 (main ports of Gioia Tauro Napoli, Salerno, Brindisi, Taranto and Augusta). This includes IT systems required for developing freight transport safety and interoperability (ERTMS European Rail Traffic Management System and VTS Vessel Traffic Service). Priority 2: Enhancement of Links between Local Systems and the Main Network (approximately 43,4% of total funding): This priority focuses on the link between TEN-T axes 1 and 21 and local infrastructure networks (between Gioia Tauro and Taranto ports, passing through axis 1) and also connections with the two axes (road link from the Jonian coast to corridor 1 and activation of multimodal transport centres that can feed priority axis 1). Priority 3: Technical Assistance (approximately 1,4% of total funding): Technical assistance will be provided for implementation of the Programme. Financial support is also available and will cover administration, monitoring, evaluation and control (Ministero dellle Infrastrutture e dei Trasporti, 2007). Some transport projects recently co-financed by the Structural Funds in Italy are mentioned below: SoNorA project, focusing on the development of multimodal transport infrastructure and services in Central Europe, providing better connections between the Baltic and Adriatic seas (involved countries: Austria, Czech Republic, Germany, Italy, Poland and Slovenia): Cofinanced by ERDF over the period November 2008 to February 2012, EU Contribution EUR 5,500 million (Markus Stradner - Central Europe Programme Cooperating for Success - Joint Technical Secretariat, 2010); and Development of the Gioia Tauro port: Co-financed by ERDF for the period , EU Contribution EUR 76,100 million (Anna Tavano - Regione Calabria, Dipartimento Programmazione Nazionale e Comunitaria, 2007). 108

122 In Italy the only active International Financial Institution from these that were described above is the European Investment Bank. Some of the recently approved, signed and financed projects on the transport sector are mentioned below: Road sector: Construction of the Frejus safety tunnel at the border between Italy (Bardonecchia) and France (Modane) (Approval date: 01/07/2011, Amount: Up to EUR 120 million); Implementing safety investments on the Milan motorways system in Northern Italy: Safety upgrading measures located on some sections of the Milan west motorway ring-road (A50) and of the Milano-Serravalle motorway (A7) including the connection to the Pavia ring-road (Approval date: 18/03/2011, Amount: Up to EUR 100 million); Improving 14 km of the A24 Motorway most western section, from the intersection with Via Palmiro Togliatti to the junction of Roma East (Approval date: 14/12/2010, Amount: Up to EUR 150 million); and Autovie Venete A4 Widening (Approval date: 15/06/2010, Amount: Approximately EUR million). Rail sector: Acquisition of around 80 new locomotives for leasing to European rail freight service operators (Railway Undertakings for freight in EU terminology) and possibly to a limited extent for passenger transport (Signature date: 31/03/2011, Amount: EUR 5 million) Maritime sector: Acquisition of 13 new multi-purpose cargo vessels (Signature date: 05/05/2011, Amount: Up to EUR 150 million); and Purchase of 4 ro-ro/ container vessels (Approval date: 14/12/2010, Amount: Up to EUR 113 million) (European Investment Bank, 2012) Romania Having joined the European Union only in 2007, this is the first time that Romania has had an opportunity to benefit from the Community funds under Cohesion Policy. Additionally, Romania is involved in three of the TEN-T Priority Axis and therefore is one of the beneficiaries countries for financial aid from the TEN-T budget. These Priority Axis are No 7 - Motorway axis Igoumenitsa/Patras Athens Sofia Budapest, No 18 - Rhine/Meuse Main Danube inland waterway axis and No 22 - Railway axis Athens Sofia Budapest Vienna Prague Nuremberg/Dresden. Particularly about the Priority Axis are No 7, Romania is involved in the section Thessaloniki-Promachon-Kulata-Sofia-Vidin-Calafat-Craiova-Timisoara-Curtici- Lokoshaza-Budapest-Gyor-Hegyeshalom. Part of the project involves an assessment study for the 109

123 entire length of section (Phase A) to establish common standards. The study will suggest the technical and operational characteristics in compliance with the Interoperability Technical Standards (TSI). It will be followed by technical studies for the sub-sections Thessaloniki-Strymon- Promachon (Greece); Radomir-Kulata (Bulgaria); Craiova-Timisoara-Arad (Romania) and Lokoshaza-Budapest-Hegyeshalom (Hungary). For this part, the estimated end year is 2015 and the planned TEN-T contribution until then for the four involved countries will be EUR 6,5 million (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans- European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010). Preliminary work suggests that Cohesion Policy programmes in Romania may contribute substantially to an overall increase in gross domestic product (GDP), with estimates of a 15% increase for the period , and create and safeguard approximately jobs. It is expected that through these investments, the proportion of the population with modern broadband access will increase more than tenfold. For the period, Romania has been allocated almost EUR 20 billion under the Convergence Objective and EUR 455 million under the European Territorial Cooperation Objective. Romania has seven programmes. Three programmes will receive funding from the ERDF: the Regional programme, the Increase in Economic Competitiveness programme and the Technical Assistance programme, while two programmes will be funded by the ESF and will focus on human resources development and improving administrative capacity. Two infrastructureoriented programmes, the Environment programme and the Transport programme, will be funded by both the ERDF and the Cohesion Fund. All regions in Romania are eligible under the Convergence Objective. Improving basic transport infrastructure and accessibility is a top priority. Nearly EUR 5,3 billion (equivalent to 28% of total allocation) will be spent on reducing the country s high infrastructure deficit. Construction of some km of new roads will be financed from the funds under priority designated trans-european transport networks (TEN-T) which criss-cross the EU (Romanian Ministry of Economy and Finance - Authority for the Coordination of Structural Instruments, 2007). On July 12, the European Commission approved the European Regional Development Fund (ERDF) and Cohesion Fund (CF) Operational programme for Romania for the period , entitled Operational Programme Transport (SOPT). The total budget of the programme is around EUR 5,7 billion and the Community assistance amounts to EUR 4,56 billion (approximately 23 % of the total EU money invested in Romania under Cohesion policy ). In order to achieve the objective of the SOPT it is proposed to allocate the relevant EU and State funds for transport towards the implementation of the following priority axes: 110

124 Priority axis 1: Modernization and development of TEN-T priority axes aiming at sustainable transport system integrated with EU transport networks (approximately 72% of EU Contribution): This priority axis aims at enhancing the territorial cohesion between Romania and the EU member states, by significantly reducing travel times with improved safety and quality of service to principal destinations, domestically as well as Europe-wide, for both passengers and freight, along the TEN-T priority axes 7, 18 and 22 (see The objective will be achieved through the development and upgrading of motorways and railway, and water transport infrastructure, with a view to improving the quality, efficiency and speed of transport services, door-to-door, and increasing volumes of freight and passenger traffic from eastern to western Romania. Priority axis 2: Modernization and development of the national transport infrastructure outside the TEN-T priority axes aiming at sustainable national transport system (approximately 21% of EU Contribution): This priority axis aims at modernizing and developing road, rail, water transport and air transport infrastructure located on the national network outside the TEN-T priority axes and promotes appropriate balance among modes of transport. Its objective is to increase passenger and freight traffic with higher degree of safety, speed and quality of service including rail inter-operability; in light of the cohesion policy s objective of developing secondary network connections. Priority axis 3: Modernization of transport sector aiming at higher degree of environmental protection, human health and passenger safety (approximately 5% of EU Contribution): This priority axis aims at implementing the principles of sustainable development of the transport sector in Romania, as per the Cardiff conclusions of the European Council (1998) and the European Strategy for Sustainable Development (Gothenburg 2001). It will promote increased levels of safety, minimize adverse effects on the environment as well as promote inter-modal and combined transport. Priority axis 4: Technical Assistance (approximately 2% of EU Contribution): A proper implementation of the structural instruments requires institutional support and strengthening of the administrative capacity in the coming years. This support will come in the form of hiring and training additional personnel in both administrative duties and technical aspects of transport project management for the Ministry of Transport and for the beneficiaries. It will also promote the understanding and appreciation of the role and purpose of the EU's contribution in developing the transport infrastructure of Romania (Alexandru Serban Cucu - Romanian Ministry of Transportation and Infrastructure, 2007). 111

125 Apart from the Romania s Operational Programme Transport, some of the transport projects cofunded by the Structural Funds are mentioned below: Technical assistance and works for the improvement of navigation conditions on the Danube in Romania: Co-funded by three ISPA projects, in three phases: ; ; and the total EU Contribution is EUR (Gabriela Teletin; Florentina Teodorovici - Romanian Ministry of Transport, Construction and Tourism, 2006); and Upgrading of 95 km of roads as well as bridge renovations and constructions in response to growing transport demand and the need for high quality roading: Co-funded by European Regional Development Fund for the 2007 to 2013 programming period with total EU Contribution EUR (Alexandru Serban Cucu - Ministerul Transporturilor si Infrastructurii, 2011). EIB is one of the IFIs which provide financial assistance in transport investments in Romania. In 2008 the EIB decided to lend EUR 1 billion to co-finance Romania s national contribution to the implementation of investment priorities and measures with EU funds over the period In addition, the Bank will co-finance priority projects not benefiting from EU grant support. This finance contract represented the biggest loan ever granted by the Bank in a Member State that joined the Union after The loan would predominantly finance priority projects identified in the Romanian National Strategic Reference Framework that would be supported by the European Regional Development Fund and the Cohesion Fund, particularly in the sectors of transport infrastructure, the environment including protection of nature conservation areas, energy and water and waste water management and in certain cases, where justified, other important investments in these areas covered by Romania s National Development Plan. Of the total loan, an amount of EUR 400 million was allocated to the transport sector. Apart from that loan, the recent signed finance contracts from the EIB to Romania mostly concern the upgrading of public transport. The most recent signed finance contracts concerning the Road and Rail sector are mentioned below: Rehabilitation of several sections of about 1100 km of national roads, either on Pan-European Corridors or links to the Corridors (Signature date: 22/12/2006, Amount: Up to EUR 450 million); and Acquisition of around 80 new locomotives for leasing to European rail freight service operators (Railway Undertakings for freight in EU terminology) and possibly to a limited extent for passenger transport (Signature date: 31/03/2011, Amount: EUR 5 million) (European Investment Bank, 2012). Although Romania is one of the beneficiary countries for financial assistance from the EBRD, the most recent supported projects focus on the private sector, energy efficiency, infrastructure and stabilization of the banking sector (European Bank for Reconstruction and Development, 2012). 112

126 JASPERS assignments in progress SEETAC WP5 Identification of necessary financial resources The following table contains a break-down of JASPERS activities in Romania. All projects in which JASPERS has been involved since its launch in 2006 are listed sorted according to the status of JASPERS assignment: Table 10 JASPERS activities in Romania (European Commission; European Investment Bank; European Bank for Reconstruction and Development; Kreditanstalt für Wiederaufbau, 2012) Status Transport Projects General Transport Master Plan Construction of 3 by-passes on the national road network Construction of 7 by-passes on the national road network - ISPA preparation Construction of Carei by-pass Construction of Lugoj-Deva Motorway Construction of Nadlac Arad Motorway Construction of Orastie - Sibiu Motorway Construction of Sacuieni by-pass Construction of selected by-passes from 1st, 2nd and 3rd packages Construction of Timisoara - Lugoj Motorway Road safety Improvements Upgrading of Bucuresti - Adunatii Copaceni TENT-T National Road Horizontal support for road outstanding issues 2nd bypass preparation package for: Bicaz, Sighisoara, Fagaras, Huedin, Barlad, Toplita, Tusnad, Timisoara Sud Waste collection system - depolluting vessels on Danube Sulina-Braila Waste collection system - depolluting vessels on Danube Harsova - Bazias Rail safety improvements Bucharest-North - Henry Coanda Airport railway construction Modernisation of Simeria - Coslariu railway Rolling stock acquisition 113

127 Railway stations upgrade Danube navigation improvements Modernisation of Brasov - Predeal railway TEN-T modernisation - Curtici Simeria-Brasov-Predeal Railway stations upgrade - Phase I Danube navigation improvement - Section 4 Port of Calafat Ad-hoc support for Ports, Airports and Railways Danube navigation improvement - Section 1 Common Sector between Romania and Bulgaria Danube navigation improvement - Section 3 Navigable channels Bank protection works on the Sulina Canal Modernisation of Coslariu - Sighisoara railway Railway stations upgrade - Phase II Modernisation of Sighisoara - Brasov railway Development of Public infrastructure on Danube ports Modernisation of Curtici - Simeria railway Priority Railway bridges/tunnels Railway Stations - Baia Mare and Satu Mare Railway Safety - Hot Axle Box Detectors Railway Safety - Interlocking Siculeni-Onesti Modernisation of Railway Station Alexandria Modernisation of Railway Section Curtici - km 614 Modernisation of Railway Stations Rm Valcea, Slatina and Resita Development of national and regional airports Modernisation of Railway Station Targu Jiu Modernisation of Railway Station Targoviste 114

128 JASPERS assignments completed SEETAC WP5 Identification of necessary financial resources Modernisation of Railway Stations Clarasi, Slobozia, Giurgiu Modernisation of Railway Station Pitesti Maritime Safety RDF System Railway Safety - Interlocking Lugoj-Ilia Modernisation of Railway Station Tg Mures Modernisation of Railway Stations Botosani, Piatra Neamt, Vaslui, Braila Modernisation of Railway Station Miercurea Ciuc Modernisation of Railway Stations Bistrita, Sf Gheorghe, Zalau Modernisation of Railway Bridges over Danube Railway Safety - Level Crossings Modernisation of Railway Bridges Constanta Region Environmental Monitoring on Danube Construciton of Cernavoda - Constanta Motorway Construciton of Timisoara - Arad Motorway Construction of Constanta bypass Upgrading of TEN-T National Roads N 24& N 24B Upgrading of Zalau - Alesd TEN-T National Road Upgrading of Alexandria - Craiova TEN-T National Road Bank protection works on Sulina Channel Implementation of ECTS / ERTMS level II on Chitila-Crivina section Modernisation and development of Constanta Port Infrastructure RORIS II - Danube VTMIS - Canals RORIS II - Danube VTMIS - Danube State aid for multi-modal terminals Strategy for the development of Regional Airport 115

129 A considerable share of the World Bank s assistance program for Romania was directed to the rehabilitation of Romania s infrastructure. While most Bank financing went for investment and equipment for rehabilitation and expansion, loans typically also included a technical assistance component for improving the policy-making capacity of the ministry in charge and for developing plans for restructuring the sectors to make them efficient. Often the rationale for the Bank s involvement was to facilitate sector restructuring to promote competition and private sector investment, by involvement in railway rehabilitation, petroleum sector rehabilitation, power rehabilitation, telecommunications, and electricity market. However, the current ongoing projects under World Bank financing concern agriculture, environment, municipal infrastructure, human development and Public Sector reform (The World Bank, 2011) Slovenia Slovenia is eligible for all the European Structural funds and beneath them is the TEN-T budget, as Slovenia is involved in two TEN-T priority axes and projects. Slovenia is involved in the Priority Project 6 (Railway axis Lyon-Trieste-Divača/Koper-Divača-Ljubljana-Budapest-Ukrainian border) and more specifically in the part of the cross-border railway line section between Italy and Slovenia, which is the nodal point between the eastern and western parts of Priority Project 6. For the two countries the planned TEN-T contribution up to the end of 2015 will be EUR 50,7 million. Slovenia is also involved with Spain, France and Italy in the Priority Project ERTMS Corridor D. This project consists of the deployment of ERTMS (Level 1 and 2) on Corridor D Valencia-Budapest. The deployment of ERTMS will play a pivotal role in the Trans-European Network, enabling the rail sector to compete more successfully in a number of growing market segments and it is also a catalyst for the development of interoperable and competitive freight transport corridors. For this purpose the planned TEN-T contribution of EUR 21 million will be allocated to Slovenia and the other three Member States (European Commission - Directorate General for Mobility and Transport; Directorate B - Trans-European Transport Networks & Smart Transport; Trans-European Transport Network Executive Agency, 2010). For the period, Slovenia has been allocated more than EUR 4 billion of Structural Funds and Cohesion Fund financing under the Convergence Objective. To complement the EU investment, Slovenia s national contribution is expected to reach around EUR 724 million. The Slovenian development priorities will be implemented through three programmes. The first, the programme for Strengthening Regional Development Potential, will receive funding from the ERDF. The second, designated as the programme for Human Resources Development, will be funded by the ESF. Finally, the programme for Environmental and Transport Infrastructure Development will be funded by both the ERDF and the Cohesion Fund. Generally, Slovenia aims to invest over EUR 1 billion, or 25% of the Community allocation, to improve transport infrastructure. It is expected that 428 km of railway line will be modernised or constructed with the help of the Funds (Slovenian Government Office for Local Self-government and Regional Policy, 2007). 116

130 More specifically, the Operational Programme Development of environment and transport infrastructure for the period in the Republic of Slovenia was approved by the European Commission on 27 August This programme sets out the Community support for Slovenia within the framework of the "Convergence" objective. Community assistance to this programme through the ERDF amounts to EUR 224 million while the assistance through the Cohesion Fund will be EUR 1,41 billion giving a total expenditure, including Slovenia's contribution, of EUR 1,92 billion (approximately 46% of the total EU money invested in Slovenia under Cohesion policy ). The operational programme is divided into 7 priority axes: 3 focusing on transport, 3 on the environment and 1 for Technical Assistance. 50% of the Cohesion Fund assets will be allocated to the transport sector and the other 50% to the environmental sector and the area of sustainable use of energy. The funds from the ERDF will be allocated to the transport sector. The 3 priority axes focusing on transport are described below: Priority axis 1: Railway infrastructure Cohesion Fund (approximately 27% of EU Contribution): The proposed investments for the modernisation and construction of new railway infrastructure will help to reduce negative environmental impacts by promoting railway transport. Roughly 30% of the available funds will be allocated to this priority. Priority axis 2: Road and maritime infrastructure Cohesion Fund (approximately 15% of EU Contribution) The investment in motorways will lead to a reduction of bottlenecks leading to greater traffic fluidity and safety as well as ensuring good traffic linkages inside Slovenia and with other European regions. With the investments in port infrastructures particular emphasis is given to motorways of the sea and the importance of inter-modal freight transport terminals. Priority axis 3: Transport infrastructure ERDF (approximately 14% of EU Contribution) This priority axis addresses the problem that less developed and more marginal Slovenian regions are often poorly connected to long distance international highways, thus leading to a poor regional traffic connection. The priority should significantly contribute to balanced regional development (Mateja Čepin - Government Office for Local Self-Government and Regional Policy, Služba Vlade Republike Slovenije za lokalno samoupravo in regionalno politiko, 2007). Some other transport projects co-funded by the Structural Funds in the transport sector are mentioned below: Construction of a four-lane motorway at the section Beltinci - Lendava with a total length of 17 km: Included in the Operational programme "Development of Environmental and Transport Infrastructure", (under the Cohesion Fund) with total provided EU 117

131 Contribution EUR ; (Monika Kiribiš - Government Office of RS for Local Self Government and Regional Policy) Slovenia is benefited by total EU Contribution EUR 5,5 million and by ERDF over the period November 2008 to February 2012 for the project SoNorA, which was mentioned above, with the rest involved countries (Austria, Czech Republic, Germany, Italy and Poland); and A new stretch of four-lane motorway is to be built in Eastern Slovenia, forming part of a motorway between Maribor, Slovenia s second city, and Croatia: Planners expect it to ease access to the Štajerska (Lower Styria) region and to take pressure off crowded local main roads. The project is co-funded by Cohesion Fund for the 2007 to 2013 programming period with total EU Contribution EUR (Markus Stradner - Central Europe Programme Cooperating for Success - Joint Technical Secretariat, 2010). EIB is one of the IFIs which supports transport investments in Slovenia. Some of the recently signed finance contracts are mentioned below: Extension of container terminal to increase capacity of Port of Koper (Signature date: 06/04/2011, Amount: EUR 35 million); Acquisition of around 80 new locomotives for leasing to European rail freight service operators (Railway Undertakings for freight in EU terminology) and possibly to a limited extent for passenger transport (Signature date: 31/03/2011, Amount: EUR 10 million); and Construction of five new motorway sections: Sentvid-Koseze (5,5 km), Vrba-Peracica (9,8 km), Ponikve-Hrastje (7,2 km), Pluska-Ponikve (7,6 km) and Slivnica-Drazenci (20 km). The first four sections are located in the Trans-European Transport Network's Corridors V and X (which are crucial routes connecting Slovenia with the neighbouring countries), while the last section provides access to this network. (Signature date: 18/12/2006, Amount: EUR 300 million) (European Investment Bank, 2012). Slovenia is one of the beneficiaries countries for financial assistance from the EBRD. However, currently there are not any ongoing transport projects co-funded by the EBRD and the Bank s focus in Slovenia is to support the financial, enterprise, infrastructure and environment sectors (European Bank for Reconstruction and Development, 2012). Concerning JASPERS he following table contains a break-down of its activities in Slovenia. All projects in which JASPERS has been involved since its launch in 2006 and are listed sorted according to the status of JASPERS assignment: 118

132 JASPERS assignments completed JASPERS assignments in progress SEETAC WP5 Identification of necessary financial resources Table 11 JASPERS activities in Slovenia (European Commission; European Investment Bank; European Bank for Reconstruction and Development; Kreditanstalt für Wiederaufbau, 2012) Status Transport Projects GSM-R installation Ljubljana Airport Passenger Terminal T2 Railway upgrade Pragersko-Murska Sobota Bypass Skofija Loka Construction on non-level crossing Murska Sobota (R2-441) Motorway A2 Pluska - Ponikve Motorway Beltinci-Lendava Motorway A2 Ponikve - Hrastje Modernisation of Maribor airport infrastructure Modernisation railway line Divacka-Koper Modernization of system for air traffic control Slovakia Slovakia as a Member State of the EU is a country eligible for funding from all the EU funds. Moreover, Slovakia is involved is two Priority Projects of the TEN-T (Priority Project 18 - Rhine/Meuse Main Danube inland waterway axis and Priority Project 23 - Railway axis Gdansk Warsaw Brno/Bratislava Vienna), but the amount of the TEN-T budget allocated for the specific priority axis to this country is not clear from the TEN-T Multi-Annual Work Programme Project Portfolio of October For the period, Slovakia has been allocated EUR 11,7 billion in total: EUR 10,9 billion under the Convergence Objective, EUR 0,5 billion under the Regional Competitiveness and Employment Objective, and EUR 0,2 billion under the European Territorial Cooperation Objective. The regions of Western Slovakia, Central Slovakia and Eastern Slovakia fall under the Convergence Objective, while the Bratislava region is the only region to fall under the Regional Competitiveness and Employment Objective. Slovakia s strategic planning for the period is being implemented through 11 programmes. In the Western Slovakia, Central Slovakia and Eastern Slovakia regions, six sectoral programmes (including Information Society ; Environment ; Transport ; Health ; Competitiveness and Economic Growth ; Research and Development ) and one regional programme are being implemented. A specific regional programme is being implemented in the 119

133 Bratislava region. Additionally, one multi-objective programme is covering the whole of the Slovakian territory. Two programmes are co-financed with the European Social Fund ( Education and Employment and Social Inclusion ). Almost one third of total EU resources, some EUR 3,5 billion, will be invested to improve transport infrastructure and thus increase the accessibility of the Slovakian territory. There will also be a particular focus on developing TEN-T (Slovakian Ministry of Construction and Regional Development Section of Regions Development Strategy, 2007). The Operational Programme for Slovakia for the period was approved on 13 September The Operational Programme Transport falls within the Convergence Objective framework and has a total budget of around EUR 3,8 billion. Community investment through the European Regional Development Fund (ERDF) amounts to some EUR 877 million, and through the Cohesion Fund to around EUR 2,3 billion. This represents approximately 29.4% of the total EU investment earmarked for Slovakia under the Cohesion Policy for The goals of the Operational Programme Transport are to construct major transport infrastructure, to improve the accessibility of regions through investments in transport infrastructure and to support public passenger transport. The following priorities represent the structure of the Operational Programme Transport : Priority 1: Railway infrastructure (approximately 24,4% of total funding) The objective of this priority is to modernise and develop railway infrastructure in the context of TEN-T. This will enhance interoperability, increase speed limits and increase operational quality and safety. Priority 2: Road infrastructure TEN-T (approximately 30,3% of total funding) This priority aims to contribute to the construction of new motorways in the context of access to TEN-T. This will have a significant impact on the accessibility to the major European road network, road safety and road quality. Priority 3: Intermodal transport infrastructure (approximately 3,2% of total funding) This priority will contribute to a network of public intermodal terminals based on the principles of sustainable mobility. This creates the basic conditions for the development of environmentally friendly transport systems. Priority 4: Infrastructure for integrated transport systems (approximately 14,7% of total funding) This priority seeks to integrate public railway transport into urban transportation systems. This will contribute to both public transportation and sustainable transport mobility. Priority 5: Road infrastructure (expressways and first-class roads) (approximately 23,1% of total funding) 120

134 The objective of the further development of expressways and first-class roads is to contribute to the proportional and gradual development of national road infrastructure. This will contribute to eliminating critical bottlenecks in terms of traffic volumes and road accidents. Priority 6: Public railway passenger transport (approximately 2,8% of total funding) This priority aims to improve the quality of railway services and to supplement activities focusing on railway infrastructure modernisation (Dušan Rizek - Slovakian Ministry of Transport, Posts and Telecommunications, 2007). Some additional transport projects in Slovakia co-funded by the Structural Funds are mentioned below: Major upgrade to rolling stock: The new or modernised vehicles will serve a target population of around 4,8 million railway passenger transport across Slovakia. The project is co-funded by the ERDF for the 2007 to 2013 programming period with total EU Contribution of EUR (Michal Pikus - Železničná spoločnosť Slovensko, 2010); and Motorway D1 Sverepec-Vrtižer: Through improving connections along the backbone transport corridor connecting Bratislava with Žilina, this project will bring benefits for both inhabitants across Slovakia (5,5million inhabitants). The project is included in Operational programme Transport, , co-funded under the Cohesion Fund and the EU Contribution is EUR (Peter Havrila - Slovakian Ministry of Transport, Posts and Telecommunications). In 2010 the EIB provided to the Slovakia a loan of EUR 1,3 billion for the implementation of projects receiving EU grants from the Cohesion and Structural Funds. These investments have been identified as priorities under the Slovak National Strategic Reference Framework, for the programming period of The EIB support partially covers the Slovak Republic s cofinancing contribution and also is available for project pre-financing needs before the corresponding grant contribution is eventually released by the European Commission. The EIB loan co-finances schemes under eleven operational programmes involving more specifically the development of infrastructure and regional accessibility, knowledge-based economy and human resources. The amount allocated to the transport sector is up to EUR 364 million. All schemes will be implemented by 31 December 2015 in the Slovak regions covered by the EU convergence and regional competitiveness and employment objectives. The current loan is the second EIB loan of this type, extending co-financing for projects supported by EU Funds. The Bank previously provided a EUR 95 million co-financing facility for the Slovak National Development Plan during the programming period. This facility has been successfully implemented. Apart from the mentioned load, some of the recently signed finance contracts are mentioned below: 121

135 JASPERS assignments in progress SEETAC WP5 Identification of necessary financial resources Acquisition of around 80 new locomotives for leasing to European rail freight service operators (Railway Undertakings for freight in EU terminology) and possibly to a limited extent for passenger transport (Signature date: 31/03/2011, Amount: EUR 5 million); and Construction of 9.6 km section of D1 motorway between Bratislava and Zilina (Signature date: 22/06/2006, Amount: EUR 50 million) (European Investment Bank, 2012). Slovakia is also one of the beneficiaries countries for financial assistance from the EBRD. The Bank financed the first road concession in Slovak Republic in 2009 by bringing private finance to the modernisation of the transport system in the Slovak Republic with a loan for the construction of the R1 motorway, part of the east-west national corridor. R1 is an important transport link in the south-west of the Slovak Republic and the first project in the country to be implemented under a Public Private Partnership (PPP) scheme. The project launches the Slovak government s PPP programme to upgrade the road network in Slovakia in order to stimulate the economy and improve regional links. The EBRD provided a EUR 200 million loan to Granvia, a special purpose vehicle created to finance the construction of the R1 motorway, and owned by Vinci Concessions and Meridiam Infrastructure Fund. Following its successful participation in the tendering process, the Slovak Ministry of Transport, Post and Telecommunications has awarded Granvia a 30-year concession to build, finance, operate and maintain four sections of R1. The project includes construction of a total of 52 km of highway, including the sections between Nitra and Selenec, Selenec-Beladice, Beladice-Tekovske Nemce, as well as the Banska Bystrica northern bypass. The total cost of the project is approximately EUR 1,3 billion. The EBRD loan will cover 20 per cent of the total debt required. The rest of the debt funding would be co-financed by a group of commercial banks, which will provide EUR 780 million (European Bank for Reconstruction and Development, 2012). JASPERS activities in Slovakia, the following table contains a break-down of all projects in which JASPERS has been involved since its launch in The projects are listed sorted according to the status of JASPERS assignment: Table 12 JASPERS activities in Slovakia (European Commission; European Investment Bank; European Bank for Reconstruction and Development; Kreditanstalt für Wiederaufbau, 2012) Status Transport Projects D1 Mway (Prešov West-Prešov South) D1 Studenec - Behárovce D3 Motorway Zilina Strazov-Zilina Brodno D3 Svrcinovec - Skalité (only Half Profile) D3 Zilina Brodno-Kysucke Nove Mesto 122

136 JASPERS assignments completed SEETAC WP5 Identification of necessary financial resources I/68 Skultetyho-Presov ZVL I/75 Galanta Bypass phase III National System of Traffic Information R 2 Ruskovce - Pravotice R2 Ziar nad Hronom Bypass R4 Košice - Milhost R4 Presov - Northern Bypass Modernisation of Cierna nad Tisou station Modernisation of rail track Trencianska Tepla-Belusa Modernisation of rail track Zlatovce - Trencianska Trepla Bratislava - Interconnectin of Corridors Priority Project No 17 Rail - Rolling stock financing D1 Mway (Sverepec-Vrtizer) D3 Mway (Hricovske Podhradie- Zilina Strazov). Expressway R1 (Zarnovica - Sasovske Pohradie) I/61Trencin Bridge Kosice Intermodal Terminal Modernisation of rail track ( Zilina Krásno nad Kysucou) Procurement of Rolling stock Žilina Intermodal Terminal Zilina Teplicka technical station - Phase 1 Modernisation of railway line Nove Mesto - Zlatovce 3.2. European Union Acceding, Candidate and Potential Candidate countries Croatia Since 2007, Croatia has been receiving EU financial aid under the Instrument for Pre-accession Assistance (IPA). IPA assistance to Croatia is implemented under decentralised management 123

137 according to the five IPA components available to candidate countries. The allocation for the years per Component is presented at the following table and graph: Table 13 IPA funds to Croatia per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2012) Component Transition Assistance and Institution Building 49,6 45,4 45,6 39,5 40,0 40,0 17,4 Cross-border Co-operation 9,7 14,7 15,9 15,6 15,9 16,4 9,7 Regional Development 45,0 47,6 49,7 56,8 58,2 57,6 31,0 Human Resources Development 11,4 12,7 14,2 15,7 16,0 16,0 9,0 Rural Development 25,5 25,6 25,8 26,0 26,5 26,1 27,7 TOTAL 141,2 146,0 151,2 153,6 156,5 156,2 94,9 Figure 15 IPA funds to Croatia per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2012) In order to ensure an uninterrupted structural adjustment process in the transport sector and the utilisation of the finance under IPA Component III Regional Development, Croatia has drafted a Transport Operational Programme (TOP). The TOP covers a three-year rolling period ( ), building on the initiatives funded by previous EU programmes, particularly ISPA. It also offers an outlook on the programming period after The Transport Operational Programme for reflects the guiding principles of the Commission s Multiannual Indicative Planning Document (MIPD) which is the strategic document for IPA. It also directly relates to one of the priorities set out in Croatia s Strategic Coherence Framework (SCF) and reflects EU and national transport sector development policies. Transportation Operational Programme supports activities directed towards: Transport infrastructure development, concerning in particular the interconnection and interoperability of national networks and with the trans-european networks; and 124

138 Technical assistance for the preparation of studies and technical support related to eligible activities, including those necessary for implementation. Also, technical assistance for preparatory, management, monitoring, evaluation, information and control activities, as well as reinforcing the administrative capacity for implementing IPA. According to the Transport Operational Programme for , the following indicative financial table shows the recent investments on the priority axis of Croatia s transport system: Table 14 Indicative financial table for expenditure on Transport Investments in Croatia (European Commission - Instrument for Pre-Accession Assistance, 2007) Public expenditure For information Total Public expenditure Community Contribution (IPA) National Public Contribution IPA cofinancing rate Other (IFI, etc.) (1)=(2)+(3) (2) (3) (4)=(2)/(1) % Priority Axis 1: Upgrading Croatia s rail transport system Measure 1.1: Line upgrading and modernisation Measure 1.2. Improvement of the safety and efficiency of railway operations Priority Axis 2: Upgrading Croatia s inland waterway system Measure 2.1. Modernisation and rehabilitation of river waterways and port infrastructure % % % % % 0 Priority Axis 3: Technical Assistance % 0 Measure 3.1 Programme management and capacity building % 0 Total Years % 0 The Accession Treaty for Croatia provides that after the day of accession Croatia will also benefit from specific instruments for transitional financial assistance. This assistance will consist of a "Transition Facility", a "Schengen Facility, and a "cash-flow facility", as detailed below. 125

139 The Transition Facility will provide temporary financial assistance to Croatia in order to further develop and strengthen its administrative and judicial capacity to implement and enforce Union. A total of EUR 29 million will be allocated under this Facility in The Schengen Facility will be a temporary instrument to help Croatia between the date of accession and the end of 2014 to finance actions at the new external borders of the Union for the implementation of the Schengen acquis and external border control. Under this Facility Croatia will receive EUR 40 million in 2013 and EUR 80 million in Finally, a special temporary "cash-flow facility" will be made available to Croatia in order to mitigate the impact of the full application immediately after accession of the acquis governing the contributions made by Member States to the EU budget. While Croatia will make the payments due to the EU budget after the accession, there will be a time lag until the actual payments will be made under the financial instruments available to Croatia. In order to improve the net budgetary position of Croatia, especially in the first year after accession, under the cash-flow facility EUR 75 million will be made available to Croatia in 2013, and EUR 28,6 in 2014 (European Commission - Instrument for Pre-Accession Assistance, 2012). In 2010 the EIB signed a finance contract to support eligible investments under the Croatian Strategic Coherence Framework and, in particular, components III and IV of the IPA programme and selected ISPA projects. The schemes will be co-financed by EU Funds. The amount of the financial assistance is EUR 200 million, a part of which EUR 66 million is allocated on transport investments. Apart from this loan, some of the financed or under appraisal projects are the following: Construction of 13 km of motorway along the Corridor Vc connecting with Bosnia Herzogovina in the north and south (Approval date: 21/10/2010, Amount: EUR 60 million); Rehabilitation of 52 sections of trunk road with total length of 687 km (Signature dates: 30/12/2009 and 12/12/2006, Amount: EUR 120 million); Construction of final section of Rijeka-Zagreb motorway (Pan-European corridor Vb) (Signature date: 09/03/2006, Amount: EUR 210 million); and The Project Croatian Motorways Ltd. (HAC), which is under appraisal since 03/02/2011, concerns the southern access to the City of Zagreb, for a total length of 4,7 km. It includes 1,8 km of urban section, 1,0 km rail switchyard overpass ( the Overpass ) and a 2,3 km motorway section linking the Overpass with the connection Velika Gorica North under construction ( the Motorway ). The proposed EIB finance is EUR 60 million (European Investment Bank, 2012). EBRD recently has co-funded many transport projects in Croatia. These projects include mostly road and ports and they are mentioned below: Road sector: 126

140 The EBRD funds will finance with a loan of up to EUR 60,6 million the construction of motorway sections of the Corridor Vc, a major transportation route stretching from the Hungarian capital of Budapest to the Croatian port of Ploce, via eastern Croatia and Bosnia and Herzegovina. The loan is allocated to to Hrvatske Autoceste, the Croatian motorway company, guaranteed by the Republic of Croatia. The EBRD is lending the Croatian state-owned road company Hrvatske Ceste EUR 40 million to build the last section of the eastern bypass in Rijeka, between the towns of Sveti Kuzam and Krizisce in north-west Croatia. It will also finance two roads that connect to the bypass. The EBRD is supporting the completion of the Zagreb-Rijeka motorway construction, which is expected to boost tourism and trade, with a EUR 50 million loan to Autocesta Rijeka- Zagreb d.d. (ARZ). The loan complements a EUR 210 million loan provided by the European Investment Bank. Maritime sector: The EBRD is supporting the development of the regional transport infrastructure and tourism network in Croatia with EUR 8 million in new financing to the Dubrovnik Port Authority to finance the reconstruction of a berth within the port. The funds represent an extension of a EUR 26,5 million EBRD loan provided in 2005 to upgrade the port s infrastructure. The EBRD is supporting the development of regional transport infrastructure and tourism network in Croatia with a EUR 12 million loan to finance the expansion of the Port of Sibenik, located on the Croatian coast, 80 kilometres north of Split. The EBRD is lending EUR 11,2 million to the Port of Ploce Authority, a key cargo port in southern Croatia, to contribute to the financing of the construction of a new bulk cargo terminal. The loan will enable the port to eliminate existing operational bottlenecks in handling bulk cargo and to increase its capacity to meet current and future market demands. The construction of the terminal is part of the Ploce Port expansion programme undertaken by the Croatian government, which the EBRD is co-financing jointly with the World Bank. The loan will be guaranteed by the Republic of Croatia. Additional technical cooperation funding of EUR has been provided by the Dutch donor fund for project preparation and assistance with preparation of the new concession agreement with the port operator (European Bank for Reconstruction and Development, 2012). As mentioned above, the World Bank is one of the active IFIs supporting transport investments in Croatia. The projects under implementation at the moment co-funded by the World Bank are the following: Croatia Rijeka gateway projects I and II: The key goal of the project is to increase Croatia's trade competitiveness by improving the international transport chain through the Rijeka Gateway for both freight and passenger traffic through a modernization of the port and of 127

141 road network connections, by privatizing port operations and by preparing to redevelop part of the port for urban purposes. The Project supports such an objective through an integrated set of components which include: (a) port restructuring and modernization; (b) port/city interface redevelopment; and (c) international road improvements. (Approved in 2003, amount of the IBRD loan: 196,20 million US Dollars); The key goal of the second Rijeka Gateway Project, a part of the comprehensive Rijeka Gateway Program is to develop the capacity, financial performance, and quality of services in the port of Rijeka to meet growing traffic demand, through public-private partnerships, while facilitating urban renewal by enabling the relocation of port activities. The Project supports such an objective by: (i) expanding the development of two port container terminals started under the first Rijeka Gateway project (extension of the existing Brajdica Container Terminal and construction of infrastructure for a 400 meter long Zagreb Container Terminal), the expansion of which is financed through the Rijeka Gateway Program; and (ii) enhancing port services (concessions of terminals, information flow, enhanced environmental response). The port component will enable the conversion of the Delta and port of Baross areas, by making alternative port space available. The concessionaire for each terminal will finance and provide superstructure and equipment. (Approved in 2008, amount of the IBRD loan: 122,50 million US Dollars); and Croatia trade and transport integration project: The Project includes investments to: (i) increase port infrastructure capacity (construction of a new container terminal and a new bulk cargo terminal); and (ii) introduce a modern electronic port community system. It also supports: (i) strengthened corridor dialogue among corridor participants; (ii) establishment of cost recovery based concession arrangements; and (iii) increased private sector involvement to address these priorities, reduce commercial risks, and secure financing for port cargo handling equipment (Approved in 2006, amount of the IBRD loan: million US Dollars) (The World Bank, 2011). Finally, although Croatia is generally one of the beneficiaries of the WBIF financing mechanism, transport and environment sectors are not generally available for IPF support, because of the country s candidate status (Western Balkans Investment Framework) The former Yugoslav Republic of Macedonia Since 2007 the former Yugoslav Republic of Macedonia has received EU financial aid under the instrument for pre-accession assistance (IPA). IPA assistance to FYROM is implemented to the five IPA components available to candidate countries. The allocation for the years per Component is presented at the following table and graph: 128

142 Table 15 IPA funds to the former Yugoslav Republic of Macedonia per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) Component Transition Assistance and Institution Building 41,6 41,1 39,3 36,9 28,8 27,2 27,9 Cross-border Co-operation 4,2 4,1 4,4 4,5 5,1 5,0 5,2 Regional Development 7,4 12,3 20,8 29,4 39,3 41,0 51,8 Human Resources Development 3,2 6,0 7,1 8,4 8,8 10,3 11,2 Rural Development 2,1 6,7 10,2 12,5 16,0 18,2 21,0 TOTAL 58,5 70,2 81,8 91,7 98,0 101,9 117,2 Figure 16 IPA funds to the former Yugoslav Republic of Macedonia per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) The overall objective of the operational programme Regional Development is to support the sustainable development of the former Yugoslav Republic of Macedonia, through the improvement of transport and environment infrastructure. To this end, the programme will implement three operational priorities and one technical assistance priority. The Priorities and the Measures according to the Regional Development programme are: Priority 1: Corridor X Motorway Completion (IPA contribution: EUR ) This priority will contribute to a better cohesion with EU Member States and regional neighbours through completion of Trans-European road Corridor X. Measure 1.1 Upgrading the remaining link along the Corridor X motorway to the level of motorway aims to co-finance the construction of the remaining highway link on Corridor X linking the southern part of the country to the border with Greece, in an extension of approximately 28 km. 129

143 Priority 2: Upgrading and Modernization of the Transport Infrastructure (IPA contribution: EUR ) This priority will contribute to a better cohesion with EU Member States and regional neighbours through investments in the transport infrastructure network, with priority given in the current period to prepare future investments in rail infrastructure in corridors X and VIII and road infrastructure in corridor VIII. Measure 2.1 Improving the rail infrastructure along the South East Europe Core Regional Network aims to upgrade rail infrastructure along Corridors X and VIII through financing small rehabilitation works to increase speed and safety and project preparation studies for future infrastructure investments. Measure 2.2 Improving the road infrastructure along the South East Europe Core Regional network aims to contribute to the upgrading and completion of the remaining sections of Corridor VIII linking the Bulgarian border in the East and the Albanian border in the west (missing links totaling 152 km), through project preparation studies. Priority 3: Improvement of Environmental Infrastructure (IPA contribution: EUR ) This priority will improve environmental protection through investments in environmental infrastructure and create conditions for environment friendly sustainable development. Measure 3.1 Establishment wastewater collection and treatment infrastructure meeting the EC requirements will support preparatory studies for future investments. Measure 3.2 Establishing of an integrated and financially self-sustainable waste management system will support physical investments in solid waste management projects that are at a most advanced level of preparation and preparatory studies for future investments in the field of solid waste management. Priority axis 4: Technical Assistance (IPA contribution: EUR ) This priority aims to ensure a sound and efficient management and implementation of the programme, by improving the administrative capacity of the institutions concerned and supporting implementation, monitoring, evaluation, control and communication activities, as well as to prepare sectoral studies, future operational programmes, and investment projects (European Commission - Instrument for Pre-Accession Assistance). The following indicative financial table shows the recent investments on the priority axis of FYROM s transport system per priority axis: 130

144 Table 16 Indicative financial table for expenditure on Transport Investments in the former Yugoslav Republic of Macedonia (European Commission - Instrument for Pre-Accession Assistance) Public expenditure Priority Priority 1 Corridor X Motorway Completion Priority 2 Upgrading and Modernization of the Transport Infrastructure Priority 3 Improvement of Environmental Infrastructure IPA Contribution National cofinancing Total funding Co-financing rate (a) (b) (c) = (a) + (b) (d) = (a)/(c) % % % Priority 4 Technical Assistance % Total ( ) % Active in FYR Macedonia since 1993, the EBRD has committed more than EUR 510 million in over 40 projects in key sectors of country s economy, mobilising addition investment worth more than EUR 620 million. The most recent co-funded projects are mentioned below: In 2010 the EBRD supported further modernisation of Macedonian transport infrastructure with a EUR 17,6 million sovereign loan to finance renewal of track along key sections of Corridor X. This is the Bank s first project in the railway sector in FYR Macedonia. The EBRD loan finances the upgrade of 53 kilometres of track along three sections of Corridor X: Tabanovce to Kumanovo, Nogaevci to Negotino and Miravci to Smokvica. The project is implemented by the Macedonian Public Enterprise for Rail Infrastructure (PERI) and will support the country s on-going railway reform programme, which is closely aligned to EU norms. In addition it will finance a feasibility study for the completion of rail Corridor VIII to Bulgarian border. The EBRD investment is complemented by grants financing worth EUR 1,2 million from the Bank s Shareholder Special Fund, the Central European Initiative (CEI), together with funding from the governments of France and Germany. In 2009 the EBRD approved to lend EUR 50 million to FYROM to finance the improvement and upgrade of more than 400km of regional and local roads that form part of key regional network and provide connections to international road corridors. The EBRD loan will be provided in two tranches of EUR 25 million each, with parallel financing by the World Bank of EUR 70 million, which is already committed. Additional technical cooperation has been provided by the EBRD Western Balkans Fund, the EBRD Special Shareholder Fund and the Central European Initiative, totalling more than EUR 3 million. 131

145 The western side of an 11km section of the Skopje bypass, whose construction was co-funded by the EBRD and the EIB, has opened for traffic in The EBRD provided a EUR 40 million loan in 2003, which was used to complete the second phase of the road circling the capital of FYROM, which will smooth traffic flows, cut journey times and reduce pollution levels in the capital (European Bank for Reconstruction and Development, 2012). The World Bank is one of the lead financiers of the regional and local transport network in the region. The current activity of the World Bank in FYROM can be described by the following recent and ongoing co-funded projects: Railways reform project: The Project balanced investments in track machinery and rolling stock with institutional and organizational reform actions. In this way, it helped to transform the Macedonia Railways company into two new market oriented companies, set up the conditions for use of the railway infrastructure by other operators, and to establish the regulatory framework for a multiple operator market. A 3-year business plan is being prepared, which, combined with the implementation of an integrated accounting system, should lead to better management of the railways (Approved in 2005, amount of the IBRD loan: 19,38 million US Dollars); Regional and local roads program support project: The Project Development Objectives is to reduce the cost of access to markets and services for communities served by regional and local roads by improving the condition and quality of the regional and local road network. The project is financing over the period the rehabilitation of about 265 km of paved regional roads (about 9% of all regional roads) and about 420 km of paved and unpaved local roads (about 5% of all local roads). The project also provides assistance to the Agency for State Roads (ASR) to improve its institutional capacity and modernize its approach to management of the road network and to develop the new Public Law on Roads (Approved in 2008, amount of the IBRD loan: 105,20 million US Dollars); Second trade and transport facilitation project: The Project Development Objective is to facilitate the movement of trade between the FYR Macedonia and its neighboring countries in South East Europe. The Project is financing: (i) the upgrade of a 7,3km stretch of Corridor X to motorway; (ii) the modernization of the main border crossing with Kosovo; (iii) the installation of a telecommunication infrastructure on the railway network along Corridor X; and (iv) the development of rail freight data exchange between railways and customs (Approved in 2007, amount of the IBRD loan: 20 million US Dollars) (The World Bank, 2011) Montenegro Since 2007 Montenegro has received EU financial aid under the instrument for pre-accession assistance (IPA), for an annual average financial envelope of over EUR 30 million. Since the 17 th December 2010, the European Council agreed to give Montenegro the status of candidate country. Therefore, for the period the Commission extends its support to all five IPA Components and its efforts are concentrating on the following targeted sectors: justice and home affairs, public administration reform, environment and climate change, transport (EUR 16,20 132

146 million), social development and agriculture and rural development (European Commission - Instrument for Pre-Accession Assistance, 2011). The allocation for the years per Component is presented at the following table and graph: Table 17 IPA funds to Montenegro per year and Component (European Commission - Instrument for Pre- Accession Assistance, 2011) Component Transition Assistance and Institution Building 27,5 28,1 29,8 29,8 29,8 16,3 5,2 Cross-border Co-operation 3,9 4,5 4,7 3,7 4,3 4,6 4,4 Regional Development ,0 15,2 Human Resources Development ,8 3,0 Rural Development ,3 7,6 TOTAL 31,4 32,6 34,5 33,5 34,1 35,0 35,4 Table 18 IPA funds to Montenegro per year and Component (European Commission - Instrument for Pre- Accession Assistance, 2011) In the terms of the financial aid to the transport sector, the goal is to contribute to Montenegro's investments in the maritime and railway sectors in order to upgrade and ensure a more efficient maritime and railway networks with as a consequence an increased competitiveness of Montenegro. Montenegro faces the opportunity to promote the connection Bar - Belgrade via combined maritime-railway transport in order to give access to the Balkans and South Central Europe hinterland and gain competitive advantage compared to already established alternatives TEN-T corridors. Montenegro is also committed to work with the South East Europe Transport Observatory (SEETO) in order to implement the priorities defined for the improvement of the transport infrastructure network. 133

147 In the past two years, IPA programmes supported the Railway sector. This is in line with the Europe 2020 strategy and climate change mitigation efforts. Therefore the 2011 programme concentrates on maritime transport with a project to develop a vessel traffic management information system. A large project is planned to assist the due preparation of infrastructure projects to be financed under the future Component III of IPA in this sector. This project refers to Vessel Traffic Management Information System (VTMIS) and response to marine pollution incidents with beneficiaries the Ministry of Transport and Maritime Affairs and the Maritime Safety Department. The purpose of the project is the enhancement of the administrative and technical efficiency of the Maritime Safety Department in the field of monitoring of vessels, with special regard to vessels carrying dangerous and polluting goods. Some of the expected results are the improvement of the monitoring of maritime traffic, the improvement of maritime safety, the protection of the marine environment, the decrease of the number of maritime accidents, the installation of Vessel Traffic Management Information System (VTMIS) and the procurement of training, so that emergency interventions will be possible. The total IPA contribution will be EUR 2,8 million (10,57% of the total expenditure) for two supply contracts to be tendered by the first quarter of 2012 (European Commission - Instrument for Pre-Accession Assistance, 2011). The EIB provides loans for investments in transport sector to Montenegro since The most recent projects concern infrastructure in road, sail and air sectors: Rehabilitation of railway infrastructure on main line crossing Montenegro and acquisition of rolling stock: The proposed project consists of the rehabilitation of railway infrastructure along the main trunk line connecting the Port of Bar and the capital Podgorica with Belgrade and Pan-European Corridor X, as well as the acquisition of selected items of rolling stock for maintenance and regional passenger services (Signature dates: 03/01/2011 and 30/09/2008, Amount: EUR 14 million); Rehabilitation of roads and bridges throughout country: The project concerns rehabilitation and backlog maintenance of the road network, including road pavements, retaining walls, repair of bridges and other structures, which have deteriorated after years of insufficient investment. Maintenance is difficult also because of the country's mountainous terrain (Last signature date: 05/11/2009, Amount: EUR 34million); and Urgent rehabilitation and modernisation of Podgorica and Tivat airports (Signature dates: 18/08/2008 and 27/02/2004, Amount: EUR 12million). Alongside is a EUR 11 million loan from the EBRD co-funding the modernization of the Podgorica and Tivat airports (European Investment Bank, 2012). Generally EBRD in Montenegro is focusing on developing municipal and environmental infrastructure and transport and boosting small business. More specifically, about the transport projects, the most recent are the following: In 2010 The EBRD approved to support the modernisation of railway transport in Montenegro with a EUR 13,55 million sovereign guaranteed loan to the Railway Passenger 134

148 Company of Montenegro (ZPCG), the country s passenger operator. The sovereign guaranteed loan to ZPCG is complemented by a dedicated technical cooperation assistance programme. As part of the new project, Germany provides technical assistance in preparing the company s institutional strengthening activities, while the EBRD s Shareholders Special Fund finances the procurement assistance. In 2009 the EBRD provided EUR 15 million to modernise Niksic Podgorica rail line. The credit was made available to ZCG Infrastruktura. The loan would be used to finance the rehabilitation of the rail tracks on a 57 km rail branch between the industrial Niksic region, in the central part of the country, and the capital Podgorica, providing improved transportation links further to the Port of Bar and to the European rail network in the southern part of the country. The sovereign guaranteed loan to ZCG Infrastruktura would be complemented by EUR 950 million in grant funds provided by the EBRD s Western Balkans Fund and its Shareholder Special Fund, as well as by the government of France. The grant financing will support project development and implementation (European Bank for Reconstruction and Development, 2012). The Western Balkans Investment Framework (WBIF) currently supports the Phase 1 of the Feasibility Study for improvement of the main road Pluzine-Scepan Polje. The project is realized in coordination with the corresponding study for Foca-Hum alignment in Bosnia and Herzegovina. The study has to identify alignments and costs for alternatives for the new section of road linking the end of works already commenced in Bosnia and Herzegovina and joining the existing road between Pluzine and Scepan Polje. The border point between two countries is bridge over Tara River and possibility of new bridge and its location is also part of this evaluation. The study also took into consideration estimation of the costs of works required, Multi-criteria Decision Analysis (MCDA) and preliminary environmental and social impact assessment. Four or more alternative alignments were compared within the spatial, technical and operational, economic and other constraints and also three new bridge locations were analyzed. This study is to recommend the optimal solution for Phase 2 of the Feasibility Study (Western Balkans Investment Framework). Concerning the World Bank, currently there is no support in the transport sector, but technical support - together with IFC - has been provided during the preparatory phases. Bank Technical Assistance (TA) and analyses funded by the Public-Private Infrastructure Advisory Facility (PPIAF) provided inputs to develop the draft concessions law and supported feasibility studies on key transport corridors. IFC helped the authorities to structure a PPP transaction to finance, construct, and operate the Bar Boljare motorway, at an estimated cost of about 125 percent of GDP (The World Bank, 2011) Albania Since 2007 Albania has received EU financial aid under the instrument for pre-accession assistance (IPA). The allocation for the years per Component is presented at the following table and graph: 135

149 Table 19 IPA funds to Albania per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) Component Transition Assistance and Institution Building 54,3 65,2 71,4 84,2 84,3 84,3 87,4 Cross-border Co-operation 6,7 8,6 9,8 10,0 10,1 10,3 10,7 TOTAL 61,0 73,84 81,2 94,2 94,4 94,6 98,1 Figure 17 IPA funds to Albania per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) One part of the assistance (Component I) focuses on implementing the main priorities of the European partnership. In particular it involves investment and measures aiming at institution building, as well as transition and stabilisation measures still necessary in the Western Balkans. It is delivered through annual national and multi-beneficiary programmes. The overall objective of EU financial assistance to Albania is to support its efforts for reform and towards compliance with EU law in order that it may become fully prepared to take on the obligations of membership to the European Union. The priorities of EU assistance for the period are in line with the objectives set out in the MultiAnnual Programming Document (MIPD) covering the period The MIPD is based on needs identified in the European Partnership with Albania, as well as those identified in the 2010 Enlargement Strategy and Opinion. The MIPD also takes into account Albania's own strategies, in particular the National Strategy for Development and Integration (NSDI) as well as the National Plan for the Implementation of the Stabilisation and Association Agreement (SAA). The MIPD has been drawn up in consultation with the Government of Albania, EU Member States and other donors. Its priorities are in line with the Copenhagen Criteria with the aim of contributing to their achievement. All the nine projects of the programme are grouped under seven strategic priority axes. Assistance under this programme responds to the recommendations of the 2009 Enlargement Strategy and Progress Report, the European Partnership priorities and will address the requirements under the Stabilisation and Association Agreement (SAA). 136

150 The transport sector is part of the preparations of IPA Component III. Furthermore, it is one of the sectors, where the European Commission has been involved continuously over the last years and where still further improvement is necessary. There are many donors active in the transport sector, the WB being the leading donor and Donor Focal Point of the sector working group on transport. Other donors active in this sector are, amongst others, the Czech Republic, Italy and Germany (mainly through KfW). Significant support also comes from European IFIs, namely EBRD, CEB and EIB. This programme foresees one major infrastructure project, which is the construction of the Vlora Bypass. More specifically, the IPA support for the Construction of Vlora Bypass comes up to EUR 19,365 million or 38% of the total expenditure of the project. The project purpose is to improve the road transport conditions in and around Vlora and in the Albania south coastal road by construction of the Bypass. The project will be implemented through one service contract for an indicative amount of EUR 2,365 million and one works contract for an indicative amount of EUR 17,0 million to be launched in the second quarter of According to the MIPD, IPA assistance aims to address the priorities identified in the Albanian transport strategy framework, focuses on the alignment of the Albanian transport sector with the EU acquis and facilitates the implementation of SAA obligations. The project Improvement of rural roads in Albania, under the Agriculture and Rural Development Component, is financed up to EUR 14,5 million or 22% of the total expenditure of the project. Its purpose is the improvement of secondary and local roads along the secondary network in rural areas of Albania as to facilitate access to essential services and economic markets, in the form of reduced user costs, for the resident population in rural areas in Albania. The project will be implemented by joint management with the European Bank for Reconstruction and Development (EBRD) through a contribution agreement for an indicative amount of EUR 14,5 million to be signed in the second quarter of The agreement will be concluded in accordance with Article 53(d) of the Financial Regulation. One of the main objectives of the MIPD is to improve the situation of the infrastructure as well as administrative capacities in all areas of the transport sector, namely road, aviation, maritime and railways. This project is also linked to the Agriculture and Rural Development Sector, which foresees to improve overall the competitiveness of the agricultural sector and where the improvement of the access to the markets play a crucial role (European Commission - Instrument for Pre-Accession Assistance, 2011). The EIB is active in Albania since Some of the recent transport projects co-funded by the EIB in Albania concern the road and the maritime sector: The European Investment Bank (EIB) and the Albanian Government have signed in 2010 in Tirana a loan aimed at the rehabilitation of secondary and local roads network. With a total amount of EUR 50 million this is the largest financing operation ever signed by EIB in Albania. The project is part of an ongoing programme of rehabilitation of km of secondary and local roads all over the Country which includes design, construction and 137

151 supervision in Albania. The main goals are the improvement of the transport conditions in the rural areas, facility in access to marketplaces and administrative, educational and health services and increasing the opportunities of economic, agricultural and tourist development for the beneficiary population via the provision of asphalted roads. The total cost of this project is around EUR 140 million, co-financed with the European Commission and European Bank for Reconstruction and Development, the projects falls under the Western Balkans Investment Framework (WBIF), which will provide grant financing to support technical assistance and investments. The rehabilitation secondary roads programme is managed by the Albanian Development Fund (Signature date: 04/06/2010, Amount: EUR 50 million); Construction of new expressway between Levan and Vlorë (Signature date: 16/11/2007, Amount: EUR 23 million); and In 2006 the European Investment Bank (EIB) lended EUR 18 million for the extension and modernisation of the Port of Durrës. The EIB loan financed the upgrading of the existing ferry terminal on-shore facilities; construction of a passenger terminal building with footbridge access from Durrës railway station, a drivers' facilities building, customs facilities and a new paving and drainage infrastructure in the ferry terminal yard. The project increases the ferry terminal capacity and upgrades facilities for passengers and drivers to modern standards (Signature date: 27/12/2006, Amount: EUR 18 million) (European Investment Bank, 2012). The EBRD is one of the largest investors in Albania. Currently the Bank is focusing in Albania on small production enterprises, developing natural resources and improving infrastructure. The most recent transport projects co-funded by the EBRD are the following: In 2007 the EBRD approved to lend the Albanian Port of Durres, the country s main commercial port, EUR 14 million to help finance a new ferry terminal and rehabilitate two quays to improve passenger and cargo services. The project was co-financed with the European Investment Bank. The loan would enable port authorities to develop an efficient, effective, modern port that meets international standards. It would help finance the construction of a building for passengers and vehicles, customs handling, as well as supporting works arising from the reorganisation of existing port cargo operations; In 2005 the EBRD supported the rehabilitation and upgrading of a 70-km section of the road from Fier to Tepelene, part of Albania s north-south axis, with a EUR 35 million sovereign loan. The project was co-financed by the European Investment Bank (EIB) with a loan of up to EUR 50 million and supported by technical assistance grants from the EU and Canada. The project has been prepared in close cooperation with the EU, which has provided extensive preparation assistance through the CARDS programme, and the EIB. Additional technical assistance is also being provided by the EU to support institutional strengthening and supervision of works. Canada will provide funds to monitor the project s implementation; and In 2005 the EBRD approved to lend EUR 21 million to Tirana Airport Partners Sh.p.k., a consortium led by Germany s Hochtief AirPort GmbH, concessionaire of the Mother 138

152 Teresa International Airport, to modernise the airport. The project includes construction of a new passenger terminal, cargo centre, other ancillary facilities and a new access road. The EBRD s financing package included a EUR 12 million loan for the modernisation of the airport and a EUR 9 million sovereign-guaranteed loan for construction of a new access road from the capital to the airport and improvements in the existing access road towards the south of the country. An additional EUR 12,9 million loan was provided by DEG-Deutsche Investitions- und Entwicklungsgesellschaft mbh, Alpha Bank A.E. Tirana Branch, and the American Bank of Albania (European Bank for Reconstruction and Development, 2012). Recently the WBIF supported the project Albanian Railway Network: Infrastructure and Signalling Improvement Project. This completed feasibility study identified the essential works (track, structure and signaling) required to improve the operational capability of the system and to begin the process of fully complying with the European requirements for the railway. The initial improvements were prioritized to provide the best opportunity for development, not only of the railway infrastructure, but also to encourage use of the system for both freight and passenger, to assist in the country s economic development. The study established the condition of the existing infrastructure and identified a range of improvements. The study, based on cost-benefit appraisal technique, addressed the issue of incremental improvement on a section-by-section basis to provide flexibility for budgets and still provide the most appropriate improvements early in the project. The study includes a preliminary assessment of the railway business based on transport scenarios provided by HSH, and an assessment and understanding of the development trends in the Albanian economy. Cash flow analysis was conducted to assess the options and indicate which is the most advantageous to the economy. The study also includes an assessment of the socio-economic context of the project and a preliminary estimate is made of those quantifiable benefits that would be associated with the project, but which were not captured within the purely financial assessments (Western Balkans Investment Framework). Finally, The World Bank has played a key role in the development of the transport sector in Albania, as the Bank recently co-financed the main transport projects in the country: Secondary and local roads project: The project proposes to achieve this objective through the (i) the improvement of priority sections of the secondary (regional) road network across Albania; (ii) the improvement of priority sections of the local road network across Albania; (iii) the introduction of the private sector in the maintenance of the secondary and local road network; and (iv) strengthening of the management of the secondary and local road network (Approved in 2007, amount of the IDA Credit: 20 million US Dollars); and Albania transport project: The components of the project are: (i) the construction of 26 km section of the Milot - Rreshen road; (ii) the introduction of innovation in road maintenance on a pilot basis through testing the output and performance-based road maintenance contracts (OPBRM) in two pilot regions of Kukes and Tirana; and (iii) institutional development and support to improving road safety in Albania (Approved in 2007, amount of the IDA Credit: 5 million US Dollars and IBRD Loan 20 million US Dollars) (The World Bank, 2010). 139

153 Bosnia and Herzegovina Since 2007 Bosnia and Herzegovina has received EU financial aid under the instrument for preaccession assistance (IPA). The allocation for the years per Component is presented at the following table and graph: Table 20 IPA funds to Bosnia and Herzegovina per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) Component Transition Assistance and Institution Building 58,1 69,8 83,9 100,7 102,7 102,7 106,9 Cross-border Co-operation 4,0 4,9 5,2 4,7 4,7 5,2 4,9 TOTAL 62,1 74,8 89,1 105,4 107,4 107,9 111,8 Figure 18 Bosnia and Herzegovina (European Commission - Instrument for Pre-Accession Assistance, 2011) Under the IPA Component I - Transition Assistance and Institution Building for 2011 and having regard to the project proposals submitted by the country concerned, the National Programme for Bosnia and Herzegovina aims at providing assistance to help the country to meet the political, economic and acquis requirements of the accession process. Based on the MIPD priorities, the 2011 National Programme will support 12 projects in the sectors Public Administration Reform, Justice and Home Affairs, Private Sector Development, Transport, Environment and Climate Change, Social Development, and Acquis related and other Actions. In addition, the programme will support Bosnia and Herzegovina s participation in EU programmes and will provide a project preparation and general technical assistance facility (PPF/GTAF). In all these sectors, the programme could benefit from important transition experiences and good practices of European Member States, in particular those who have joined the Union since 2004, in areas corresponding to the programme priorities. Bosnia and Herzegovina is a transit country for the trans-european Networks, in particular for the Corridor Vc from Budapest to the harbour of Ploče in Croatia. Therefore it is in the EU's best interest to support Bosnia and Herzegovina to comply with the Memorandum of Understanding on 140

154 the development of the South-East Europe Core Regional Transport Network. Supporting the transport sector, in particular the upgrading of transport infrastructure will generate a number of catalytic effects, e.g. supporting industrial and agricultural production, trade, employment, and improving environmental conditions. Bosnia and Herzegovina adopted a number of transport related strategies, which will serve as a basis for EU support, in particular the transport master plan, the Sava River basin strategy, the investment plan for railway development and the air space development strategy. The European Union provided substantial support, in particular to upgrade the Trans-European Transport Networks (corridor Vc), to bring railway regulations in line with the relevant EU Directives, to support the civil aviation authority, to improve transport infrastructure and to rehabilitate the Sava river waterway. The programme will implement one project in this sector which covers 15% of the programme's budget. Under the Transport Sector, there are two objectives to be supported; the development of a strategic framework for the transport sector at State- and Entity-level and the improvement of the transport infrastructure, in line with the South East Europe Core Regional Transport Network. The project to be supported under this programme is the Modernization and Development of Transport Infrastructure on the comprehensive network in Bosnia and Herzegovina with up to EUR 14 million European Union Contribution via the IPA or the 85% of the total expenditure. The purpose of this project is to strengthen the information and educational function of the Bosnia and Herzegovina Institute for Preparation of a general strategy and sub-sector strategies for transport and action plans for transport and its sub-sectors (Task I), to prepare a Road Safety Strategy and an Action Plan for its implementation (Task II), to prepare the Main Design and investment support for the section Zenica-Doboj (58,4 km) of Motorway on Corridor Vc (Task III), to complete the Preliminary Design, updating of the Feasibility Study and the Preparation of the Main Design for the E-road from Brod na Drini (Foca) to Hum (Scepan Polje) including the interstate bridge (Bosnia and Herzegovina and Montenegro) as well as several studies concerning the improvement of the E- road from Sarajevo to Foca (Brod na Drini) (Task IV). The first two tasks will be implemented through service contracts (EUR 1 million and EUR 0,5 million), while the tenders will be launched in the second quarter of Tasks III and IV will be implemented in joint management with the EIB and EBRD in accordance with Article 53d(1)(c) of the Financial Regulation. Contribution agreements with EIB (EUR 10 million) and EBRD (EUR 2,5 million) are foreseen to be signed in the second quarter of 2012 (European Commission - Instrument for Pre-Accession Assistance, 2011). The EIB is financing in Bosnia and Herzegovina since The most recent co-financed transport projects concern the road sector: In 2008 the EIB lend EUR 75 million for the construction of a motorway section North of Sarajevo in Bosnia and Herzegovina on trans-european Corridor Vc, which runs through the country from South to North, connecting Ploce to Sarajevo, Osjek in Croatia and ultimately 141

155 Budapest in Hungary. The investment project was co-financed by the European Bank for Reconstruction and Development (Signature date: 18/12/2008, Amount: EUR 75 million); In 2007 the EIB lend EUR 50 million for the rehabilitation of roads in Bosnia-Herzegovina, following a loan of EUR 40 million signed in 2006 for the rehabilitation of the road network in Republika Srpska. Similarly to that operation, the loan of 2007 supported pavement rehabilitation, overlays and strengthening and ancillary works on the main and regional road network in the Federation of Bosnia and Herzegovina. As with the earlier operation in Republika Srpska, the selection of the road sections (some 109 sections totaling to km) covered by this project has been made an on the basis of the evaluation of the entire road network of the Federation of Bosnia and Herzegovina taking into account the traffic volumes and condition of the roads. The EIB loans financed 50% of the total costs of the two projects (in Republika Srpska and in the Federation) that were expected to be co-financed by the European Bank for Reconstruction and Development and the World Bank, providing another example of the good coordination and cooperation among these international financial institutions in the Western Balkans (Signature date: 26/03/2007, Amount: EUR 50 million); and Rehabilitation of 55 sections of road with total length of around km in Republika Srpska (Signature date: 05/09/2006, Amount: EUR 40 million) (European Investment Bank, 2012). The EBRD is the largest institutional investor in Bosnia and Herzegovina and its activities include infrastructure projects that are crucial for regional development. In the four years up to February 2011 the EBRD signed 47 projects in the country amounting to over EUR 716 million. The most recent co-financed transport projects are the following: In 2010 the EBRD supported the modernisation of Sarajevo International Airport with a EUR 25 million loan to expand the airport s infrastructure and help it address capacity constraints. The loan is extended directly to Sarajevo International Airport and is guaranteed by the state of Bosnia and Herzegovina. The EBRD loan is used to finance the expansion of the passenger terminal, to build a new rapid runway and to expand the aircraft parking apron. The project will add close to square meters to the current area of the passenger terminal of square meters. The expansion is supported by grant financing from the Dutch government, the Western Balkans Fund and EBRD Shareholder Special Fund of nearly EUR 1 million. The grants are used for tasks including preparation of the final design of the expanded passenger terminal and updating the corporate plan outlining the airport s future strategy; In 2009 the EBRD supported the modernisation of the transport infrastructure of Bosnia- Herzegovina with a EUR 21 million loan for the completion of the construction of the Banja Luka Gradiska motorway. The motorway from Banja Luka to Gradiska, the first in the Republika Srpska, links the capital Banja Luka with the international transport Corridor X. It is being built with financing from both the EBRD and the European Investment Bank. This EBRD s sovereign loan would be extended to the Republika Srpska Motorways, a newly- 142

156 established public company responsible for managing the motorway network. The proceeds of the loan are used to finance the construction of the Mahovljani Interchange, which completes the missing link on the Banja Luka Gradiska motorway. The Project also supports a programme of institutional strengthening for this new company. The project includes the construction of a 1,8 km new two-lane motorway, four interchange two-lane slip roads, with a total length of 6,9 km, two viaducts, which carry two of the slip roads over the new motorway, and four other bridges within the interchange. In addition to the EBRD loan, the project is co-financed by EUR 5 million in grant funds provided by the European Commission through its pre-accession programme, and EUR 0,5 million from the Central European Initiative and the Western Balkans Investment Framework; In 2006 the EBRD lend Bosnia and Herzegovina EUR 12 million to help finance a new air traffic management programme that would improve safety across the country and the Balkan region. The project was to be implemented by the Bosnia and Herzegovina Directorate of Civil Aviation, part of the Ministry of Communication and Transport, and would assist the Directorate to purchase and install navigational, communications and meteorological equipment, as well as, help train staff in using the new equipment and finance consultants to create a new air navigation service provider that would control the airspace over BiH (European Bank for Reconstruction and Development, 2012). Bosnia and Herzegovina has nine IPF Techncial Assistance projects supported by the WBIF. Three of them are on the transport sector: The project Construction of the Main Foca-Hum Road seeks to upgrade the road between Foca in Bosnia and Herzegovina and the Montenegrin border. A parallel project in Montenegro deals with the road across the border. An inter-state commission has been established to coordinate cross border matters in general and the bridge crossing in particular. This road is part of the link that forms the shortest connection between the two respective capital cities: Sarajevo and Podgorica. The road is also part of SEETO network and Sarajevo- Podgorica-Tirana communication, Rout 2b. Final report on Phase 1 presented to stakeholders on workshop in Trebinje, in May, Traffic survey completed in September, 2010.ToR for Phase 2 approved and project activities started in December, 2010.Workshops on conceptual design of the road and Tara bridge held in Sarajevo in January and February, Feasibility study completion and presentation of its results to beneficiaries are planned for June, 2011; Bosnia and Herzegovina s Motorway in Corridor Vc is part of the Trans-European Network of inland corridors. This corridor connects the Port of Ploce, which is the main sea gate for Bosnian economy, with Sarajevo as the country s capital, Osijek in the Republic of Croatia as the junction point between Corridors X (Zagreb-Belgrade motorway) and Vc and Budapest. BiH authorities earmarked the Motorway in Corridor Vc as the top strategic development project of the country. Within the FS of the Motorway, which was completed in December 2006, the social-economic efficiency and feasibility were identified for the Motorway as the 143

157 overall scheme, as well as for individual motorway sections. In that respect the FS indicated, that subsections Svilaj-Odzak and Pocitelj-Croatian Border belong to top priority. Considering the time elapsed from the completion of the FS, it was necessary to carry out the updating of the FS for those two sections, which is the subject of this project. Management support to PIU in procurement activities in the second part of this project. Final report on FS up-date completed. Management support to tendering processes ongoing; and The section Podlugovi-Sarajevo (around 25 km) is on the railway line from Ploce to Budapest, which is part of Pan European Corridor Vc. The project is divided into two steps: the first step is preparation of a simple Feasibility Study (including CBA) which will justify the scope for the reconstruction (track overhaul) of the section Podlugovi - Sarajevo including the extension via Rajlovac freight station. In general the idea is to continue the reconstruction practice as used on other sections of the corridor: track overhaul to bring back the line into design speed ( kph) and where possible without re-alignment; new track and switches in stations; repair of bridges, culverts, slopes and sub grade; installation of signaling/interlocking on stations where this is missing; adaptations of level crossings. Second step will be a detailed design and preparation of draft tender documents. The scope of this work will be track overhaul and will be based on the outcome of the FS. The project was on hold for almost one year as there was no consensus among the various stakeholders on the scope of works of the ToR. Following disagreement on the initial ToR, a Task Force consultation was established last summer. As a result of it, IPF2 was assigned to re-draft ToR for a simple Feasibility Study and Main Design for existing track overhaul and supplementary stations and level crossings interlocking. On early April,2011, a letter of consent was issued and following the finalization of ToR and respective work plan and study team, DG-ELARG gave on April 29 the Administrative Order to start. The project starts in May, 2011 and is expected to be completed in 12 months (Western Balkans Investment Framework). The World Bank has been supporting the rehabilitation of magisterial and regional roads through the Road Infrastructure and Safety Project, under implementation since The project builds on the results of the Road Management and Safety Project (RMSP), which closed in June The implementation of the RMSP directly led EIB and EBRD to contribute significant parallel financing to the current US$220 million program to clear the maintenance backlog on the road network (excluding structures), out of which the Bank project provides US$25 million. The Bank is currently preparing the Sava Waterways Rehabilitation Project, which aims to improve the operational performance and safety of commercial and leisure vessels on the Sava River, thereby contributing to improved utilization of the river ports and broader economic development in the hinterland. The Project proposes to achieve this objective through the following three components: (i) the rehabilitation of the Sava River within BH; (ii) targeted investments to improve the operational performance of, and access to, the river ports on the Sava River in BH; and (iii) necessary implementation assistance and institutional support. The project is an important one from a regional perspective, and will occur in parallel with rehabilitation works in Croatia and Serbia (The World Bank - Country Office Bosnia and Herzegovina, 2011). 144

158 Kosovo under UN Security Council Resolution 1244 Kosovo is receiving EU financial aid under the instrument for pre-accession assistance (IPA) since The allocation for the years per Component is presented at the following table and graph: Table 21 IPA funds to Kosovo per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) Component Transition Assistance and Institution Building 68,3 184,7 106,1 66,1 66,9 65,9 70,7 Cross-border Co-operation ,2 1,8 2,9 3,0 TOTAL 68,3 184,7 106,1 67,3,000 68,7 68,8 73,7 Figure 19 IPA funds to Kosovo per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2011) Annual programmes of the Instrument for Pre-accession are designed in accordance with the strategic Multi-Annual Programming Documents (MIPDs). They are adopted by the Commission following consultation with the beneficiaries and a wide range of stakeholders. In the case of Kosovo, they are implemented by centralised management. The programme covers 23 projects covering three major categories: political criteria, economic criteria, and European standards. The projects have been prepared in close cooperation with the authorities and beneficiaries in Kosovo and in close consultation with other donors. IPA assistance within the framework of economic criteria of the Kosovo Multi-annual Indicative Planning Document (MIPD) for amounts to over EUR 104 million and includes the improvement of social and economic infrastructure in municipalities to improve notably schools and youth facilities, health services and roads to enhance service delivery to the population (EUR 39 million), support to energy efficiency and transmission (EUR 9,5 million), support to education and employment (EUR 20 million) including through the contribution to a multi-donor trust fund, and improving the environment with specific focus on water treatment and waste management to 145

159 improve public health (EUR 18 million) (European Commission - Instrument for Pre-Accession Assistance, 2010). WBIF has four IPF Technical Assistance projects in Kosovo. The transport project is the Rehabilitation of railway route 10. The type of the Technical Assistance provided by the WBIF is the Feasibility Study. The project was approved in April 2010 and the estimated investment is EUR 125,5 million (Western Balkans Investment Framework) Serbia Since 2007 Serbia has received EU financial aid under the instrument for pre-accession assistance (IPA) for an annual average financial envelope of over EUR 190 million. The allocation for 2010 totals EUR 198 million (European Commission - Instrument for Pre-Accession Assistance, 2012). The allocation for the years per Component is presented at the following table and graph: Table 22 IPA funds to Serbia per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2012) Component Transition Assistance and Institution Building 181,5 179,4 182,6 186,2 190,6 190,0 203,1 Cross-border Co-operation 8,2 11,5 12,2 11,8 11,3 12,1 11,6 TOTAL 189,7 190,9 194,8 198,0 201,9 202,1 214,7 Figure 20 IPA funds to Serbia per year and Component (European Commission - Instrument for Pre-Accession Assistance, 2012) The priorities of the IPA 2011 National Programme for Serbia are in line with those of the Multi- Annual Indicative Planning Document On the Transport sector, the restoration and development of the country's infrastructure network is one of the Serbian government's priorities. The development of Pan-European Corridors VII the Danube River and Corridor X which 146

160 runs between Austria and Greece is a priority for both the EU and Serbia. A good strategic framework is in place for multidonor support and for a sector wide approach. The main goals in the field of transport are to promote integration of Serbia into the European transport network in a way to generate sustainable economic growth. Over the programming period focus will be placed on rail and road transport, as well as inland waterways. Two projects in the Transport sector will be supported under this programme. Their aim is to modernise railways and to build access roads to the Žeželj Bridge on Corridor X. The IPA supply to the overall transport sector is comes up to EUR 13,8 million or the 8% of the total IPA financial aid under the 2011 National Programme. The projects financed under this sector are the Modernisation of Railways (IPA contribution EUR 8,3 million) and Access roads to the Žeželj bridge (IPA contribution EUR 0,5 million). More specifically, the purpose of the project Modernisation of Railways is to advance the completion, modernisation and sustainable development of the Serbian railway transport system within the Pan-European Corridor X, in order to meet the required capacity levels and quality standards relevant to the TEN-T network. The project will be implemented through two service contracts both to be contracted in the forth quarter of 2012 after the signature of the FA. Serbia's Ministry of Infrastructure will be the beneficiary of this project. Regarding the link to MIPD, the project falls under the Transport sector and more specifically under its objectives to support the modernisation of the transport system in Serbia and to strenghten regional cooperation, as well as implement the commitments made in the framework of the regional transport initiatives. Further, the project will have an impact on the economic development of Serbia and the region as a whole. The purpose of the project Access roads to the Žeželj bridge is to restore full road and rail traffic across the Danube in Novi Sad as part of the Belgrade-Subotica-Budapest segment of Corridor Xb of the TEN-T network. The project will be implemented through one service contract and one work contract. The indicative timetable for contracting refers to the third quarter of 2012 for the service contract and to the fourth quarter for the works after the signature of the FA. Serbia's Ministry of Infrastructure will be the beneficiary of this project. The project is linked to MIPD and falls under the Transport sector and more specifically under its objectives to support the modernization of the transport system in Serbia and to strenghten regional cooperation, as well as implement the commitments made in the framework of the regional transport initiatives (European Commission - Instrument for Pre- Accession Assistance, 2011). The EIB is operating in Serbia since 2000 and the most of the supported transport projects are on the road sector. Some of the recent so-financed projects are the following: Construction of motorway section in pan-european corridor X in Serbia (Signature date: 29/11/2010, Amount: EUR 195 million); 147

161 Construction of new Sava bridge and access roads in Belgrade (Signature dates: 29/11/2010 and 18/12/2009, Amount: EUR 160 million); Construction of 47 km bypass, of which 27 km of motorway and 20 km of road, on Pan- European Transport Corridor X, west and south of Belgrade (Signature dates: 27/09/2010 and 19/10/2007, Amount: EUR 100 million); Construction of motorway section on Pan-European Corridor X between Grabovnica and Levosoje in southern Serbia (Signature date: 23/10/2009, Amount: EUR 384 million); Rehabilitation of roads and bridges throughout country (Signature dates: 05/11/2009, 30/09/2008, 16/07/2007, 17/05/2006 and 13/12/2005, Amount: EUR 38 million); Rehabilitation of E70/E75 motorway crossing Belgrade and of R251 ring road (Signature date: 16/07/2007, Amount: EUR 33 million); and Rehabilitation of railway lines on Corridor X and upgrading of rolling stock (Signature date: 08/12/2006, Amount: EUR 33 million) (European Investment Bank, 2012). The EBRD s focus in Serbia is on the development of transport infrastructure, boosting small business and promoting renewable energy. The Bank has been the country s largest investor since 2001 committing almost EUR 2,5 billion to the country. In 2010 the EBRD committed EUR 590,5 million across 24 projects. Some of the transport projects recently co-financed are mentioned below: In 2010 the EBRD supported further modernisation of rail operations in Serbia with a EUR 100 million sovereign guaranteed loan to the Serbian state-owned railway company Zeleznice Srbije to finance the upgrade of Corridor X rail and the purchase of locomotives. The EBRD loan would be used to renew over 111 km of track on Corridor X, to purchase track maintenance machinery and to acquire 15 new electric locomotives, which will replace outdated cars for freight services. The project, supported by EUR in technical assistance grants from the Central European Initiative, German government and the Bank s Shareholder Special Fund, will also support Zeleznice Srbije in its restructuring process, implementation of this project and the development of various energy efficiency initiatives. In 2009 the EBRD supported the modernisation of transport infrastructure in Serbia with a EUR 150 million sovereign loan to finalise the construction of a new motorway section along the strategic Corridor X. The first section of the E-80 motorway, 18 km from Nis to Prosek, has already been built. The EBRD funds together with loans from the World Bank and the European Investment Bank would be used to finance the construction of the remaining sections of the new four lane motorway. The motorway would be built on a new route, which includes interchanges with the existing road network. With a total cost of approximately EUR 795 million, the project is co-financed by the World Bank, the European Investment Bank, and the Republic of Serbia. The project is supported by grant funds from the EBRD Western 148

162 Balkans Fund, which would be used to develop a plan for introducing the private sector into road toll collection and to support the implementation of the Roads Law in Serbia. In 2005 the EBRD financed the upgrading of the road from Belgrade to Novi Sad and the construction of a new bridge across the Danube with a EUR 72 million loan to the Roads Directorate of the Republic of Serbia. The project includes the transformation of the road agency into an independent enterprise, the introduction of performance-based maintenance contracts, and a public-private-partnership strategy. The project is co-financed with the European Investment Bank, which will lend EUR 115 million. The project is also supported by the European Union, through a EUR 1,3 million grant, and the Canadian International Development Association, who will provide EUR for the development of a publicprivate-partnership strategy (European Bank for Reconstruction and Development, 2012). Serbia has ten IPF Technical Assistance projects supported by the WBIF. One of these concerns the transport sector and more specifically the rail sub-sector; the objective of the project is the reconstruction of the Railway axis Nis FYROM Border (Corridor X). The type of the Technical Assistance provided by the WBIF is the Feasibility Study and the EIA. The project was approved in November 2009 and the estimated investment is EUR 257,6 million (Western Balkans Investment Framework). The World Bank currently supports the transport sector through the Transport Rehabilitation Project and Corridor X Project. Both projects aim to improve road safety through reconstruction/construction and improvement of standards of the road network. Serbia transport rehabilitation project: The Project objectives will be achieved by financing (i) institutional strengthening, which includes technical assistance, training, services, and provision of goods for strengthening the PERS Information Center, including the improvement of its road asset databases, as well as the establishment of a computerized system for contract management; strengthening of systems, and procedures for planning and budgeting road expenditures, based on economic appraisal methodologies; improving the procurement and supervision of road works; (ii) consultancy services for supervision of road maintenance and rehabilitation works; and, equipment, materials, and supplies for improved road management capability in the PERS; and (iii) the enhancement of road maintenance, rehabilitation, and road safety, including the rehabilitation of priority sections of the main road network (10 sections from IDA and 8 from IBRD loan), and performance based road maintenance, on a pilot basis, in the regions of Macva and Kolubara (Approved in 2004, amount of the IDA Credit: 55 million US Dollars and IBRD Loan 50 million US Dollars); and Corridor X project: The Project objectives will be achieved by financing (i) the construction of two sections of motorway on E-75, totaling 31,9 km between Grabovnica and Grdelica, and between Vladicin Han and Donji Neradovac, (ii) construction of 8,67 km of motorway on a E- 80 section of the corridor between Dimitrovgrad and the border with Bulgaria (Dimitrovgrad Bypass), (iii) technical assistance in the area of Road Safety and (iv) Implementation 149

163 Assistance and Institutional Support (Approved in 2009, amount of the IBRD Loan 388 million US Dollars) (The World Bank, 2011) Third countries Moldova In 2007 the EIB signed a loan of 30 million EUR with the Republic of Moldova, to support the rehabilitation of roads linking the capital Chisinau to the EU border. This is the first ever operation of the EIB in Moldova. EIB, the Bank promoting European objectives, supports the European Neighbourhood Policy, which aims to strengthen the links between the enlarged EU and its Neighbours and promote an area of prosperity, stability and security. This project, piloted by the World Bank (WB), is being co-financed by the WB, the EIB and the EBRD. The WB and the EBRD are providing loans of respectively 16 million USD and EUR 30 million to rehabilitate the main North-South road axis in the country. The three loans are closely coordinated with the International Monetary Fund and the European Commission. In 2008 the EIB lend EUR 20 million for the rehabilitation and capacity increase of Chisinau airport - Moldova's sole international airport. The project is being co-financed by the European Bank for Reconstruction and Development and the EU Neighbourhood Investment Facility. It comprises the rehabilitation of the airport's runway and taxiways, reconstruction and extension of the passenger apron and expansion of the arrival and departure halls of the passenger terminal. The NIF grant would finance the preparation of an Airport Master Plan and implementation assistance and works supervision. This was the second loan provided by the EIB in Moldova. More recently, in 2010, the EIB signed a load of EUR 75 million to Repair and upgrading of key national road sections (European Investment Bank, 2012). In Moldova the EBRD supports a reinvigorated reform process by financing the modernisation of transport and municipal infrastructure and by investing in the private sector, with a strong focus on energy efficiency improvements. The recent transport projects co-financed by the EBRD are mentioned below: In 2010 the EBRD is provided a EUR 75 million sovereign loan for the rehabilitation of the country s national road network, supporting Moldova s transport infrastructure strategy. The EBRD loan, structured in three tranches, would address priority projects that will underpin economic growth and regional integration, as identified in Moldova s road sector investment plan, prepared with the support of the World Bank. The first EUR 27 million tranche of the EBRD loan would finance the rehabilitation of two sections of the M3 Chisinau - Giurgiulesti road, between the towns of Comrat and Ciumai, with a total length of approximately 55 kilometres. The M3 Chisinau - Giurgiulesti road is an important road in Moldova, providing a link between Trans-European Corridors IV and IX and access to Danube river and the Black Sea. The remaining tranches, of EUR 25 million and EUR 23 million respectively, would be used to finance additional investments in the roads infrastructure in Moldova. The project was co-financed by the EIB. The EBRD investment is complemented by EUR 1,5 million in technical assistance grants to support project implementation 150

164 and institutional strengthening of the State Road Administration, the implementation agency for the project, as well as to support the advancement of the road maintenance reform. In 2008 the EBRD financed the modernisation of the airport in the capital Chisinau with a EUR 25,5 million loan. The EIB co-financed this project with a EUR 20 million loan. The funds would be used for the rehabilitation and upgrade of the airport infrastructure and related equipment. The EU s Neighbourhood Investment Facility (NIF) contributed EUR 1,75 million in technical cooperation funds for assistance with the preparation of an Airport Master Plan and for Project Implementation Assistance and Supervision Services. The Project has also benefited from technical co-operation funds from The Netherlands, Germany and the Early Transition Countries Fund for project preparation. In 2007 the EBRD together with the World Bank and the EIB is providing the country with a financing package which will bring major improvements. The project will have two phases with a total cost of EUR 89,5 million, of which the EBRD will provide a total of EUR 30 million. The works involved the rehabilitation of road sections along the main north-south corridor and the eastwest corridor linking the capital Chisinau with the border to Romania (European Bank for Reconstruction and Development, 2012). The World Bank currently co-finances one transport project in Moldavia with other Donors (EBRD and EIB), as it was mentioned above. The project Road sector program support project addresses a range of road sector issues by: (i) creating a reliable and unified system for handling large road sector investments; (ii) developing a reliable financing mechanism for road maintenance; and (iii) implementing a system designed to curb the circulation of overloaded trucks (Approved in 2007, amount of the IDA Credit: 16,32 million US Dollars) (The World Bank, 2011) Ukraine The EIB lend EUR 200 million to Ukraine for the rehabilitation of the M-06 road, which is the major route between Ukraine and the European Union, linking the Ukrainian capital to the neighbouring EU Member States of Hungary, Slovakia and Poland. This is the first-ever operation of the EIB in Ukraine. The promoter of the project is Ukravtodor, the State Road Service of Ukraine. This operation is also an example of efficient cooperation between the EIB and the EBRD (European Bank for Reconstruction and Development), which is co-financing this project with a loan of an equal amount. In 2011 the EIB provided the largest loan to date in the Eastern Partners: EUR 450 million for the rehabilitation and quality improvement of roads in Ukraine. EIB funds will help to improve some 350 km of five sections of highways branching out from the Ukrainian Capital Kiev, representing crucial European and national transport corridors largely on the extended TEN-T. The project is being co-financed by the EBRD with a loan of EUR 450 million. The works, predominantly covering the road corridors interconnecting Dresden-Katowice-Lviv-Kiev and Moscow-Kiev- Odessa as well as key national corridors in Ukraine, will be implemented in two phases by 151

165 Ukravtodor, the State Roads Administration of Ukraine. This is the second EIB loan provided for the rehabilitation of the Ukrainian road network (European Investment Bank, 2012). Ukraine has been severely affected by the global economic downturn and the political and economic uncertainty up until the country s elections in early Following significant EBRD support in 2009 to the banking sector, the Bank s focus in 2010 was directed towards key infrastructure development and support to the corporate sector. In 2010 The European Bank for Reconstruction and Development provided a EUR 450 million sovereign loan facility to Ukravtodor, the State Road Administration of Ukraine, to finance rehabilitation and upgrade of the road approaches to Kiev (almost 700 kilometres of the M06 motorway), which form part of key the European and national corridors in Ukraine. This is one of the key arterial roads in the country, which forms part of Pan-European Corridors III and V, linking Ukrainian capital with the EU, rehabilitation of which will be completed under the new project. The EBRD financing, which is provided in two tranches, is matched by a similar-sized loan from the European Investment Bank. In 2009 the EBRD supported the transport infrastructure in Ukraine with a $27 million loan facility to finance the development of a logistics service centre/ new container terminal in the area of the Black Sea Port of Odessa. In 2009 the EBRD supported for the reform of Ukraine s state railways system with a $62.5 million loan to finance the purchase of freight wagons for a programme to renew rolling stock. The EBRD in 2207 provided a EUR 26 million sovereign guaranteed loan to Illichivsk Sea Commercial Port, one of the largest ports in Ukraine. The fifteen-year loan will help the port carry out a programme of modernisation that includes berth reconstruction, procurement of the cargo handling equipment and dredging works. In 2006 the EBRD provided a $20 million loan to support further expansion by Odessa-based shipping company, Black Sea Shipping Management Co Ltd. (BSSM). $10 million out of this loan was syndicated to Bank of Scotland. The project envisages post-delivery financing of five new dry cargo vessels of deadweight each. The vessels will be commissioned at Kherson shipyard in south Ukraine. A $120 million EBRD loan to Ukraine s main passenger and freight carrier Ukrzaliznytsia (Ukraine Railways) is the Bank s largest yet in the country. The sovereign-backed loan, the Bank s second loan to Ukrzaliznytsia, will be used to introduce fast-train services country wide, acquire trackmaintenance equipment and rebuild Beskyd Tunnel, a major trans-european bottleneck (European Bank for Reconstruction and Development, 2012). The World Bank is Ukraine s key partner in the transport sector. The USD 400 million Roads and Safety Improvement Project is financing i) an upgrade of a 126 km section of the Kyiv-Kharkiv road; ii) elimination of the accident black-spots throughout the nation s road network; and iii) technical assistance to strengthen road agency s capacity in road management and maintenance. 152

166 The Project Development Objective is to improve the condition and quality of sections of the section between Boryspil and Lubny of the M-03 road, and increase traffic safety on roads (Approved in 2009, amount of the WB Loan: 400 million US Dollars) (The World Bank, 2011). 153

167 4. Private Sector Participation in the Development of Transport 4.1. General Issues In the efforts to provide financial assistance on the transport sector to the countries of the Southeast European region involved in the SEETAC project, apart from the research that has been made on the Community financing mechanisms and the financing resources from the IFIs, it is considered as necessary to research on the potential development of cooperation with the private sector along with international financial institutions, seeking their active involvement in the development of the Trans-European Transport Network and the Pan-European Network. Besides, the White Paper of Roadmap to a Single European Transport Area - Towards a competitive and resource efficient transport system 21, recognizing the difficulty of raising capital in building infrastructure, sets the guidelines for the Public-Private sector engagement. There is recognized the necessity to establish an enabling framework for the development of Public-Private Partnerships (PPPs) in order to introduce a formal screening of TEN-T projects to identify those with PPP potential, to create a standardized and predictable PPP procurement process for TEN-T projects over time and to revise TEN-T regulations accordingly so as to accommodate the PPP procurement process and payment mechanisms. In the context of the cooperation framework established between the Commission services and EPEC, the Member States are encouraged to use more PPPs, while acknowledging that not all projects are suitable for this mechanism, and provide relevant expertise to Member States. Finally, the Commission participates in designing new financing instruments for the transport sector, particularly the EU project bond initiative (European Commission - Mobility and Transport, 2011). Under EU law, there is no specific system governing PPPs. There is, however, EU legislation which is relevant to certain aspects of PPPs. For example, PPPs represent one method of public sector procurement. The EU has two procurement directives, the Public Sector Directive (2004/18/EC), which prescribes the procedures for the award of works contracts, public supply contracts and public service contracts; and the Utilities Directive (2004/17/EC), which prescribes procurement procedures for entities operating in the water, energy, transport and postal sectors. Furthermore, all contracts in which a public body awards work involving an economic activity to a third party, whether PPPs or not, must be examined in the light of the rules and principles of the EC Treaty, including, in particular, the principles of transparency, equal treatment, proportionality and mutual recognition 22 (European PPP Expertise Centre, 2011). 21 COM(2011) 144 final, Brussels, Communication from the Commission to the European Parliament, the Council, the European Economic and Social on Public-Private Partnerships and Community Law on Public Procurement and Concessions, COM(2005) 569 final Brussels,

168 4.2. Types of Private Sector Partnership Models Different labels are often used to name structures aiming at extending private involvement into infrastructure related activities (including provision of services) that have historically been the preserve of the public sector: 1. Private Sector Participation (PSP): This covers a priori all kinds of private sector participation. This broad concept is frequently used by IFIs and international organisations dealing with developing countries. For example, the World Bank PPI database (Private Sector Participation in Infrastructure), which covers electricity, natural gas, telecommunications, transport and water sectors in low and middle-income developing countries, uses the following criteria and terminology: Definition of private participation: The private company must assume operating risk during the operating period or assume development and operating risk during the contract period. A foreign state-owned company is considered a private entity. Project types: Operations and management contract. A private entity takes over the management of a state-owned enterprise for a given period. This category includes management contracts and leases. Operations and management contract with major capital expenditure. A private entity takes over the management of a state-owned enterprise for a given period during which it also assumes significant investment risk. This category includes concession-type contracts such as build-transfer-operate, build-lease-operate, and build-rehabilitateoperate-transfer contracts as applied to existing facilities. Greenfield project. A private entity or a public-private joint venture builds and operates a new facility. This category includes build-own-transfer and buildown- operate contracts as well as merchant power plants. Divestiture. A private consortium buys an equity stake in a state-owned enterprise. The private stake may or may not imply private management of the company. 2. Public-Private Partnership (PPP): A lot of controversy exists about the concept of partnership. The only consensus is that there is no one-size-fits-all definition of public-private partnership. In most definitions, the focus is on the balanced sharing of responsibilities, risks and rewards for the production of a public service. In that sense, full privatisation is not a PPP, neither is for example the subcontracting of road maintenance. Whatever the definition is, there is always a large grey area between what is clearly public and what is clearly private. Works concessions granted to private entities or BOT projects are usually classified as PPPs. 3. Concession: literally means that a public authority grants ( concedes ) the right to provide a public service to a financially accountable entity, public or private or both (joint-ventures), 155

169 partly or fully responsible for carrying out investments needed to achieve objectives specified by the concession contract. However, national legislations differ quite significantly with regard to the legal definition of concessions. Common law jurisdictions, in contrast with civil law jurisdictions, do not treat concessions as a species of contract distinct from ordinary commercial contracts and specifically refer to the various types of contracts (BOT, DBFO an so on see below). 4. Build, Operate and Transfer (B.O.T.) projects: usually used to designate contracts between a public and a private entity to design, build, finance an infrastructure an operate it for a fixed period of time, most often without commercial risks (payments are made by public entities on the basis of technical performance). This basic concept has been used in many different ways. The name BOT is often abusively used to stand for all these variants. 5. Project finance: Project finance refers to the financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure where project debt and equity used to finance the project are paid back from the cash flow generated by the project (definition given by the International Project Finance Association). In other words, this is a financial structure whereby lenders look to the project s assets and revenue stream for repayment rather than to other sources of security such as government guarantees or the assets of the project sponsors. Project Finance is widely used in concession/bot projects (Patrick Boeuf - European Investment Bank, 2003) Private Sector Partnership Advantages and Benefits Development of PPPs is part of the general trend towards increased private sector participation and market discipline, including privatisation and deregulation, which developed over the last two decades in the production of goods and services that have historically been the preserve of the public sector. Main sectors concerned are network industries and to a lesser extent social services. Rationale behind this trend is at least threefold: Volume: In a context of public finance constraints, PPPs increase the volume of investments that can be delivered during a given period of time. Efficiency/quality: World-wide experience shows that, under certain conditions, significant efficiency/quality gains can be obtained by giving more responsibilities to the private sector and, in some cases, by bundling these responsibilities into one main contract. Competitiveness and fair competition: mainly valid for network industries, as a consequence of liberalisation and deregulation policies. The volume argument is widely used to justify PPPs, but a more careful examination shows that, in developed economies, it is mainly valid as a short-term argument, during periods of budgetary constraints. In many PPPs indeed, annual payments are made by the conceding authority and not by the user of the service. Depending on the sharing of risks between public and private parties, some of these PPPs are accounted outside general government books. However, these PPPs only have a 156

170 shortterm impact on public deficits, during the initial construction period (budgetary payments are just differed and spread over time). Their main financial impact is on public debt. Another reason for using the volume argument with caution when promoting PPPs is that, stricto sensu, private sector participation is not always needed to externalise the financial impact of infrastructure development. According to the European System of Accounts (ESA), the creation of a public company has the same impact on public finance provided it is run on a commercial basis and receives more than 50% of its income from user payments (public toll motorway companies, for example, even if loans are guaranteed by the State). Ideally, in the long term, accounting conventions should make public finance available to fund economically justified investments when it provides the best deal for society. In Europe, the competitiveness and fair competition argument is mainly used to push for the privatisation of incumbent companies in the energy and telecom sectors, where PPP structures are not frequently used. Therefore, the efficiency/quality argument appears to be the decisive one for PPPs: ultimately a PPP is an alternative to procure/deliver a public service (or achieve a policy outcome). It should only be selected if it can deliver value-for-money and quality. The underlying principle is that the private sector is expected to bring its rigour and expertise in the design, implementation and operation of a project in a manner that will benefit the society as a whole. Unless this can be demonstrated/achieved i.e. if the private sector can provide same (better) service/outcome at a lower (same) cost there is no rationale to resort to a PPP (Patrick Boeuf - European Investment Bank, 2003) Guidelines for successful Public-Private Partnership According to the Act on PPPs and the Regulation on the criteria for assessment and approval of PPP projects, any public body that wishes to implement a PPP project is supposed to submit to an Agency for Public Private Partnership (APPP) a project proposal and all supporting documentation. Subsequently, according to the criteria for the assessment and approval of PPP projects, the APPP assesses a project proposal following two discrete sets of criteria: justifiability of the project and justifiability of using the PPP model. The minimum content of a PPP project proposal is defined by criteria for assessment and approval of PPP projects of which the most important elements are: A feasibility study for the project that includes a comparison of the planned costs of the application of the public private partnership model versus the classic (budgetary) model of funding of all costs of the implementation of the project over the whole proposed term of the contract (Public Sector Comparator test PSC); A general distribution of risk between the public and the private partner, including a general quantification of the risks concerned, occurrence probability assessment and the costs arising there from; 157

171 A decision on environmental impact assessment, if in view of the purpose and goal of the project there is a legal obligation to obtain the decision concerned (Special Secretariat for Public Private Partnerships within Hellenic Ministry of Economy, Competitiveness and Shipping; Centre of International and European Economic Law; Agency for Public Private Partnership, 2010). The general key principles of PPP projects for the successful development of Public-Private sector engagement according to the Public-Private Partnership Guide of the European Commission are mentioned below: Public partner specifies its needs in terms of outputs, performance levels and standards over the term of the contract; Private partner provides full technical package of inputs (design, construction, operational method etc.) that meet the outputs and accepts the inherent technical and commercial risks; Private partner finances the necessary investment, and therefore has capital at risk ; Private partner receives payments only when the project enters in its operational phase after construction and those payments are spread evenly over the contract period; and If performance levels or standards fall short of what is specified, payments are reduced to compensate the public partner for the shortfall. More specifically, during the initial stages of the PPP project life, the Contracting Authorities have to plan and carefully prepare their PPP project management. The management of a PPP contract is a process that enables both parties to meet their respective obligations in order to deliver the objectives. It involves building an excellent working relationship between the two parties, and continues throughout the project. The central aim of PPP contract management is to obtain the services specified in the output specifications and ensure ongoing affordability, value for money and appropriate risk transfer. There are three stages in PPP contract management: I. Procurement Stage: The Contracting Authority should establish its contract management ground rules for the life of the contract. Preparations for the long term management of the contract need to be started at the very beginning of the overall project; Although contract management/monitoring is the last stage of the overall procurement process, it is critical as it is concerned with the delivery of the contract over time. If it is to be carried out effectively it must be thought about at the outset and incorporated into the development of the project; and To assist this process it is essential to include in the Contracting Authority s project team the contract manager designate, and possibly performance monitoring and service recipient expertise. 158

172 II. Development Stage: From award of the contract to the start of payments on commencement of delivery of the services required by the output specification; During this stage the role of the contract manager is to monitor the Private partner s progress towards meeting the service commencement date; As soon as the contract is awarded, the contract manager should start to establish close working relationships with the private partner at all levels; During the development stage, on behalf of the authority, the contract manager, should aim to do no more than to monitor the private partner s implementation procedures to ensure it will be able to deliver the services on time; The contract manager should only require sufficient management information from the Private partner to retain confidence in the delivery timetable and to ensure compliance with any residual safety issues; The contract manager should be in a position to assess whether the Private partner will achieve the commencement date or might be able to commence the service earlier if the Authority wishes and can afford the payments. It will also need to confirm that the private partner will deliver the specified outputs and continue to meet construction programme; and The contract manager needs to be aware of any project related risks retained by the Authority. Responsibility for monitoring and managing these risks may, where appropriate, be assigned to the contract manger. III. Delivery Stage: Covering the provision and use of the contracted services during the remaining life of the contract. In the delivery stage, the authority may wish to review its contract management and performance monitoring arrangements to deal more effectively with the new circumstances arising in monitoring service delivery; and The contract manager should continue to avoid excessive monitoring which interferes with the private partner s flexibility to resolve operating problems as they arise (within the terms of the contract) (Agency for Public Private Partnership; Special Secretariat for Public Private Partnerships; Centre of International European and Economic Law, 2010) Lessons from Recent Experience in Central Eastern and Southeastern Europe Public funding for transport infrastructure projects has been constrained and is now likely to fall further. Nearly all the SEE countries have faced limitations both on their current spending which has led to under-spending on maintenance and a maintenance backlog that forms a significant liability. In addition, they face constraints in their fiscal space, precluding the traditional reliance on public investment to upgrade the network - both problems are set to become accentuated with the 159

173 unfolding economic crises. With constrained public resources, little room exists for the public sector on its own to cope with these pressing capital intensive demands. The first attempts to implement PPP projects in the region under research were high profile and unsuccessful, which reduced the attractiveness of PPPs for many countries and impeded more rapid development. The first international tenders for toll motorways as PPP projects were the following: Istrian Y Motorway Project, in Croatia in 1991; D5 Motorway between Prague and the border with Germany, in the Czech Republic in 1992; and M1/M15 Toll Motorway Project, in Hungary in Although the procurement process in Croatia was interrupted by war, the financial close of the first phase was achieved in The Czech Republic D5 project was abandoned in 1993 as it became clear during procurement that the expected traffic volumes were too low for the desired toll rates. Similarly, after construction of M1/M15 was finished, the project soon ran into problems caused by lower than expected traffic and resistance to tolling, and was subsequently re-nationalized. Several concessionaires bearing demand risks were severely impacted in the initial years by optimistic traffic forecasts. A review of 183 road projects showed that half of the forecasts were off by at least 20% and a quarter by 40% or more. The situation is even worse for railways, with threequarters of forecasts over-predicted traffic by more than two-thirds. When this happened in the region, in the absence of minimum traffic or revenue guarantees, the lenders sometimes requested an independent traffic review, delaying and potentially preventing financial close. Alternatively the concessionaire had to bear the cost of lower traffic, often resulting in financial distress. This mainly happened in the road sector and was the main cause for projects becoming financially distressed. Examples of projects that failed or did not materialize due to lower than expected or absence of traffic projections include the Czech Republic Motorway PPP in 1993, the M1/M15 toll road in Hungary, the Pitesti-Bucharest-Constanza motorway in Romania and the A4 Zagreb-Gorican Motorway in Croatia. PPP investment in transport remained low from 2000 to 2003, but increased from 2004 onwards, driven by only a few countries and transactions. The contrast between the 1990s and the mid-2000s is significant. The share of transport started growing again in 2004 following the global trend of increasing transport investment. Between 2004 and 2005, investment in transport PPPs more than doubled and reached the highest level since The increase in 2005 was mainly due to one transaction, the Budapest International Airport, which represented two-thirds of the total PPP investment in that year. This partly explains the significant decrease in 2006, where total investment in nominal terms appears 80% lower than in Total PPP transport investment in in the region was over twice the amount received in (see Figure 13 below). This increase is high on a worldwide scale, with global PPP transport investment increasing by about 32,4% during the same time. About 87% of total 160

174 investment came from only four countries, Hungary, Poland, Croatia and Bulgaria. As discussed above, the year 2005 was exceptionally good, driven by two transactions representing about 50% of total PPP investment received in : the Budapest International Airport in Hungary and the A1 Gdansk-Torun Motorway in Poland. Despite these outlier transactions, the group of countries with PPP investment was more diversified in the latter period as countries with no prior experience launched their first PPP projects. Figure 21 PPP Investment in Transport in and (V. Cuttaree; M. Humphreys; S. Muzira; J- P Strand - World Bank, 2009) Within the region under research, PPP investment has occurred almost exclusively in Central and Eastern European countries (CEE), with only a few Southeast European countries (SEE) managing to attract private participation in transport. CEE countries seem to have benefited from past experience whereas SEE countries are implementing their first PPP projects in the transport sector. In the CEE region, almost all countries that implemented a PPP project in transport had previous experience in PPP during the 1990s. PPP investment increased in SEE, but remained until 2006 limited to a few EU member or accession countries. However, the countries of the former Yugoslavia and smaller SEE countries are starting to implement their first PPP projects. This is the case for Albania, with the Mother Teresa Airport (2005), as well as Serbia, with the failed attempt to structure the Horgos-Pozega Motorway as a PPP concession (2007). Transition countries have a harder time attracting private financing for transport infrastructure projects. The limited involvement of the private sector stems from the perceived risks of investing in a particular country or region. High risks could compromise the overarching goal of making a return on investment. Therefore, private investors hesitate to be involved in an environment with perceived economic, legal or political instability, or low traffic levels and demand. PPP transport investment in CEE between 1993 and 2006 represented about 78% of CEE/SEE. The weak performance of the SEE countries is partly explained by the Yugoslav Wars of the 1990s. After the war, the former adversaries inherited significant public debt and war claims while trying to revive 161

175 their moribund industries and war-ravaged economies. The conflict also inflicted neighboring countries which had relied on the former Socialist Federal Republic of Yugoslavia as a key market in itself and a transit country to Western European markets. An additional explanation is the relatively smaller size of SEE economies, given that PPP investment usually favors countries with larger economies and higher growth. As a result, PPP investment took place only more recently in a few SEE countries such as Bulgaria and Albania. Although PPP investment was highly concentrated in a few pioneering countries, some countries attracted less investment than expected. Investment in CEE is highly concentrated in two countries, with Hungary and Poland representing 89% of total investment during Croatia leads SEE in total investment, receiving 62% of investment in SEE, followed by Bulgaria (21%) and Albania (12%). Although this trend is also seen in other regions, it is not always the largest economies or countries with the highest growth that attracted most investment, but often the ones that started experimenting with PPP early. For example, Romania, despite having a GDP per capita close to Poland in the 1990s, had only one PPP project in transport, resulting in a marginal level of private investment. Hungary, on the other hand, has been not only the main recipient of PPP investment in transport (53% of total investment between 1993 and 2007) but also the pioneer in the early 1990s, with about 79% of total investment in Croatia and Poland were also pioneering countries, although they started a few years later and with smaller accumulated investment. In recent years, as more countries have successfully implemented their first PPP projects, total investment has increased. The most active countries in the SEETAC area of action are Hungary, Bulgaria, Croatia and Romania in terms of number of projects and amount of transport investment received usually reached financial closure for only one project per year. This means that the total amount of private financing has been highly dependent on a few large transactions in a relatively small number of countries. This is illustrated by the very low level of investment in , in which the top three countries had only one transaction reaching financial closure. However, the situation improved in 2005 and 2006, with respectively five and four PPP projects reaching financial closure. These projects were smaller than the large transactions in roads and airport for Hungary but nevertheless show a positive trend of diversification. These years also witnessed the first transaction for Albania, Bulgaria and the Slovak Republic, widening the group of countries receiving private investment for transport projects. Recent PPP investment took place mainly in the road and airport sectors, with more airport projects reaching financial closure in recent years. These sectors represented about 90% of total PPP investment in the transport sector, with the difference being almost equally shared between railways and seaports (See Figure 14 below). In fact, investment in the road sector was mainly made in three countries (Croatia, Hungary and Poland) and the first projects in 1993 and 1994 were all road projects. On the other hand, the greatest share of PPP investment in airports occurred in 2005 and Most countries in the region under research have had some investment in airports. The investment in the airport sector was driven by three transactions in Hungary (including the Budapest International Airport project, which represented 95% of PPP investment, including payment to 162

176 Government, in the airport sector in 2005), Albania and Bulgaria in 2005 and These projects were all concessions, representing a total investment of US$ 3,47 billion. Figure 22 PPP Investment by Sub-sector in the CEE/SEE Countries ( ) (V. Cuttaree; M. Humphreys; S. Muzira; J-P Strand - World Bank, 2009) Although the other sub-sectors have a lower share of total investment between 1993 and 2006, the trend in PPP investment in ports is very encouraging. PPPs in the port sector only started in 1998 and about 50 percent of the investment took place in 2005 and Poland was the recipient of more than half of this investment and the more recent investment was driven by three transactions: the US$ 121 million concession of the Baltic Container Terminal in Poland (2003), the US$ 200 million Build-Own-Operate deep-sea Gdansk container terminal project in Poland (2005) and the US$ 135 million Ventspils Nafta Terminal divestiture in Despite the need for massive investment, railways did not attract much investment, mainly due to the complexity of the required reforms. PPP investment in railways has represented only 3% of total investment in the transport sector. In addition, about 95% of PPP investment in railways came from the Estonian Railway Project in 2001, which subsequently failed. Although regional needs are known to be significant, private investment in railways is usually linked to reforms of the sector, which are usually difficult and time-consuming to implement. With the end of the conflict in SEE and new incentives to better integrate into the European network, more investment is likely to take place. The limited interest of the private sector in railways can also be a matter of economic viability. In many SEE countries, for example, the railway sector suffered massive losses in traffic (and hence revenue) following the periods of war and conflict; and levels have not recovered to anywhere close to pre-war levels. Despite other regions attracting more PPP investment, only a few projects have been cancelled or distressed after financial close. Information is not readily available on cancellation before reaching financial closure, or on delays and interruption of procurement. Three projects were cancelled (two in Hungary and one in Estonia) representing a total investment of US$ 773,6 million, about 8% of total investments. In Hungary, the Ferihegy Airport Terminal 2 expansion and the M1/M15 Toll Road were cancelled in 1997 and 1999, respectively (V. Cuttaree; M. Humphreys; S. Muzira; J-P Strand - World Bank, 2009). 163

177 Private Sector Partnership experience at the Member States involved in SEETAC project Austria The Austrian Government has declared the need to invest in infrastructure, particularly in the transport sector, but it is not clear whether such investment will be directed through PPP schemes. Despite the highly publicised A5 PPP motorway project, major new road schemes will not be implemented as PPPs although regional roads may be. As a response to the current situation, the Government has suspended its plan to establish a competence centre for PPPs. On the Road sector, at the beginning of 2007, the first section of the A5 motorway project, leading from Vienna north towards the Czech border, reached financial close. This project was widely considered as a catalyst transaction, which, if successful, would lead to further PPP road projects, including further sections of the A5. However, the management of Motorway and High-Speed Carriageway Finance Company (ASFINAG- Die Autobahnen und Schnellstrassen Finanzierungs Aktiengesellschaft) recently announced that it will not carry out the forthcoming parts of the Austrian A5 as PPPs. On the other hand, PPP is being considered for other types of road, such as regional roads. While the Styrian Regional Government decided against PPP, the Government of the Region of Lower Austria has recently launched a tender for a by-pass around the village of Maissau. On the Rail sector, whilst a number of rail projects are under consideration, it is unlikely that any will be implemented as PPPs. Examples include the Summerau-Spielfeld railway announced some time ago, which has been put on hold and will not be implemented as a PPP. PPP has been implemented in some form in Austria for years but the current pipeline is particularly sparse Bulgaria Since 2007 Bulgaria has made both legislative and institutional progress in the area of PPP. Although there is no specific PPP law, sector specific legislation has been amended to accommodate PPPs. The sectors attracting most attention for PPP development are education, IT/Telecoms, infrastructure, health care, waste management and renewable energy. Some of the continuing obstacles to successful development of PPP projects include the need for further legislative clarity and more transparent procedures for awarding PPP projects. Trakia highway, a major project, was cancelled due to lack of financing. One of the main priorities of the Government elected in July 2009 is to adopt measures which will lead to the unblocking EU funds and the creation of a favourable environment for PPP development. Concerning Roads, the Bulgarian government is considering a PPP for the EUR 1,5 billion Hemus motorway, the EUR 720 million Black Sea motorway, and the Rila motorway projects (a by-pass connecting the Struma, Trakia and Hemus motorways). These very large projects are currently in pre-tender phase. The EUR 720 million Trakia Highway concession was awarded in March 2005, but the European Commission found the original contract in breach of EU state aid rules which led 164

178 to it being amended in The concession was officially cancelled following a resolution from the Bulgarian Council of Ministers after the concessionaire failed to meet the financial closing deadline. The positive effects of PPP projects in the airport sector in Bulgaria are already visible. The concession for two Bulgarian airports, Varna and Bourgas on the Black Sea coast, has led to an increase in airline passenger traffic, modernisation of passenger terminals, purchasing of new flight safety equipment, and contributed to the development of the tourism sector in the Bulgarian Black Sea coastal region. The two airports were awarded as a 35 year concession. The State received an initial concession fee of EUR 3 million and will receive an annual concession fee of 19,2 % of the higher of: (i) all income from the airport activities, or (ii) airport fees. The Ministry of Transport plans to launch two more procedures for granting a concession for the Ruse (Sharkelovo) and the Gorna Oriahovitza airports. Located 70 kilometres away from Bucharest, the Ruse airport would attract passenger and cargo traffic destined for Romania, which would benefit both countries. This project is currently on hold due to the fact that there were no bidders for the original tender. A significant amendment to the Bulgarian Civil Aviation Act (Published in State Gazette No. 94/ ) is expected to be adopted. This amendment should allow the granting of concessions for separate parts of Bulgarian airports, e.g. cargo terminals, passenger terminals, parking lots, and thus, should contribute to and facilitate the implementation of more PPP projects. The Plovdiv Airport Project closed in June 2009 and the Parking Lot Construction Project at Plovdiv Airport is currently listed as in pre-tender status. The major task for the new government is the unblocking of access to EU funds. Thereafter, it remains to be seen whether the new government will continue the favourable policies of previous administrations towards PPPs. At this point, this is considered very likely due to the general lack of available financing caused by the credit crunch and budgetary deficits. Most of the major infrastructure projects under contemplation by the new government are expected to be implemented in the form of PPPs within the next two years Greece The government of Greece is using PPPs as a key instrument for economic development. In 2008, the government proposed a PPP programme focusing primarily on social infrastructure with a value in excess of EUR 5 billion. The Special Secretariat, the Greek PPP unit, has gained credibility and experience and now has a significant pipeline of PPP projects under procurement. PPP projects to date have not suffered from legal challenges to procurement procedures although challenge through the courts was a regular feature of previous procurement regimes. Loans for two motorway concessions have been successfully syndicated. The Corinth-Patras- Pyrgos-Tsakona toll road motorway concession awarded in 2007 was financed through a syndicated loan for the EUR 2,8 billion project. The syndication attracted an oversubscription of around 20%. The EIB participated with EUR 200 million of the total debt. The tenor of the loan is only 13 years which reflects the economic difficulties of negotiating long term loans for PPP projects. A total of seven banks have joined the syndication process for the EUR 1,54 million of debt backing the E

179 Central Greek motorway project with a further two banks still reviewing the process. The Greek government has provided a bridge loan of up to EUR 929 million for a period of six years (i.e. to the end of the construction period). The project also involves a section of road which will be built by the government and then handed over to the concessionaire for on going maintenance and operation. To date, a total of 5 motorways have reached financial close, notably Maliakos-Kleidi; Elefsina-Korinthos-Patras-Pyrgos-Tsakona; Korinthos-Tripoli-Kalamata plus Lefktro-Sparti; E65; and Ionia Odos. A sixth one (Attica Urban roads, which is the extension of the Attiki Odos motorway) is planned to be tendered shortly. At the beginning of 2009, Greece cancelled a tender to privatise and upgrade port facilities at Thessaloniki, Greece s second largest port after the preferred bidder withdrew on the grounds that it would not be able to obtain financing because of the global downturn. Dockers had gone on strike and banned overtime working in protest against the proposed privatisation which caused profits to drop for Thessaloniki Port Authority (OLTH), the current operator, owned 74% by the Greek state. In November 2008, Piraeus Port concluded a contract worth EUR 4,3 billion over 35 years for the upgrading and management of the container port facilities with a Chinese company, Cosco Pacific. The Hellenic Ministry of Mercantile Marine is undertaking a Port Security PPP project under which the private sector partner will design, finance, install and operate the security systems for 12 ports. The project is valued at approximately EUR 342 million, with the EIB providing 50% of the funding. The concession lasts for ten years and the concessionaire takes the risk of availability through availability payments. A tender has been issued for a private partner for a new airport in Crete. To be implemented on a joint venture basis with a new airport operating company, the concession will last for 35 years. The future is looking promising for Greek PPPs with a steady pipeline of projects which will appear on the market over the next few years provided that financing holds up Hungary The effects of the credit crunch and recession have been particularly severe in Hungary. The economic situation and the terms of a recent International Monetary Fund (IMF) loan to Hungary have resulted in restrictions on public spending and cancellation, suspension or postponement of PPPs outside the road sector. International financial institutions have developed a crisis response package for Hungary concentrating principally on investment in transport infrastructure, particularly motorways. Despite Hungary s track record in a number of sectors, the outlook for PPPs is uncertain. On the one hand, changes in procurement regulations and state accounting rules are adverse to PPPs, and with elections pending there is uncertainty over the future policy stance. On the other hand, the Interministerial PPP Committee report issued in June 2009 was positive about the record of PPPs and recommended their future development, whilst identifying a number of areas that need improvement in implementation. 166

180 The Government Decree on the rules of long-term financial commitments and the Act on Public Finances together contain the procedures for prioritising long-term commitments, including PPPtype projects. The priority list is reviewed six monthly and as of July 2009 is as follows: Table 23 Priority listof PPP-type projects in Hungary (DLA Piper, European PPP Expertise Centre, 2009) Project Estimated maximum annual fee (Million HUF) Operation phase 1. M4 expressway, section between Budapest- Cegléd 2. M44 expressway, section between Tiszakürt-Kondoros 3. M60 expressway (developable into a highway) section between Pécs South Junction-Szentl rinc Motorways are government s favoured projects to counteract the financial crisis and currently the priority ranking list includes three road projects (see Table 9) although, as noted above, these will not necessarily be completed as PPPs. The M5 and three phases of M6 have been developed on a PPP basis and the other motorways in Hungary s network of 5 motorways are owned and operated by the state. Both the EBRD and the EIB have been involved in the financing of the M1/M15, M5 and M6 motorways with the EIB providing some EUR 400 million of financing for the M6. Users pay for access through electronic vignette creating income for the state, while the concession companies are paid on the basis of availability. In November 2007, financial close was reached on the on the concession for the design, construction, financing, operation and maintenance of a 49,2 kilometre section of the M6 motorway between Szekszárd and Bóly and the 30,2 section of the M60 motorway between Bóly and Pécs. The expected total construction time for the two sections is 28 months. The net present value of the availability fees amounts to EUR 980 million. The financing was syndicated in early In July 2008, financial close was reached on the 65,1 kilometre section of the M6 motorway between Dunaújváros and Szekszárd awarded as a 30 year concession in June In August 2008, a tranche of EUR 200 million was refinanced by the EIB. The section was to be opened to traffic in March 2010, at the same time as the third phase of the M6. The net present value of the availability fees amounts to approximately EUR 440 million. In July 2009, the Government Decree Nr. 1085/2008 (XII. 20.) which gives priority ranking to specified long-term developments was amended to exclude the proposed M3 expressway section between Nyíregyháza and Vásárosnamény as a PPP and the three bidders were informed that the PPP was cancelled on grounds of the impact of the financial crisis on the public budget. This was despite the fact that the EIB had agreed to loan more than half the senior debt for the project. It may be built at a later date using traditional procurement methods and EU funds. Despite the country s track record, and the endorsement of the Inter-ministerial PPP Committee (IMPPPC), the future of PPP in Hungary remains uncertain. A major factor in its future will be the 167

181 stance towards PPPs adopted by the government following the 2010 general election. Currently the Ministries are vigorously seeking to develop and disseminate PPP know-how and expertise derived from experience Italy The Italian PPP market continues to be centred on transport and healthcare projects with several very large procurements. The procurement regulations have been updated with new tender procedures and PPP regulations. Poorer regions of Italy in the South are less able to finance projects due to poorer credit ratings. Despite political support for PPPs, there is an enormous sense of frustration amongst the market participants over the lack of progress on PPPs in Italy. A recent report published by the Sda Bocconi School of Management argues that up to 88% of projects have failed or have been cancelled, primarily for reasons of lack of public sector organisation or change in political will. For large projects (over EUR 100 million) very few have achieved financial close during the last years. More than 60% of Italian PPPs are roads projects, including tunnels and bridges. There are many projects in process (either in tender or awarded but not yet funded) and a number of projects on hold. In 2008, an agreement which fixed the tariff increases for the concessions granted to a concession company by the highway agency, Italian highways agency (ANAS-Azienda Nazionale Autonoma delle Strade), was approved by the Italian parliament for temporary relief of road users during the ongoing financial crisis. The agreement, which came into force before the freezing of tolls in early 2009 described above, means that the concession company may only increase tolls by a fixed percentage related to inflation during the concessions. A court decision by the Council of State ruled in favour of a bidder offering a price 25% lower than the promotore s price for the award of the EUR 2,1 billion Pedemontana Veneta toll road. The bidder had initially been excluded from the procedure but was readmitted by the Regional Administrative Court as a temporary measure. The final decision of the Council of State was in favour of the bidder originally excluded and it was awarded the concession. This project is also an example of how public authorities are taking a stake in PPPs as EUR 300 million is being provided by the Italian government and Venetian regional authorities. In May 2009, ANAS published a tender for a new EUR 315 million road PPP project to design, build, finance and maintain a 24 kilometre stretch of road connecting the A1 motorway at the junction of Capua to Grazzanise airport. Public authorities are providing a significant portion of the financing ( 200 million) with the private sector funding EUR 115 million. An example of how lack of debt finance is affecting the PPP market is the EUR 1,1 billion Cispadana toll road which is being let on a BOT basis and which will likely be awarded to the promotore, since bidders were not able to find financing Another project awarded to the promotore, is the EUR 1,6 billion TEM project for Milan s eastern ring road. The project, which was started in 2004 and awarded in March 2009, did not attract any competitive bids, arguably on grounds of the difficulties of obtaining private financing. ANAS reached agreement in March 2009 on a single concession agreement which renewed existing concessions for 242 kilometre of motorway linking Livorno to Civitavecchia, provides for upgrading of certain stretches and provides for the building of a new stretch of road. Total cost is some EUR 3,2 billion. 168

182 Whilst the government stimulus package announced in July and November 2008 included a number of rail projects (notably the Milan-Verona line, the Milan-Genoa link and the Verona-Padova connection and a EUR 10 billion allocation for other state rail projects), it is not thought that the heavy rail projects will be let under PPP or concession contracts since the Italian railways remain unprivatised. Despite the ownership of the rail network by the state rail operator, Ferrovie dello Stato, the Grandi Stazioni railway stations project for the refurbishment of main stations in several major Italian cities operates as a 40 year concession with private partners. In January 2009 the refinancing of the project was closed when two banks provided guarantees for a EUR 150 million loan from the EIB. With many major projects under procurement, the public sector faces an enormous task to organise itself well enough so that projects can be achieved. Even if projects overcome this hurdle, the difficulty will be to find sufficient numbers of private sector parties willing to provide equity funding to match government funds on large projects and to finance smaller projects generally Romania Romania faces many structural problems and is concentrating on its economic situation and convergence with EU standards. The main sources of funding are the EU and multilateral and development banks. Some of this funding must be matched with funds from other sources and the EIB and EBRD are playing a major role by providing loans which Romanian project sponsors can use to match EU funds. Implementation of PPPs is a priority of the government s 2009 anti-crisis programme. The Ministries of Transport and of Public Finance are cooperating with the Romanian Roads Agency in preparing major roads projects under public works concessions. Projects in the pipeline include the Bucharest Ring Road, the Sibiu-Pitesti motorway and the Ploiesti-Buzau-Focsani motorway. There is a pilot project for the operation and maintenance of national roads based on performance criteria in Dolj county. In July 2009, the Ministry of Transport announced that in August it will sign a Design, Build, Finance, Maintain and Operate (DBFMO) contract for the 58km A3 motorway between Cormarnic and Brasov. The Ministry of Transport had deemed the bid of one bidder inadmissible and the project suffered delays as the decision was challenged through the courts. With a Bucharest court of appeal judgement in its favour, the project can now proceed to contract signature. Estimated construction costs are EUR 1,2 billion. The project may attract the support of the EIB, the EBRD and the IFC, who could potentially provide up to EUR 800million. Commercial banks are understood to want a reduction in the transfer of risk from the public sector before being willing to lend. Discussions with the preferred bidder for the financial close are soon to begin. The Ministry of Transport will make availability payments with a minor role for a toll mechanism over the 30-year concession period. The public rail infrastructure is state-owned and administered by the state owned Romanian National Railroad Company, on the basis of a concession agreement concluded with the Romanian State. Whilst a number of projects for modernising and upgrading the network have been announced, it is unclear whether any will be made by way of PPPs. Such projects include: 169

183 construction of a high-speed railroad Budapest- Bucharest-Constanta; construction of the CF Bucharest North International airport Henri Coanda Bucharest railroad; modernisation and development of the Curtici Simeria railroad, with an estimated cost of EUR 828 million, out of which EUR 300 million is to be provided by the EIB and the remainder by the State and/or structural funds; modernisation and development of the Predeal-Brasov railroad, with an estimated value exceeding EUR 500 million; and modernisation and development of the Brasov-Sighisoara railroad. A 35-year concession contract was awarded in January 2009 by the Bacau County Council to a Bucharestbased provider of passenger airline services for the improvement and operation of the International Airport George Enescu Bacau. At a cost of approximately EUR 45 million, the concessionaire will upgrade and modernise the runways, extend the passenger terminal, create a new baggage handling system and generally upgrade the airport to international standards. This innovative project aims to increase tourism to the Moldavia region. In May 2009, plans for a PPP at the international airport located in Saulesti, Deva were unveiled. Phased over 20 years, the capacity of the airport will increase from an initial passengers per year to over 1 million. Works include the construction of a meters runway capable of taking Airbus 737s, an aircraft hangar and a passenger terminal. The Hunedoara County Council will provide the land. Other airports where modernisation and extension of terminals have been announced include Iasi, Suceava, Arad, Otopeni (Henri Coanda) and Baneasa (Aurel Vlaicu). The matching of EU funds with funds from other sources will continue to dominate Romanian projects. PPP models for procurement may become more widespread if they can be successfully integrated with EU funding. The Romanian authorities will most likely focus on the main highway projects envisaged to be developed in the next few years, namely the IV Pan-European corridor which includes Bucharest-Brasov and Transylvania highways Slovenia In Slovenia a new PPP act came into force in 2007 setting out detailed regulations on PPPs. PPP activity is very limited and unlikely to resume until the economic situation improves. Currently, there are few PPP projects in Slovenia and several of them are on hold. The largest PPP projects are in Ljubljana. The most impressive envisages the conversion of the main passenger railway and bus station into a shopping, working and living area (the Emonika project). The project is worth EUR 250 million and is being implemented by a Hungarian- Canadian company. Recently the project appears to be on hold due to financing difficulties. 170

184 There have been reports of several projects related to the Slovene railways that would be carried out in the form of PPP. However, due to the reorganisation of Slovenske zeleznice, the railway operator, which has had its role extended, these are currently on hold. Although a new PPP Act has provided a more robust framework under which PPPs can be procured and the official policy is to encourage PPPs, in practice it is unlikely that any PPP activity will resume until the economic situation improves Slovakia In Slovakia both central and local governments have been active in developing roads, health care, sports and leisure projects. The first PPP road project reached financial close and a second reached commercial close. These successes are likely to provide a spur to progress on further projects. The world financial crisis means that financing of projects remains the biggest problem. The sometimes vague rules in Slovakia s current legislative framework constrain the development of PPP. The first section of the D1 project for a motorway between Martin and Presov reached commercial close in April The second road PPP, the R1 project, achieved financial close in August On both packages, the banks had to reconsider the basis on which they would provide funding and reduced their overall lending commitment. As a consequence, the project sponsors had to approach a larger number of banks to finance the projects. Ultimately the private sector could not raise sufficient funding and the Slovak Minister of Transport started negotiations for additional support from the EIB and EBRD whilst the sponsors negotiated more favourable terms to ensure financing. On the R1 project, the consortium negotiated an increase in availability payments. The EIB is providing around EUR 1 billion of funding for the D1 project out of the EUR 3 billion (possibly more) required for the total project. The Slovakian government is ready to provide a state guarantee to the EIB and a deed of guarantee and indemnity is under negotiation. Financial close of the D1 project was expected in February 2010, although securing funding of such a large value will still remain a big challenge. Other roads projects, including the second package of the D1, are expected in the coming years, as this sector is strongly supported by the Slovak government. Plans for the D4 project, which was to be procured traditionally, have been changed to a PPP procurement because of increased public sector debt. The project, which consists of a ring road around Bratislava, may involve the introduction of a toll system rather than availability payments. Wider development of this sector through PPP at local governmental level is expected. In September 2009, Bratislava airport plans to invite tenders for its redevelopment and construction of a further terminal, with a total capital value of EUR 162,5 million. This project is not however standard PPP. Within the immediate surrounding area, there are also plans for parking facilities railway connection services and construction of hotels, totaling more than EUR 332 million. The successful bidder is expected to be announced mid December The success of the D1 and R1 projects should stimulate further interest in PPPs. The increasing public sector deficit means that PPPs may continue to be favoured as a policy tool. Generally tougher financing conditions are expected which means that more expensive projects will need the 171

185 support of the Slovakian Government and international financial institutions. More rigorous scrutiny of projects by lenders is likely to facilitate speedier development of the Slovakian legislative environment (DLA Piper, European PPP Expertise Centre, 2009) Private Sector Partnership experience at the Candidate and Potential Candidate countries involved in SEETAC project Croatia In Croatia, the worldwide financial crisis coupled with shrinking state resources has led to budget cuts and reduced numbers of PPP projects. A new PPP Act passed in 2008 introduced a new Agency for PPP and provided additional requirements for consents and compliance with the state budget, such that local authorities no longer have autonomy to introduce PPPs and the tender procedure is lengthened. Croatian road concessions have successfully attracted refinancing. Road, tunnels and bridges have benefited from significant investment over the last few years. Currently the motorways in the main three directions (Zagreb-Split-Dubrovnik, Zagreb-Osijek and Zagreb-Rijeka) are being extended and are in very late completion phase. In October 2008, syndication of the refinancing of the Zagreb-Macelj motorway successfully closed. This motorway extends from the Zagreb ring road to the Croatian-Slovenian border at Macelj and forms part of the Trans-European Network. The motorway was built under a concession jointly owned by Strabag and the Croatian government. This follows the successful syndication of the refinancing of the Istrian motorway in March New investments in the airport sector, although necessary, have been put on hold. It is likely that they will be recommenced only once the world economy and, in particular, the tourist industry picks up. Due to obligations to meet the EU standards regarding environment protection, there will be an increase of investments in environment protection, especially in the waste water sector where over EUR 7,94 billion is expected to be invested. It remains to be seen how much of this can be effected through PPPs, but it is likely to provide significant opportunities. Growth is also expected in the rail, airports and healthcare sectors, but probably only after economic recovery is well under way. With budget cuts and the urgent need for domestic saving as a result of the worldwide financial crisis, it is expected that no further road and IT/Telecom projects will be planned in the near future (DLA Piper, European PPP Expertise Centre, 2009) The former Yugoslav Republic of Macedonia Due to the potentiality of attracting foreign investments through the models of Public-Private Partnership there was a need in the former Yugoslav Republic of Macedonia to enact an adequate legislation as a necessary ground for increasing investments and providing more dynamic economic development. The Parliament, with the intention of achieving satisfactory level of harmonisation to the acquis in the field of awarding concessions and PPP on the road of Euro integration processes in the counrty, in 2008 enacted the Law on Concessions and other Types of Public Private Partnership, 172

186 where Directive 2004/18/EC of March 31, 2004 was adequately implemented. In the period after the enactment of the Law until today several procedures were implemented for awarding a concession in the field of energy, transport and communications, and lately activities are taken for implementation of PPP procedures in the field of health, environment etc. The significant projects of public private partnership are the concession for performing works of construction, reconstruction, maintenance, payment of toll and use of part of the state roads in FYROM (this procedure is underway with a deadline for submission of bids according to tender documentation as of April 2011) and the concession for development, financing, use and maintenance of airports in Skopje, Ohrid and the cargo airport in Shtip (in phase of construction and operation with existing infrastructure). The draft law, which is expected to be enacted by the middle of 2011, is being prepared in cooperation with SIGMA, who made detailed analysis of the existing Law and provided specific directions and suggestions for preparation of a new consistent text fully harmonised to the acquis in this field (Katerina Kosteska - Ministry of Economy of FYR of Macedonia, 2011) Montenegro The government has approved a concessions law in 2009 to promote PPPs for infrastructure investments that are too costly to be financed with budgetary revenues. The government s key challenge consists of creating the fiscal space to fund road maintenance and new investments in motorways, regional and secondary roads. Connecting the road network to the trans-european corridors would ensure producers access to markets, while increasing the value of the Adriatic port of Bar. The government has prioritized road maintenance, while planning to invest in major regional connections, including the Bar-Boljare highway (en route to Belgrade), linking the country to the trans-european Corridor X. However, the scale of these investments will require substantial fiscal resources, despite the increased employment of PPP approaches. IFC helped the authorities to structure a PPP transaction to finance, construct, and operate the Bar-Boljare motorway, at an estimated cost of about 125 percent of GDP (The World Bank, 2011) Albania AlbaniaPPPs in Albania have been implemented since 1992, after post-communist period in a large scale and proper principles: Privatization of enterprises; Public Procurement Contracts, executed under the law on public procurement no. 7971/1995, Concession Contracts, executed under the law on concessions and participation of the private sector in public infrastructure no. 7973/1995; and Others such as lease, usufructor other models on property use. On 2006, the ministry responsible for the economy, with the assitence of IFC and local legal consultancy, started to work on a new project which scope was strengthening of the institutional capacity within the Government of Albania in order to process and award concessions in a transparent and effectiv manner. Law On concessions, no. 9663, dated (amended); DCM, No. 27, dated On the adoption of the rules for the evaluation and granting of concessions (amended); and DCM, No. 150, dated On organization and functioning of ATRAKO - ConcessionsTreatementAgency. The 173

187 New Concession Law defines a concession as the agreement between the Private Sector and Contracting Authority and which provides for the terms and requirements, in terms of which the Concessionaire provides an economic activity which would otherwise be carried out by Contracting Authority related to concession project, management contract or other public services. The Ministry of Transport has initiated based on unsolicited proposals procedures on granting concession projects regarding: the motorwaythumane - Rrogozhine (Launched in 2010); the containersterminal in the port of Durres (Launched in 2010); construction and operation of small marinas (Launched since 2008); and BOT of periodical technical control of vehicles (Signed in 2009) (Mata, 2011) Bosnia and Herzegovina Public Private Partnership, as a cooperation model between the public sector and the private sector, is a relatively new model in Bosnia and Herzegovina, where market cooperation is still in the early stages. The Corridor Vc is a 710km route that stretches from Budapest in Hungary, via eastern Croatia, bisecting Bosnia and Herzegovina, ending in the Croatian port of Ploče. This highway, also designated as the European route E73, is a highly significant project for Bosnia and Herzegovina and a high priority. At a meeting between the Ministry of Communication and Transport of Bosnia and Herzegovina and the EBRD which was held mid 2008, the financing of the priority parts of Corridor Vc were discussed. Representatives of the EBRD stated during this discussion that the EBRD is prepared to support the financing of the continuation of building works on the Corridor Vc in accordance with the PPP model. In October 2008, a credit agreement was signed with the EBRD worth EUR , and has since become effective after all the conditions set by EBRD were met by the authorities in Bosnia and Herzegovina. Besides applying the PPP model in the sector of road construction, regulations concerning local selfadministration in Bosnia and Herzegovina enable municipalities, within their powers, to establish mutual companies with private entities or implement different types of projects. As a result, it is expected that a more intensive application of the PPP model will occur in areas in addition to the road construction sector, where it is already used. There is currently no government PPP body; however, the International Forum Bosnia (IFB) is planning to establish a new and autonomous thematic centre of research focusing on the development of modern economic development modelling of PPP. In Republika Srpska (one of two main political entities of Bosnia and Herzegovina), the Law on PPP (the PPP Act ) was adopted by the Parliament of Republika Srpska on 11 June 2009 and became effective on 10 July The PPP Act is fully in compliance with the relevant EU 174

188 Directives. The PPP Act provides that the PPP structure may be used for the construction, use, maintenance and management or the reconstruction, use, maintenance and management of property in order to fulfil the public need regarding roads and their associated infrastructure, railways, harbours, communal infrastructure, airports, bus and railway stations, education, culture and sport projects and health projects. Concessions are governed by Bosnia and Herzegovina s State Law on Concessions, the Entities laws on concessions and the Cantons laws on concessions (the Concession Laws ). The Concession Laws provide that the following can be the subject of a concession: the construction and / or use of highways, railways, harbours, airports, the use of water flows and other waters, the construction of power facilities, the construction and use of hydro accumulations, hunting and fishing, gambling, and the use of forests (CMS Legal Services EEIG, 2010) Kosovo under UN Security Council Resolution 1244 PPP offer Kosovo the opportunity to modernize and expand its public infrastructure and services. With a new law on Public-Private Partnerships and the establishment of a centralized PPP Unit in the Ministry of Finance and Economy, the institutional and legal framework are now in place to allow line ministries, POE s, municipalities and other budgetary organizations to begin implementing PPP across multiple sectors (Partnerships Kosovo; Ministry of Finance and Economy). Some of the recent, ongoing PPPs projects and privatization projects in pipeline in the Transport sector and more specifically in the Air Transport, Road Infrustructure and the Railway sub-sectors are the following: Prishtina International Airport PPP: It is the only Airport in Kosova with over 1,3 million passengers annually and positive passengers growth every year. There is large potential of Expending Costumer base and non-aeronautical commercial activities. The Public-Private Partnership Model used is Design, Build, Finance, Operate, Transfer with a 20 year contract. The transaction value is US 194 million. Route 6: Skopje Mitrovica border with Serbia Motorway: The road is connected to Pan- European Road Corridor VIII. It is a 80 km four lane motorway. It is Kosovo's outlet to Pan European Corridor connecting to the strategic port of Thessaloniki. According to the traffic data, the expected flow is over vehicles per day. The Public-Private Partnership Model used is Build Operate Transfer and the transaction value is estimated over US 1 billion. Route 7: The Vermice (border to Albania) Pristina Merdare (administrative boundary to Serbia) road, approximately 117 km. The Public-Private Partnership Model used is Service, Management, Lease and the estimated PPP financial assistance is EUR 1,15 billion. Railway Transport: Rail Link with Pristina International Airport and generally Kosova Railways (Donat Alay - Republic of Kosova, Ministry of Economy and Finance, 2011). 175

189 Serbia The current outlook for infrastructure projects in Serbia is poor with the failure of the only two concessions that have been tendered to date. The Serbian Motorway (Horgos-Belgrade-Pozega) Concession Project fell through in December 2008 after the concessionaire selected in a tender procedure in March 2007 withdrew from the concession agreement with the Serbian Government. The 25 year concession agreement envisaged construction of a 106 kilometre highway from Horgos to Novi Sad, operation and maintenance of the 68km highway from Novi Sad to Belgrade, and construction of a 148 kilometre highway from Belgrade to Pozega. Upon the consortium s withdrawal from the concession agreement, the Serbian Government attempted to activate a bank guarantee for EUR 10 million, but the claim was not upheld by the competent Viennese court. The consortium initiated arbitration proceedings against Serbia in May 2009, requesting EUR 71 million in damages. The case is still pending before the ICC International Court of Arbitration in Paris. The future for PPPs is uncertain and may depend on the resumption of negotiations on EU membership Ukraine Support for the Ukrainian economy is the overriding government concern. Suffering as it is from a lack of capital and institutional investors, many PPP projects have been suspended. The holding of the UEFA football championships in Ukraine in 2012 (EURO 2012) offers an opportunity to which all political parties have given top priority. Despite delays and threats of UEFA withdrawal, EURO 2012 is still on-going and progress is beginning to be made. A new PPP law was enacted in June 2009 although it is yet to come into force. Improvements to the motorway concessions regulations have also been enacted. Lack of transparency is a common problem. The very wide definition of a PPP in the new PPP law reflects the way that PPP is seen in Ukraine: basically any contract between a governmental authority and the private sector can qualify as a PPP. This makes it difficult to distinguish which projects are PPPs in the sense of transferring long term risk to the private sector or making the private sector responsible for obtaining financing. Whilst the concept of a concession is well established, it is not always easy to obtain information as to whether a particular project is to be structured as a concession or not. Therefore, in reading the information about projects set out below, whilst they may conform to Ukrainian notions of PPP, they may take the form of more traditional construction contracts. High demand for construction and reconstruction of airports in Ukraine taking into account the economic need and the long distances between some Ukrainian cities means there is a great opportunity for PPP projects in this sector. EURO 2012 is already resulting in airport modernisations, such as the major extensions to Boryspil airport in Kyiv. The government has issued a number of orders/ regulations related to airport reconstruction. However, such regulations represent to a great extent government s intentions, rather than an adequate legal framework and further work is required. Although not all of them will be realised due to lack of funds and other obstacles, there are plans to improve airports at the following locations: Kyiv, Boryspil, Donetsk, 176

190 Kharkiv, Lviv, Dnipropetrovsk, Odessa, Gostomel, Ivano-Frankivsk, Mykolaiv, Zaporizhzhya, Mariupil and Lugansk. If they materialise, some of these may be on a PPP basis, but at least two of them have already been cancelled due to lack of interest from bidders. The outlook for the Road sector can be described as moderately positive. A major problem is the lack of international investors willing to take on Ukrainian political risk. Lack of available long term capital has caused suspension of many PPP projects which were expected to be announced, the on-going projects being required for EURO At the moment most of the motorway construction projects are funded by the state, the World Bank or the EBRD or the EIB. The main ongoing motorway projects are the Grand Kyiv Ring Road and the construction and operation of a motorway between the border with the Russian Federation (check point Shcherbakivka ) and the Kyiv- Kharkiv-Dovzhanskyi motorway. The following projects are listed as being pre-tender: The Southern Trans-European Highway Construction, a motorway from the western border of Ukraine to the city of Kyiv, total length circa 735km (international transport corridor Nos. 5 and 3); Motorway service area on the Kyiv-Odessa motorway at Grebinky in the Kyiv Region (international transport corridor No 9); Motorway service area in Olevsk, Zhytomyr Region on the Kyiv-Kovel motorway; Motorway from the border with the Russian Federation, ending at the Kyiv-Kharkiv- Dovzhansk motorway in the Kharkiv District, total length circa 48.7km; Lviv-Brody motorway in the Lviv Region, length circa 80,2km; and Brody-Rivne motorway in the Rivne Region, length circa 94,8km. Projects currently under way in the heavy rail sector include the acquisition of electric trains with compulsory body tilt (Pendolino type) and the development of a high speed railway (200km/h) for passenger trains between Kyiv and Poltava. Ukrainian infrastructure is greatly underdeveloped in comparison with European standards. All sectors could be attractive, including railroads and rolling stock, healthcare, telecommunications (where Ukrtelecom the largest national provider of fixed telephony services owned by the state may be privatised in the near future), water supply and waste water management and port facilities. In addition, local authorities may be willing to undertake smaller PPP projects which to date have not been feasible. These opportunities are however dependent upon improvements in the Ukrainian economic and political environment so that foreign investors become more willing to invest in Ukraine (DLA Piper, European PPP Expertise Centre, 2009) Moldova Since 2007 the Government of the Republic of Moldova has turned to the private sector and promoted the Public Private Partnership (PPP) concept to provide a wide range of public services previously delivered solely by the public sector. The public services and infrastructure in the 177

191 Republic of Moldova are underdeveloped, while public financial resources for their rehabilitation and modernization are insufficient. The Government is eager to join its efforts with the ideas, projects and resources of the private sector to increase the quality and efficiency of public services and provide the value that consumers and public at large are expecting. The sectors that Government identified as high-priority for projects under Public-Private Partnerships are energy, transport, health, business infrastructure and municipal utilities. The step-by-step initiation of PPP projects in Moldova is as following: 1. Relevant central or local public authority sets projects objectives and general conditions; 2. A project feasibility study is developed to be further endorsed by Public Property Agency; 3. A decision on organization of tender for private partner selection is adopted; 4. The tender is organized and private partner selected; appeals and petitions are accepted during 15 days; 5. The contract draft is prepared within 30 days since the tender decision was taken; 6. Negotiating and signing the contract with the private partner within a maximum period of 30 days (Ministry of Economy of the Republic of Moldova; UNDP Moldova; Moldovan Investment and Export Promotion Organisation, 2010). Currently, the Project of multi-level parking concessionin the Chisinau International Airport is under construction and preparation for selecting the private partner. The capacity is up to 800 parking stands next to the terminal. The operating income is under the principle BOT - Build- Operate-Transfer and the concession period is 20 years (Ion Potlog - Ministry of Economy of the Republic of Moldova, Public Property Agency, 2011). A project list set out by country for the European and Global infrastructure communities is listed in the Annex III of this report Active Agencies for Public-Private Partnerships European PPP Expertise Centre (EPEC) The European PPP Expertise Centre (EPEC) is a joint initiative of the EIB, the European Commission and European Union Member States and Candidate Countries. EPEC helps strengthen the capacity of its public sector members to enter into Public Private Partnership (PPP) transactions. With the support of a full time Executive made up of experienced PPP professionals, EPEC's Members share experience and expertise, analysis and best practice relating to all aspects of PPPs. EPEC s mission is to strengthen the ability of the public sector to engage in Public Private Partnership (PPP) transactions. It does this by helping Members to share experience and expertise, analysis and good practice. 178

192 EPEC has 34 Members, including the EIB and the European Commission. All other Members are national or regional authorities that are responsible for PPP policy or programmes in their jurisdictions. Membership is restricted to public authorities in European Union member states, Candidate Countries and certain other countries in Europe. Limiting EPEC's membership to the public sector helps ensure a free and open exchange of information. More specifically, apart from the European Commission and the European Investment Bank, who are EPEC's primary sponsors, the membership compose the followings: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Israel, Italy, Latvia, Lithuania, Malta, Netherlands, Poland, Portugal, Romania, Scotland, Slovak Republic, Slovenia, Spain, Turkey, United Kingdom and Wales. The main activities of the European PPP Expertise Centre are: Collaborative Working: EPEC draws on the experience and expertise of its membership for all its activities. Members, supported by the EPEC Executive, work together to develop structured approaches to identifying best practice in issues of common concern. Helpdesk: The Executive also provides a helpdesk facility to give rapid responses to immediate questions, or re-direct these questions to other Members with relevant expertise. This service is available only to Members and EPEC cannot assist with other enquiries or requests. Institutional Strengthening: The EPEC Executive also has some capacity to respond to requests to work with individual Members. This might, typically, be to help countries set up a PPP programme, refine policy or to analyze institutional bottlenecks. EPEC does not, however, advise on individual projects. EPEC is unique - as a Members' club designed solely to support public authorities deliver more, and better, PPP programmes, EPEC can promote the sharing of knowledge and experience in a way that would not otherwise be possible. Public authorities can discuss their experiences confidentially on a peer-to-peer basis, without fear of compromising negotiating positions on current or future deals. The involvement of the EIB, a public bank and Europe's leading funder of PPPs, adds further value. Commission Services with an interest in PPPs - notably DGs MOVE, REGIO, MARKET as well as EUROSTAT - benefit from the ability to learn from practitioners within the Membership, as well as giving Members the opportunity to discuss issues with the key European policy makers. EPEC is funded by the European Investment Bank and European Commission (in 2010 DG MOVE and, from 2011, DG REGIO and the TEN-T Executive Agency). EPEC's Members do not make a financial commitment but contribute their time and expertise to EPEC. A number of Members have also chosen to second staff to EPEC's Executive team (European Investment Bank, 2012) South East European Public-Private Partnership Network (SEEPN) At the Ministerial conference held on 25th September 2009 in Sarajevo with the title Public Private Partnerships in Strategic Network Industries - Developing the PPP Enabling Environment in 179

193 Southeast Europe, organised by Regional Cooperation Council (RCC) it was adopted the Ministerial Statement supporting the initiative to establish a Southeast European PPP Network and the initial SE PPP Network Secretariat in Croatian Agency for PPP, as an initial body for adopted initiative implementation. The Network s main purpose is to coordinate the regional exchange of knowledge and expertise on PPPs, support the assessment of South East Europe's PPP enabling environment and propose measures for its further development and harmonization. Following the Ministerial Conference, the first SEEPN workshop was organized with the objective to bring together PPP practitioners from SEE and build an agreement on the interest in supporting PPP development in Southeast Europe and to initiate PPP cross-border projects. The Network operates within Regional Cooperation Council (RCC). The member states besides Croatia are Albania, Bosnia and Herzegovina, Bulgaria, Greece, FYROM, Moldova, Montenegro, Romania, Serbia, Turkey and UNMIK/Kosovo. On 7th to 8th February 2011 Croatian Agency for PPP, as the provisional Secretariat of the SEE PPP Network, in cooperation with UNECE/CECI/TOS for PPP and RCC has organized the conference on Capacity Building on PPP in SE Europe. More than 50 leading representatives of PPP bodies from more than ten countries from SEE region and beyond have participated in the event. Among priority activities of SEEPN Provisional Secretariat during 2011 is going to be systematic collection of data related to the legal and institutional PPP frame of each RCC member, in cooperation with RCC and authorised PPP Units and data concerning ongoing and announced cross border PPP projects, as well as PPP projects of each RCC member. The goal is to enable any interested party to get from SEEPN updated and reliable related information and to raise awareness of the level of harmonisation of the legal and institutional frames within a SEE region compared to the EU and wider international standards and to enable any interested party to either invest or participate on tendering procedures in SEE region to get reliable related information and by improving transparency and competition, to encourage investments, ensure higher value for money for the private sector and to boost infrastructure development (Agency for Public Private Partnership, 2012). 180

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206 ANNEXES i

207 ANNEX I Grant application form 2011 (Western Balkans Investment Framework) ii

208 Western Balkan Investment Framework (WBIF) Project Grant Application Form Submission date: XX/XX/XXXXX Last update: XX/XX/XXXXX These boxes are filled by the WBIF Project Financiers Group of the WBIF Contribution Request nr XX to be presented to the Project Financiers Group of XX/XX/2009 WBIF decision sought Approved Under review 23 Non-approval Proposal of the Project Financiers group: (to be filled by the PFG) Grant Contribution from WBIF: from EC Budget: from other funds: WBIF Screening (cf. Screening list in Annex 2) (to be filled by the DG Elarg) WBIF Assessment (cf. Assessment list in Annex 3) (to be filled by the Lead IFI) To be filled by the submitter Title of the Operation: Beneficiary(ies)/ Country(ies) (Interested) Lead IFI Eligible Sector Sub-sector DAC Sector 24 DAC code Location XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX Borrower / Beneficiary(ies): (contact points for both) Project description : (description of the required investment(s) and the present situation, including problems to overcome) Outcome / Results to be 23 subject to the finalisation of the approval procedures of the corresponding institutions 24 iii

209 Western Balkan Investment Framework (WBIF) achieved for the investment: (specify the foreseen results, indicate 1. the economic 2. the social 3. the environmental benefits produced by the investment as well as the estimated number of direct beneficiaries) Description of the Grant use: (precise what is concretely financed and the expected outcomes) Strategic justification: (specify which strategy and/or investment plans both at national and regional level include the proposed project) Can you describe how the project is in line with - EU pre-accession strategy - National strategy -Other donors strategy? Additional comments on the project: (duration, constraints, partners/site availability, assumptions and risks appraisal etc..) Grant request justification: (Why a grant contribution is needed for the Project completion?) Conformity with the eligibility checklist: summary (cf. list in Annex 1) Title of the Operation: XXXXX iv

210 Western Balkan Investment Framework (WBIF) Type of Contribution (type of grants) 25 EUR equivalent In Project Currency Curr. Total Investment XXX XXX EUR Financing Plan (Annex 4) Costs Total Grant requested Total Loan requested To be adapted case by case Finance Institution Total ( M) Remarks (grants/loans) EC Contribution IPA WBJF EBRD EIB CEB Beneficiary Contribution Total Financing ( ) 100% Activities Project preparation Investment Total activities Eligible Finance Institution Consortium 100% Lead Finance Institution Contact person Phone XXX Other Eligible FI (EFI) member of the consortium Contact person Phone XXX Project Chronology Assessment mission WBIF steering committee approval date of signature of the loans foreseen with the beneficiary start of project end of project 25 The grant financing to a specific investment project ( Grant operation ) may take the form of: 1) Technical assistance: financing technical assistance including preparatory work for eligible investment projects such as impact assessments, feasibility studies, detailed design, project supervision and targeted capacity building and implementation support. 2) Investment grants: direct grants for specific project components, as well as incentive schemes based on performance of implementing institutions. 3) Incentive payments to financial intermediaries. 4) Interest rates subsidies: provision of a lump-sum amount to ensure that the loan finance needed for the investment project can be made available at reduced interest rates. 5) Insurance premia: funding of insurance premia necessary to implement the investment projects. v

211 Western Balkan Investment Framework (WBIF) Annex 1: Eligibility checklist Yes No 1 Operations covered by the WBIF benefit one or more of the following beneficiaries: Albania, Bosnia and Herzegovina, Croatia, FYR Macedonia, Montenegro, Serbia and Kosovo under UNSCR Fall within one of the eligible sector: Environment: water supply, waste water treatment, sewage systems, solid waste and hazardous waste management, emission control etc.; Energy: renewable energy, interconnection systems, transmission, co-generation, hydro, and gas pipelines, etc.; Energy efficiency and savings; Transport: railways and inland waterways including river ports, roads, seaports, airports, border facilities, inter modal terminals and urban transport; Social: schools and education centres, hospitals and health centres, social housing, reclusion centres and other public buildings; SME, private and financial sector support 2bis The project is not supported by or eligible for the Regional Development Component of IPA 3 project benefit public or private entities or entities with mixed public-private capital responsible for the provision, management, construction and negotiation of public utilities and services 4 All elements included under the activities covered by a WBIF grant 26 for the investment projects are in principle eligible for grant financing 5 The project is submitted by the Beneficiary, either via the NIPACs27 or via the partner IFIs 6 The project is consistent with the EU Pre-Accession Strategy and relevant sector policies and national investment plans 7 Grant requests explicitly mention any complementarities or coherence with projects supported or planned for support under the IPA National Programmes (for implementation by the EC Delegations or by the Beneficiaries authorities) and/or other donors activities 8 The borrower/beneficiary intend to use the leverage of a loan through the Joint Lending Facility for this project 9 Grant operation is be consistent with the policies, rules and procedures of each source of funds (Commission, EIB, EBRD, CEB and EWBJF) 26 When calculating the eligible costs of a project that may benefit from grant financing or co-financing, the rules and procedures of the Commission, the partner IFIs and the EWBJF will apply. Eligibility of IFI Grant financing should be confirmed with co-financiers. According to the IPA Regulation the following expenditures are not eligible: a) taxes, including value added taxes (in principle); b) customs and import duties, or any other charges; c) purchase, rent or leasing of land and existing buildings; d) fines, financial penalties and expenses of litigation; e) operating costs (can be allowed on a case-by-case basis); f) second hand equipment; g) bank charges, cost of guarantees and similar charges; h) conversion costs, charges and exchange losses associated with any of the component specific euro accounts, as well as purely financial expenses; and i) contributions in kind. In addition, any leasing costs or depreciation costs are not eligible. In the case of revenue-generating projects, meaning a project involving an investment in infrastructure, which is subject to charges borne directly by users, the eligible cost is calculated according to a funding gap method deducting the value of the net revenue over a specific time from the value of the investment cost. 27 NIPAC = National IPA Coordinator. The NIPAC is responsible for coordination of programming and monitoring the implementation of IPA in the Beneficiaries of the Western Balkans and Turkey. As IPA represent the biggest source of external aid and is linked to the progress and development needed in the EU accession process, and in line with the local ownership over donor funds and donor coordination as foreseen in the Paris declaration, the involvement of the NIPAC is of utmost importance for the effectiveness of the JGF and the WBIF. vi

212 Western Balkan Investment Framework (WBIF) Annex 2: Screening (to be filled by the DG Elarg) How can you ensure that beneficiaries NIPACs (National IPA Coordinators) have been adequately involved and are supportive of project? How the project is consistent with national (sector) strategies, national and regional investment plans and with the IPA priorities and the project potential for IPA support (not allocated via the JGF) or other donor funding? How the project is consistent with EU policies (pre-accession agenda, sector priorities, competition rules etc.) drawing from and involving the EC Delegations, line DGs and ELARG geographical teams? Assess eligibility of projects for support from the JGF and the appropriate mix of funding sources Conclusion vii

213 Western Balkan Investment Framework (WBIF) Annex 3: Assessment (to be filled by the lead IFI) 28 Rationale for use of grant funds The Financing Plane Regional / Cross Border Impact Conformity with socioenvironmental standards Economic and Financial justification Capacity of Beneficiary institution Proposal Contribution: from EC Budget XXX from other Funds XXX 100 % % Type of Intervention : grant 28 As per ToR the Lead IFI has checked the following aspects: - Technical aspects, environmental and social standards, procurement, financial and economic profitability, credit risk, legal aspects. - Consistency with IFIs policies and procedures - Analysis and estimation of TA/grants needs - Financial structuring/identification of lending under the Joint Lending Facility (only IFIs) - Identification of lead IFI and possible mutual reliance - Link with project borrowers and promoters on technical and financial aspects - Exchange of information among Finance Institutions (e.g. pricing, conditionality) viii

214 Western Balkan Investment Framework (WBIF) Annex 4: Indicative Financial Plan Envisage ( ) (to be filled by the lead IFI) ix