Albania. Restructuring Public Expenditure to Sustain Growth. Public Expenditure and Institutional Review. Sector related presentations-transport

Transcription

1 Albania Public Expenditure and Institutional Review Restructuring Public Expenditure to Sustain Growth Sector related presentations-transport Tirana March 15, 2007

2 Main messages 1. The assets of the sector are inadequate in condition, scale and scope, and their value is declining; 2. The current allocation of expenditures is unbalanced, contributing to a significant fiscal risk; 3. Significant efficiency gains can be realized by strengthening institutions and improving asset management in the sector; and 4. There needs to be greater involvement from the private sector in the sector.

3 Outline/Content 1. Roads - Spending - Outcomes - Financing needs - Institutions 2. Railways 3. Maritime and civil aviation 4. Facing the challenges: main recommendations

4 1- An increasing share of sector spending goes to roads Functional Composition of Transport Spending by type, ,000,000 20,000,000 15,000,000 10,000,000 5,000, Admin National roads Local Roads Railways Civil Aviation Maritime Transport

5 1- The Transport Infrastructure - Roads The condition of the roads and structures on the network is poor 33% in fair or good condition (78% HR: 65%, BIH; 67% in poor condition (22% in HR: 35% BIH). 25% of firms see transport as an impediment to doing business (down from 35% in % in ECA region); and Death and Injury on the roads is high and expected to increase significantly.

6 1- Why are sector outcomes so bad? Maintenance has suffered at the hands of expansion; Maintenance have been totally inadequate: Albania spends 40% less on maintenance of the national and local road network than is required Overloading is widespread : 50% of sampled trucks were overloaded; No clear lines of responsibility for enforcement; and Regime is inadequate. The result is accelerated deterioration, increased costs for road users, and increased backlog maintenance.

7 1- Future spending needs on maintenance in the road sector Required Annual Maintenance Expenditure on Road Network (lek million) Addressing backlog maintenance 4,601 4,601 4,601 4,601 4,601 National Roads 2,994 2,994 2,994 2,994 2,994 Local Roads 1,607 1,607 1,607 1,607 1,607 Normal Maintenance 6,531 6,531 6,531 6,531 6,531 National Roads 2,838 2,838 2,838 2,838 2,838 Routine/winter maintenance 1,092 1,092 1,092 1,092 1,092 Periodic/renewal 1,488 1,488 1,488 1,488 1,488 Bridges and Tunnels Local Roads 3,693 3,693 3,693 3,693 3,693 Routine/winter maintenance 2,000 2,000 2,000 2,000 2,000 Periodic/renewal 1,362 1,362 1,362 1,362 1,362 Bridges and Tunnels Total 11,132 11,132 11,132 11,132 11,132 Source: Jenkins (2005).

8 1- Can sector revenues pay for this? Revenues and taxes from users are significant Limited scope for additional funding from road users Revenues from Road User Charges (lek millions) Fuel Prices and Taxes (November 2004) % % Retail price(us$centsper liter) Bulgaria Serbia BiH Romania FYROM Croatia Albania Diesel price US$ Cents/litre Gasoline price US$ /Litre 50% 40% 30% 20% 10% 0% Fuel dutyasa %of Retail Price Total Revenue From Road Users Tas as a %of Diesel Price Tas as a %of Gasoline Price % of total expenditures on roads Source: GTZ (2005) International Fuel Prices. Source: GTZ (2005) International Fuel Prices.

9 1- These needs and planned investments create a financing gap Additional investments in the road sector beyond those planned in the Albanian National Transport Plan (ANTP) will need careful assessment;... and likely require offsetting reductions in planned spending elsewhere. Projected Road Sector Revenues and Expenditures (lek million) National Roads 13,706 24,926 24,926 19,826 9,626 Planned Development Expenditures 3,900 3,900 3,900 3,900 3,900 Milot Morine 4,080 15,300 15,300 10,200 - Necessary Maintenance Expenditures 5,726 5,726 5,726 5,726 5,726 Local Roads 5,253 5,253 5,253 5,253 5,253 Necessary Maintenance Expenditures 5,253 5,253 5,253 5,253 5,253 Total Projected Expenditures 18,959 30,179 30,179 25,079 14,879 Current and Projected Revenues 21,668 22,318 22,988 23,677 24,388 Estimated Funding Gap 2,709-7,861-7,191-1,402 9,509 Source: Various.

10 1- The institutional framework is inadequate A sector policy and strategy for the first time, the ANTP: BUT there is a need to develop capacity and process to revise over time; Poor budgetary planning and execution and rent seeking behavior in contract administration; Limited use of formal techniques for economic appraisal in project identification and prioritization; Lack of professional asset management; and Decentralization has created an unfunded mandate in the road sector.

11 2- Railways Sector is small, antiquated and in poor condition Traffic volume has fallen considerably and continues to fall Selected Productivity Indices for Western Balkans and Benchmark Railways 1.2 Thousand traffic Unit per staff (2002) Traffic Units/Track-Km Serbia Croatia BIH-ZFBH Montenegro BIH-ZRS Macedonia Albania Kosovo Latvia Azerbaijan Lithuania Russia Georgia Romania Slovakia Bulgaria Hungary Slovenia Czech Armenia Croatia Serbia Bosnia Estonia Ukraine Poland Macedonia Belarus Moldova Albania

12 2- Railways The financial position of Albanian Railways remains parlous Capital expenditures in the rail sector shall be taken conditional on positive economic and social returns Profit and Loss Accounts, HSH, (lek 000) Operating Expenditures 1,033,651 1,500,529 1,212,350 1,328,401 Operating Revenues 443, , , ,184 Total Operating Loss 191, , , ,426 Operating Subsidies 556, , , ,633

13 3- Maritime and aviation sector: case for greater private sector participation The majority of investments should come from the Private sector unless market failure; Private sector participation is increasing in civil aviation; Reform in the maritime sector has begun. Public investment in the port sector has declined at this time; Need for greater involvement of Private Public Partnerships (PPPs) in service delivery in parallel to strengthening the enabling legal and institutional environment.

14 4- Facing the challenge: Improving planning and budgeting in the transport sector Strengthen the professional management of assets: particular attention to the establishment of an Asset Management System; Review the functional classification of the road network of roads; Subject all projects to the full cycle of project preparation as per the newly designed guidelines on public investment management; Develop a multi-criteria-based decision tool to identify and prioritize steps needed in the local roads sector; Strengthen budgetary controls and use of competitive bidding in procurement of projects; Establish the process by which the ANTP is regularly revised and updated, to inform the Medium Term Budget Program.

15 4- Facing the challenge: Reviewing the composition of transport expenditures Increase the share of recurrent expenditures on roads (normal and backlog) this will help address the fiscal risks from underinvestment in maintenance Contract out all routine and periodic maintenance work to the private sector, testing the use of output based methods on a pilot basis Consider some degree of re-centralization of managerial responsibilities for key access roads under a reformed GRD.

16 4- Facing the challenge: Improving the incentives for appropriate road usage Restructure the taxes on the heaviest vehicles to ensure that the charges more closely reflect the damage done to the road network.

17 4- Facing the challenge: Addressing the problem of the rail sector Consider a reduction in the scale and nature of public support to the railway sector, within the context of a sound business plan: Withdraw, in the short term, the major loss-making passenger services, and freight services. In parallel, reduce staff numbers to raise labor productivity and reduce operating expenditures. Improve the marketing of the railway services to try and capture all feasible traffic to rail. Subject all proposed investment projects in the rail sector to rigorous economic and social benefit analysis and tender future investment project through competitive bidding.

18 4- Facing the challenge: Increasing the contribution of the private sector Develop the key prerequisites for successful Public Private Partnerships (PPPs): adequate and strong institutional framework including a welldesigned sectoral policy and strategy; primary and secondary legislation on concessions and public procurement (already started); appropriate capacity within the MoF and the MoPWTT to evaluate proposals and assess the potential implicit and explicit contingent liabilities. Protect fiscal stability by limiting the government s fiscal exposure wherever possible.