F I N A N C E
by Alysia Davies
The price tag for cleaning up the Central and Eastern European (CEE) region's environmental sector is estimated at over ECU 120 billion. The EU may be able to provide some of the money — if the CEE countries can meet their requirements for financing.
Delegates from CEE governments and national environmental funds met with European Commission (EC) representatives at the REC from Nov. 14-16. They were there to learn how to qualify for a major new funding instrument — the ISPA, or "Instrument for Structural Policies for pre-Accession."
"This sounds like good news," says the EC's Marc Franco who will be in charge of ISPA funding. "But don't underestimate the work that needs to be done."
ISPA will provide ECU 1 billion of funding a year to pre-accession countries between 2000-2006. The funding will be split equally between environment and transport projects. Environmental funding from ISPA will amount to approximately ECU 3 billion over six years.
This will not even come close to covering the environmental price tag in the region, nor is it meant to. The long-term goal is to leverage funding from CEE government coffers, national environmental funds, international financing institutions (IFI's), banks and other private sector sources. Applicant countries already spend roughly ECU 2 to 3 billion yearly on environmental investments and this will have to increase in order to meet EU requirements.
Representatives from the Organization for Economic Co-operation and Development (OECD), the World Bank and other IFI's attended the conference to discuss funding options. The biggest current source, said participants, are environment funds that provide grants or preferential credit to environmental projects. These will become increasingly important when combined with EU and IFI funds.
They will also be used to manage the ISPA "repayable grants." The way this works is that each country will appoint an authority to submit proposals to ISPA. ISPA will then select projects to be funded and give the grant money to the country authorities to pass on. Some of that money can be disbursed as loans to be repaid to the country authorities, who must in turn re-invest it in another environmental project.
In the future, private investments will also be harnessed for environmental investments. EC representatives, however, acknowledged that CEE countries cannot make the jump to private funding straight away.
"By no means can we solve the environmental problems in Central and Eastern Europe with only public money," says Franco. "But let's not dream and say we'll be ready [to switch] next month."
This system and level of funding are new to most CEE countries, and they will need to prepare an infrastructure for administering it. All applicants for ISPA funding must present detailed descriptions of their technical capacity, a financing plan, a cost-benefit analysis, an environmental impact assessment and information on the types of contracts that will be used for hiring.
"There's no time to waste in preparing for these opportunities," said Timo Makela from the EC's Environment, Nuclear Safety and Civil Protection Directorate.
REC Executive Director Jernej Stritih echoed this sentiment. "We've only got 13 months to 2000, and it takes at least a year to go through full project preparation."
Alexandra Orlikova of the Czech Ministry of Environment says her government will start an immediate campaign to make environmental groups aware of the ISPA requirements and "help them channel the money from Brussels to their communities."
The REC will host another meeting in March 1999 to bring together all the stakeholders and to check on the countries' progress.
