92002E1656

WRITTEN QUESTION E-1656/02

by Ioannis Souladakis (PSE) to the Commission

(11 June 2002)

Subject: Funding of CARDS infrastructure programmes

The five-year strategic programme, CARDS, does not provide for funding for major infrastructure projects owing to a shortage of appropriations. Consequently, funding to strengthen and improve infrastructure, which is essential for the long-term development of south-eastern Europe, is excluded from the Community framework, raising questions as to how it can be financed.

1. What methods of funding major infrastructure projects has the Commission provided for south-eastern Europe?

2. Which European Union services and financial organisations does it intend to involve in the funding of infrastructure projects?

3. In what context will the Commission participate and become involved in funding and building the infrastructure, as provided under the five-year CARDS programme which the Commission itself drew up?

Answer given by Mr Patten on behalf of the Commission

(22 July 2002)

1. Cards programming and infrastructure development in the Western Balkans

One of the key objectives of the CARDS regional strategy for 2002-2006 which was presented on 5 October 2001 in the CARDS committee and approved on 22 October 2001 by the Commission is to assist the countries in developing coherent strategies for infrastructure with an international dimension in transport, energy and environment.

When presenting this strategy, the Community made clear that, in the programming of CARDS, it should indeed pay consideration to the need to ensure a greater focus of resources in a few priority areas where the Community has a clear comparative advantage so as to ensure impact a requirement of the overall Commission reform of Community assistance. An additional factor specific to the Western Balkans which affects CARDS programming is the evolving needs of the region as the reconstruction stage is being completed and the long term challenges, such as those of the stabilisation and association process take more prominence.

Support in these areas continues but in a manner that reflects the Commission's above constraints and the comparative advantage of other players, in particular International Financial Institutions (IFIs), to address the region's needs:

- the focus of support is to develop strategies and preparatory studies, as well as catalytic investments with a view to reconnect the region's transport, energy and environmental infrastructure into the Pan European Networks. While CARDS will support primarily the development of regional strategies and catalyst investments, IFIs are best placed to address the financing requirements of the infrastructure. It must be noted that the EIB, which is the Investment Bank of the Union, now covers the entire region since it expanded its operations in 2001 to Croatia and the former Republic of Yugoslavia (FYROM), and has announced that it will continue to give a particular emphasis to regional infrastructure development.

- The CARDS programme, by concentrating significantly on institution building development of administrative capacities, regulatory framework reform will also address in an effective manner the concerns of the EIB about the ability of the countries to cope with and fulfil necessary obligations/commitments a shared concern of IFIs and major donors. One major initiative promoted by the Community in the region, the Regional Electricity market, illustrates that an overall strategy in the electricity sector should not only be based on physical investments but also on market and regulatory framework reforms.

- Infrastructure investments will still continue substantively in the case of FYROM and Kosovo to complete reconstruction work already begun. Elsewhere in the region, CARDS resources may be used to help catalyse key infrastructure investments in certain priority cases. Limited infrastructure needs may also be funded under Integrated Border management programmes.

2. The Community's contribution to initiatives undertaken to develop strategies and fund major infrastructure projects in South-East Europe.

Coordination with IFIs and other donor activity

The Infrastructure Steering Group (ISG) was set up in 2001 (SP WT II meeting in Tirana, May 2001). The ISG is currently under the chairmanship of the Commission and consists of experts of the EIB, the Commission, the European Bank for Reconstruction and Development (EBRD), the World Bank (WB), the Council of Europe Development Bank, and the Office of the Special Coordinator of the Stability Pact. The Community (EC)/WB Joint Office provides secretariat of ISG.

The Infrastructure Steering Group is to vet projects that contribute and are part of a strategic approach to develop infrastructure networks of regional importance and comply with agreed criteria. It will, where appropriate, consult with other multilateral or bilateral agencies. It will help put together a financing package using its experience to bring in the private sector as often as possible. It will also verify that appropriate institutional, regulatory and sectoral frameworks, that will accelerate the creation of regional markets, are being developed.

Strategic framework

October 2001 Commission paper Transport and Energy Infrastructure for South Eastern Europe: this basic blue-print is already being developed through the various study projects financed by CARDS and other donors in 2001 that cover energy (i.e. on electricity, gas and oil) and transport, notably the Transport Infrastructure Regional Study. Its II phase is due to start in July 2002.

Water Strategy Regional Approach for South Eastern Europe prepared by the EBRD. A basic regional approach for the development of environment infrastructure is also being developed with CARDS support through the Regional Environmental Reconstruction Programme.

Air Traffic Regional Infrastructure Study for South East prepared by the EIB

Outcome: the regional infrastructure programme in South-East Europe

The co-ordinated efforts by the Community and IFIs, in the wake of the Regional Funding Conference of March 2002 and since then within the ISG, are listed under the Regional infrastructure programme for South-East Europe, which implementation is regularly monitored by the EC/WB Joint office.

The current list of ongoing regional projects all international donors cofounded amounts to 41 projects with a total cost of EUR 3,32 billion. Transport (particularly road infrastructure) represents 66 % of the overall cost, equivalent to some EUR 2,2 billion, and spread between 33 different projects. The energy sector comes second, with a cost of EUR 0,82 billion (25 %) for five electricity projects, and the water and environment sector comes last with three projects and a total cost of EUR 0,29 billion (9 %). An updated list was presented on 21 June 2002 at SP WT II meeting in Sofia.