Ministry of Environmental Protection and Physical Planning Republic of Croatia Strategy, Investments, Financing Sources Conference on Financing the Environmental Dimension of Sustainable Development, 24-26 April, 2002, Paris Mirjana Papafava, M.Econ.
Croatia - key indicators (2001) Surface area: 56 538 km 2 Population: 4,4 million Capital: Zagreb (population: 1 mil) GDP: US $ bn 20,7 GDP per capita: US $ 4 602 Average monthly gross wages and salaries: ~ US $ 800 Inflation: 4,8 % Industrial production (growth rate): 6 % Foreign direct investment flow (FDI) : US $ mil 925 FDI (1993-1999): US $ bn 3.6 Source: Monthly statistical review, January 2002, Ministry of Finance 1
Environmental Strategy with National Action Plan Environmental Strategy with National Action Plan was adopted in Croatian Parliament in January 2002 GOALS ½ To develop a long term strategy for maintaining the environment as a component of the sustainable development of Croatia ½ To identify priority problems ½ To define priority actions ½ To attract donors Hereinafter: Environmental Strategy with National Action Plan = Environmental Strategy 2
Environmental Strategy Priority Environmental Problems Solid Waste Management Water Management Inadequate environmental management, weaknesses in: ½ Information system ½ Financing ½ Integrated planning ½ Education and public awareness 3
Environmental Strategy Priority Action Plan /PAP/ PAP summarises the highest priority actions that need to be started in next two years PAP presents three types of projects: Legislative/institutional/organisational projects Master plans/studies/feasibility studies Investment projects Source: Environmental Strategy, January 2002 4
Environmental Strategy PAP - Legislative/Institutional/Organisational Projects Establishment of the Environment Agency Strengthening Croatian Capacity in Environmental Data Gathering Establishment of the Eco-fund Legislation Gap Analysis - Harmonisation with the acquis communautaire Drafting of the EU Approximation Strategy Assistance to Croatia on Implementation of the Aarhus Convention Establishment of a Network of Environmental Information and Education Centres (Eco-centres) Personnel strengthening on the local level etc. (see www.mzopu.hr) Source: Environmental Strategy, January 2002 5
Environmental Strategy PAP - Master plans/studies/feasibility studies Development of a National Waste Management Strategy Development of a study on the establishment of a system for collection and recovery of bulky waste (including scrap tyres) Slaughterhouse waste management study within the integrated waste management system for the Republic of Croatia Feasibility study for municipal waste management on islands, pilot project on one island or group of islands Water management plan Coastal zone environmental management project as an element of the ASEMP (Adriatic Sea Environmental Master Plan Project) Comprehensive biodiversity inventory and mapping Karst Ecosystem Conservation (KEC) Project etc. (see www.mzopu.hr) Source: Environmental Strategy, January 2002 6
Environmental Strategy PAP - Investment Projects (waste, water, air) WASTE MANAGEMENT ½ Remediation and reconstruction of the majority of existing dumpsites ½ Construction of new disposal sites ½ Building of municipal and hazardous waste incinerators WATER MANAGEMENT* ½ Construction of sewage systems ½ Construction of wastewater treatment facilities (municipal and industrial) AIR AND CLIMATE CHANGES ½ Improvement of fuel quality (refineries) ½ Reduction of green house gases emission from power plants ½ Gasification ½ Use of renewable energy sources * The Croatian Water Company has a separate list of projects in preparation (see www.voda.hr) Source: Environmental Strategy, January 2002 7
Implementation of Environmental Strategy Cost assessment Assessment of a 10-year period costs for: (bil ¼) Solid waste management..... 2.50 ½ Wastewater treatment.....5.68 ½ Air quality protection..0.64 Total..........8.82 Annual average (estimate).. ¼ mil 882.0 /4.2% GDP/ Costs per capita at 2000 level *... ¼ 2013 Costs should be covered by: local level, industry, state * Population in 2000, preliminary data 4.381.352 Statistical yearbook of the Republic of Croatia, 2001 8
Annual investments in environmental protection C R O A T I A 2000 0,25% GDP 1999 0,12% GDP 1998 0,17% GDP ¼ mil 52,3 Waste 8,8% Air 6,4% BOSNIA & HERCEGOVINA Others 6,9% Water 77,9% Source: Statistical Reports, 2000 & Statistical Yearbook of the Republic of Croatia, 2001 9
Main sources of funds for environmental protection State Budget and local budgets Extra-budgetary funds (Croatian Water Company, Croatian Forest Company); revenues coming primarily from pollution charges and user charges Business entities (primarily industry) ½ Foreign and domestic financial institutions such as IBRD, EBRD, Japan Bank for International Cooperation Croatian Bank for Reconstruction and Development /HBOR/ through loans ½ ½ International financing mechanisms/programmes/organisations such as GEF, METAP, UNIDO EU/CARDS, Life III Countries, Stability Pact (REReP) etc.) through financial and technical support Bilateral and multilateral co-operation through financial support More investment is expected from: ½ Foreign investors through direct investments (especially in upgrading the environmentally friendly technologies) ½ Domestic and foreign investors on basis of concession contracts and public-private partnership Note: The sequence is not conditioned by the size of funds for environmental protection 10
Legal framework for environmental investment Constitution of the Republic of Croatia (Official Gazette 41/01) Law on Commercial Companies (Official Gazette 111/93, 34/99) Law on Public Utility Management (Official Gazette 36/95, 128/99, 57/00, 129/00, 59/01) Law on Concessions (Official Gazette 89/92) Law of Obligations (Official Gazette 53/91, 73/91, 37/94, 77/96, 112/99) Law on Ownership and Other Property Rights (Official Gazette 91/96, 73/00) Customs Law (Official Gazette 78/99, 94/99, 117/99, 73/00) By-Law on Customs Tariffs (Official Gazette 113/01, 10/02) Law on Incentives for Investments (Official Gazette 73/00) Decree on the content of the report on the use of incentive measures, tax and customs privileges (Official Gazette 53/01) 11
Investment modes Investment modes for commercial activities (Law on Commercial Companies): ½ Invest capital on a contractual basis ½ Invest capital in a company (public limited liability company, limited partnership, joint stock company, limited liability company, silent company) ½ Invest on the basis of a concession granted Investment modes for utility services (Law on Public Utility Management) ½ Invest capital on the basis of a concession granted ½ Invest capital in a company for utility services which can be funded only by a local self - government unit, holding minimum 51% of the company s property 12
Investment guaranties Constitutional and law provisions of the Republic of Croatia offer extremely solid guaranties to foreign investors: ½ foreign investors have the same rights, obligations and legal status within an enterprise as domestic investors, provided the condition of reciprocity is met ½ the rights acquired through capital investments cannot be withdrawn by law or by any other legal act ½ free repatriation of profits and free repatriation of capital on disinvestments are secured ½ investors can keep the profits in HRK on domestic currency account; it can be used for loans to domestic entities and for transfers into domestic currency accounts of their foreign persons ½ foreign natural persons and legal entities are free to acquire real estate (including the acquisition of mortgage rights) if the condition of reciprocity on real estate in Croatia is met. 13
Economic and other measures for improvement of environmental investment Establishment of the Fund for Environmental Protection and Energy Efficiency Improvement of existing pollution charges level/structure/calculation and gradual introduction of new pollution charges, and introduction of product charges Gradual increase of water price and utility services prices up to the full price level and market directed fuel/energy prices Introduction of economic/financial incentives such as tax and import duties relieves/ exemptions for environmental investments, subsidies (as temporary measure) for bank interests, project preparation documentation, etc. Improvement of international funds utilisation and permanent capacity building Strengthening activities in presenting/highlighting the environmental investment needs Removal of administrative barriers to investment in Croatia, etc. 14
Fund for Environmental Protection and Energy Efficiency (in process of establishment) Fund is going to be established by the special law (under going parliamentary procedure) Fund is a legal person public institution owned by the Republic of Croatia Fund is a non profit extra-budgetary entity Fund s bodies: ½ Management Board (7 members) ½ Managing Director - Management Board: Representatives of relevant state admistration bodies, experts from the field of environmental protection, scientific institutions and non-governmental organisations - MB members are appointed and renounced by the Government of the RC based on the proposal of the minister of environment, agreed by the minister of economy Fund s organization ½ Subsidiary for projects and programmes in the field of environmental protection, conservation and sustainable use of natural resources (air, climate, ozon layer, soil, water and sea, biodiversity, waste, sustainable business and economy development) ½ Subsidiary for energy efficiency and renewable energy sources (implementation of the national energy programmes) 15
Fund for Environmental Protection and Energy Efficiency (in process of establishment) Main objectives and principles ½ Providing additional funds (i.e. supplementary to the existing environmental fund sources) for financing of preparation and implementation of environmental programmes, projects and related activities ½ Granting, directly or through financial intermediaries, primarily loans and subsidies on interest payments ½ Respecting principles of transparency and publicity, objectivity and responsibility in decision-making and international standards of good practice Revenues of the Fund will come primarily from new polluter charges, a special charge paid at registration of motorcars, and repayments of loans Recipient of funds can be any legal or natural person which meets the prescribed conditions and proposes a project that complies with the Fund s defined criteria The establishment of the Fund is supported by the German Government through financial and technical assistance of the German Technical Collaboration Society (GTZ), within the framework of the Stability Pact, Regional Environmental Reconstruction Program for SEE (REReP). 16
Current information available at www.mzopu.hr Prepared by: Mirjana Papafava Ministry of Environmental Protection and Physical Planning Head of Economic Incentives Department Ulica grada Vukovara 78 10000 Zagreb, Croatia Phone: + 385 1 610 65 63 Fax: + 385 1 611 20 73 E-mail: mirjana.papafava@mzopu.hr Technical assistance: Hrvoje Matijaševiü, C.E. Economic Incentives Department 17