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Strategy, Investments, Financing Sources Conference on Financing the Environmental Dimension of Sustainable Development, 24-26 April, 2002, Paris Ministry of Environmental Protection and Physical Planning Republic of Croatia Mirjana Papafava, M.Econ.

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Strategy, Investments, Financing Sources

Conference on Financing the Environmental Dimensionof Sustainable Development, 24-26 April, 2002, Paris

Ministry of Environmental Protection and Physical PlanningRepublic of Croatia

Mirjana Papafava, M.Econ.

Croatia - key indicators (2001)

Surface area: 56 538 km2

Population: 4,4 millionCapital: Zagreb (population: 1 mil)

GDP: US $ bn 20,7GDP per capita: US $ 4 602Average monthly gross wages and salaries: ~ US $ 800Inflation: 4,8 %Industrial production (growth rate): 6 %Foreign direct investment flow (FDI) : US $ mil 925FDI (1993-1999): US $ bn 3.6

Source: Monthly statistical review, January 2002, Ministry of Finance 1

CROATIA

Environmental Strategy with National Action Plan

Environmental Strategy with National Action Plan wasadopted in Croatian Parliament in January 2002

GOALS� To develop a long term strategy for maintaining the

environment as a component of the sustainabledevelopment of Croatia

� To identify priority problems

� To define priority actions

� To attract donors

Hereinafter: Environmental Strategy with National Action Plan = Environmental Strategy

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Priority Environmental Problems• Solid Waste Management• Water Management• Inadequate environmental management, weaknesses in:

� Information system� Financing� Integrated planning� Education and public awareness

CROATIA

Environmental Strategy

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PAP summarises the highest priority actions that need tobe started in next two years

PAP presents three types of projects:

• Legislative/institutional/organisational projects

• Master plans/studies/feasibility studies

• Investment projects

Environmental Strategy

Priority Action Plan /PAP/

Source: Environmental Strategy, January 2002

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Environmental StrategyPAP - 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

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• 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 onone 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

Environmental StrategyPAP - Master plans/studies/feasibility studies

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Environmental StrategyPAP - Investment Projects (waste, water, air)

WASTE MANAGEMENT� Remediation and reconstruction of the majority of existing dumpsites� Construction of new disposal sites� Building of municipal and hazardous waste incinerators

WATER MANAGEMENT*

� Construction of sewage systems� Construction of wastewater treatment facilities (municipal and industrial)

AIR AND CLIMATE CHANGES� Improvement of fuel quality (refineries)� Reduction of green house gases emission from power plants� Gasification

� Use of renewable energy sources

Source: Environmental Strategy, January 2002

* The Croatian Water Company has a separate list of projects in preparation(see www.voda.hr)

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Implementation of Environmental StrategyCost assessment

Assessment of a 10-year period costs for: (bil �)

• Solid waste management………...….……….…………2.50� Wastewater treatment………….…………….………....5.68� Air quality protection……………………………….….0.64

Total………………………………...…...………....…….8.82

Annual average (estimate) ………………….. � mil 882.0 /4.2% GDP/Costs per capita at 2000 level * ……………... � 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

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CROATIA

Annual investments in environmental protection

Source: Statistical Reports, 2000 & Statistical Yearbook of the Republic of Croatia, 2001

� mil 52,3

Air6,4%

Others6,9%

Water77,9%

Waste 8,8%

2000 – 0,25% GDP

1999 – 0,12% GDP

1998 – 0,17% GDPC R O A T I A

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BOSNIA &HERCEGOVINA

CROATIA

Main sources of funds for environmental protection

• State Budget and local budgets

• Extra-budgetary funds (Croatian Water Company, Croatian Forest Company); revenues comingprimarily from pollution charges and user charges

• Business entities (primarily industry)

� Foreign and domestic financial institutions such as IBRD, EBRD, Japan Bank for InternationalCooperation…Croatian Bank for Reconstruction and Development /HBOR/ through loans

� International financing mechanisms/programmes/organisations such as GEF, METAP, UNIDOEU/CARDS, Life III Countries, Stability Pact (REReP)…etc.) through financial and technicalsupport

� Bilateral and multilateral co-operation through financial support

More investment is expected from:� Foreign investors through direct investments (especially in upgrading the environmentally

friendly technologies)

� 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 protection10

CROATIA

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 andcustoms privileges (Official Gazette 53/01)

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CROATIA

Investment modes

• Investment modes for commercial activities (Law on Commercial Companies):

• Investment modes for utility services (Law on Public Utility Management)

� Invest capital on a contractual basis� Invest capital in a company (public limited liability company,

limited partnership, joint stock company, limited liability company, silent company)� Invest on the basis of a concession granted

� Invest capital on the basis of a concession granted� 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

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CROATIA

Investment guaranties

Constitutional and law provisions of the Republic of Croatia offer extremelysolid guaranties to foreign investors:� foreign investors have the same rights, obligations and legal status within an enterprise as

domestic investors, provided the condition of reciprocity is met

� the rights acquired through capital investments cannot be withdrawn by law or by any other legal act

� free repatriation of profits and free repatriation of capital on disinvestments are secured

� investors can keep the profits in HRK on domestic currency account; it can be used forloans to domestic entities and for transfers into domestic currency accounts of their foreignpersons

� 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.

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CROATIA

Economic and other measures for improvement ofenvironmental 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 bankinterests, 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.

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CROATIA

Fund for Environmental Protection andEnergy Efficiency (in process of establishment)

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• 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:

� Subsidiary for projects and programmes in the field of environmental protection,conservation and sustainable use of natural resources (air, climate, ozon layer, soil, waterand sea, biodiversity, waste, sustainable business and economy development)

� Subsidiary for energy efficiency and renewable energy sources (implementation of thenational energy programmes)

� Management Board (7 members)

� 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

CROATIA

Fund for Environmental Protection andEnergy Efficiency (in process of establishment)

The establishment of the Fund is supported by the German Government through financialand technical assistance of the German Technical Collaboration Society (GTZ), within theframework of the Stability Pact, Regional Environmental Reconstruction Program forSEE (REReP) .

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� 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� Granting, directly or through financial intermediaries, primarily loans and subsidies on interest payments� 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 atregistration of motorcars, and repayments of loans

• Recipient of funds can be any legal or natural person which meets the prescribed conditionsand proposes a project that complies with the Fund’s defined criteria

• Main objectives and principles

Current information available at

Prepared by:Mirjana PapafavaMinistry of Environmental Protectionand Physical PlanningHead of Economic Incentives DepartmentUlica grada Vukovara 7810000 Zagreb, CroatiaPhone: + 385 1 610 65 63Fax: + 385 1 611 20 73E-mail: [email protected]

Technical assistance:Hrvoje Matijaševi�, C.E. Economic Incentives Department

www.mzopu.hr

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