CEB and Western Balkans Investment Framework:

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CEB and Western Balkans Investment Framework:Options for Contribution to Poverty Reduction and Social Inclusion

León Herrera

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Outline of Presentation

• Introduction to the WBIF• WBIF general progress to Date• CEB’s mandate & resources• CEB’s experience & views on the Social Sector• Opportunities to increase investment in social sector• Conclusion

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WBIF Objectives and Stakeholders

Objectives• Coordinate support by Commission, IFIs and donors, to the

Western Balkans countries: a single entry point for projects to improve coherence, synergy, efficiency and visibility

• Combine/Leverage grants and loans to improve project financing • Support EU Accession process and regional and national policies

and strategies

Stakeholders• Albania, Bosnia and Herzegovina, Croatia, Kosovo (under UNSCR

1244), FYR Macedonia, Montenegro and Serbia• European Commission• IFIs (CEB, EBRD, EIB) and bilateral financial institutions and donors• World Bank and RCC (observers)

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WBIF Sectors and Structure

Sectors

• Starting with: Energy, Environment, Transport and Social Infrastructure

• From 2011: Private Sector Development and Energy Efficiency

Structure

• Steering Committee and Project Financiers Group

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WBIF Application and Approval Process

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PROJECT FINANCIERS’ GROUP

STEERING COMMITTEE

Single Entry point

Project Identification, Programming,

Screening,Assessment

Strategy definition,Operations approval,Supervision of action

Single strategic orientation

Implementation

Secretariat

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WBIF Implementation Process

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GrantsLoans

Grants

Progress to date (1)

• 81 grants

• Value €139 million

• 73 projects

• > €3 billion levered IFI loans

• > €6 billion total investment

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Energy 9%

Transport 62%

Social 11%

Environment 18%

Estimated Investment Total: 6.84 billion euros

Social Sector Development – CEBunique Mandate

SECTORAL LINES OF ACTIONSECTORS OF ACTION

Strengthening social integration

- Aid to refugees, migrants and displaced persons- Housing for low-income persons- Creation and preservation of viable jobs - Improvement of living conditions in urban and rural areas

Managing the environment- Natural or ecological disasters- Protection of the environment- Protection and rehabilitation of historic and cultural heritage

Supporting public infrastructure with a social vocation

- Health - Education and vocational training- Administrative and judicial public service infrastructure

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CEB mandate and the EU 2020 Strategy

• The 5 targets on the Europe 2020 strategy (employment, R&D/innovation, climate change, education, poverty/social exclusion) cover CEB overall approach

• Three of them (employment, education, poverty/social exclusion) embrace CEB approach to social inclusion in the WB.

• Will it be possible to work towards aligning around these targets the views of WB countries, and WBIF partners?

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Other relevant social inclusion objectives

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CEB and the Commission embrace common objectives on Roma inclusion•“The EU Roma Integration goals are also relevant to Enlargement countries”, (Commission’s communication, April 2011)

‐ CEB has been engaged in Roma inclusion activities for the last 15 years, with loans (€25.9m) and grants (€2.7m) and active participation in awareness and policy events.

•CEB stands ready to finance suitable loan projectsIn 2010, CEB approved a € 8 million project for the « Acceder » programme in Spain, to promote professional training for RomaThis program has been singled out as a model of good practices and his transposition has been recommended to the countries of Central and Eastern Europe

Social Sector Development CEB Resources

Policies2010-2014 Medium Term Development’s assumptions:

up to 60% of CEB’s loans outstanding in favour of target countries by 2014 with a particular emphasis on the poorest South Eastern countries, (most affected by the crisis)

67% increase in capital approved in January to back-up CEB’s expanding activities in target countries

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CEB’s specific means of action (1)Selective Trust Account: “social dividend” funded through annual allocation of profits to be used (mostly through interest rate subsidies) to respond to high priority social needs. In particular in the poorest target countries.

At the beginning of 2011, € 34.5 m. of grants are available for new commitments.

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CEB’s specific means of action and resources (2) 3 Trust accounts to finance technical assistanceThe Norway Trust Account: to help the implementation of socio-economic reforms in the WB The Human Rights Trust Fund: to contribute to the consolidation of the rule of law and protection of human rights.The Spanish Social Cohesion Account: in support to CEB’s projects mainly in the target group countries€ 2.8 m. of cumulated resources available for new commitments up to date with a clear focus on Eastern Southern Europe countries

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Social Sector Development CEB Experience

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Decent housing is a basic necessity, it facilitates access to education and health services

Housing: €1.8 bn approved by CEB since 2006

In November 2010, the Bank approved a project in Serbia in favour of 1,700 households with low and middle income (€32m loan) benefiting from a € 70,000 grant through WBIF


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…. Over the 5 past years •Education: €1.5bn approved e.g. ”the Education Excellence and Equity program” in Albania in favour of which CEB has approved a €14m loan, completed with a €3.4m interest rate subsidy + grant through WBIF + contribution from the Spanish Cohesion Account (Fiduciary account managed by CEB)• Health: €795m approvede.g. the on-going project of rehabilitation of the Skodra Hospital in Albania. CEB finances up to 58% of the total cost and grants €0.8m interest-rate subsidy . A grant from the Norway Trust Account has also been approved to cover technical assistance


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Protection of Human Rights and implementation of the rule of law throughout Europe are at the heart of CEB’s mandate. “ The social cohesion of a society finds its expression in the way it treats its weakest segments”.

In response to the recommendations of the 3rd Council of Europe Summit (Warsaw, 2005), the CEB is now financing projects to support infrastructure of administrative and judicial services, aiming for example at the establishment of suitable conditions of detention for prison populations, in conformity with European Prison Rules

In the WBIF countries 5 projects are at different stages of implementation

Albania, Bosnia-Herzegovina, Croatia, FYR Macedonia and Serbia

CEB’s viewson social inclusion

• Targetted projects are only effective if they are designed in the framework of universal public policies and inclusive services in health, employment, education, housing.

• Targetted policies benefit primarily from their alignement and synergies with inclusive mainstream policies and services (J.M. Fresno, President of Spain’s Council for the Promotion of Equal Opportunities and against Discrimination)

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Economic considerations on social sector projects

• The economic impact of social inclusion should be further explored and acknowledged

• The World Bank report on the economic impact of Roma inclusion is an excellent example

• The impact of education on productivity and competitiveness is well known but should be enhanced

• Raising the activity rate (and in particular of women, and aged men in an aging Europe), is tightly connected with better health and living (housing) conditions

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Financial considerations on social sector projects

• Strong externalities in social inclusion projects require a specific approach

• Weak or no income generation is a common feature, therefore the need for grants/lower leverage is higher

• Ownership at all levels has proved to be the basis of a succesfull project, therefore a certain degree of budget/loan co-financing will be an element towards good results

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The social sector and the impact of the crisis

Impact of the crisis on social inclusion:

• Increasing number of jobless people

• Stretched capacities of current social systems

• Social projects tend to be relegated vis-à-vis income

generating projects

• Important role of the Commission to ensure a minimun of

ressources and political attention to social issues

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WBIF – Opportunities to Increase Investments in the Social Sector -

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So far, estimated investment in the social field is only 11%, although needs for social infrastructure are crucial (as pointed out in DG Enlargement’s country reports)

How could WBIF support more strongly this sector in the future?

WBIF – Opportunities to Increase Investments in the Social Sector -

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Better identification of high priority projects

•Ministries in charge are invited to be more proactive and propose potential projects to NIPACs Giving more visibility to social needs at all

levels, including WBIF•Social issues should be more precisely singled out

In Conclusion

Importance and awareness of social sector must be reflected in the number/volume of projects financed through WBIF. A proactive role of concerned ministries in the Western Balkan countries is essential.

Challenges: budgetary constraints, new IPA sectoral approach: how to fit it with the project approach used by some IFIs

RCC, Council of Europe, World Bank, CEB ready to help beneficiaries to better define priorities. CEB, EIB and other IFIs and bilateral FI to help beneficiaries to materialize priorities into results.

Importance of liaising with NIPACs and coordinating with other important sources of funding: IPA national programmes, bilateral donors.

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Thank you for your attention

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CEB and Western Balkans Investment Framework:

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