Denmark's environmental assistance to Eastern Europe 1991 -1996 3. Cooperation with the countries in Eastern Europe3.1. Principles and methods for cooperation 3.1. Principles and methods for cooperation.From its inception the cooperation between DESF and the recipient countries has been formalised through bilateral agreements, concluded between the Environmental Protection Agency in Denmark and the relevant counterpart in the national administration of the recipient country. The counterpart is in all cases the Ministry in charge of the Environment; although in Russia it is the State Committee of the Environment. The first agreements were signed in 1991 with Poland, Czechoslovakia, Hungary, Estonia, Latvia and Lithuania. An agreement with Russia was signed in 1993. In 1994 further agreements were concluded with Romania, Bulgaria, Belarus and Ukraine, which had not previously been included under DESF, and with Slovakia, which had become independent in 1993. There have been individual projects in Moldova, Croatia and Bosnia, but agreements with the national authorities have not been concluded. The political situation in the former Yugoslavia has generally been too unstable for the operation of the fund. The concluded agreements are quite broad frameworks for cooperation and do not contain specific priorities for the use of DESF funds in the individual countries. The agreements are significant for creating a political understanding and acceptability of environmental support, but the specific priorities for the use of DESF funds have been developed through the subsequent cooperation between DESF and the national environmental authorities. While in the first years of DESF operation proposals passed a more ad-hoc approval from the national authorities, since 1996 regular country programmes, outlining the methods of cooperation and fields of priority, have been developed with all the recipient countries. Still, the methods of cooperation differ considerably among the countries. Among the 8 countries included in the country review the procedures are most developed and formalised in Poland. With regard to Poland, a joint Polish-Danish Working Group, conducted by a joint Steering Committee, has been established. The group meets four times annually to decide on project proposals. In Lithuania, Estonia and Slovakia the structure is less formalised, but there appear to be biannual meetings between DESF and the national authorities where projects are approved. With respect to the Czech Republic, proposals are reviewed quarterly, but at desk officer level. In Ukraine and Romania project proposals are decided upon according to a more ad-hoc procedure without regular meetings. In Russia, cooperation agreements have been concluded both at the federal level and with the authorities in the two regions Kaliningrad and St. Petersburg. Biannual meetings are held to discuss projects, but these can also be approved by written procedure. The differences in the procedures for cooperation reflect to some extent the intensity of the DESF activities in the recipient countries, and are not surprisingly least developed in the countries where DESF activities have been initiated most recently. To some extent the procedures for cooperation also reflect the strength and capacity of the national environmental ministries; the quite formalised structure in Poland reflects the country's relative professionalism in dealing with foreign donors, while the absence of strict procedures in the Czech Republic seems to reflect a more modest interest in environmental aid as such. The absence of strict selection procedures, despite biannual reviews of proposals, in most of the countries also suggests that the recipient countries do not always insist on getting closely involved in the exact selection procedure for new projects. The introduction of more regular and systematic rounds of project assessments seem to offer several advantages. First of all the fixed deadlines for review of applications can be communicated to potential applicants. Secondly the regular meetings may create the opportunity to choose and prioritise among different projects, which can favour a more cost-effective use of the funds. Thirdly the regular interaction between DESF and the national environmental authorities can facilitate the identification and selection of new projects in areas of high priority. Fourthly, the interaction with other financial sources, domestic and international, may be facilitated through such mechanisms. In the first years the environmental assistance was coordinated from Copenhagen, but the preparation and implementation of Danish projects have since 1996 been improved through the employment of local programme coordinators in several of the countries (Belarus, Lithuania, Latvia, Estonia, Slovakia and Romania). Denmark is presently the only bilateral donor which has such local programme coordinators placed in the national ministries, although also EU's PHARE-programme has a similar organization. US-AID has also had environmental programme officers placed in the countries, but mainly at or associated with the US embassies. The use of local programme coordinators seems to be useful in all the programme countries due to the limited administrative and technical capacity. Proposal for employment of programme coordinators is being negotiated in Poland, Russia and Ukraine. In Russia the State Committee of the Environment has been reluctant about the proposal, while in Ukraine and Poland an initiative is likely to be taken soon. The local programme officers in the five above mentioned countries have generally been recruited from the staff of the national ministries. The local programme coordinators play an essential role in identifying potential projects and partners in the recipient countries and in assisting DESF personnel from Copenhagen on missions in the recipient countries. In principle, the local programme coordinators are also responsible for overseeing implementation of initiated projects, but in practice they are more likely to get involved in such projects only when specific problems that may require advice or intervention occur. 3.2. General problems in the recipient countries.Especially in the first years of DESF operation, that followed immediately after the revolutions in Eastern Europe, the whole administrative and political system in the countries of Eastern Europe was in a state of flux. The transition to democratic and marketbased economies was encompassing; new democratically elected institutions were installed and had to find their role, former state enterprises found themselves exposed to the down-scaling of subsidies and to more fierce competition, the relationship between central and local authorities was changed and there was a general lack of confidence in persons and institutions that had been involved with the former regimes. In the Baltic republics new political and institutional structures had to be created, also in the environmental field, after independence had been attained. Although most of the CEE countries had established environmental administrations before the revolutions, these administrations were often inadequately funded and staffed, and there was a lack of financial structures for environmental investments and modernisation. In the Baltic republics the regional environmental administrations, which during the Soviet period had been without formal powers, were suddenly promoted to national ministries, with all that it implied. In all of CEE and NIS the national environmental administrations had to find a new balance in the relationship with local authorities. In many cases electricity companies, water works and sewage plants were transferred from operation by national ministries to ownership by local municipalities, a transfer that created considerable economic, legal and political uncertainties and confusion. There was a lack of reliable environmental data and a lack of developed cost-benefit assessment procedures, which impeded an "optimal" use of the resources available, including the foreign assistance. During the 1990's, all the CEE and NIS countries have experienced periods with rapid inflation, that among other things have eroded the salaries of public officials, including those in the environmental administration. The result has been a rapid turnover of staff in the environmental ministries. In particular persons with good linguistic or managerial skills have been able to get more decently paid jobs in the private sector, and although a number of committed persons have remained, the general tendency has been a thinning out of the environmental ministries for the best and most qualified staff. Environmental issues, which played a significant role in the revolutionary process, are no longer subject to the same degree of public concern. The economic difficulties of the transition process have made the public more concerned about basic issues such as salaries, bread prices and housing costs, and environmental issues are to some extent seen as more 'luxurious' problems. Environmental issues are often closely interconnected with the major economic, political and even national issues at stake in the transition process. The lack of effective pollution control and the degradation of water supply utility services constitute not only a serious threat to the health conditions of the population, but are also interconnected with the state of the economy. The ineffective energy supply systems, with substantial losses and use of pollution-intensive fuels, are costly to the economy and maintain the dependence on expensive energy imports, which in turn may entail continued political dependencies on certain big energy exporters in the region. There seems to be considerable room for win-win solutions that will create a double dividend, both for the environment and for the economy - but this opportunity remains poorly understood among key decision-makers in the region. The situation differs considerably across the region, however. Environmental protection and policies are best understood and developed in Poland, Hungary and the Czech Republic. In Slovakia, Romania and Bulgaria environmental policy-making has been affected by the generally slow pace of reforms and the reluctant attitude among parts of the political elite towards democratization and the emergence of independent organizations, such as environmental NGOs. In the former Soviet republics there is, despite many common features, a division among the three Baltic republics and the NIS countries Russia, Ukraine and Belarus. In the Baltic republics, environmental policies have been propelled by considerable foreign aid, particularly of Nordic origin, which has also provided the environmental ministries with an increased leverage in the domestic political process. In the NIS countries the situation is the most difficult both in physical environmental terms and in political, as a viable framework for environmental financing and policy-making has not been developed. In the following sections, the conditions, experiences and accomplishments of DESF activities in the 8 countries covered by the country review are detailed. More details are available in the 8 country reports prepared separately as part of the review (in Danish). 3.3. Summarising description of the situation, the cooperation and the accomplishments in 8 selected CEECs3.3.1. PolandTrends in environmental and economic indicators Poland did not, despite economic hardship, suffer such serious declines in GDP as other
CEE countries in the aftermath of 1989. GDP declined initially by about 7 per cent, but
since 1992 the Polish economy has been growing, and the growth rates have in the most
recent years been notably high, from 5-7 per cent, and GDP is now above the 1990 level.
The improvements in the environmental field should be seen against this background. From
1990 to 1995 Despite these positive trends, Poland's economy remains pollution-intensive with
emissions considerably above the OECD-average. Measured against per unit of GDP Institutional capacity and domestic sources of financing. In 1989 all environmental and nature protection responsibilities were consolidated within a single new ministry; The Ministry of Environmental Protection, Natural Resouces and Forestry. The ministry prepared an ambitious National Environmental Policy plan, which was published in November 1990 and approved by the parliament in May 1991. The plan sets both short-term, mid-term and long-term goals and stands as a platform for an active environmental policy which should lead towards a more sustainable development. In 1989 the National Fund for Environmental Protection and Water Resources Management was also established. The fund was to become an essential financing mechanism for Polish environmental policy. It receives its incomes from a broad range of environmental charges and fees, which are being used to finance environmental protection projects. The charges are automatically increased with the inflation rate, and the Fund has been able to finance about 20 per cent of the annual environmental investments since the early 1990's. Its activities are supplemented by more than 2400 municipal and 49 regional environmental and water management funds. These decentral mechanisms for environmental financing have taken an equal share of the investments. The system of environmental funds has served as a safeguard for environmental protection investments, especially in the first difficult years of transition, where the funds covered up to 58 per cent of environmental investments. In later years the environmental funds have retained their relative share at about 40 per cent. Foreign aid has been provided both as debt-relief and as loans and grants. In 1992, the Polish Ministry of Finance established the EcoFund as a tool for debt-for-environment swaps. The EcoFund administers funds committed mainly by the United States, but also by France, Switzerland, Norway and Sweden. Its role remains limited, as it stands for only a few per cent of the annual environmental investments. The assistance is partly untied, however, as the projects are offered on a tendering basis mainly to companies from the donor countries. Despite an impressive level of activity of western environmental donors, the overall level of environmental assistance, including both grants and Eco-Fund contributions, is equivalent to only about 5 per cent of the annual environmental investments in Poland. Poland has, in comparison with other CEE countries, a relatively consolidated and independent environmental ministry and its unique and independent financial institutions for environmental investments, created in 1989, have assured that environmental policy receives financial backing during the transition process. The independent Polish environmental funds serve as a model, which the OECD has recommended other countries in the region to apply. Patterns and problems of cooperation. Poland was, due to its vicinity to Denmark, the first country where DESF began to operate, and about one third of the total DESF grants have been provided for projects in Poland. From 1991 to 1996 354 million DKK in support for 138 projects have been granted. Among the bilateral donors to Poland, other than EU/Phare, Denmark has been the most significant donor, with about 25 per cent of the grants. The Danish contribution has been equivalent to about 1 per cent of the total environmental investments in Poland in this period. 70 per cent of the DESF funds have been allocated to investment oriented projects, and waste water treatment has been a major focus area with about 138 million DKK in disbursement. Poland was one of the first countries which strongly required that the support was spent on investment projects rather than technical assistance, and since 1993 the Danish assistance became oriented mainly in this direction. Co-financing from Polish sources has been substantial, in average 71 per cent. From 1991 to 1995 cooperation between DESF and Poland, on the selection and financing of projects, took place through the National Fund. In the first years a project unit of the Fund was located in the Ministry, but it was later transferred to the National Fund. In 1995, at the request of the Ministry's international office and as part of a general reorganization of the donor coordination, the cooperation was shifted from the Fund to the Ministry. This shift seems to have led to the significant decline in project activities which took place in 1996, where only 11 new projects were approved. While the Ministry is experienced in international cooperation, it seems to lack experience in project financing and approval, whereas a core task for the National Fund is to evaluate, prioritise and finance project proposals. DESF has not yet placed a programme coordinator in Poland, but the issue has been raised with the Polish authorities. Talks are also progressing on improving the collaboration with the National Fund to the previous level. Achievements One of the early technical assistance projects, in the Jelena Gora region, which the review team had the opportunity to discuss with the Polish participants, confirmed the difficulties inherent in the initial DESF approach. In this 3.5 million DKK project a group of Danish consultants, led by the Association of Danish Municipalities, had established contact with the local authorities in this 'black triangle' region. A somewhat broad project, that would consult the regional and local authorities on establishing waste services, waste water treatment, district heating and clean-up of a hazardous site was initiated. The Danish consultants, unfortunately, modelled their recommended solutions very much according to the administrative and institutional set-up in Denmark, and did apparently not understand well enough the different conditions that apply in Poland. Except from some visits to Denmark for the Polish participants, the major part of the project grant was used for the consultants' fees. Apart from some brief and quite general reports there have not been tangible results of the project. Understandably, this type of project, which was not unusual among donors particularly in the first years of assistance activity, created frustrations on the Polish side. The experiences attained in this and some similar projects seem to have led DESF to focus its activities in Poland more strongly on investments. There were several challenges to the more investment oriented grant policy that was pursued from 1993. The Polish authorities hesitated about waste water projects in the larger cities, often designated as HelCom hotspots, due to difficulties with planning and approval. In Gdansk a comprehensive effort to renovate waste water treatment, supported by DESF, got stalled in complicated local political affairs, with competing German and Swedish engineering companies on the sideline. The Polish strategy was to focus the assistance to middle-sized cities. The effort was based on a comprehensive assessment of river quality in demarcated river basins, supported by Danish modelling of water quality, e.g. in the Rega and Narew river basins. The focus on medium-sized cities was more compatible with the size of the grants that DESF could offer within its annual budgets, and could in several instances also take place in HelCom designated Hot-spots. Major projects, for which funding have been provided, have been carried out in Dzialdowo, Kielce, Kolobrzeg-Grzybowo, Pultusk, Szczecin-port and Zielona Gora. Smaller, low-cost technology projects have also been carried out at a number of locations, so that through 36 projects altogether more than 70 sewage treatment plants have been supported. Most of the waste water treatment plant projects that have been supported by DESF have been located in the northern part of Poland, close to the Baltic coast, but projects have been implemented in the southern tributaries of the Vistula and Oder rivers too. Three major air pollution projects with investments have been carried out mainly at one location, the Dolna Odra power plant, situated south of Szczecin not far from Denmark. Air pollution projects are generally very investment intensive, and traditional scrubber or flue gas technologies are not a major Danish competence, but in the case of Dolna Odra advanced lean-burn technology has been introduced. Two large geo-thermal energy projects have been part of the air pollution projects and
built on Danish expertise. The projects are much larger in scale than similar units in
Denmark, and now serve as demonstration plants for geothermal energy. Environmentally the
effect on Despite about 10 different technical assistance projects in the field of waste management, few tangible results have been achieved. An ambitious project for a complete waste incineration plant in the town of Zychlin was not implemented because of concerns from local citizens. Significant projects within nature protection and support for NGOs have been implemented with higher degrees of success; e.g. this involved pest control in Polish forests, the establishment of an ornitological association and support for a conference facility for Poland's Ecological Club. Summarising observations The DESF activities in Poland have been comprehensive and the collaboration with the Polish authorities has been well developed, although the National Fund for many reasons seems to have been a more logical and effective counterpart than the Ministry's international office. Activities have taken place throughout Poland, with a certain regional focus on the north-western Rega-area, where a cluster of projects developed (Dolna Odra, geothermal energy, waste water). One might ask what difference or impact DESF financed projects have on the environmental situation in Poland, given the considerable domestic resources available. This question was raised in several interviews during the review visit to Poland, and it seems that the DESF support is seen as significant not primarily for its absolute contribution to environmental investments, but rather for its possible catalyzing effect in bringing in modern technology and expertise. While in Poland in particular, the stress is on the 'best technology' it seems that DESF projects, if well managed, also can help to assist the relevant Polish authorities in identifying the most appropriate solutions from a technical point of view. Approximation with EU environmental legislation currently stands as a baseline against which all environmental issues are measured. The estimated costs of Polish compliance with the aquis communautaire range from 3-500 billion DKK, and deficits are still serious in many sectors. Although environmental concern in the Polish population is no longer as outspoken as in 1989, the impact of air pollution and poor drinking water on human health remains serious in several regions. Poland has responded to the environmental crisis by devoting significant resources of its own to remediate the problems. This approach contrasts significantly from some of the other countries where DESF has been active. The previous DESF assistance has been relatively well placed, sectorally and geographically. Some resources have been used on technical assistance projects and feasibility studies with limited practical effect, but there have also been significant investment projects that will yield direct environmental improvements. A stronger emphasis on cooperation with the environmental funds on specific investments is desirable. One option to be considered is to join the EcoFund such as Norway and Sweden has done, either by grants or by converted debts. In any case, a stronger cooperation with the funds in the early project identification phase may assure better opportunities for a follow-up on feasibility studies for investments. 3.3.2. EstoniaTrends in environmental and economic indicators From 1991-1993, and following the disintegration from the Soviet planned economy,
Estonia's GDP declined by 32 per cent. In the later years the economy has grown again,
with GDP-increases of 3-6 per cent annually. Emissions of Despite certain positive trends, Estonia's economy remains pollution-intensive with
emissions considerably above the OECD-average. Measured against per unit of GDP Institutional capacity and domestic sources of financing. The Ministry of the Environment was established in 1989, but gained full powers only after independence from the Soviet Union. From 1990 to 1995 37 new environmentally related pieces of legislation have been approved. The ministry is relatively small, however, with only about 100 employees, and the environmental administration at the local level is weak or non-existing. The Estonian Fund for Nature Protection and Rational Use of Natural Resouces was established in 1983, with incomes from fines and non-compliance fees. It was reorganised in 1990 as an extra-budgetary environmental fund. It has both a state branch and 19 county branches. The resources of the fund are limited and in 1994 the total expenditure of the fund represented only 8 per cent of the country's total environmental expenditure (ECE, 1996: 62). The charges are automatically adjusted according to the inflation, and the fund also receives 5 per cent of the revenue from privatization of land and enterprise. Although formally independent, the fund is closely integrated in the operation of the Ministry. The fund offers mainly grants but also loans at low interest rates, and it plans to extend this activity to become a revolving fund with a more stable capital base. In particular the nordic countries have offered environmental aid to Estonia. Finland (46%) has been the largest donor, followed by Denmark (18%), EU-Phare (12%) and Sweden (11%). In 1994 the foreign assistance was equivalent to 34 per cent of total environmental expenditures in Estonia (KPMG: 15). Patterns and problems of cooperation. Among the three Baltic Republics, DESF initially focused mainly on Estonia, but in the later part of the reviewed period emphasis shifted more to the two other countries. With 33 projects from 1991-1996, and grants worth 65 million DKK, DESF activities have been relatively moderate in Estonia. Still, on a per capita basis five times more funds were spent in Estonia than in Poland. The environmental problems are most acute in the north-eastern, predominantly Russian speaking, region, but the Estonian authorities preferred that foreign environmental assistance was prioritised for the Talinn region. The considerable Finnish aid and interest for Estonia affected the possibilities for identifying projects further. There has been a majority of technical assistance projects; only 6 investment oriented projects have been granted. From 1991-1993 all projects were technical assistance projects, a development which seems to reflect that the relatively new environmental administration was in a state of flux and was uncertain about its priorities and about how to deal with foreign assistance. A more investment oriented grant policy has been initiated with effect from 1994. The six investment oriented projects approved from 1994-96 account for about 80 per cent of the value of the grants in that period. An Estonian programme coordinator, which oversees project implementation, has been employed since the beginning of 1997. Co-financing from Estonian and other sources has been low; DESF has financed 83 per cent of the project portfolio, while Estonian sources have contributed with 10 per cent in average. Achievements The major fields of activities have been waste management and drinking/groundwater protection. The most significant project seems to have been the clean-up of a former Soviet military airbase at Tapa, where about 100 tons of jet-fuel were removed. The project serves as a demonstration project for similar efforts. In addition DESF funded projects have resulted in one windmill and the installation of a saw dust filter at a wood-manufacturer in Viisnurk. An ambitious project to build up a national system of hazardous waste collection, co-financed by the environmental fund and Phare, has been delayed by poor coordination and difficulties with identification of an acceptable site (cf. PLS Consult report). A solid waste project has also been obstructed by poor cooperation with the involved municipalities and lack of financial commitment from the Estonian side (cf. PLS Consult report). A drinking/groundwater project in Tapa and Arukula, supported by 3 consecutive grants, has pointed out threats towards groundwater supplies from oil-contamination, but the drilling of new water wells awaits implementation of a tender procedure. It is notable that few waste water treatment projects have been initiated in Estonia. Other donors have supported the Talinn waste water treatment plant. DESF has in 1996 initiated water supply projects in Narva and more rural areas with IFI-financing, which will deliver significant improvements. Summarising observations It has been difficult for the review group to assess the exact reasons for the difficulties with project implementation in Estonia, but at least three factors can be mentioned: 1) The lack of experience in a relatively young post-Soviet environmental administration; 2) The limited financial capacity and commitment from the Estonian side and 3) Staff discontinuity in the DESF administration with regard to Estonia. While 1) and 2) may have worked to cause an imbalance towards technical assistance projects, in particular in the first years of activity, 2) and 3) seems to explain the problems with implementing the approved investment projects. A further factor might be the relative difficulties often involved with projects concerning waste. 3.3.3. Lithuania.Trends in environmental and economic indicators After the disintegration from the Soviet economy, Lithuania suffered a severe setback
in GDP. From 1990 to 1993 GDP declined by 62 per cent. The emissions of The Lithuanian economy is energy-intensive, but Institutional capacity and domestic sources of financing. Up to 1990 the central institution responsible for protecting Lithuania's environment, the Environmental Protection Department, was subordinated to its counterpart in Moscow. During the process which led to independence it was transformed and subordinated directly to the Lithuanian parliament. Only somewhat late, in 1994, was an independent Ministry of Environmental Protection established. The State Nature Protection Fund was established in 1988. It was consolidated with the 1991 laws on taxes on natural resources and pollution, but it is not an independent fund as the Polish. Only two thirds of the proceeds from the taxes are devoted to the fund; one third is devoted to the state budget. There are more than 50 different charges and taxes, but as they are all quite low, their main function is revenue-raising. In addition to the state fund there are also 55 municipal funds. The funds have achieved a more important role since 1993, and are assessed to have covered about 20 per cent of the environmental investment costs in Lithuania in 1996 (COWI, 1998: 21). The National Fund is still an integral part of the ministry and does not have the independent status as the Polish one. In 1998, the Lithuanian Environmental Investment Fund (LEIF) was established on basis of a 2 million ECU Phare grant. It is expected that its income will be supplemented by revenue flows from charges and fines. LEIF will operate as a revolving fund, offering low-interest loans. Foreign assistance to Lithuania seems to have arrived later than to the other Baltic countries. The most important actor, when counting both grants and loans, has been Denmark (42%) followed by Phare (16%), EBRD (12%), Sweden (11%), World Bank (1%), Finland (4%), NEFCO (3%) and Norway (2%). From 1991 to 1996 Lithuania received assistance equivalent to 120 million US dollars, mainly for investment purposes. In 1997 the disbursed foreign financing is expected to amount to about 45 million US dollar, a sum which is equivalent to the total environmental investments of 1996 (COWI, 1998: 23, 41). Foreign assistance hence plays a significant role for the overall level of environmental investments in Lithuania. Patterns and problems of cooperation. Two thirds of the grants, measured in kroner, have been devoted to investment related projects. Technical assistance dominated mainly in the first years, but since 1994 a more investment oriented strategy was implemented. It coincided with the increase of activities. Although Lithuania's position as a former Soviet republic is not different from that of Estonia, it is notable that there has apparently been a better interplay between the Ministry in Vilnius and DESF in identifying priorities and making good use of the support. It cannot be ruled out, that the understanding has been that while Finland was active in Estonia, Denmark tried to support Lithuania. Although there does not appear to be a specific structure for coordination and consultation, cooperation with the Lithuanian ministry seems to be well established. The good relationship and the fact that several projects have been identified and initiated in high-priority areas seem to rest with a well developed cooperation with key persons at a high level in the ministry. Cooperation has been facilitated by a local programme coordinator since 1996. Co-financing of DESF projects from Lithuanian sources has been notably higher than in Estonia (62 per cent). On the background of Lithuania's economic hardship, this figure reflects in many ways the close cooperation that has been developed. Achievements About one third of the grants, measured in kroner, has been committed to waste water treatment projects, the majority of which have been placed in HELCOM designated hot-spots. Compared with Poland there have been relatively few feasibility and appraisal projects; practically all the grants have been spent on actual investment projects (IN3). DESF has supported the completion of the Vilnius waste water treatment plant, which had been initiated but never finalised in the Soviet period. Danish soft loans at 60 million DKK have been granted for this project too. Soft loans have also been attached to a more recent project grant, that will introduce sewage treatment in 13 medium sized cities. Small plants based on low-cost technology in rural areas have been supported too. A large geothermal energy project in Klaipeda, co-financed by the World Bank and Lithuanian sources, is one of the notable results of the projects within sustainable energy. There have been relatively few projects within air pollution. Nuclear issues have been dealt with by the sectoral programme managed by the Ministry of the Interior, but training of Ignalina personnel has been supported. Within waste management a modern and protected landfill with biogas production will be established in Kaunas. Nature protection has been an issue subject to several projects. The projects have focused at forest management, protection of river deltas and abatement of forest pests as well as support for NGO-activities in the field. Projects to strengthen the young Lithuanian ministry, in particular with regard to EU-approximation have been carried out. Summarising observations The DESF activities in Lithuania developed later than in Poland and Estonia, but have been comprehensive and surprisingly well placed. The collaboration with the Lithuanian authorities seem to have been exceptionally good in the reviewed period. Given Lithuania's difficult economic situation - it is the country with the most serious decline in GDP of the eight surveyed here - the foreign environmental support seems to make a real difference as it represents about 50 per cent of the total annual environmental investments in Lithuania. So far the projects seem to have matched the priorities and problem pressures of Lithuania well. Waste water treatment was and is the main priority, with waste policy as a second priority (ECE, 1995), and also nature conservation is a traditional Lithuanian concern (Rinkevicius, 1997). Some concern has been expressed in a debate in Lithuanian newspapers that the combination of Danish soft loans and bilateral assistance will lead to more expensive solutions than what would have been obtained in an open tender. It has also been noted that the costs of Danish consultants are quite high, and that Lithuanian expertise could be better integrated in the projects. The decline of environmental investment expenditure that has taken place in Lithuania from 1994 to 1996 from 1.03 to 0.46 per cent of GDP (cf. above) is disturbing in some respects. The foreign support is not meant to make room for budgetary reductions in environmental expenditure. On the other hand, most of these reductions seem to have taken place at local level, where the authorities have been pressed by the realities of the transition economy. 3.3.4. The Russian FederationTrends in environmental and economic indicators Since the dissolution of the Soviet Union in December 1991 and the independence of the
Russian Federation, the transition to market economy has been a difficult process. From
1990-1995 GDP declined by 38 per cent. Partly this decline is believed to reflect
overcapacity in the former production system, which was created to conform with five year
planning, as well as the uncontrolled shadow-economy which has developed in the 1990's.
From 1990-1995 emissions of Environmental investments as a share of GDP has been fairly constant at about 0.36 per cent, but declining in absolute terms due to the decline in GDP (COWI, 1998). Considerable uncertainties are related to actual disbursements, cf. below. The Russian economy does not only remain pollution-intensive - its outdated technology and infra-structure poses a serious health threat to the population. Official data which has become available in later years show that 15 per cent of the country is regarded as zones of ecological catastrophe; 26 of the 89 regions are particularly affected. About half of the population is supplied with drinking water that does not meet sanitary requirement. Air pollution exceeds permitted levels in 204 cities and 1.4 billion tons of toxic waste is generated annually, while facilities for treatment are practically absent (see Nikitina and Kotov, 1998 for a more complete overview). Life-expectancy ranks among the lowest in the industrialised countries. Institutional capacity and domestic sources of financing. The most significant institutional innovation has been the unification of environmental responsibilities in one institution. In the Soviet period, environmental responsibilities rested with sectoral ministries that were also responsible for production or exploitation of natural resources. Former president Gorbatjov created in 1988 a State Committee for Nature Protection, and in 1991 this institution was promoted into the Ministry for the Environment and Natural Resources. The Ministry aquired competences and responsibilities from a range of other ministries, but a bureaucratic competition on tasks and responsibilities continued. The result of this process has been a gradual weakening of the Ministry for the Environment and Natural Resources from 1994 and onwards. In 1996 the Ministry was degraded to a State Committee, and with no Minister it had no longer a voice in the government. Competences regarding natural resources and control with the Russian environmental fund were shifted to other ministries. The re-creation of a state committee is without doubt a serious step backwards for environmental protection in Russia. A decentralisation of responsibilities to regions and Oblasts has taken place, but although these have shown an increased interest for this competence, it is generally not believed to have strengthened environmental protection due to the discretion of local power elites. Corruption is widely spread in government institutions in Russia today. Environmental charges and taxes were introduced under perestroika and in 1991 environmental funds were established at all levels of the Russian Federation (local, regional and federal). 60 per cent of the revenue is allocated to the local level, while 30 per cent is allocated to the regional level. The Federal Russian Environmental Fund hence aquires only a limited share of the available means; 10 per cent of the 200 million US$ which were collected in 1996. Due to the persistent budget crisis, the local authorities have generally incorporated the revenues from environmental charges into their general budgets. Another Russian phenomenon is 'underfinancing'; although the federation formally allocates revenues in the budget, the means are not available. Hence, the national environmental fund is believed to finance salaries for employees in the State Committee. The resources of the national fund are equivalent to 2-3 per cent of the national expenditures for environmental protection - in principle (COWI, 1998b). User charges for water and energy are low and do not reflect operating costs, where they exist. However, they often contribute with a significant revenue flow for environment related investments in these sectors. There is no coherent overview of foreign environmental assistance to Russia, but OECD estimates that the foreign environmental support is equivalent to 7 per cent of the annual environmental investment expenditures. The major contributors are international financing institutions, such as the World Bank and the Global Environment Facility (GEF). About 1-2 per cent of the 7 per cent stem from bilateral donors, which include Germany, Netherlands, Switzerland, USA and the Nordic countries. Grants are provided mainly for local projects, often with transboundary pollution effects, and projects are therefore concentrated mainly in western Russia. Patterns and problems of cooperation. DESF activities in Russia were initiated in 1992, although the cooperation agreement was signed only in 1993. The activities have comprised 46 project grants worth 156 million DKK, and have been focused in the Baltic Sea Region as well as in the Moscow region. Although from the Russian perspective, the DESF share of foreign environmental assistance probably appears modest, Russia has actually been the second largest beneficiary of DESF funds. Two regional programmes for DESF activities in the St. Petersburg and Kaliningrad regions were drawn up in 1996. The average self-financing of DESF projects from the Russian side has been 46 per cent. This figure is surprisingly high, and reflects that there is a substantial capacity for co-financing, in particular among utilities in the water and energy sectors - somewhat in contrast to the appalling conditions of the federal budget. The major cooperative partner has been the State Committee for the Environment, which has approved the various DESF projects. In practice project contacts have been established mainly at the regional or Oblast level, also outside the prioritised regions. Working conditions seem to have been difficult in Russia. While grants are appreciated at the local level, the authorities at the federal level, who must give their approval, are not well informed about the situation in the regions and have not always accomodated the cooperation as effectively as desirable. The contact in the State Committee is with an office for international relations which has many other responsibilities, and which lacks practical experience with project assessment and financing. However, there are also contacts with the State Committee's regional offices, e.g. in St. Petersburg. A proposal for a DESF country coordinator, to be placed in the State Committee, seems to be in progress, and could provide a significant strengthening of the activities. It is the impression of the review team that more diplomacy is needed in cooperation with the Russians than in other CEE and NIS countries. The absence of a strong focal point for environmental protection, bureacratic competition and the difficult economic and financial situation is only part of the problem. Providing assistance to a country with such a political and international legacy as Russia seems to require some extraordinary reflections on the approach and balance of the activities. A too one-sided emphasis on assistance to the western part of Russia, for instance, might be misinterpreted in domestic Russian politics. Achievements. About two thirds of the assistance has been investment-oriented; technical assistance dominated mainly in 1992. Nearly 60 per cent of the grants, measured in DKK, have been provided to projects within waste water. Waste water treatment plants have been renovated and upgraded in the large cities of St. Petersburg, Pskov, Novgorod as well as in the Leningrad Oblast, and sewerage pipes have been renovated in St. Petersburg - all in the Baltic Sea catchment basin. At Moscow's Kuryanovo waste water treatment plant, the world's largest, a unit with phosphorus and nitrogen removal which meets EU standards has been established. Another priority issue has been waste management, where 5 different projects have been
carried out in the Moscow area. Whereas the first were feasibility studies, the final
project will result in the construction of 600,000 A project to plan phaseout of ozone-depleting substances has resulted in 54 million ECU in financial implementation support from the Global Environmental Facility. The project was also carried out in other countries, e.g. Ukraine and Belarus. There have only been few capacity-building projects, but notable is a project to
strengthen the Russian environmental funds. Strengthening takes place in administrative
and organisational terms, e.g. teaching the staff western accounting principles. Few air
pollution projects have been carried out. An ambitious project to retrofit a utility with In Kaliningrad a number of projects have been initiated, particularly for improving water supply, and the investment effort in St. Petersburg has recently gained momentum. Although a number of feasibility projects have been carried out, the impression is that the follow-up has been better in Russia than in Poland. The later start of activities in Russia have favoured a more investment oriented grant policy. Summarising observations Despite difficult financial conditions a number of large-scale investment projects have been implemented in Russia. Cooperation seems to be most effective with utilities in the water sector at the regional level, and despite formal contacts with the State Committee in Moscow the activities are strongly regionalised particularly with regard to the Baltic Sea area. The severe environmental crisis in Russia threatens human health, and a more clear mandate seems to be needed for DESF in order to address this aspect more systematically. Environmental protection does not receive much attention in the current situation in Russia, and since 1994 a systematic weakening of key environmental institutions have taken place. More recently the Duma has shown interest in closing the environmental fund in order to transfer the revenue from environmental charges to the state budget. Russia lacks the prospect of EU-membership to bring its environmental standards up to a reasonable level of protection. On this background, the foreign support could achieve a greater impact if it was more clearly connected with a policy for reforms of Russian environmental policy. Despite a certain degree of donor project coordination, there seem to have been few attempts in this direction currently. The degradation of the Ministry into a State Committee as well as the undermining of the environmental funds are counterproductive developments to the purposes of the foreign environmental assistance and must be regarded as unacceptable from a donor point of view. Foreign support has been linked with policy reforms in other fields, and DESF could raise this possibility with the major international financing institutions involved in environmental projects. 3.3.5. The Czech RepublicTrends in environmental and economic indicators The economic development in the Czech republic since the velvet revolution has been
fairly good, although not as good as the Polish development. GDP declined with 20 per cent
from 1990 to 1992, and has increased gradually with 2.5-3.5 per cent since then. Following
the liquidation of the planned economy, emissions of Despite the decrease in emissions the Czech economy is still energy- and pollution
intensive. Institutional capacity and domestic sources of financing. Environmental policy has experienced a turbulent period since the velvet revolution in 1989. Environmental issues had been a significant theme up to 1989 and remained so until the dissolution of the Czech- and Slovak republic in 1992. The Federal Committee of the Environment (FCE) was from 1990-92 a strong and relatively independent institution, which initiated a comprehensive legislative activity. FCE was not conceptualised as a traditional ministry, but was composed of the regional environmental ministers, viceministers of foreign, financial and economic affairs and the parliamentarian chairs of the environment committees in the Slovak and Czech republics. The purpose was to assure integration of environmental concerns in other sectors of activity. Independent regional administrations, subordinated only to FCE, were created. Forest and nature protection was included under the competence of FCE. Most of these advances were lost when FCE was abolished with the division of the republic in 1992. The Ministry of the Environment lost competences and positions to the economic ministries, and it faced difficulties in having its proposals accepted. The population was less concerned about the environment, and so was the Vaclav Klaus government, which regarded environmental protection mainly as glaze on the cake. Since 1992 the allocations on the state budget for environmental purposes have been reduced. The State Environmental Fund (SEF), which was established in 1991, and based on the incomes from environmental charges, does not enjoy the same status and independence as the Polish fund. It is controlled by the Ministry of the Environment, and it is the Minister which takes the final decision on the allocation of funds (Bizek, 1994). The charges have not been regulated with inflation. SEF is responsible for about 10 per cent of the annual environmental investments, which indicates that its role is limited. However, it seeks to act as a lever for further investments by offering only 40 per cent grants, 40 per cent loans - and requiring 20 per cent self-financing. SEF has mainly spent its revenues on water pollution control, but has recently given more priority to waste management. The revenues of SEF are expected to decline after the 1998 compliance deadline for air pollution emissions. Under the circumstances of the high share of GDP devoted for environmental investments in the Czech republic (2.4 per cent of GDP) the absolute contribution of SEF is more substantial than the 10 per cent share seems to indicate. It is difficult to obtain information on the activity of donors in the Czech Republic. No figure seems to be available in the Czech Ministry on the overall figure for foreign assistance, but one source indicates that foreign assistance has not exceeded 10 million US$ annually, equivalent to 1-2 per cent of total environmental expenditure (Bizek, 1994). Another more recent survey indicates that the following bilateral donors have been active: Austria (38%), Germany (35%), USA (21%), Denmark (4%) as well as Canada, Norway, France, Switzerland and others (together 1%) (Branis and Jehlicka, 1998). The latter survey seems to indicate a higher level of assistance, rather 20 million US$ annually, or equivalent to 3-4 per cent of total environmental expenditure. Patterns and problems of cooperation The Czech and Slovak republic was one of the first countries where DESF began to operate. In what is now the Czech republic 48 project grants worth 73 million DKK have been granted. The activities peaked in 1993, and have declined to a rather low level in 1996. The share of funds granted for technical assistance projects has been relatively high throughout the period; and more than 50 per cent. In 1996 no investment projects were approved. The average share of self-financing of projects in the Czech republic has been 61 per cent. Cooperation with the Czech authorities was affected by the political and constitutional changes that took place in 1992. While DESF initially cooperated directly with the Federal Committee of the Environment, cooperation shifted to the international office of the Ministry of the Environment in the Czech republic after 1992. It is the impression of the review team, that this ministry is seriously affected by turnover of staff. It lacks a clear policy for how to utilise foreign assistance in the most effective way, perhaps because it does not regard the foreign assistance as significant. The Czech government does not cooperate with the international financing institutions, as it does not want to obtain loans for environmental purposes. The modest share of the Danish assistance as compared with other donors can also have affected the attitude of the Ministry. Achievements Control of air pollution seems to have been a major priority for DESF in the Czech republic. The country is only marginally located in the Baltic Sea basin, and sewage treatment has not been an issue of DESF concern, except for equipment for one smaller demonstration project in the city of Horice. It is notable that three projects concerning industrial air pollution have been carried out; the two of them addressing chemical factories and one addressing a wood- and furniture company. The air pollution effects have not been transboundary, however, and the projects seem to have developed as more or less commercial projects. The factories have identified Danish environmental technology or consultants and support has subsequently been obtained. A cluster of projects have been implemented in the city of Decin in the 'black triangle' and have resulted in conversion of two decentral coal fired units to gas fired units. It functions as a demonstration project for Danish gas turbines and gas technology and has helped reduce local air pollution in a valley with serious inversion and forest die-back. The project, which was identified by DESF, was co-funded by SEF and Clean Air Policy, a private US donor. In return for its contribution the US donor required that all of the reduced emissions could be credited in a domestic US emission trading programme. The US donor financed only 10 per cent of the project, but according to independent observers the Decin project is now better known in the Czech republic as a demonstration project for joint implementation, rather than for the Danish contribution. As the project otherwise has been found to be very satisfactory, it raises some questions regarding PR and information on the Danish efforts. Within waste management one project has assisted in the commercial establishment of a controlled landfill for hazardous waste in the Ostrava region. A project to build an incinerator in the city of Most failed because of lack of financial support, due mainly to poor project preparation, and political difficulties. Technical assistance has been offered in a number of projects, and three project clusters relating to capacity building will be mentioned here. Three subsequent projects addressed the establishment of a new water law in the Czech republic. Draft legislative texts were discussed, and study trips for the Czech officials to a number of countries sponsored. According to the project documents, the project was carried out succesfully. However, during the visit of the review team to Prague it was revealed that the water law had never been passed. It had been turned down at an early stage, apparently because of a 'poor and inconsistent draft' according to an independent observer at Charles University. A second and more succesful TA project cluster relates to the issue of economic instruments in Czech environmental policy and green tax reform. The first project resulted in a comprehensive report on Danish environmental taxation experiences, and a closer working relationship has been developed with the Ministry as with Czech environmental economists on this issue. The projects are not so sophisticated in terms of economic methodology, but have catalysed essential and otherwise absent policy considerations. It is the impression of the review team, that the broader political impact of these projects so far have been limited, due to the weak position of the Ministry of the Environment, but the advent of a new government might cause a change. A regional energy TA project in East Bohemia has many similarities with the Jelena Gora project in Poland. It was a technical assistance project and the Danish consultants addressed several issues, including feasibility studies and demonstration of energy saving measures in a public institution. However, a much closer working relationship seems to have developed, in particular because a Czech partner was directly involved in the implemention of the project. This consultant is at the same time a key advisor on Czech energy policy for the government, e.g. on energy price reform, and it seems that Danish ideas and principles for energy planning and saving in this way have become institutionalised knowledge in the Czech Republic, in particular a computer model for local energy planning. Summarising observations DESF activities in the Czech republic have declined somewhat after the environmental protection 'recession' began in 1993. The lack of an active attitude from the Czech Ministry of the Environment and the fact that DESF has been one of the smaller donors, seem to be significant factors in understanding the way the project portfolio has developed. The relative strong emphasis on technical assistance, in particular for feasibility studies etc., is surprising given the level of technical know-how in the Czech republic. On the other hand, the investment oriented projects seem to have developed mainly due to more commercial interest from Czech firms or utilities that have screened the market for adequate environmental technology. It cannot be ruled out that Danish technology would have been chosen also without DESF support. DESF seems to have been only partly succesful in linking its funds for local or regional investment projects on a broader scale, with the Decin and Ostrava projects as notable exceptions. The lessons to be learned from the mentioned TA-projects seem to be pertinent to the CEE as a whole. To engage directly in the details of legislative activity is cumbersome and not without substantial risks, and may lead to excessive use of funds. To match relevant national partners with Danish project consultants seems to be a better way of transferring know-how and methods, while leaving the specific decisions or proposals to be developed to the country itself. Due to the commitments in the legislation that was passed in 1991-92, particularly regarding air pollution control, the ambitions in Czech environmental policy must be regarded as relatively high. Also expenditures for environmental investments are apparently at a higher level than in many other countries in Europe, including the EU. Approximation with EU environmental legislation remains an economic and political challenge, and the Czech Republic seems to rely mainly on the polluters to pay, as strong environmental funds do not exist. Whether foreign assistance still has a role to play in the Czech republic is an open question, given the level of know-how and internal financial commitments, as well as the domestic political priorities. 3.3.6. Slovakia.Trends in environmental and economic indicators. The economic development in the Slovak Republic was difficult in the first years of
transition, where GDP declined with 21 per cent. However, since 1993, and after
independence, Slovakia's GDP has been steadily increasing, with annual growth rates from
4-9 per cent. In 1995 The Slovak economy is energy and pollution intensive, dominated by several heavy
industries. Nominal Institutional capacity and domestic sources of financing. The Slovak Republic followed the same path of almost revolutionary developments in environmental policy as the Czech Republic in the years of the joint Czech and Slovak Republic. However, from the 'velvet divorce' in 1993 the developments have been marked by "the resignation of many experts from the state environmental administration, restrictions in budgeting for the environmental sector, constraints in presenting environmental themes in the mass media, environmental legislation stagnation and the continuing development of anti-environmental and unsustainable trends and activities" (Szollos et. al., 1998: 96). Legislation has been passed to spite the NGO's; restrictions have been imposed on their spending. The Ministry of the Environment inherited the responsibilities of the former Federal Committee of the Environment, but was weaker and much less influential. Still, an important strategic document, the State Environmental Policy, managed to get approved by the government in 1993 and by the parliament in 1996. The reductions apportioned to the Ministry on the state budget exceed the budget reductions of any other ministry. The State Fund for the Environment of the Slovak Republic was established in 1991. The Minister of the Environment appoints an advisory board for the fund, but is responsible for the allocation of funds. In 1993 the Fund contributed 20 per cent of total environmental expenditures. Since then its incomes have not been increased, despite inflation. Foreign environmental assistance has been provided by the usual range of donors, but has been more limited than in the Czech Republic. From 1994-1997 the most important were Denmark (46%), EU-Phare (28%), GEF (13%) and Switzerland (12%). In 1996 the contribution was about 35 million DKK and (compared with a SEF-budget of 1.2 billion SEK) it means that the share of foreign assistance was about 2-3 per cent of total environmental expenditures. Patterns and problems of cooperation. DESF has been especially active in Slovakia since 1995. A total of 16 projects representing grants of 44 million DKK have been initiated in Slovakia. 78 per cent of the grants have been provided for investment projects and the Slovak co-financing has been surprisingly high, 87 per cent. The projects are scattered across a wide range of activities, with a certain focus on air pollution, waste water and sewage projects. The 1993 DESF strategy for Slovakia made air pollution first priority and 49 per cent of the means have been devoted for such projects. A programme coordinator has been employed in Slovakia since 1996. Achievements The results of two of the early technical assistance projects confirm the difficulties inherent in the 1991-92 approach of DESF. The recipients formulated it politely that a report on a waste management system in Kosice was "considered as informative material - from this point of view we have not used the project". Some more ambitious investment projects have been initiated in later years of DESF operation. A modern waste water treatment plant has been established in Ziar nad Hronum and serves as demonstration unit for Danish technology. Two windmills will be placed in Ziar nad Hronum. And dustfilters will be installed at wood and furniture factories. Technical assistance continues to be provided also. Two subsequent projects have addressed a possible laboratory structure for the Environment Ministry. A fact-finding mission was carried out to Slovak slaughterhouses and a feasibility study for geothermal energy initiated. Summarising observations The developed projects seem to be sound, but most of them are still under implementation. The situation in Slovakia is not elevating and is likely to have affected the opportunities for project development. Environmental expenditures have been reduced significantly, despite growth in the domestic economy. The government is reluctant to ensure progress in environmental protection and environmental interests are not taken seriously. The DESF project portfolio has so far not addressed issues of capacity-building or strengthening of NGOs, but it would be appropriate to do so under the present circumstances. 3.3.7. RomaniaTrends in environmental and economic indicators The decline in GDP in Romania was serious from 1990-92; about 25 per cent. From 1993
GDP has increased notably with 3-5 per cent annually. Emissions of Romania's economy is the most pollution- and energy intensive in eastern Europe, when
not counting the NIS-region (Klarer, 1997: 7). Emissions of Institutional capacity and domestic sources of financing. The Ministry of Water, Forests and Environmental Protection was first established in 1990 and aimed at an integral approach to environmental management. The pace of reforms has generally been slow in Romania, and that seems also to apply to environmental protection. In 1995 the new Environmental Protection Act was finally approved by the parliament. The Ministry lacks an operational wing in terms of an environmental protection agency, and as the administrative tradition is quite centralised, the local and regional authorities are rather weak, also in environmental matters. Romania is nevertheless keen on implementing the international conventions it has signed. No environmental fund exists in Romania. The main source of environmental financing is the state budget as well as private enterprises. US-AID has initiated a project to prepare for the creation of an environmental fund. No figures or data are available on the relative contributions of other donors. Patterns and problems of cooperation. DESF activities in Romania were only initiated quite recently. Apart from an early ODS phaseout project, the first project was granted in 1995. The start of the cooperation with Romania was connected to the preparation of a national environmental action plan at the occasion of the Sofia conference. Denmark had agreed to a twinning arrangement with Romania for this purpose, and from the cooperation on the NEAP the project portfolio seems to have developed. Cooperation took place with ICIM, a research institute subordinated both to the Ministry of Environment and the Ministry of Education. ICIM has elaborated the NEAP for Romania in cooperation with Danish consultants. In 1995 and 1996, 12 different projects, accounting for total grants worth 47 million DKK have been initiated. 2/3 of the grants have been spent on investment related projects, but most of these are still under implementation. Romania's ability and willingness to co-finance projects have improved, e.g. in the Arad waste water project and the cement projects. A project coordinator has been employed since 1996. The coordinator is not placed in the Ministry, but works from Brasov. The contacts with the Ministry itself seem to be reasonable, although there is scope for improvement in particular regarding the application of the NEAP. Cooperation with the Ministry of Industry is well developed. Achievements One of the more spectacular projects is a project to limit emissions from Romania's cement industry with Danish technology. The present production methods are primitive and the emissions are harmful to health several places in Romania. The project is under implementation, but has been impeded by privatization of the industry. As new French owners refused to continue the agreed project at one plant, the Romanian Ministry of Industry decided to require formally, in the tender documents, that the project be carried out with the required co-financing at the other plants to be privatised. A project concerning a Local Environmental Action Plan is under implementation, and the chosen region is well-known in Romania for its active pollution control policy. Investment projects regarding water supply, waste water treatment, district heating and solid waste management at various locations have been granted. The identified projects seem well placed and efforts have been done to assure co-financing. It is noteworthy that few feasibility studies have been initiated, and that it has been possible to progress directly towards rather comprehensive investment projects. Summarising observations Cooperation with Romania has been developed only recently. Not many other donors have paid attention to Romanias environmental difficulties, that belong to some of the most serious in Eastern Europe. The slow pace of reforms may have contributed to this development. The links which have been established through work on the NEAP seem to have provided a good platform for further initiatives by DESF and a special relationship with key authorities that may prove fruitful in the future. 3.3.8. UkraineTrends in environmental and economic indicators Ukraine has found itself in a painful and difficult process of adaptation to the
dissolution of the former Soviet Union. Political reforms towards a market economy have
been slow or absent, while GDP has declined more than 50 per cent compared to 1990. There
are not indications that the economy will recover in the near future. Emissions of Ukraine's economy is pollution-intensive. Emissions of Institutional capacity and domestic sources of financing. The Ministry of Environmental Protection and Nuclear Safety was established in 1991, building on the former State Committee that was established in 1987. Management of issues related to nuclear safety was added to the portfolio of the Ministry in 1994, and constitutes the most significant part of the Ministry's activities. The Ministry has responsibilities related to environmental standards, health protection and inspection, but issues related to water supply and sewage is vested with the recently merged State Commitee of Architecture, Housing, Construction, Reconstruction, and Water. The Ministry's operational wing is the State Department for Environmental Protection, which is responsible for practical implementation and has regional offices in the different Oblasts. In addition, a separate Ministry of Emergencies and Affairs of Population Protection from the Consequences of Chernobyl Catastrophe was established in 1991. There is a lack of clarification of responsibilities between these two and several other ministries (Diukanov, 1998: 136). Since 1991, Ukraine has adopted a basic environmental legislation, but mainly based on 'command-and-control' approaches. In 1996, a National Environmental Action Plan was approved by the government, and approved by the parliament in 1998. The plan is a result of the NEAP process, but is said to lack clear priorities, clear targets and specific initiatives. The plan has only recently been made available to the public. Environmental funds in Ukraine are weak. Pricing of water and sewage follows the principles from the Soviet period and has not been reformed. Foreign environmental assistance to Ukraine has been limited. OECD estimates that for 1994-97 it totals about 430 million DKK, including both donations and international credits and loans. The World Bank has so far not succeeded in implementing any of its loans. Under the TACIS programme about 10 rather small scale projects focusing on nature conservation and technical assistance have been granted. US-AID has operated an office in Kiev, but is not likely to continue its activities. Figures are not available for the contribution of various donors, but Denmark is said to be the most active bilateral donor presently. Patterns and problems of cooperation. Cooperation with Ukraine commenced in 1992. The first project was initiated in 1993 and a formal agreement of cooperation signed in 1994. Ukraine has been one of the smaller beneficiaries of DESF activities, but in recent years the activities have increased. From 1991-96 grants worth 41 million DKK distributed on 13 projects have been initiated. 12 of these projects were approved from 1994-96, so the activities are quite recent. DESF has indicated that annual disbursements could be raised to the level of 40 million DKK in 1999. 60 per cent of the grants have been directed towards investment projects, mainly within air pollution but also related to water and waste water. Technical assistance has been focused mainly in the water sector, and has related to efforts to improve water supply and sewage systems in different parts of Ukraine. There has been little co-financing from domestic sources in Ukraine. Projects that required co-financing have been stalled due to lack of financial means and other difficulties. The Ministry's environmental section has limited staff and is marked by the same difficulties with turnover of staff as elsewhere in the region. Salaries of public officials have not been increased with the inflation, and the morale does not seem high, as one cannot sustain on the official income. DESF should continue to be aware of the risk of corruption, which may take place through requirements for returns from Ukrainian project partners. A country programme with a list of priorities has not been formally agreed between Ukraine and DESF, although agreement was reached with the Ministry of Environmental Protection and Nuclear Safety. The State Committee of Housing, Construction, Reconstruction, Water and Architecture wanted to stand as signatory of the agreement. This latter Commitee has apparently been a difficult partner in projects relating to water. Achievements The DESF supported investment projects are generally large-scale and impressive, as they address significant environmental problems. A project to clean up a former Soviet military air base at Ludsk for oil pollution will address one of the largest contaminated sites in Ukraine, and is a project several times the scale of similar projects in Denmark. A project to introduce cleaner technologies in the machine-building industry will involve up to 20 companies and offer training of Ukrainian engineers and staff. Although the project will probably not create win-win situations from an economic point of view, it will serve to demonstrate what can be achieved by minimising consumption of materials for production. It will also institutionalise know-how about cleaner technology through the involved Ukrainian partner. Ambitious and large-scale projects to remediate air pollution effects in Ukraine have been agreed, but the projects have not been able to raise the desired co-financing, due to the economic situation. A substantial effort has finally been done in relation to the water sector. In Lviv, studies for preparation of a water and waste water project are likely to lead to implementation. And a feasibility study at Chrimea is likely to lead to the World Bank financing a regional project to renovate the water infrastructure. The Chrimean region is particularly affected by the decay of water infrastructure. Finally, DESF has supplied significant water supply equipment for Yalta and Sevastopol. Summarising observations Despite the difficult framework conditions for environmental policy, DESF has managed to launch a number of ambitious projects, that are likely to yield significant environmental benefits. Cooperation with the Ukrainian authorities as well as with the international financing institutions, particularly the World Bank, seems to be good. The prospects for the future effort in Ukraine look promising, although the lack of domestic means for co-financing is not acceptable in the longer run. The main problem in Ukraine seems to be the lack of reforms, politically and
economically. The absence of reforms has also implications for environmental protection.
Institutional strengthening, e.g. through improved information systems in the Ministry and
possibly for creation of an independent environmental fund, could help catalyze the
environmental reform process. The focus on water supply could be supplemented with
initiatives to introduce proper pricing of water services in the Vodocanals, and hence
increase the revenue flow for renovation of the water infrastructure.
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