Denmark's environmental assistance to Eastern Europe 1991 -1996 5. Concluding assessment of DESF activities 1991-19965.1. Assessment of the achieved results
5. Concluding assessment of DESF activities 1991-1996.5.1. Assessment of the achieved results.5.1.1. The project portfolio.From 1991-1996, DESF provided grants for 496 projects of bilateral assistance. By September 1st 1998, 327 projects had been finalised, while 169 projects were still under implementation. In the first two years of activity the emphasis was mainly on technical assistance. From 1993, a more investment oriented strategy has been pursued, in which projects that integrate support for equipment and construction works with consulting services have been prioritised. In the first five years of activity, DESF relied on applications from Danish project initiators, but since 1996 a tender procedure, for projects developed in co-operation with the recipients, has been introduced to supplement the application procedure. The review of the project portfolio has shown that the most significant field of activity has been support for waste water treatment, followed by sustainable energy projects. About one third of the grants was spent on purposes related to waste water treatment, mainly extention and modernisation of existing plants. Within sustainable energy, activities have focused on coal-to-gas conversions and geothermal energy. In the reviewed period 62 per cent of the available funds were provided for investment oriented projects, while 38 per cent were provided for technical assistance. The actual share of DESF funds granted for hardware and equipment has for the reviewed period as a whole been 25 per cent, but has increased to about 35 per cent in the years after 1993. A fundamental component of the DESF strategy has been to assure co-financing from sources in the recipient countries and, where possible, from international financing institutions. This co-financing has been considerable; the final accounts from 342 finalised or reported projects show that DESF funds have been matched with other funds in the ratio of 1:2. Financial sources in the recipient countries have covered 62 per cent, while the remaining shares have been covered by Danish loans, partner contributions, other donors and international financing institutions. When including the co-financing, the hardware share of the total DESF project budgets has been 70 per cent in the reviewed period. The considerable East European co-financing of the DESF projects is in some respects surprising. The degree of co-financing varies among the different countries, and has been most significant in countries such as Poland, the Czech Republic, Slovakia and Lithuania. The East Europeans contribute to the projects with labour and buildings but also with financial means for investments, and they seem particularly keen on the need for actual equipment and hardware that represent environmental investments. DESF has made a considerable effort to release loans from International Financing Institutions (IFIs), such as the World Bank and the European Bank for Reconstruction and Development, for environmental projects. This effort has provided significant results in 15 projects. DESF has provided grants for pilot projects, that have served to prepare the way for subsequent loans. This effort is part of a more recent strategy and most of the projects with IFI involvement are still under implementation. From 1991-96, DESF has been engaged in IFI projects with a total commitment of about 782 million ECU or about 6 billion DKK. Two thirds of the projects have been co-ordinated by Danish consultants. There are relatively few Danish firms which have the capacity and resources to manage environmental projects in Eastern Europe. About 20 Danish firms, mainly consulting engineers, have been very active in DESF projects and account for the majority of the grants. Still, supply of equipment and materials have involved a larger group of Danish firms. The most important type of project partners in the recipient countries has been local, regional or national authorities, as well as consulting companies and public utilities. 5.1.2. Results of the project reviewA survey was conducted among the project contractors of all DESF financed projects and a sample of DESF projects were carefully reviewed by a team of technical and environmental experts (PLS, 1998a). The projects were reviewed both according to the overall DESF targets and according to their own implementation. The review followed a systematic classification (cf. Chapter 2). The survey among the project contractors showed an overall satisfaction with the programme management of DESF. There seems to be room for further improvement in particular regarding the transparency of project selection, and also regarding the time used to make decisions on projects. A crucial component of the overall review was the in-depth review of a sample of 47 projects. These projects were selected to be representative for the total number of investment projects, geographically and with regard to type of activity. Interviews were carried out with the project partners and a technical inspection took place. Each of the 47 projects has been described and assessed in a separate report. Each project has been assigned a score on seven variables, that are deduced from the general principles for DESF operation. The variables reflect both project internal targets as well as programmatic targets for DESF activities. The following classification scale was used for the assessment of the projects: 0-1 H: Very dissatisfactory, 2-3 H: Dissatisfactory. 4-5 H: Less satisfactory. 6-7 H: Satisfactory. 8-9 H: Very satisfactory. The results of the in-depth project review are presented in table 2.12 on page 36-38. 15 projects were rated very satisfactory, 16 projects were rated satisfactory, 7 projects were rated less satisfactory and 3 projects were rated dissatisfactory. The average score for 41 application projects was hence "satisfactory". Also for the 6 tender projects, the result was on average satisfactory. This result shows that the general results of DESF's activities at project level have been found to be satisfactory when assessed against the original purposes with DESF's activities. This is a result, which is not often achieved by programmes for foreign assistance. 5.1.3. Results of the country review.A review of environmental policies and institutions, as well as the patterns of co-operation with DESF, has taken place in eight countries; Poland, Estonia, Lithuania, Russia, Czech Republic, Slovakia, Romania and Ukraine. Considerable declines in air and water pollution emissions have taken place in all of Eastern Europe since 1989, but these declines generally reflect the decline in industrial production. Only in Poland and the Czech Republic have active pollution control policies played a perceptible role. In Estonia and Lithuania policies combined with foreign support have played a role mainly with regard to waste water treatment. In Russia, Ukraine, Slovakia and Romania the declines in various emissions are mainly due to the difficulties of the economic transition processes. Foreign assistance for environmental protection has been offered by many Western countries. In the Baltic states the foreign assistance has reached a level of 35-50 per cent of the annual environmental investments. In Poland, the Czech Republic and Russia foreign environmental assistance has not exceeded 5-7 per cent. The capacity for environmental protection can be regarded as relatively satisfactory only in Poland, where the existence of independent environmental funds, based on the incomes from pollution charges and fines, offer a stable financial framework for continuous investments in pollution control. In the Czech Republic and in Estonia, the environmental funds are weaker and have a smaller turnover. In these three countries, as well as in Lithuania and Romania, there is however an interest to conform with EU environmental standards, which seems to assure a certain amount of progress. This is not the case in Russia, Ukraine and Slovakia where environmental protection policies, compared with the ambitions immediately after the changes of the political systems, by and large have been dismantled. Foreign environmental assistance has a different role to play in the different parts of the region. In Poland and the Czech Republic, the environmental assistance can provide access to advanced equipment and offer partnership and training to local institutions and persons. In the smaller Baltic states, the assistance can enable these countries to achieve a more reasonable environmental standard. In Russia, Ukraine and Romania the assistance can offer relief in some hot-spots. Co-operation between DESF and the environmental authorities in the recipient countries has taken place according to framework agreements. Co-operation seems to have been significantly well developed in Lithuania and to a considerable extent also in Poland, which have been some of the largest beneficiaries of DESF activities. Co-operation seems also quite well developed with Romania, Ukraine and Slovakia, although marked by the political and institutional difficulties in these three countries. In the Czech Republic and Estonia there are other donors who have played a more significant role, and the activities and achievements of DESF have been less impressive. In Russia, co-operation has been developed both at the national and regional level, and despite the prevailing administrative and economic disorder, the results are good. Generally, the recipients stress, that DESF operates in a flexible and effective way, that the DESF staff is active and enthusiastic and that DESF belongs to the group of donors that offers real assistance in terms of support for investments. 5.1.4. Environmental effects of DESF activities.The investment projects account for two thirds of total DESF grants, and of this category about 80 per cent have reported achieved or stipulated environmental effects. 84 have reported their achieved environmental effects by August 1998, while 80 projects under implementation have reported stipulated environmental effects. The remaining projects within technical assistance have not yielded direct environmental effects. The environmental effects have not been directly measured, but are the effects reported by the project coordinators. The effects are the gross effects, resulting from the total financial effort in addition to DESF support, as it is not possible to disentangle the environmental effects resulting from the DESF contribution. In table 5.1., the key environmental effects are listed and compared with key environmental emission data for Denmark. The overall environmental effects to be achieved under the DESF programme are significant. It was mainly with effect from 1993 that DESF initiated its more investment oriented support policy, and delays in project implementation have not been unusual for many of the large investment projects, that require co-financing and which need to pass lengthy approval and planning procedures. Many of the project grants from 1995 and 1996 were effectively still under implementation when the review was carried out. This explains why the greater part of the environmental effects depend on projects currently under implementation. With regard to air pollution 5,197 tons of With regard to water pollution, organic material equivalent to about 407,000 person equivalents has been removed, mainly due to renovation and extention of municipal waste water treatment. Further reductions of about 1,866,000 person equivalents are expected as a result of the DESF effort. This capacity includes in many cases phosphorus and nitrogen removal. With regard to waste management, a hazardous waste capacity of annually 830,000 tons has been established. Landfill capacity of 341,000 tons has been achieved and expected
Table 5.1. Environmental effects from DESF supported investment projects (N=145). Achieved, stipulated and total. The stipulated environmental effects represent estimates from the project contractors, and the review team expects on basis of previous experience that some of the stipulated project effects are likely to encounter implementation difficulties. The effects within waste water treatment are the most realistic, while figures for air pollution and waste management are more uncertain. The total environmental effects are less impressive than initially expected, especially
with regard to 5.2. Summarising conclusions.The assessment of DESF activities from 1991-96 has shown, that the beginning was difficult, but that the DESF administration has managed to develop and innovate its grant policy in a direction, that has yielded satisfactory and promising results. In the first two years of activity, the emphasis on technical assistance did generally not provide a reasonable level of results. The use of the application method combined with the understaffing of DESF caused an unfortunate bias towards consultant-driven projects, the output of which was often a rather general exchange of ideas between East and West, e.g. in terms of non-committing feasibility studies. The political and administrative disorder in Eastern Europe contributed to the difficulties with project identification. The more investment oriented grant policy, based on a closer dialogue with the recipients, which was introduced from 1993, has managed to produce a more significant and visible output. This effort was partly developed on the basis of project contacts that had been established in 1991-92, but also on the close co-operation with relevant environmental authorities. Annually, DESF has supported about 40 large and middlesized investment projects, co-financed with East European and other sources - mainly within the fields of waste water treatment, sustainable energy production and waste management. The efforts of DESF to develop co-operation with the International Financing Institutions in order to multiply the funds available for environmental projects have been a significant component of the more investment oriented strategy and a major achievement. Through IFI-involvement in 15 projects about 6 billion Danish kroners will be provided as loans for environmental projects. The in-depth review of 47 projects, a representative sample, has shown that when assessed on a systematic scale, that includes both programme relevance and project goal fulfilment, the implementation of the DESF projects is found to be "satisfactory". The in-depth review was a crucial component of the overall assessment and this result is significant for the overall evaluation of the ability of DESF to develop and fund projects. There have been well developed contacts with the national environmental authorities in all the recipient countries, and often close consultation on the selection of projects. Of the 8 countries included in the country review the results of DESF activities are especially impressive in Lithuania, while they seem quite promising in Romania and Ukraine despite the shorter timespan of the DESF effort. Good results have also been obtained in Russia and Poland. Results are most impressive where large-scale projects have been identified and implemented to address basic environmental issues or problems. In countries where the co-operation with the environmental authorities have been especially close and succesful, the project pattern seems to be less marked by feasibility studies, and more by direct implementation. The implementation of the investment projects has not always been as smooth as one
might expect, and several of the largest and most ambitious projects are still in
progress. Delays have been caused by factors that could not always be anticipated. The
achieved and reported environmental effects from DESF activities are so far relatively
moderate as regards the key parameters There is reason to believe that the implementation of the full DESF project portfolio
will yield significant environmental benefits; i.e. a renovated waste water treatment
capacity of about 2,300,000 person equivalents in the Baltic Sea region, a reduction of
acidyfying The relatively high level of co-financing from other actors implies that the overall return percentage, i.e. means being used for the purchase of Danish technology and know-how, is calculated to be not less than 130 per cent of the grants. Since data are missing from 77 investment projects and from the IFI projects it is a somewhat conservative figure, but the only one available. There has hence been an additional commercial benefit for Denmarks environmental industry from DESF activities. Still, there have also been many DESF projects financed mainly or exclusively by DESF means, for instance within nature protection, soil pollution and capacity building. More than half of the 496 projects were implemented only with DESF support. The assessment has shown that since the more investment oriented strategy was initiated in 1993, in average 35 per cent of the DESF grants have been used for equipment/hardware, while the remaining has been spent on consulting services. Within the group of investment projects the share used for equipment/hardware is higher, in average 50 per cent. However, the average hardware share for the reviewed period as a whole was only 25 per cent. Concerns have been voiced in the recipient countries that Danish consultants are expensive, and the recipients stress that they have domestically a strong base of technical know-how that could be better integrated in the projects. They prefer the support to be used mainly for purchase of advanced environmental equipment. The reviewers do not agree with the most hardware-focused opinions that have been expressed, but the hardware share is essential because it is the combination of tangible amounts of hardware combined with technical assistance which is likely to have the most significant impact in pedagogical and environmental terms. Many donors offer only technical assistance, but DESF belongs to the group of donor agencies that also offers support for investments. It belongs to one of the substantial merits of DESF that the decision was taken also to support direct investments. Still, the reviewers are of the opinion that the hardware share of DESF grants could be increased to a somewhat higher level than the present. A 50/50 division between hardware and consulting services would be a reasonable and realistic yardstick. A higher hardware share would also allow more Danish firms to contribute to DESF projects. The introduction of the tender procedure in the last years of the reviewed period provides reason for optimism regarding future DESF performance. Basically, the tender procedure offers the possibility to identify large-scale projects in close co-operation with the authorities in the recipient countries and in closer accordance with their priorities. The tender procedure allows also for competitive bids for project implementation. Some difficulties arise from the resources and time necessary to develop tender projects; tender projects need to be large projects and they need to be very carefully prepared. The review team recommends that DESF is supplied with additional administrative resources for this purpose, if necessary by being allowed the same share of administrative resources as Danced and the former Danida. The review team also recommends that the application method be continued, although with some changes cf. below. The tender projects that have been initiated in 1996 provide reason for optimism as regards the future capacity of DESF to deliver considerable results for the resources devoted to environmental assistance. These projects address urgent problems, the hardware share is notably high and collaboration seems to progress productively. 5.3. RecommendationsThe following recommendations are provided on the basis of the assessment: - to include health-related aspects of environmental protection, particularly regarding water supply, more firmly in the DESF-mandate, - to announce to the recipient countries the approximate annual amount available for projects in each country, to allow the recipients to consider their priorities more carefully, - to strengthen co-operation with the recipient countries by extending the network of country co-ordinators to all the involved countries, - to increase the use of the tendering method and provide an effort to increase the average hardware share of DESF grants to a minimum of 50 per cent, - to advertise transparently the possibility to submit applications for DESF grants at specified deadlines, with indication of priority activities and countries, - to revise the project assessment system to include also financial cost-effectiveness methods, providing yardsticks for reasonable costs per unit of emission reduction, - to encourage the participation of technical experts and companies from the recipient countries in the projects and to provide credit for such inclusion in the project assessment, - to develop more routine project packages that can be replicated with fixed shares of DESF grants, in particular for waste water treatment, coal-to-gas conversions and cleaner technology, and in general to allow replications of projects where reasonable, - to avoid projects related to waste incineration, except where clear and firm commitments can be provided ex-ante by the relevant authorities, - to provide technical assistance to further the strengthening of environmental funds and establish transparent and accessible information systems in the environmental ministries, - to establish fixed and guaranteed deadlines for consideration of project proposals, - to introduce firm procedures for monitoring and inspection of DESF investment projects, possibly also by third-parties - to introduce firm procedures for ex-ante and ex-post monitoring of emissions, in order to substantiate environmental effects of DESF projects, - to improve the network of country co-ordinators by annual seminars and more precise assignment of responsibilities, - to extend and improve informational activities on the supported projects, for instance through DESF signposting at major investment projects, - to consider untying the assistance to Poland by placing financial means directly in the Polish Eco Fund in return for a seat on the Board, as other countries have done, - to reconsider the need for assistance to the Czech Republic and Hungary, - in Russia, Ukraine, Belarus and Slovakia to improve donor co-ordination in order to tie the Western assistance more closely to suggestions or requirements for reforms of environmental policy and its institutions, - to strengthen the co-ordination with other Danish ministries and the recipients, as well as with the wider economic and political issues at stake in the region, by placing environmental attachés (with environmental insight) at Danish embassies in Warsaw, in Russia and in one of the Baltic states if possible at a reasonable level of cost. 5. Sources: OECD
environmental data 1995; Miljøtyrelsen Vandmiljø-96, Miljøstyrelsens affaldsstatistik.
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