Slobodan Perović, Assistant Minister In The Sector For Strategic Planning And Projects, Ministry Of Environmental Protection:

The Four “I”S Of Serbia’s Environment Portfolio

The current state of play in Serbia’s green investment portfolio might seem grim even to connoisseurs – but only at first glance. Even with the current low rate of investments and projects in the pipeline, a reality check shows that Serbia might be the future investment Eldorado when it comes to capital environmental infrastructure projects

The paradigm shift needed for the commencement of a new investment cycle and the necessary inflow of private capital in the green part of domestic economy is still essential. It will comprise the introducing of innovations in the traditional investment cycle and the initiating of a new portfolio of infrastructure projects. Both activities will demand the full commitment of the stakeholders involved and excellent communication between them – which is definitely not a job for a single ministry alone. As this was spotted early by the Ministry for Environmental Protection’s (MEP) Sector for Strategic Planning and Projects (SSPP), the outline of a more strategic approach to the vital issue of rebuilding Serbia’s environmental infrastructure can naturally be described with four “I”s: Initiative, Infrastructure, Investment and Innovation.

INITIATIVE

The main driving force behind the initiative is the Government’s determination to empower the ministry and increase its ability to manage EU environmental approximation processes, efficiently prepare and take part in the upcoming EU accession negotiations for Chapter 27 and successfully implement the EU Acquis. Managing such long-term needs will require a thorough revision of environmental planning and the financing of the system, with special focus on setting priorities and developing a pipeline of investment projects. However, rethinking innovative environmental management will require strong leadership, a clear vision and improved communication among all parties involved, as well as the streamlining and clarifying of decision-making process. At the end, delivering negotiated targets will also require the clear setting of the sequencing of priority projects and which institution is to assume the responsibility for achieving negotiated targets.

INFRASTRUCTURE

The priority fields for investments in the environment in Serbia are clearly the waste and water management sectors. If we delve into greater detail, several directives and their implementation will be the main driving force for the selection and preparation of priority infrastructure projects for financing. Among the most important for public infrastructure financing in the field of environment are the ‘Urban Waste Water Treatment Directive’ and the ‘Drinking Water Directive’ – for large water management infrastructure – and the ‘Landfill Directive’, including the ‘Waste Framework, Packaging and Packaging Waste Directive’ – defining regional waste management infrastructure. In addition to available IPA funds and several successful PPPs, Serbia has very limited experience in completing capital infrastructure projects in these fields. Some of the public projects commenced in 2010 have still not been finalised, while the number of projects in the development pipeline is not even close to enabling the utilisation of all available funds. There are multiple reasons for this situation, but only one answer: Serbia needs developed infrastructure projects, and the focus of the MEP in the period ahead will be supporting the development of technical and tender documentation in accordance with Serbia’s priority list of projects. Special assistance is to be provided to municipalities and cities, since their internal resources are often insufficient to meet the needs for new investment in environmental infrastructure.

The Green Fund and its operationalisation will mean that the new, transparent way of supporting the green agenda has prevailed and that innovators in Serbia are gaining a powerful ally

INVESTMENT

Financing environmental investment remains a major issue for providing a solid background for the Negotiating Position. According to the preliminary proposal developed by the Ministry of Environmental Protection, to be discussed with the Ministry of Finance, financing of €6.44 billion for investment in the water and waste sectors from public sources (EU and national) might be required, while the expected sharing of funds among priority infrastructure needs is approximately 70 per cent for water and 30 per cent for the waste sector.

The planning and coordination of financing sources for waste and waste water project preparation and implementation remains the main task for both the Ministry of Environmental Protection and the Ministry of Finance, in order to improve investment processes. A prerequisite for this is the so-called ‘multiannual investment and financing plan’ which will integrate costs and financing needs from all available DSIPs. Furthermore, in order to make the process transparent and inclusive, the MEP has adopted ‘Environmental Financing Principles’, which include both the determination to concentrate and manage financing resources from all sources and to reduce the greatest negative impacts on the environment first. Something that is also appearing as a logical solution is the utilising of public funds only for priority public infrastructure, while gaining maximum available environmental funds via co-financing and making investments attractive to private investors and simultaneously affordable for end users.

INNOVATION

Rethinking the classic principles and “greening”, from technology to financing, is certainly one of the MEP’s basic values. The Green Fund and its operationalisation will mean that the new, transparent way of supporting the green agenda has prevailed and that innovators in Serbia are gaining a powerful ally. Moreover, the nascent ‘Climate Smart Urban Development Project’, which is currently being implemented together with the UNDP, will provide a safe environment for developing innovative ideas and concepts until they are mature enough to be financed at the local level. Finally, there is a realistic hope that innovations will horizontally connect the private sector with academia and investors, thereby providing a solid base for new investments leading to economic growth.