Standard Summary Project Fiche

Standard Summary Project Fiche

Basic Information

Dsire Number: RO 02

Title: Institution Building for Economic and Social Cohesion

Sector: Integrated Regional Measures (RE)

C. Institution Building to Support the Small and Medium Towns Infrastructure Development (SAMTID) Programme Implementation of Pilot Phase

To support Romanian Government to develop and implement an integrated multi-annual capital investment programme in order to improve the standards of municipal water and wastewater services in small and medium towns together with creating efficient, financially viable and autonomous integrated regional service providers in the context of a process of consolidation in the sector, in line with National Development Plan (NDP) and EU policies and practices.

To support PCU located in the Ministry of Administration and Interiorand PIU located at beneficiaries level in the management of the pilot phase of the SAMTID programme;

To support final beneficiaries (groups of local authorities) in order to equip them with tools to monitor performance of their services operators, emphasising efficiency, cost-control and loss reduction, thereby enhancing the capacity of the groups of towns to plan investment programmes and assume and service debts.

Description

Background and justification:

At the Nice Summit in December 2000 the European Union confirmed its objective to enlarge the EU with several countries from Central and Eastern Europe. Preparation for accession is the key issue for each government administrations. Chapter 21 of the Aquis is related to regional policy and more specifically to the preparation for Structural Funds. As a candidate country, Romania, will have to continue its efforts to create an effectively functioning institutional and legislative system as well as sufficient administrative capacity to manage the funds.

Moreover, in the pre-accession period a significant step-up in the level of EU financing available for Romania is going to occur through PHARE, ISPA and SAPARD. Other resources coming from IFI or bilateral agreement with Member States will be also available for similar purpose. It is imperative that the Romanian authorities are capable of using this financial support in a way that guarantees the maximal impact on regional and infra-regional disparities.

Efforts currently underway to improve inter-ministerial coordination, policy development, programming, programme management and implementation, as well financial control capacities at the national and regional level will need to continue. The absence of appropriate knowledge and skills throughout the system will impede the Romanian authorities ability to make effective and efficient use of this funding without sustained institution building support.

The European Commissions 2001 Regular Report on Romanias Progress Towards Accession (13 November 2001) highlight a number of areas where significant improvements are needed before progress can be made in the negotiation process under Chapter 21 of the General Acquis communautaire Regional Policy and the Coordination of Structural Instruments.  These include:

Development of the legal instruments necessary for implementation of the EU Structural Funds after accession;

Development of a multi-annual budgetary system;

Development of the system of regional statistics to bring it up to the level required for regional policy planning and programming;

Genuine application of the partnership principle for policy development and programming based on political consensus at national and regional levels, with clear definition of the ministries and all other bodies involved in preparing future Structural Fund assistance;

Structural Funds-compatible monitoring and evaluation systems and procedures, including ex-ante evaluation of the National Development Plan to support its evolution towards a Structural Funds programming document;

Allocation of sufficient financial resources to administrative structures for Structural Funds which will operate at the regional level;

Increased numbers of better-qualified and better-trained staff in all bodies involved in programming, management and implementation of Structural Fund and Cohesion Fund assistance with special focus on financial staff and internal auditors.

The performances of the Romanian economy and the capacity to respond to the competition pressure at the level of the European Union are directly dependent on the quality of human resources. The governing programme puts priority to actions aimed to increase the professional level of the human resources by training, retraining and reorientation according to the labour market needs. With a view to efficient, beneficial use of human resources, it seems to be necessary to intensify the structural adaptation of the human resources, in accordance with the restructuring of the economy and the perspectives given by the EU integration. A significant improvement of the initial and continuing vocational training system is necessary in this context.

Hence the Romanian authorities need not only to develop capacity for effective implementation of increased levels of Pre-Accession assistance under the 2002 Institution Building for Economic and Social Cohesion Component. They must also begin to build the actual structures, procedures, processes and human resource capabilities to be used for EU Structural Funds after accession.

The IB Component therefore foresees separate yet complementary sub-components, using Technical Assistance for Pre-Accession and Twinning for Post-Accession institution building priorities, underpinned by a substantial package of support for training and staff development covering both Pre- and Post-Accession needs to be designed and delivered in a strategic manner.

C. IB to support the SAMTID programme pilot phase implementation

After a period of more than four decades of centralized management, Romania has decided to return to local autonomy principle, in this way transferring major and concrete responsibilities to the local administration. One of these, specifically mentioned in Law no. 215/2001 concerning the local public administration, enforced by the Law no. 326/2001 regarding the local public services, refers to their obligation to organize their operation and management in an efficient and adequate manner. In this context, the Ministry of Administration and Interior has assumed important responsibilities in promoting the investments in the field of local services. Thus, in compliance with the provisions of the Government Decision No. 8/2001, the Ministry of Administration and Interior has the following responsibilities in this field:

organize actions for attracting external investments in the benefit of local communities;

support and advise local public administration authorities in the process of attracting investments;

monitor the process of attracting investments and accomplishment of conditionalities;

support local public authorities in contracting internal or external loans and in providing financial guarantees.

Currently 17 municipalities, each with more than 150.000 inhabitants, have been part of capital investment programs for rehabilitation of their water and wastewater infrastructure. A significant number of these municipalities also obtained funds through the ISPA Program to continue the rehabilitation and modernization of the water supply and wastewater systems. Bucharest and Ploiesti municipalities concluded concession contracts with private operators and succeeded in this manner to attract external capital for financing of their local infrastructure. In total, 50% of the urban population of the country benefit from these programs.

The Strategy concerning the acceleration of the public administration reform, approved through the Governmental Decision no. 1006/2001, established the fundamental objectives for the development of the local public services:

decentralization of public services and increasing responsibility of local authorities regarding the quality of the services supplied to the population;

extension of the systems for basic services (e.g. water supply, wastewater and sanitation) and increasing access of the population to these services;

extension of credit financing for local infrastructure;

promotion of sustainable development measures.

The Strategy regarding the development of the local public services foresees in chapters 4.2 and 4.7:

a)Expansion of the services with major impact on public health and standard of life (water supply, wastewater and sanitation)'

The poor condition of existing infrastructure makes access of the population to these services difficult. The Government intends to improve the access of the population to these services through:

promoting investment programs for rehabilitation, extension and modernization of the water supply systems, wastewater, collecting, transport and disposal of  domestic waste from urban area (ISPA, SAMTID);

implementing development programs for rural infrastructure (SAPARD, RDP).

b)Promoting sustainable development measures'

Local public services have a special impact on the environment. On one hand they can be an important pollution factor, but on the other hand they also can contribute in an essential way to limit the degree of pollution (adequate treatment of wastewater and improved solid waste collection and disposal). Compliance with environmental requirements during the life cycle of local infrastructure (building operating maintaining demolition) plays an important role in the concept of sustainable development. For this, the Government intends to:

provide financial support to those programs with measures for development of environmental infrastructure (ISPA, SAPARD, RDP, SAMTID, TECP2, etc.);

promote special programs for small towns with the purpose of rehabilitating and modernizing local environmental infrastructure.

The Government views the transformation and modernization of the water and sanitation services in these towns as a long-term effort. Even with focusing on the most urgent needs to rehabilitate and upgrade water and wastewater systems, SAMTID may need a full decade to reach most of the towns. The government is committed to implementing this program in three phases in order to achieve the following coherent multi-annual specific objectives:

to commercialize the water and wastewater services provision of small and medium towns on a voluntary basis, through the creation of efficient and financially viable and autonomous integrated regional services providers, as free from political influence possible;

to improve the performance of the operators and raise the water and wastewater service standards through capital investment for rehabilitation and modernization and assistance programs, while promoting the application of cost recovery principles.

The SAMTID Program include three phases:

Pilot Phase, runs from 2002 until 2004, to establish foundation elements and apply these on a pilot basis for a few group of municipalities, and prepare for future projects taking into account lessons learned;

Expansion phase, runs from 2005 to 2006, the program will be adjusted and expanded to a wider number of groups of towns;

Consolidation phase, from 2007 to 2010, a new framework facility can be finance modernization in additional municipalities.

This project will have two components, each responding to a requirement of a sound management of SAMTID program pilot phase:

Management support to national coordinating body, Project Coordination Unit established at this level and Project Implementation Units established at the level of final beneficiaries (groups of local authorities);

Financial and Operational Performance Improvement Program (FOPIP) directed as a first priority at the four or five groups of towns selected for the pilot phase of SAMTID investment support and the operating companies that serve them. FOPIP will provide technical assistance to improve the capacity of the selected groups of towns to monitor the performance of their service operators, emphasising efficiency, cost-control and loss reduction, there by enhancing the capacity of the groups of towns to plan the investment programmes and assume and service debts. Appropriate training on management and operational issues will also be provided to services operators themselves. Following work with initial groups of towns, this project assists other groups of towns to establish FOPIP programmes as part of their preparations for receiving SAMTID support.

Additional assistance will be provided with support of PPF Phare 2001 as described in the accompanying Terms of Reference (Annex 4.6).

The international financial institutions that co-finance SAMTID will give their inputs and their non-objection prior to launching all such technical assistance. The Terms of Reference developed to prepare the SAMTID program using PHARE 2001 funds, are considered preliminary and will be left open as such as possible to investigate alternatives in terms of financing, investment planning and service delivery structures.

Presentation of the concept for the complex (multiple financial sources), multi-annual SAMTID programme is included in Annex 4.4. A solid agreement between MoPA and MPF on this programme is presented in Annex 4.5.

D.

C. Institution Building to Support the SAMTID Programme Pilot Phase Implementation

Improved capacity of the national coordinating body to manage the implementation of SAMTID pilot phase;

Improved overall co-ordination of the SAMTID pilot phase, by PCU;

Better management by the Project Implementation Units at the beneficiary level in implementing their projects, and monitoring the implementation at national and regional level by MEI and RDAs;

Shared knowledge and experience gained through the pilot phase of the program;

Enhanced capacity of the local authorities in monitoring the technical and financial performance of their operators and setting up tariffs in order to ensure full recovery of debt service through a Guarantee Fund/Reserve Account and requirements for a  Maintenance Replacement and Development fund (MRD).

C. Institution Building to Support the SAMTID Programme Pilot Phase Implementation

C1. Support to national coordinating body in implementation of SAMTID pilot phase

In order to implement this sub-component, the following activities will be undertaken:

Support to the Steering Committee;

Support to the PCU in Ministry of Public Administration;

Assistance in setting up and training the PIUs at the beneficiaries level;

Support for the PCU and PIU in monitoring and controlling the projects and in reporting to different levels;

Support to the Regional Development Agencies, MEI and Selection Committee in selection and monitoring of projects for an efficient implementation of SAMTID program.

C2. Financial and Operational Performance Improvement Program

Under this sub-component the following activities will be undertaken:

Support local authorities to establish and monitor operational and financial performance requirements with their operators, in order to ensure the flow of funds to service debt and finance a MRD fund;

Monitor and report on the performance of the utilities and their compliance with conditions in their loan agreements, and recommending up-dating of these conditions;

Train PIUs and operators staff in FOPIP concepts and in practical implementation of these concepts;

Prepare and disseminate Guidelines on financial and operational performance improvement issues;

Share knowledge and experience gained through the project among all current and potential beneficiaries.

FOPIP sub-component will make full use existing training and technical assistance capacity in Romania, promote the use of modern and participatory approaches to training, and contribute to ensuring the sustainability of national training structures with capacity to meet the needs of use municipal services sector. The MoPA will propose institutional models to deliver technical advisory services that build on these local capacities to transfer to the smaller towns the knowledge gained from improvements in the utilities of Romanias largest cities.

Groups of towns benefiting of SAMTID investment assume an obligation to undertake to closely monitor and seek to improve the performance of their service operators, in line with approach developed under SCEPD project and USAID Regional Infrastructure Program currently being implemented by MoPA, an element of self-financing should be introduced into training and human resource development for the towns and operating companies.  FOPIP will require a partial contribution towards training costs on the part of the beneficiaries.

Budgets for component C (C1 & C2) are based on experience from MUDP 2 and will be financed entirely from Phare. Phare 2002 resources will provide for the pilot phase 2.00 Meuro. Existing PPF resources from Phare 2001, together with support from beneficiaries, will finance preparatory activities. The RIP program of USAID provided the Terms of Reference needed for hiring the contractor under Phare 2001 (Annex 4.6).