PHARE 2003

STANDARD SUMMARY PROJECT FICHE

Basic Information

CRIS Number: PHARE

Title: Investments in Economic and Social Cohesion

Sector: Integrated Regional Measures (RE)

Location: Romania 8 Development Regions

Objectives

2.1 Overall Objective(s):

To support the Romanian Government to implement an integrated multi-annual regional development policy through investment projects in priority sectors, in order to enhance the indigenous economic and social potential of the 8 Development Regions, according to the provisions of the National Development Plan (NDP) and in close correlation with the institution building support provided for designing national economic and social cohesion policies in line with the EU policies and practices.

2.2 Project purpose

The achievement of the wider objective will be attained through an integrated set of measures, with the following specific immediate objectives:

A. .Technical and Vocational Education and Training (TVET)

To strengthen and consolidate the achievements of the reform acquired through the PhareTVET RO 9405 programme for initial TVET, as well as through Phare 2001-and Phare 2002 Economic and Social Cohesion (IB for TVET) in order to further assist in the modernisation of the rationalized TVET system;

To consolidate reviewed responsibilities, governance and accountability mechanisms in the provision of initial TVET in line with the social and economic development as stated in the National Development Plan and based on further recommendations acquired through IB activities of the 2001 and 2002 programme;

To further assist in the provision of equal chances of young people to achieve relevant professional qualification comparable with those within the European Union, by providing TVET which flexibly responds to the learning needs of each individual, taking into account the institutional achievements of 2001 and 2002 programme. Special attention will be given to young people in rural areas.

B. .Human resources development

nTo support Ministry of Labour, Social Solidarity and Family (MoLSSF) to improve the   administrative capacity for implementation of employment projects similar to those financed by European Social Fund.

nTo facilitate access to employment for job seekers by enhancement of active employment measures and to develop new skills according to evolving needs of the labour market, promoting equal employment opportunities for vulnerable groups, such as young unemployed and long-term unemployed

nTo develop labour force skills to become more adaptable to structural changes according to identified labour market skill shortage

C. .Small-scale waste management investment scheme

To support the Romanian Government to develop and implement the pilot phase of an integrated multi-annual national program for the period 2004 2006 on creating and promoting local waste management activities.. This will help local public authorities to implement the National Development Plan (NDP) priorities and EU directives, in order to increase the attractiveness of the areas for inward investment, to rehabilitate the environment and increase the quality of life of communities, to protect the population health.

To improve the capacity of the local public authorities in contributing to the environmental protection

To develop and implement local-scale projects within the waste management sector, that will provide waste management facilities to ensure environmental rehabilitation and protection in areas where they will be implemented.

To reduce the impact of landfill sites to the environment

To improve the collection and transport of waste in areas where until now no sanitation system exists

To improve effective and simple waste treatment methods with a good cost-benefit relation

D. .Large-scale infrastructure

D.1 Regional and local infrastructure

To develop infrastructures supporting tourism development, in order to strengthen competitiveness of SMEs from tourism sector and improve the attractiveness of recognised tourism areas;

To rehabilitate degraded sites with economic potential (industrial sites, closed enterprises from urban heavily polluted areas),

To develop infrastructures supporting business and tourism development, in order to strengthen competitiveness of SMEs through better access to technologies, services, markets and information;

To improve the regional transport infrastructure for supporting a modern, efficient transport, while decreasing the environmental impact of the transport activities.

D.2 Small and Medium Towns Infrastructure Development Programme (SAMTID)

To support the Romanian Government to develop and implement the pilot phase of an integrated multi-annual national program creating and promoting a framework of transforming service provision and investing for sustainable water services in small and medium towns. This will help national and local authorities comply with National Development Plan (NDP) and EU directives, through:

the commercialisation of 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;

the implementation of capital investment for rehabilitation, modernization and up-grading of local water and wastewater infrastructure and performance improvement programs that raise service standards while promoting the application of cost recovery principles.

E. .Business Development Support Services

To develop the private sector by strengthening SMEs management capacity and competitiveness which contribute to new job creation and increase in exports;

To develop and strengthen the capacity of SME intermediaries to deliver SME financial and business development support services.

F. .Awareness Campaign, Selection, Monitoring and Site Supervision

To promote measures and provide information and advice on project preparation

To ensure a transparent, competitive and effective process for project appraisal and selection

To increase capacities of regional structures for programming and effective implementation of projects financed under this programme in order to carry out monitoring, control and evaluation activities, efficiently.

To upgrade and sustain an adequate implementation system for the infrastructure type projects, including site supervision and inspection.

Accession Partnership and NPAA priority

The project has the potential to impact on the following priorities identified in the revised Accession Partnership (adopted June 2002):

Adopt and implement a comprehensive public administration reform package.

Enhance policy formulation by consulting stakeholders in particular social partners and representatives from civil society.

Stress human rights and the protection of minorities, by improving the situation of Roma, the situation of persons with handicap and to prevent and combat all forms of discrimination.

Increase the volume and quality of public investment, including infrastructure, education environment and health.

As regards Social Policy and Employment, to implement the adopted national Action Plan for Employment, commitments and recommendations identified in the Joint Assessment of Employment Policy Priorities (JAP) and ensure appropriate capacity for management of European Social Fund type projects in preparation for Structural Funds; develop capacity of the National Agency for Employment to implement active measures and employment programmes, strengthen its regional and local structures; complete and implement reform of the social assistance system, (including clarity in the decentralisation process) in line with the acquis principles: continuity of the social protection, administrative efficiency, predictability, sustainability, equal treatment and anti-discrimination; continue to support social partners capacity building efforts, in particular with a view to their future role in the elaboration and implementation of EU employment and social policy; improve inter-institutional co-operation, properly decentralising social responsibilities to the local level, budgetary organisation, ensuring adequate staff numbers, and effective training of personnel.

For the SMEs it will be considered to: implement market oriented strategy to stimulate SMEs competitiveness and sectoral programs; promote a SME-friendly economic and legal environment; review policy framework and legislation to improve the access of SMEs to investment finance.

Regional policy should concentrate on:

oDevelop a national policy for economic and social cohesion and, in this context, regularly update and improve the National Development Plan (further co-ordination with the national budgetary and policy-making processes, including multi-annual programming and budgeting).

oSet up the required monitoring and evaluation system, in particular for ex-ante and ex-post evaluation and for the collection of the relevant statistical information and indicators.

oStrengthen the institutional and administrative capacity of the bodies in charge of programming and managing funds for economic and social cohesion, in line with the Structural Funds approach.

oDevelop the capacity to (i) select, discuss and clarify development priorities at both national and regional levels, and (ii) identify, programme, and prepare projects

oEstablish a clear division of responsibilities at national and regional level and improve the administrative capacity in terms of recruitment, career profiles and training. Improve co-ordination and co-operation between ministries, as well as between relevant agencies and social and economic partners.

oPrepare to comply with basic financial management and control provisions as laid down by the respective regulations of the Structural Funds. Particular attention should be given to clarifying the role of the regional levels and strengthening inter-ministerial co-operation and partnership.

Regarding the environment it is important to: ensure progress with the implementation of the transposed acquis, including through securing the necessary financial resources

Continue the implementation and transposition of the Environmental Acquis in the waste management field

Improve administrative capacity to implement the acquis, through reinforcement of staffing both in the Ministry and in other relevant bodies. Particular attention needs to be paid to enforcing capacity of the Environmental Protection Inspectorates at local level and the regional level as well as to co-ordination between ministries.

Reinforce structures and mechanisms (including co-ordination between ministries) to ensure integration of environmental protection requirements into the definition and implementation of all other sectoral policies so as to promote sustainable development.

More specifically, the project addresses priorities identified in some areas of the NPAA (National Programme for Accession of Romania to the European Union, June 2002). These are:

Short- and medium- priorities for Regional Policy and Co-ordination of Structural Instruments (4.21 of the NPAA) include: Strengthening of the partnership [principle? sic] through activities targeting the awareness of the potential partners on the role and benefits they have by participating in the elaboration and implementation of the regional development policy as well as by participation in the improvement of the programming and monitoring exercise.

Short-term priorities regarding Public Administration Reform (Ch. 5. of the NPAA) include: decentralisation of public services and strengthening of administrative and financial local autonomy and the need to develop local public services and improve their quality in order to meet the EU requirements, notably for activities related to water and wastewater services.

For Employment (ch. 4.13) there are the following short and medium term priorities: application of the labour market structural and institutional adjustments identified within the Joint Assessment of Employment Policies priorities (JAP), preparation of participation on European Strategy for Employment

Development of institutional capacity and training the staff of the Ministry of Labor, Social Solidarity and Family (as Managing Authority) and of the National Agency for Employment (as Paying Authority and with attributions for implementation) for participating in projects financed out of the European Social Fund (ch. 4.13).

According to the Chapter 4.18. Education and Training from the NPAA, our country should ensure the continuation of the reform of the vocational training system. The following measures are taken into consideration: completing the legal framework by drawing up the law on vocational training, involving the social partners at all levels and the cooperation of all institutions, establishing the operational structures of the National Adult Training Board and authorizing the first centres for education and certification of professional skills, strengthening the control of the activity of the providers of vocational training services, developing a national network of authorized centres that will asses vocational competence, implementing programmes meant to train the trainers, preparing for implementing programmes such as European Social Fund in the domain of vocational training of work force.

This project meets the following NPAA medium term priority for SMEs: improving the administrative capacity of NASMEC by monitoring the impact of measures and programmes to support SME development and updating the statistical database comprising the situation and structure of SMEs..

As concerning the infrastructure the main aims are to improve and develop the local and regional infrastructure, essential requirement for the private sector development; transport, tourism and environmental infrastructure that will be identified and respond to priorities of the regional development programmes

Contribution to National Development Plan

In line with the demand of the present exercise, Romanias regional policy, included in the National Development Plan for the period 2002-2005, states as development axes the following:

Axis 1:   Development of the productive sector and related services, strengthening the economic activities competitiveness and private sector promotion

Axis 2:   Improvement and development of infrastructure

Axis 3:   Improvement of human resources potential, labour force capacity to adapt to the market needs/requirements and the social services quality

Axis 4:   Support to agriculture and rural development

Axis 5:   Environment quality improvement and its protection

Axis 6:   Support to scientific research, technology development, innovation as well to communications, IT and information society

Axis 7:  Improvement of economic structure of the Regions, support to sustainable and balanced regional development.

Projects financed under this component will address directly or indirectly the following axes:

Axis 1 Due to the fact that the regions do not benefit from sufficient productive capital, supporting productive sector, through investments promotion, is a priority for Romanias national policy for regional development; as objectives within which this priority is observed are private sector development and investment promotion, support to productive SMEs in order to increase competitiveness;

Axis 2 - Improvement and Development of Infrastructure - the economic potential of a region, as well as its attractiveness for locating investment, depend highly on its infrastructure conditions. Successful regional development initiatives require that the local infrastructure, as a component of the economic base, is able to support the demands placed upon it. It is, however, generally recognised that the Romanian social and economic infrastructure is insufficiently developed to meet the needs and requirements of a growing economy.
Local infrastructure, as an element of the economic base, must support the demands placed on it. Emphasis has been given in recent years to improving water and wastewater service delivery in large cities and in priority areas for regional development. The more recent policy to create new opportunity for small and medium towns to improve their local services is being incorporated into the NDP.

Axis 3 - Improvement of human resources potential, labor force capacity to adapt to the market needs/requirements - Social policy is central to reducing inequalities and imbalances and promoting social cohesion. Along with economic policies and the employment policy, it creates the necessary mechanism for attenuating poverty, improving living and work conditions and raising the quality of life. It is imperative, therefore, to establish a genuine correlation among these policies and close co-operation between the respective implementing factors, thus achieving an integrated strategic approach. The national strategy of the labour force aims at creating such structures that are able to transform the unemployed into working people on the first labour market, by supporting competitive and sustainable job creation. This objective will be realized by promoting active measures to fight against youth and long-term unemployment and promoting social inclusion by access to employment and by promoting vocational training programmes, in order to develop skills for the new labour market in the context of lifelong learning.

Axis 5: - Environment quality improvement and its protection - Measures related to environmental rehabilitation of degraded industrial sites and closed enterprises in heavily polluted areas, in order to make use of the existing industrial infrastructure for the development of new economic activities.
The main priorities in the field of environmental protection are:

oWaste management

oWater management

oAir quality, climate changes, Integrated Pollution Prevention and Control

oBiodiversity protection and conservation

The waste management scheme will increase the attractiveness of the urban areas for inward investment, will rehabilitate the urban environment and will increase the quality of life of communities, will protect the populations health and will facilitate the compliance with the EU waste management acquis.

The SAMTID project will bring strong environmental benefits too, enabling small and medium municipalities to meet EU and Romanian environmental standards.

Axis 6: - Developing the information society and IT - The broad use of opportunities offered by the information society represents an important aspect of the economic support strategy.

Cross Border Impact

Not applicable.

Description

The Phare 2003 investment schemes will be implemented in all the development regions. Concentration is ensured through supporting a specific target group (like in the employment measures) or to focus a measure on very distinct types of projects and activities with clearly defined selection criteria, such as: waste management, tourism and transport infrastructure, water and wastewater infrastructure.

A. Technical and Vocational Education and Training (TVET)

Background and justification:

The VET system aims to respond in a dynamic and flexible way to the increasingly changing demands of the community at large, resulting from economic developments and from specific measures for social cohesion as defined by the government policy.

The proposed project represents the continuation of the Phare 2001 and 2002 Investment in Social and Economic Cohesion TVET, and it is based on the achievements of Phare VET programme RO 9405 and its generalisation policy. At the end of the EU Phare VET programme RO 9405, in December 1998, the system of vocational education and training has been partially completed (education levels corresponding to vocational schools and post-high schools), and left clear recommendations for generalisation and the completion of the whole system.

New developments of the educational system requires new adjustment of the TVET system, as the Ministry of Education, Research and Youth launched the proposal of extending compulsory education from 9 to 10 years. According to the new extended duration, the TVET system will be consolidated through developing two TVET pathways, one leading to the third level of qualification part of the high school education, and an integrated three level training offer, with 3 exits corresponding to the three European qualification levels, as follows:

I.

1. grades IX X , compulsory TVET leading to 1^st level of qualification, which can continue with 2. grade XI, post-compulsory TVET, leading to 2^nd level of qualification, which can continue with

3. grades XII-XIII, post-compulsory TVET leading to 3^rd level of qualification

II.

4. grades IX-X, compulsory TVET leading to recognition of competences, which can continue with

5. grades XI to XII/XIII, post-compulsory TVET leading to 3^rd level of qualification

These amendments will affect the role of the TVET school clusters, including their marketing strategy, so that they have to reconsider their position and to motivate young people for a whole TVET career, instead of offering short training segments of parallel qualifications, as it is now.

The regional and local disparities on the availability and quality of TVET are specifically addressed. Heavy industrial restructuring does also require restructuring of educational offer in TVET from traditional industrial trades to new economic areas (e.g. agro-tourism) and trades, which are emerging in the labour market.

The development of core skills implied by the new technologies and management systems - required in order to ensure the continuation of reforms initiated by previous Phare VET 9405 and Phare ESC 2001 and 2002, the require to answer to the challenges raised by the extension and restrcturing of compulsory education, the lasting regional and local disparities in the quality of TVET and the specific needs of the groups at risk, all these demand further investment in TVET school infrastructure in a long term perspective.

These measures have in view both respecting the safety standards and general pedagogical norms of the MoERY, and the standardisation of the working process and quality assurance required by each employment domain.

Moreover, the introduction of the modular training and certification procedures through the several interventions in the TVET reform supposes a modular design of the training places and appropriate facilities for acquiring core skills, such as self-management and use of IT. At the same time, the process of rehabilitation should convert under-utilised TVET schools into modern training centres, for both initial and continuing training.

At national level the project is aiming at adjusting the whole VET system to enable schools to respond to the education and labour market training needs at local and regional level. This by providing initial education and training, lifelong learning opportunities, as well as training on demand. The provision of education and training has to be sustainable and of good quality, comparable with European standards. The project wants to ensure the coherence of the national VET system and as such counteracting disparities between regions as well as assuring the quality of VET provision all over the country.

At local and regional level the project is aiming at VET schools to learn to respond to the education and labour market training needs of individuals, those of the community at large and the business community in particular. As such VET schools will contribute in a pro-active and flexible way to economic growth and social cohesion of the area they are serving. In the actual stage of development, there is a need for further investment in rural areas with potential for economic development, as well as for strengthening the local capacity of the TVET resource centre to facilitate transfer of know-how.

The present project adds a special focus on TVET schools in rural areas with the aim to sustain the economic and social cohesion objectives. There is a significant proportion of students in rural areas (47% of students at compulsory school age is enrolled in education within the rural areas) and the schooling capacity is very limited. This particular attention to rural areas results also from the conclusions of the 2002 study of MoERY and the Institute of Educational Sciences, which shows low participation rate in secondary education in rural areas, including abandonment of apprenticeship schools due to lack of resources and job perspectives. In the current context, encouraging a longer duration of compulsory education including basic TVET leading to qualification at the first level, as well as the perspective of regional and local administration and development of human resources, it is expected the graduates who decide to remain in their localities to have the needed skills to perform jobs required by local economic agents, like farms, agro-tourism pensions and small and medium scale industries. In the mean time, there is considered the chance of compulsory education graduates to continue their upper secondary education in rural areas schools, by enlarging access to TVET, as indicated by the Joint Assessment Paper developed in October 2002. The restructured TVET system includes, during and after compulsory education, learning paths having dual purposes, namely education and training.

Therefore, additional 50 schools will be assisted in view of broaden access and diminished inadequacies in the territorial provision of TVET.

Linked activities

See Annex 4.1.

Results

As a continuity of Phare 2001 and 2002 Programme, which provided for structural repairs and consolidation of the units presenting serious damages, under Phare 2003 the 111 selected units (100 TVET schools and 11 resources centres) will benefit from the rehabilitation of the vocational workshops in order to be fit for installing the specialised equipment and to facilitate the delivery of initial and continuing TVET equal to European standards.

As a continuity of Phare 2001 and 2002 Programme, tThe 111 selected units (100 TVET schools and 11 resources centres) will receive further assistance to procure and install in rehabilitated vocational workshops the specialised equipment according to reformed curriculum for the last years of training.

The additional 50 schools will be assisted to act as community resource centres in order to serve the training needs of young people in view of regenerating the local economy in rural areas.

The need for VET institutions acting as resource or support centres at the regional and local level was already stressed by the Feasibility Study that grounded the TVET projects of IB and Investment under Phare 2001. An additional Study will be elaborated by the TA under the Phare 2002 ESC IB component to give an accurate image of the functions these resource centres should play especially in rural areas.

Therefore, a total number of 161 schools will be assisted for investment under Phare 2003, which represent a sound nucleus for ensuring the sustainability of TVET reform measures.

111 selected units (100 TVET schools and 11 resources centres) will benefit from the rehabilitation of the vocational workshops in order to be fit for installing the specialised equipment and to facilitate the delivery of initial and continuing TVET equal to European standards.

Didactic and modern technologies equipment and didactic software (which has been identified on the basis of a labour market assessment of the medium and long-term strategies for skills development) supplied, installed and in use, for the specialised years of training of the 111 schools

IT and office equipment supplied, installed and in use in 50 schools in rural areas

Supporting the curricular reform in order to facilitate the training of core skills of the students, as well as those technical skills requested by employers

Transition from school to working life facilitated

Better access to information and documentation ensured and training facilities for trainers and trainees improved, with a special focus on rural areas.

Activities

Planning of the activities for the overall Phare supported TVET reform covers a longterm perspective of three consecutive Phare programmes. An indicative figure to cover the Phare investment was in Phare 2001 programming estimated as 48,4 MEURO. It was initially planned to cover two consecutive Phare programmes. However, in order to ensure efficient use of funds, better absorption and enough time for implementing the results of the Phare 2001 programme (preparing the TVET system for further investment by upgrading infrastructure), it was decided to spread the financing to cover three consecutive Phare programmes (16 MEURO for Phare 2001+ 18 MEURO for Phare 2002 + 14.4 MEURO for Phare 2003)

Based on the estimated results of Phare 2001 and 2002, additional funding is needed to cover the investment needs of the schools in rural areas and ensure sustainability of the local transfer of know how through the selected resource centres

.305 MEURO of Phare funding will be provided for TVET investment in 2003, with the following distribution:

14.4 Meuro as representing the second part of the specialised equipment (years 3 or/ and 4 and 5 of study) to be given to the 111 schools and resource centers previously selected during Phare 2001 and 2002.

1.905 Meuro representing IT and office equipment for the additional 50 schools

6 Meuro for workshops rehabilitation

Twohree types of contracts will be concluded under this component:

A1. Procurement of the specialized equipment for specialised training workshops in the 111 schools (supply of equipment)

A2 Procurement of IT and office equipment for additional 50 schools (supply of IT equipment)

A3. Schools buildings rehabilitation (works)

A1. Supply of Equipment The Investment component for equipment contracting started already in Phare 2001, with the delivery of the information technology (computer networks) and office equipment, as well as the preparation of technical specifications for the specialised equipment and preparation of the related tender documents for Phare 2002. The investment sub-component for procurement of didactic and modern technologies equipment and didactic software will be implemented based on labour market assessment concerning the medium and long-term strategies for skills development, in order to assure the core skills achievement and facilitate the transition from school to working life.

100 schools and 11 resource centres previously selected for the priority areas as defined through Phare 2001 will receive specialised equipment for the laboratories and workshops They have received the equipment for basic training (namely the first two or three years of TVET) from Phare 2002 and the rest of the equipment for specialised training (the 3rd and/or the 4^th and the 5^th years of TVET) is to be supplied under Phare 2003.

The preparation of the technical specifications (TS) for the specialised equipment for the 111 schools was provided during the Phare 2001 IB sub-component programme.

The expected delivery for June 2005 will allow the teacher and instructors training during the Phare 2002 programme.

Additional TS for the 50 schools acting as community resource centres for rural areas will be object of preparation under Phare 2002 IB.

The total 14.4 Meuro average costs of the equipment for specialised training are estimated as follows:

135,200Euro/school x 100 schools = 13.52 MEURO from Phare contribution

80,000Euro/resource centre x 11 resource centres = 0.88 Meuro from Phare contribution

A2 Supply of IT equipment Taking into consideration the average costs of the similar equipment provided during the previous Phare 2001, the amount of average 38,100 EURO per school represent the estimation of IT and office equipment costs. The lot allocated to each beneficiary unit will include about 25 work stations and 1 server 2 printers [m1] , 1 overhead projector, 1 TV set , 1 video player, 1 copy machine, 1 fax machine, 1 flipchart. Internet access and e-mail will be also provided.

The total 1.905 Meuro average costs of the IT and office equipment are estimated as follows:

38,100 Euro/school x 50 schools = 1.905 Meuro from Phare contribution

A . Works The selected schools will benefit of gradual rehabilitation, starting with basic repairs from Phare 2001 and finalising with the upgrading of vocational workshops, as follows: 100 schools units involved in the Phare 2001 TVET programme + 11 resources centres inside the target areas; rehabilitation of the vocational workshops and necessary upgrading for installing the specialised equipment.

Technical specifications for the rehabilitation of worshops will be prepared under Phare 2001 by short-term technical assistance.

An average amount of 54 000 euro/ school unit (Phare) represents a provisional estimation of the costs that should be allocated for the works. Local authorities could provide local co-financing for additional works for preparation, improvement and rehabilitation of school areas. Total Phare amount for A1 is 6 Meuro.

Beneficiaries:

The local level is represented by the TVET schools, as main beneficiaries together with their social partners at local, county and regional levels, and assures the operational activities.

The estimated total number of the involved schools is 161, from which 11 will act as resource centres in target areas, and 50 schools are new ones added in the programming year 2003

D.2 Small and Medium Towns Infrastructure Development Programme (SAMTID)

1. Background and Justification

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 functioning efficiently and adequately. 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 conformity 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 to attract external investments for the benefit of local communities;

support and advise local public administration authorities in their steps concerning attracting investments;

monitor the way of attracting investments and accomplishment of conditionalities;

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

Currently 17 municipalities, each with more than 150.000 inhabitants, have benefited from capital investment programs for rehabilitation of their water and wastewater infrastructure. Many 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 their local infrastructure. In total, 50% of the urban population of the country benefits from these programs.

Justification

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 local public services:

decentralization of public services and increase in 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 increase access of the population to these services;

extension of credit financing of local infrastructure;

promotion of the 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 infrastructure makes population access to these services difficult. The Government intends to increase 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 the 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 the 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 sustainable development concept. For this, the Government intends to:

provide financial support to those programs which contain measures for the 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.

In Romania, out of 263 urban localities, around 230 are considered small and medium-sized towns that have not been able to attract financing from either the international financial institutions or private operators. Depending, therefore, solely on central budget contributions, these towns have made very little investments during the last 10 years to maintain and develop their water and wastewater infrastructure. As a consequence, the condition of these systems is very poor. Given all this, the towns still need to:

comply with environment standards regarding drinking water quality and treatment of wastewater;

assure an adequate living standard to their inhabitants and a continuous water supply.

are not eligible for ISPA:

The Ministry of Administration and Interior decided to develop the SAMTID Program for this category of towns, taking into consideration that they:

have not the financial power to sustain investment projects in environmental infrastructure by themselves;

have not sufficient revenues in the local budget to guarantee a loan for the full amount of large infrastructure projects;

The necessity for investment in small and medium towns was outlined in the strategy for investment promotion in local environmental infrastructure. In July 2001, the SAMTID concept was presented during a meeting organized at Victoria Palace, with participation of central and local authorities who were involved in MUDP 1 and MUDP 2, representatives of IFIs and mass media.

As present fragmented structure for provision of municipal service are not favourable to effective management of investment resource and service provision, SAMTID will aim to Motivate groups of towns to begin to work together, taking account of experience in EU Member State and elsewhere as regards consolidation in water sector, to benefit from economies of scale and to ensure the rational use of water resources.

The Government of Romania views the transformation and modernization of the water and sanitation services in these municipalities as a long-term effort. As many as 230 small and middle-sized towns with a total of approximately 6.2 million inhabitants, representing 50% of the country's urban population, are in need. 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:

Phase 1: Pilot - Starts with Phare programme 2002, a design stage to establish the foundation elements, followed by an application stage to test this elements on a pilot basis for five groups of municipalities, and prepared for future projects taking into account the lessons learned.

Phase 2: Expansion Depending on the progress of the pilot phase, the program will be adjusted and expanded to a wider number of groups of municipalities within the context of the framework loans by the international banks that finance these first two phases.

Phase 3: Consolidation This will built on the expertise gained during the pilot and expansion phases. A new framework facility can finance modernisation in additional municipalities as well as other investments needs such as system expansions for the participants in the initial phases.

Phare investment support under this project is for the expansion phase to be implemented during 2004-2007, still preparing for later expansion scale of activities.

SAMTID will finance projects on the basis of a similar procedure with 'Call for proposal' with a bottom up approach. Local authorities are already preparing for this, identifying their needs for projects under USAID Regional Infrastructure Project (RIP) in collaboration with the Water Training Centre of the Romanian Water Association. Additional assistance will continue with support of PPF Phare 2002 and 2003 as described in the accompanying ESC IB project fiche on technical assistance and project preparation facility for SAMTID.

A project under the program would be the integrated investment sub-program (two parallel investment schemes[1] and the relevant contract package mentioned under the SAMTID Architecture in Annex 4.4.) for a single group of municipalities with one identified local authority (municipality or county council) acting as leader to be financed by a consistently applied combination of grants (Phare & National Fund) and loans (single IFI per project).

2. Linked activities

See Annex 4.1.

Results

Implementation of water supply rehabilitation, upgrading and modernization works in 20 to 50 small and medium sized Romanian towns (nine to twelve groups) as the extension of experience to be expanded around the country.

Improvement of the quality of water supply services with an impact in these towns.

Amalgamation and restructuring of the operations and administration of the water supply services and stimulation of cooperation between local authorities to resolve some priority needs in the field of public services;

Identification and implementation of measures to improve the creditworthiness of utilities, thus creating possibility of accessing credit schemes;

Development of the institutional and organizational basis for the implementation of the EU Water Framework Directive concerning the water management within river catchment basin areas.

4. Activities

The SAMTID program will provide a balanced distribution of grant and loan resources in a fair and transparent manner for all beneficiaries over a multi-annual period. As a general principle all beneficiaries will have equal access to a pre-established balance between loans and grants. Project proposals will identify separately the loan and grant components, that will be executed through separate contracts. Phare 2001 PPF resources will be used to determine the manner to apply this principle to the pilot projects and then, Phare 2002 will carry out an assessment of the scheme drawing up lessons for the expansion phase of the programme. Financing for all components in a project will be agreed prior to development of tender documents.

The investments of SAMTID should be selected based on the identified needs of the SAMTID eligible local beneficiaries and the linked proposal for improving the quality of the services and the performance in the water and wastewater field, emphasizing a short payback period and maximum cost-effectiveness, to reduce operating costs, improve efficiency and reliability. The mentioned proposal should include an investment in infrastructure proposal, a financial analysis showing the financial viability of the investment[2] and a complete cost-benefit or cost effectiveness analysis, including the overall impact of the proposed investment and the related measures . New meter installation programs should form part of every project where these are not universal and should be part of demand management programs.

Minimum Criteria for Project Selection

With the support of the Phare 2001 team working with all the stakeholders involved in this programme (MoAI, MIE, MPF, BEI, BERD, European Commission) a set of eligibility and selection criteria has been developed, to allow the pre-selection of projects by RDAs and then the final selection made by the SAMTID Steering Committee. The criteria are presented below.

The Steering Committee of SAMTID require the following eligibility criteria to be satisfied to facilitate potential investment projects being included in the SAMTID programme:

1. Eligibility of Applicants

a.       be Associations of local public authorities, which will be responsible for contracting of services on the water and wastewater networks within the participating Associations with a Licensed Operator;

The applicants will be a combination of Local Councils of eligible towns and County Councils. The County Council will represent the interests of the association and in the case where two or more County Councils join together the County Council representing the greater benefiting population will be the lead.

b.       the Association of Municipalities must be authorised, through Articles of Association, to be the designated promoter of infrastructure investment proposals; the proposed infrastructure to be extended/rehabilitated/improved should clearly demonstrate its public utility;

c.       the Articles of Association of the Association of Municipalities should define the lead County Council a Lead Council, which is authorised to act on behalf of the participating local authorities, and should provide that all member local authorities jointly participate in the activities of the Association;

d.       the applicants should have their headquarters in Romania, in the region were the project will be implemented;

e.       the applicants should have feasibility studies elaborated in conformity with the Romanian regulations in the field, and approved by the relevant entitled authority according to laws in force. The feasibility study should not have been elaborated or up-dated more than one year before and developed in line with the content detailed in the SAMTID Manual; the applicants should also have the consent of the Urban Certificate. In a separate study called Supplementary Information for the Feasibility Study applicants should present additional analysis developed in line with the SAMTID Manual representing international standards for analyzing bankable projects.

f.        a commitment by each local council to contract the same single licensed commercial water services operating company that may hold one or more legal arrangements to operate in service areas within the AoM at a future date ;

g.       has developed a baseline assessment for a master plan according to the format in the SAMTID manual and established key performance indicator targets for a Licensed Operator;

h.       has developed a conformity plan according to Law 458/2002.

i.         Stated commitment to increase tariffs in real terms where necessary and meet the requirements of debt service

2. Eligibility of projects

2.1. Size of Projects

The project is likely to have a value of between 2.0 Meuro and 1 3 Meuro per Association and structured in such a way that 50% will be grant, supported by EC Phare Grant from the ESC fund and the GoR National Fund and 50% by Loan through an IFI;

The maximum size of town that can be served under the scheme is 150000 inhabitants.

Municipalities can be included in the scheme only if they do not benefit from ISPA or SAPARD funding;

Duration: The duration of the execution of the works may not exceed 20 months. For each project, the deadline for signing the works contracts is 30.11.2005 and the deadline for disbursement is 30.11.2007.

2.2. Sectors or themes

The following sectors to which the projects must relate are:

Water abstraction, transmission, treatment and distribution systems

Wastewater collection, treatment and sludge disposal systems

The scheme will support the rehabilitation and modernisation of local water and wastewater infrastructure. SAMTID will finance expansions of the systems and building of new assets, such as extensions of networks or new treatment plants for water or wastewater, only in exceptional and duly justified cases. Investments will be selected and prioritized for financing which reduce costs, improve efficiency and improve basic services. New meter installation programs will form part of every project where these are not universal and should be part of demand management programs.

Expenditures must be directly linked to achieving the purpose of the project and appropriately accounted for. Eligible expenditures could include investment costs related to the site preparation, public utilities networks, main works, plant and machinery, supervision during implementation, contingencies. Cost of land acquisition is not eligible under the programme.

Pre-selection Criteria

The indicative list of pre-selection criteria that are envisioned:

Technical and financial feasibility of the investment programme and maturity of the documentation;

Potential for improving the level of key performance indicators provided in the licensing procedures and gaining efficiencies through reduced operating costs;

Detailed financing plan and positive benefit/cost analysis or least cost analysis;

An affordability study has been carried out and an indication obtained on the populations willingness to pay for an improved level of water services.

Demonstrated commitment to universal metering and demand management measures.

Priority given to investments that will result in reduced operating costs and improve the levels of service provided, such as network rehabilitation, pump replacement, and meter installation programmes.

2.4. Selection Criteria

Secondary selection criteria will be developed during TA2 that will enable ranking to be carried out for nomination of the pilot projects. These are expected to be based on the following secondary selection criteria:

Commitment of IFI to fund project with specified conditionalities to be met that will be identified as part of the due diligence process;

Institutional capacity of PIU and MSU;

Commitment to transfer loan conditionalities into the concession contract.

A detailed Manual of selection procedures, including Standard Forms and Check Lists, will be issued and tested through the pilot phase. The procedures developed under the pilot phase will be adjusted after the assessment of the pilot phase implementation financed from Phare 2002 technical assistance.

Generally, projects will range from a minimum of 2 Meuro to a maximum of 13.3 Meuro total credit plus grant financing. If two or more counties join consideration will be given to increasing the range of funding.

Eligible beneficiaries

The final beneficiaries will be small and medium municipalities that have not yet benefited from international financing under the programs MUDP I, MUDP II, or ISPA. Unlike MUDP II that worked with single cities or counties and existing utilities, SAMTID must motivate groups of towns to begin to work together to benefit from scale of operations and to plan and implement investments that ensure rational use of water resources and of environmental conditions. This can involve any combination of municipalities and/or county council covering a suitable group of towns, associated in partnership - with a clearly identified leader assuming the responsibility for the loan component - and contracting[4] a single licensed services operator (see Annex 4.4)

To be eligible for SAMTID, municipalities should choose a form of delegated management to a licensed services operator from an open bidding process as required by recent legislation. This is critical to the sustainability and efficiency of the services. Technical assistance from the program will support the process.

It is expected that the group of municipalities must demonstrate being capable of implementing projects and receiving and servicing credit financing for infrastructure based on fees from the operator. They must comply with all financial criteria approved by the SAMTID Steering Committee. Further, the groups of municipalities will be responsible for securing the management and control structures of the projects that will be grouped for the purpose of common operation by commercial companies, complying with relevant legislation and with policy to reduce the number of small utilities. The Phare 2003 Institutional Building technical assistance that accompanies the investment program will provide support for grouping the cities and contracting the commercial service operators.

The municipality that receives program financing will own the respective new assets and maintain the public sector ownership of the rehabilitated infrastructure for a period of at least 5 years. If privatisation occurs before, the conditions of private capital involvement will be subject to formal approval from the EC Delegation.

Access to the infrastructure must be guaranteed for all potential users on equal terms; if differentiated tariffs are foreseen, detailed justification should be provided on a case-by-case basis.

Contracting

Parallel co-financing of investment within the overall SAMTID framework will allow procurement, contracting and financial management arrangements for specific investment contracts to correspond to the specific requirements of each source of financing.

Contracting of the works financed from Phare ESC shall be under the responsibility of the MIE as Implementing Agency, subject to endorsement by the EC Delegation. A separate agreement for the implementation of the projects will be concluded between MIE and each leader of the selected group of local authorities, in order to ensure the close monitoring and supervision.

The Ministry of European Integration will manage contracting that uses Phare funds and the corresponding national co-financing.

For the EIB financed projects it was agreed that one work contract will be concluded for Phare grant plus national co-financing and EIB loan, following Phare procedures. For EBRD financed projects one work contract will be concluded for Phare grant plus national co-financing and EBRD loan, following EBRD procedures (see Annex 4.5 on Contracting SAMTID ).

Budget: 21 Meuro Phare contribution.

For SAMTID projects, Phare will support the supervision costs for the whole budget of this component, composed of Phare contribution, national co-financing and IFIs contribution.