12/04/ CEB and Western Balkans Investment Framework: Options for Contribution to Poverty Reduction and Social Inclusion León Herrera

2 Outline of Presentation Introduction to the WBIF WBIF general progress to Date CEBs mandate & resources CEBs experience & views on the Social Sector Opportunities to increase investment in social sector Conclusion 26/05/2011

WBIF Objectives and Stakeholders Objectives Coordinate support by Commission, IFIs and donors, to the Western Balkans countries: a single entry point for projects to improve coherence, synergy, efficiency and visibility Combine/Leverage grants and loans to improve project financing Support EU Accession process and regional and national policies and strategies Stakeholders Albania, Bosnia and Herzegovina, Croatia, Kosovo (under UNSCR 1244), FYR Macedonia, Montenegro and Serbia European Commission IFIs (CEB, EBRD, EIB) and bilateral financial institutions and donors World Bank and RCC (observers) 26/05/2011 3

4 WBIF Sectors and Structure Sectors Starting with: Energy, Environment, Transport and Social Infrastructure From 2011: Private Sector Development and Energy Efficiency Structure Steering Committee and Project Financiers Group 26/05/2011

5 WBIF Application and Approval Process 26/05/2011 PROJECT FINANCIERS GROUP STEERING COMMITTEE Single Entry point Project Identification, Programming, Screening, Assessment Strategy definition, Operations approval, Supervision of action Single strategic orientation Implementation Secretariat

6 WBIF Implementation Process 26/05/2011 Grants Loans Grants

Progress to date (1) 81 grants Value 139 million 73 projects > 3 billion levered IFI loans > 6 billion total investment 12/04/2011 7

8 Progress to date (2) 26/05/2011

9 Progress to date (3) 26/05/2011

Social Sector Development – CEB unique Mandate SECTORAL LINES OF ACTION SECTORS OF ACTION Strengthening social integration - Aid to refugees, migrants and displaced persons - Housing for low-income persons - Creation and preservation of viable jobs - Improvement of living conditions in urban and rural areas Managing the environment - Natural or ecological disasters - Protection of the environment - Protection and rehabilitation of historic and cultural heritage Supporting public infrastructure with a social vocation - Health - Education and vocational training - Administrative and judicial public service infrastructure 26/05/

11 CEB mandate and the EU 2020 Strategy The 5 targets on the Europe 2020 strategy (employment, R&D/innovation, climate change, education, poverty/social exclusion) cover CEB overall approach Three of them (employment, education, poverty/social exclusion) embrace CEB approach to social inclusion in the WB. Will it be possible to work towards aligning around these targets the views of WB countries, and WBIF partners? 12/04/2011

Other relevant social inclusion objectives 26/05/ CEB and the Commission embrace common objectives on Roma inclusion The EU Roma Integration goals are also relevant to Enlargement countries, (Commissions communication, April 2011) CEB has been engaged in Roma inclusion activities for the last 15 years, with loans (25.9m) and grants (2.7m) and active participation in awareness and policy events. CEB stands ready to finance suitable loan projects In 2010, CEB approved a 8 million project for the « Acceder » programme in Spain, to promote professional training for Roma This program has been singled out as a model of good practices and his transposition has been recommended to the countries of Central and Eastern Europe

Social Sector Development CEB Resources Policies Medium Term Developments assumptions: up to 60% of CEBs loans outstanding in favour of target countries by 2014 with a particular emphasis on the poorest South Eastern countries, (most affected by the crisis) 67% increase in capital approved in January to back-up CEBs expanding activities in target countries 26/05/

Social Sector Development CEB Resources CEBs specific means of action (1) Selective Trust Account: social dividend funded through annual allocation of profits to be used (mostly through interest rate subsidies) to respond to high priority social needs. In particular in the poorest target countries. At the beginning of 2011, 34.5 m. of grants are available for new commitments. 26/05/

Social Sector Development CEB Resources CEBs specific means of action and resources (2) 3 Trust accounts to finance technical assistance The Norway Trust Account: to help the implementation of socio- economic reforms in the WB The Human Rights Trust Fund: to contribute to the consolidation of the rule of law and protection of human rights. The Spanish Social Cohesion Account: in support to CEBs projects mainly in the target group countries 2.8 m. of cumulated resources available for new commitments up to date with a clear focus on Eastern Southern Europe countries 26/05/

Social Sector Development CEB Experience 26/05/ Decent housing is a basic necessity, it facilitates access to education and health services Housing: 1.8 bn approved by CEB since 2006 In November 2010, the Bank approved a project in Serbia in favour of 1,700 households with low and middle income (32m loan) benefiting from a 70,000 grant through WBIF

Social Sector Development CEB Experience 26/05/ …. Over the 5 past years Education: 1.5bn approved e.g. the Education Excellence and Equity program in Albania in favour of which CEB has approved a 14m loan, completed with a 3.4m interest rate subsidy + grant through WBIF + contribution from the Spanish Cohesion Account (Fiduciary account managed by CEB) Health: 795m approved e.g. the on-going project of rehabilitation of the Skodra Hospital in Albania. CEB finances up to 58% of the total cost and grants 0.8m interest-rate subsidy. A grant from the Norway Trust Account has also been approved to cover technical assistance

Social Sector Development CEB Experience 26/05/ Protection of Human Rights and implementation of the rule of law throughout Europe are at the heart of CEBs mandate. The social cohesion of a society finds its expression in the way it treats its weakest segments. In response to the recommendations of the 3 rd Council of Europe Summit (Warsaw, 2005), the CEB is now financing projects to support infrastructure of administrative and judicial services, aiming for example at the establishment of suitable conditions of detention for prison populations, in conformity with European Prison Rules In the WBIF countries 5 projects are at different stages of implementation Albania, Bosnia-Herzegovina, Croatia, FYR Macedonia and Serbia

CEBs views on social inclusion Targetted projects are only effective if they are designed in the framework of universal public policies and inclusive services in health, employment, education, housing. Targetted policies benefit primarily from their alignement and synergies with inclusive mainstream policies and services (J.M. Fresno, President of Spains Council for the Promotion of Equal Opportunities and against Discrimination) 12/04/

20 Economic considerations on social sector projects The economic impact of social inclusion should be further explored and acknowledged The World Bank report on the economic impact of Roma inclusion is an excellent example The impact of education on productivity and competitiveness is well known but should be enhanced Raising the activity rate (and in particular of women, and aged men in an aging Europe), is tightly connected with better health and living (housing) conditions 12/04/2011

21 Financial considerations on social sector projects Strong externalities in social inclusion projects require a specific approach Weak or no income generation is a common feature, therefore the need for grants/lower leverage is higher Ownership at all levels has proved to be the basis of a succesfull project, therefore a certain degree of budget/loan co-financing will be an element towards good results 12/04/2011

22 The social sector and the impact of the crisis Impact of the crisis on social inclusion: Increasing number of jobless people Stretched capacities of current social systems Social projects tend to be relegated vis-à-vis income generating projects Important role of the Commission to ensure a minimun of ressources and political attention to social issues 12/04/2011

WBIF – Opportunities to Increase Investments in the Social Sector - 26/05/ So far, estimated investment in the social field is only 11%, although needs for social infrastructure are crucial (as pointed out in DG Enlargements country reports) How could WBIF support more strongly this sector in the future?

WBIF – Opportunities to Increase Investments in the Social Sector - 26/05/ Better identification of high priority projects Ministries in charge are invited to be more proactive and propose potential projects to NIPACs Giving more visibility to social needs at all levels, including WBIF Social issues should be more precisely singled out

In Conclusion Importance and awareness of social sector must be reflected in the number/volume of projects financed through WBIF. A proactive role of concerned ministries in the Western Balkan countries is essential. Challenges: budgetary constraints, new IPA sectoral approach: how to fit it with the project approach used by some IFIs RCC, Council of Europe, World Bank, CEB ready to help beneficiaries to better define priorities. CEB, EIB and other IFIs and bilateral FI to help beneficiaries to materialize priorities into results. Importance of liaising with NIPACs and coordinating with other important sources of funding: IPA national programmes, bilateral donors. 26/05/

Thank you for your attention 26/05/