UN EP REPORT on the Training Course on “Implementation of Economic Instruments for a Sustainable Operation of Wastewater Utilities in the Mediterranean Region of Bosnia and Herzegovina” (Sarajevo, December 20, 2002) EI/2003/TC-R/B&H Priority Actions Programme Regional Activity Centre Split, February 2003 EI/2003/TC-R/B&H Page 2 REPORT on the Training Course on "Implementation of Economic Instruments for a Sustainable Operation of Wastewater Utilities in the Mediterranean Region of Bosnia and Herzegovina" (Sarajevo, December 20, 2002) BACKGROUND INFORMATION 1. It is the fact that Bosnia and Herzegovina has been developing very slowly in economic, political and legal sense and that all these aspects are loaded with key problems. This is why very little attention, generally speaking, is paid to development of environmental policy. 2. Participation of economic instruments in environmental protection, and especially in protection of air and water, as well as in waste disposal management and protection of flora and fauna in Bosnia and Herzegovina, is not sufficient. There are no simulative instruments in the system of public revenues for investments into projects and programmes directed to fulfilment of objectives in environmental protection. 3. Bosnia and Herzegovina is trying to make progress in strengthening or development of the system of economic instruments. Some forms of economic instruments used mainly in environmental protection in Bosnia and Herzegovina are the user charges (for use of natural resources and public utility services), discharge fees for pollutants discharged into the environment and special taxes to products the consumption of which has detrimental impact on the environment (oil derivations). The revenues attained by economic instruments in Bosnia and Herzegovina are mainly the inflows of the state, entity, Cantonal and Municipal budgets, which are later on used to defray public expenditure, and which are mainly not related to the environment. 4. Dynamical changes that marked the period of transition in Bosnia and Herzegovina, create conditions and the need for new, more efficient policy of economic instruments, actually by introduction of new economic instruments whose objectives will be clearly defined. But, sometimes it is more efficient and easier to improve the existing economic instruments than to introduce the new ones. Basic rates of charges and fines in the field of environmental protection are too low to be able to give a more significant stimulus for reduction of pollution or to attain more significant revenues. As an example, wastewater charges can be mentioned, that are so low in the whole territory of Bosnia and Herzegovina that even the payment collection is 90% it cannot cover the operational costs. Besides, such low wastewater user charges do not influence changes of awareness of users to use the natural resource rationally and economically. 5. With the adoption, by the Contracting Parties to the Barcelona Convention, of the Strategic Action Programme (SAP) to address marine pollution from land-based sources and activities in the Mediterranean, the Priority Actions Programme Regional Activity Centre (PAP/RAC) in Split, Croatia, has been entrusted with the preparation and implementation of the project "Development and Implementation of Economic Instruments for a Sustainable Implementation of the SAP MED". 6. The goal of the project is to identify economic instruments that will assist in developing a sustainable financial platform for the continued implementation of the SAP MED in the long term, to incorporate these economic instruments into National Action Plans (NAPs), and to EI/2003/TC-R/B&H Page 3 assist in developing administrative, legal and fiscal mechanisms for the sustainable financing of the implementation of the SAP MED at national level. In order to achieve this goal, PAP/RAC is working in close co-operation with national partners, relevant international organisations and institutions, and regional experts. 7. The Pilot Project "A Sustainable Operation of Wastewater Utilities in the Mediterranean Region of Bosnia and Herzegovina" has been proposed as a part of the project entitled "Development of Economic Instruments for a Sustainable Implementation of the SAP MED". A pilot wastewater utility in the Mediterranean region of Bosnia and Herzegovina has been selected, for which the existing economic instruments will be adapted and implemented over the two years of the Pilot Project's duration. 8. The key problem identified by this project is the current low level of provision of wastewater collection and treatment services and ineffective maintenance of existing infrastructure for dealing with wastewater in Bosnia and Herzegovina. 9. The training course on application of economic instruments for combating the land-based pollution was held in Sarajevo, Bosnia and Herzegovina, on December 20, 2002. The training course was organised within the overall project “Development of Economic Instruments for a Sustainable Implementation of the SAP MED”, founded by GEF and generally managed by PAP/RAC. The aim of the meeting was to present the project activities and the state of development of economic instruments in Bosnia and Herzegovina in order to gather the views of stakeholders on the subject. PARTICIPATION 10. Eighteen representatives of relevant stakeholders from Konjic Municipality, Cantonal Ministry for Construction, Physical Planning and Environment, Cantonal Ministry of Economy, Water Utilities, NGOs, Institutions for Public Health and Industries attended the meeting. The List of Participants is given in Annex I of this report. The Agenda of the meeting is attached as Annex II to the report. OBJECTIVE OF THE MEETING 11. The objective of the meeting was to instruct the participants in: a) General issues regarding the economic instruments in environmental protection; b) Development and implementation of economic instruments; c) Overview of economic instruments applied in Bosnia and Herzegovina; and d) Pilot Project “Implementation of Economic Instruments for a Sustainable Operation of Wastewater Utilities in the Mediterranean Region of Bosnia and Herzegovina” (Expected results of the Pilot Project). Agenda item 1: OPENING OF THE MEETING 12. The meeting was opened by Mr. T. Kupusović (Co-ordinator of MAP for Bosnia and Herzegovina and Director of Hydro-Engineering Institute) who welcomed the participants on behalf of Hydro-Engineering Institute, and of his own. He presented briefly the SAP MED project, as well as the project component “Sustainability of the SAP MED”, which is to be implemented by Hydro-Engineering Institute. EI/2003/TC-R/B&H Page 4 Agenda item 2: AN INTRODUCTORY NOTE TO THE PROJECT COMPONENT “SUSTAINABILITY OF THE SAP MED" 13. Ms. D. Povh (PAP/RAC) gave an introductory note to the project component “Sustainability of the SAP MED”. She described the objectives, needs and expected results of the project, mentioning, among others, the countries eligible for the project and the time span of the project. The objectives of the project “Sustainability of the SAP MED” were presented as follows: to develop and implement economic instruments for a sustainable implementation of the Strategic Action Programme for the Mediterranean Sea; to make actions for combating the land- based pollution self-financing at national level through revenue generation; and to demonstrate the economic benefits of more integrated approaches to management. For this purpose, the project needs a sustainable financial platform for a continued implementation of the SAP MED in the longer term, and incorporation of such economic instruments into National Action Plans at national level, as well as the national professionals trained for economic instruments. The expected results of the project are: development of administrative, legal and fiscal mechanisms for a sustainable financing of the SAP MED implementation at national level; and enhanced government capability to identify, develop and implement various types of economic instruments suitable for a relevant country. The activities will be performed in the framework of the three main phases of the project: Analysis; Pilot Projects; and Synthesis and Evaluation of the Project Results. This presentation is contained in Annex III of the report. Agenda item 3: GENERAL INTRODUCTION TO ECONOMIC INSTRUMENTS IN ENVIRONMENTAL PROTECTION 14. The above-mentioned topic was introduced to the participants by Mr. N. Dale (Metroeconomica Ltd., UK). He explained the definition of and a rationale for economic instruments, the main types of economic instruments and their advantages and limitations. This presentation is contained in Annex IV of the report. Agenda item 4: AN OVERVIEW OF ECONOMIC INSTRUMENTS APPLIED IN BOSNIA AND HERZEGOVINA 15. Ms. R. Alić (Hydro-Engineering Institute, Sarajevo) gave an overview of economic instruments applied in the country, pointing out to their strengths and weaknesses. She spoke about the existing and new legislation regarding environmental protection in the country, institutional framework for economic instruments implementation, and public participation in Bosnia and Herzegovina. This presentation is contained in Annex V of the report. Agenda item 5: DEVELOPMENT AND IMPLEMENTATION OF ECONOMIC INSTRUMENTS 16. Mr. Dale, then, presented and explained the following issues: Evaluation criteria for economic instruments; Evaluation of user charges against criteria; Requirements for development and implementation of economic instruments; and Overview of operation of economic instruments in Central and Eastern Europe. This presentation is contained in Annex VI of the report. Agenda item 6: PILOT PROJECT “IMPLEMENTATION OF ECONOMIC INSTRUMENTS FOR A SUSTAINABLE OPERATION OF WASTEWATER UTILITIES IN THE MEDITERRANEAN REGION OF BOSNIA AND EI/2003/TC-R/B&H Page 5 HERZEGOVINA” 16. Mr. A. Ćerić and Ms. A. Perić explained the Pilot Project to be implemented in the Mediterranean region of Bosnia and Herzegovina, and the results to be achieved by this project. It was stressed that the key problem identified was the current low level of provision of wastewater collection and treatment services, and ineffective maintenance of the existing infrastructure for dealing with wastewater in the Municipality of Konjic. The following objectives have been set out in the Pilot Project Implementation Plan: to set up sewage user fees in the utility that will recover costs of providing wastewater services; and to increase collection rates. 18. Thereafter, Ms. Perić presented the implementation procedure and supporting measures for adopting economic instruments (wastewater tariff) for a sustainable operation of wastewater utilities. Measures and procedures to increase the rate of revenues collections were also explained. This presentation is contained in Annex VII of the report. The wastewater tariff model for general use by all wastewater utilities, which was presented by Mr. Ćerić, is attached as Annex VIII to this report. Agenda item 7: DISCUSSION 19. The discussion that followed presentations was focused on a possibility to implement the proposed economic instruments for a sustainable operation of wastewater utilities and their efficiency. The participants underlined the problems of the collection rate in existing social and economic conditions. Issues like a high unemployment rate, the insufficient number of economic activities and low wages issue, were emphasised. It was stressed that in such economic conditions the Municipality was not in a position to provide the basic services like health insurance, educational and social care. Most of the participants agreed that the existing sewerage system in the Municipality required urgent reconstruction and development. In that context, the participants raised the issue of financing costs of capital investments. The adequate water and wastewater tariffs, as well as the sufficient collection rate were recognised as the best way to reach the improvement in communal infrastructure. It was proposed that the wastewater tariff be based on real costs for wastewater services covering also part of capital investments. According to legislation in Bosnia and Herzegovina, the Municipality is responsible for the final approval of water and wastewater tariffs. The authorities of Konjic Municipality expressed their willingness to adopt the proposed changes of wastewater tariffs. Agenda item 8: CLOSURE OF THE MEETING 20. The meeting was closed on December 20, 2002, at 17:00 hours. EI/2003/TC-R/B&H Annex I Page 1 Annex I List of Participants 1. Ms. Ramiza Alić Place: Sarajevo Hydro-Engineering Institute Phone: +387 33 21 24 66/67 Fax: +387 33 20 79 49 2. Ms. Enisa Bašić Place: Mostar Hercegovačko - neretvanski Canton, Ministry of Phone: +387 36551 510 Civil Engineering, Physical Planning and +387 36 324 324 Fax: +387 36 551 051 Environment +387 36 312 190 3. Mr. Emir Bubalo Place: Konjic Municipality of Konjic Phone: +387 36 727 221 Fax: +387 36 729 813 4. Mr. Admir Ćerić Place: Sarajevo Hydro-Engineering Institute Phone: +387 33 21 24 66/67 Fax: +387 33 20 79 49 5. Mr. Ivo Ćupić Place: Sarajevo Organisation and Economic Institute Phone: +387 33 203 149 Fax: +387 33 203 149 6. Mr. Nick Dale Place: London Metroeconomica Ltd. Phone: +44 1225 826954 Fax: +44 1225 323423 7. Ms. Tihana Gašević Place: Mostar Public Enterprise for "Watershed Area of the Phone: +387 36 397 882 Adriatic Sea" Fax: +387 36 397 883 8. Mr. Anton Jekauc Place: Sarajevo Organisation and Economic Institute Phone: +387 33 203 149 Fax: +387 33 203 149 9. Mr. Safet Kovačević Place: Jablanica Municipality of Jablanica Phone: +387 36 752 954 Fax: +387 36 753 215 10. Mr. Andrija Krešić Place: Neum Public Utility for Wastewater “MARECO” Phone: +387 36 880 225 Fax: +387 36 880 136 11. Mr. Tarik Kupusović Place: Sarajevo Hydro-Engineering Institute Phone: +387 33 212 466 Fax: +387 33 212 466 12. Ms. Kadira Močević Place: Sarajevo Public Enterprise for Electricity “Elektroprivreda Phone: +387 33 526 503 of B&H” Fax: +387 33 526 503 13. Ms. Emina Nikšić Place: Konjic Public Utility “Water and Wastewater” Konjic Phone: +387 36 727 576 Fax: +387 36 727 576 14. Ms. Andja K. Perić Place: Sarajevo Hydro-Engineering Institute Phone: +387 33 21 24 66/67 Fax: +387 33 20 79 49 EI/2003/TC-R/B&H Annex I Page 2 15. Ms. Daria Povh Place: Split PAP/RAC Phone: +385 21 340 478 Fax: +385 21 340 490 16. Mr. Sulejman Sokolivić Place: Mostar Hercegovačko - neretvanski Canton, Ministry of Phone: +387 61 385 958 Economy Fax: +387 36 552 806 17. Mr. Suad Špago Place: Konjic Public Utility “Water and Wastewater” Konjic Phone: +387 36 727 576 Fax: +387 36 727 576 18. Mr. Miralem Variščić Place: Konjic NGO “Greens Neretva” Phone: +387 36 728 470 Fax: +387 36 728 470 EI/2003/TC-R/B&H Annex I Page 3 Annex II Agenda 09:00 - 09:30 Registration of the participants. 09:30 – 9:45 Opening of the meeting. 9:45 - 10:00 An introductory note to the project component “Sustainability of the SAP MED" (Ms. D. Povh). 10:00 – 11:00 General introduction to economic instruments in environmental protection (Mr. N. Dale). 11:00 – 11:45 An overview of economic instruments applied in Bosnia and Herzegovina (Ms. R. Alić). 11:45 – 12:00 Coffee break. 12:00 – 13:00 Development and implementation of economic instruments (Mr. N. Dale). 13:00 - 14:00 Lunch break. 14:00 - 15:30 Pilot Project “Implementation of economic instruments for a sustainable operation of wastewater utilities in the Mediterranean region of Bosnia and Herzegovina” (Ms. A. K. Perić, Mr. A. Ćerić). 15:30 – 15:45 Coffee break. 15:45 –17:00 Discussion. 17:00 Closure of the meeting.