development of romanian transport infrastructure...
TRANSCRIPT
Development of Romanian transport infrastructure and EU funds:
the challenge of absorption requires structural changes
Preliminary Draft – For discussion only
Alexis GressierAntti Talvitie
Bucharest, May 10, 2011
Content
• Introduction and background• Review of current absorption (SOP-T and ROP)• Analysis and recommendations – Governance and planning
– Institutional structures and sector governance– Planning capacity– Financial planning
• Analysis and recommendations – Implementation– Management and human resources– Project preparation– Reviews, authorisations, approvals– Procurement,– Contract management,– Financial management
• Legislative apects• Role of private sector• Conclusion
Transport infrastructure and the economy
• Develop transport infrastructure to accompany economic growth.– Mobility of persons and goods– Transport costs, speed and safety
• Not only motorways:– National and county roads– Railways– Danube
• Not only construction:– Operation– Maintenance– Services
EU funds
• Phare and ISPA: precursors. ISPA: – More than 1 billion euro for transport– Take stock of actual implementation. Learn lessons
• SOP-T:– 2007-2013 (2015 for eligibility of expenditures)– 4.5 billion Euro from EU– 1.1 billion Euro national co-financing (eligible costs)– 67%: TEN-T priority axis– 24%: other national infrastructure
• ROP:– 0.87 billion Euro priority axis 2 (county roads and streets)– Large share of priority axis 1 (urban growth poles)
Absorption of EU funds
• Three aspects:
– Modernisation of transport infrastructure needed by citizens and by the economy
– Inflow of financial resources with direct impact on GDP
– Lower pressure on budget
• But also: act as vector of the modernisation / reform of the infrastructure sector
Absorption of EU funds:projects approved (contracting) and absorption rates
(June 2010)
Overview of EU absorption:implementation rate (June 2010)
Current absorption SOP-T
• Two main figures – status at 18/03/2011
– 20.46%: eligible value of approved projects against global SOP-T allocation, with 24 investment projects
– 2.47%: amount of payments (EU contribution) against global SOP-T allocation
• March 2011: 47% of total time period (2007-2015)
• But: need to take into account the project cycle
Forecasts - MA
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
5,000.00
2007 2008 2009 2010 2011 2012 2013 2014 2015
SOP TRANSPORT cumulated
Committed Contracted Paid
-mil euro-
Analysis: how reasonable is the forecast?
• Eligible value of projects under appraisal: 3.4 billion Euro (74.4% of global allocation), with
– 4 motorway projects
– 3 railway projects
The project contracting forecast might be achieved
Main risk: rate of payment, i.e. actual implementation
ISPA experience
Not specific to EU funds
• Transylvania motorway• Bucharest – Ploiesti motorway• EIB funded projects (road rehabilitation)• Very limited railway rehabilitation projects funded by other funds
than EU Systemic deficiencies, not specifically related to EU funds:
- Weakness of public administration- Inappropriate governance- Insufficient planning
Over-optimistic forecasts postpone the necessary reform of the system
Delays create backlog: 2007-2010 implementation of ISPA instead of SOP-T, no current preparation for next programming period
Current absorption - ROP
• Very different from SOP-T: large number of small projects
• Lack of transport related strategy
• Strong appetite for transport infrastructure projects: 53% of total projects value approved to date (priority axis 2 but also 1)
• Full contracting of priority axis 2, overall rate 56%
• Still low payment rate: 5.6% overall
Analysis and recommendations –Sector Governance
• Core: Functional Review Action Plan• Infrastructure projects: require long term
planning and operational stability Need for a clear strategy (master plan) Reduce political interferences in implementation Need for “arm-length” management of main
infrastructure companies (CN ADNR SA and CFR SA):- Medium term management contracts- Set objectives and financial means (Performance
Agreements)
Functional Review – extracts of action plan
Analysis and recommendations –Planning capacity
• Role of the MoT• In the 1990s, priorities were obvious: rehabilitate
the existing infrastructure• 2000 – to date: build core motorways and
rehabilitate railway along Corridor IV• Future ?
– Financial allocation for transport infrastructure (construction and maintenance)
– Role of railways: revitalisation, rationalisation, local level
– Investment priorities
Planning capacity – local level
• Large number of projects but risk of lack of coherence
• Future programming period: Europe 2020 strategy– energy efficiency (decarbonising the economy),
– urban dimension of transport
– coordinated implementation of infrastructure projects that must contribute to the effectiveness of the overall EU transport system
=> Need for Regional strategies
Analysis and recommendations –Financial planning
• Rationalise public investment program
– Value of signed contracts for roads: in excess of 7 billion Euros
– Take into account all project costs
– Ensure adequate funding of maintenance
ensure medium term financial framework (in line with medium term budget)
• Ensure sustainable funding mechanism and coherence between road and rail
Analysis and recommendations –Human resources
• Promote a unitary and attractive remuneration system,
• Develop staff retaining strategies based on incentives and carriers,
• Review decision making systems in order to ensure better timeliness,
• Involve audit and control authorities in order to identify best practices.
• Make increased use of consultants and external services, to lower internal constraints
Analysis and recommendations –Project preparation
• Focus on project preparation: shortcuts in preparation lead to execution delays and cost overruns
• Project preparation requires time and funds
– 4 to 5 years as a minimum (feasibility, EIA, design, land acquisition, utilities)
– Around 5% of project costs
Implementation - preparation
• No “magic formula”:
– Design-build: not convincing
– PPP: not fast track
– Transfer of responsibilities towards contractors: not realistic
• Delimitate responsibilities (State / contractors)
• Criteria for project maturity
Implementation – reviews, authorisations, approvals
• Several different procedures:– Environment,– Urbanism,– Use of public funds,– EU funding
• Several reviews (design check, ISC, etc)• Large number of authorisations (local authorities,
utility managers)=> Mapping, analysis of added value and
simplification
Implementation - tendering
• Standardise:
– Documents
– Criteria
– Interpretation of rules
• Increase coordination between authorities
Implementation – contract management
• Standardise contracts and procedures• Strengthen human resources and improve management
style• Improve quality control• Contract = partnership• Role of control environment: harmonise interpretations• Favor timely solution of difficulties• Develop risk management, with adequate risk prevention
measures, including financial reserves• Develop financial management• Streamline role of external authorities: environment, state
inspectorate in construction, utilities managers, accreditation bodies
Implementation – financial management
• Multiannual perspectives
• Co-financing of EU funds: eligible and non-eligible
• Risk management: reserve fund
• Absorption: speed of payment and reimbursement mechanisms
– Need for cash-rich system
– Speed of process (N+3/N+2 rule)
Legal aspects
• Changing the law is not the solution to lack of planning and deficient management (OUG 34, land acquisition)
• Law on utilities
• Advance payments
Role of private sector
• PPP: bad track record
Ensure streamlined legal framework (possible infringement procedure on current law)
Restore credibility
• Role of private sector in project management:– Not efficient if not accompanied by public sector
reform,
– Not efficient if limited to contract implementation.
• Increase technical assistance to management
Positive steps
• New law on land acquisition
• Tenders for motorways prior to project approval
• Start of contract standardisation
• Intention to tender the management of some State owned companies
=> but: partial measures do not solve the issues
Conclusions
• Short term priorities– No replacement projects– Focus on implementable projects– Start preparation of next programming period
• Recommendations:– prevent staff turn over by implementing improved human
resources policies (salaries but also carrier management, non –financial incentives and rewards)
– prevent managers turn over– streamline and simplify procedures– hire significant technical assistance in order to assist with
contract management– Establish reserve fund
Conclusions – Medium term– Streamline the sector management, in accordance with the
recommendations of the functional review
– Streamline the sector financial planning, by ensuring preparation of mid-term projections, linked with the State budget,
– Standardize tender documents and conditions of contracts
– Streamline, coordinate and simplify the role of the different actors in infrastructure projects (review bodies, control and audit entities, authorization issuers, etc)
– Prepare a law on public utilities that make utilities owners responsible
Overview
• Wide agreement over problems
• Many papers on solutions
• What might trigger reform implementation?
– Reports, Policy notes
– Funding institutions
– Loss of funds and delayed infrastructure improvement