Assistance in implementation of infrastructure improvement projects for cities
17 February 2010
Project Implementation Assistance and Selection of Partner Cities Continue
As part of the Municipal Finance Strengthening Initiative (MFSI) project supported by USAID, the Institute for Budgetary and Socio-Economic Research (IBSER) is assisting Ukrainian cities in implementation of their infrastructure improvement investment projects, in particular, in the area of energy conservation.
This important work was initiated at the Fifth Financial and Economic Forum in late November 2009, which brought together the representatives of central and local governments, banks and investment companies to discuss the situation in this sector and work out new approaches for attracting funds for the financing of municipal infrastructure development projects, which are primarily focused on energy conservation.
As it is difficult to implement such projects due to lack of funds in municipalities, IBSER, working proactively with potential investors (or creditors), is helping to find the required funds and prepare all the necessary documents, such as agreements, decisions of central and local governments, regulatory permits, etc. in accordance with the current law. In addition, evaluation is conducted of both the project efficiency and capacity of a local government to discharge its obligations, including those related to debt repayment. This evaluation involves identification of possible legal and budgetary risks, and allows taking steps towards their rectification already at the project development phase in order to protect the rights of both parties, i.e., the investor/creditor and local government.
Funds for project implementation may be attracted in various ways: through issue of municipal bonds, applying for a grant or loan to banks or financial organizations, including international organizations, or by attracting the funds of investors, using the Public-Private Partnership tools. At this time, joint efforts have been launched to work out the mechanisms for project financing with the cities of Ostroh, L'viv, and Cherkasy, protocols of intent have been signed with the Slavuta and Komsomolsk city councils, private partners (VAT ESCO-CENTER Central Energy Service Company, ZAT ESCO-Rivne Communal Energy Service Company), and potential creditors (NEFCO, KFW Bureau, АТ State Export and Import Bank of Ukraine).
However, the core problems slowing down the progress of projects lie in the legislative field. Therefore, the focus on practical development and implementation of innovative financial approaches will make it possible to gain a unique experience for drafting legislative changes, some of which have already been incorporated in the existing normative-legal documents (in particular, amendments to Resolution No.207 of the Cabinet of Ministers of Ukraine dated 24 February 2003).
Therefore, IBSER has chosen the tactical approach of proceeding in two directions:
1) developing and applying the mechanisms of attracting funds for local infrastructure development projects in the existing legislative environment; and
2) working to improve the legislative framework for strengthening the financial capacity for implementation of infrastructure projects at the local level.
The Municipal Finance Strengthening Initiative project, which underlies the said activities, is in progress. Still in progress is also the selection process of cities, which can take part in implementation of this project. If your city needs to implement certain infrastructure projects, especially those intended for energy conservation, please contact the Institute for Budgetary & Socio-economic Reasearch directly at 15V, Borysohlibska St., 2nd Floor, Kyiv, tel. 353-58-58, or by email to inform@ibser.org.ua.
With your application, please enclose brief information about municipal projects, which could be considered as joint pilot projects involving the mobilization of investment or credit resources, or those to be implemented based on Public Private Partnership.
Glyanec