Contact: Brendan Gillespie, OECD Environment Directorate. Tel: ; Fax: ; Brendan

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1 For Official Use ENV/EPOC/EAP/MIN(2004)4 ENV/EPOC/EAP/MIN(2004)4 For Official Use Organisation de Coopération et de Développement Economiques Organisation for Economic Co-operation and Development 11-Oct-2004 English - Or. English ENVIRONMENT DIRECTORATE ENVIRONMENT POLICY COMMITTEE TASK FORCE FOR THE IMPLEMENTATION OF THE ENVIRONMENTAL ACTION PROGRAMME FOR CENTRAL AND EASTERN EUROPE, CAUCASUS AND CENTRAL ASIA PROGRESS REPORT ON PARTNERSHIPS Conference of EECCA Environment Ministers and their Partners October 2004 Tbilisi, Georgia This document presents a preliminary and partial review of environmental partnerships developed under the EECCA Environment Strategy. It analyses the available information on completed, ongoing and planned partnerships in the EECCA region since September It provides background information on Agenda item 4. ACTION REQUIRED: For information English - Or. English Contact: Brendan Gillespie, OECD Environment Directorate. Tel: ; Fax: ; Brendan Gillespie@oecd.org JT Document complet disponible sur OLIS dans son format d origine Complete document available on OLIS in its original format

2 TABLE OF CONTENTS EXECUTIVE SUMMARY INTRODUCTION Purpose and objectives Background DEFINITION, SCOPE AND PROCESS Partnership definition Scope PROGRESS ON PARTNERSHIPS General overview Link to the EECCA Strategy Objectives Geographic focus of partnerships Stakeholder participation in the partnerships (Partners involved) Types of partnerships Financial aspects of the partnerships Annex 1: Foreign Direct Investment to the EECCA Region

3 EXECUTIVE SUMMARY 1. This report presents a preliminary and partial review of environmental partnerships developed under the EECCA Environment Strategy. Reporting from EECCA and donor countries is incomplete so care must be taken in drawing conclusions. Moreover what should be counted as a partnership needs further clarification. Nevertheless, the report is a first step to establish a framework for monitoring partnerships. It has yielded a number of insights that can be refined over time and thereby act as a useful reference for those wishing to develop partnerships to help achieve the objectives of the EECCA Strategy. 2. A total of 300 partnerships were analysed, of which 66% are ongoing, 20% are planned and 14% are completed. While these figures are an indicator of progress achieved since September 2002, it is not clear whether these initiatives were carried out as a result of the adoption of the EECCA Environment Strategy, or whether they would have happened anyway. At a minimum, the EECCA Strategy has provided additional support for their development and implementation. 3. The review of the information shows that a significant number (more than 50%) of partnerships reported focus on achieving objectives 2.2 (Municipal water supply and sanitation) and 3.1 (IWRM). This is probably because of the serious water-related problems in the EECCA; but also because of the internationally agreed targets on water agreed at the WSSD including achievement of the Millennium Development Goals (MDGs). In addition, these areas have been supported and monitored within the framework of the EU Water Initiative. It may be that the number of partnerships and the financial support they receive is overemphasised because of the inclusion of loans in the partnership analyses. At the same time the review shows that the areas receiving the least attention are sectoral integration (objective 4) education & awareness raising (objective 6.3) and urban air pollution (objective 2.1). The apparently limited efforts in the latter area are perhaps surprising in view of the potentially significant health effects that are involved. Other objectives accounted for between 4 and 9% each of the total. 4. While in most of the EECCA countries the partnerships are implemented either at the national (42%) or sub-national (28%) levels there are significant differences between the sub-regions e.g. Russia/Ukraine (more partnership implemented at the national level) and Central Asia (more partnerships with sub-regional focus). Partnerships for municipal water supply and sanitation (objective 2.2.) and waste and chemicals management (objective 2.3.) are mainly implemented in the Russian Federation, Ukraine and Moldova. 5. The biggest share (47%) of the partnerships implemented in the EECCA countries provides technical assistance and support for capacity building. Investments also represent a high share (16%), but all of them are focused on improving the municipal water supply and sanitation, mainly in the western part of EECCA and Kazakhstan. Institutional strengthening and technology transfer are the least frequent types of partnerships. 6. Most partnerships are led by government, and most of those do not involve partners from other sectors. NGOs participate in about 25% of partnerships reported. The partnerships that have been initiated by the NGO do not usually include the government as a partner. Partnerships with private sector and the mass-media are much less frequent. 3

4 7. Donor environmental assistance to EECCA countries has risen absolutely and as a share of total assistance in recent years. However, it is still a smaller share of assistance than in other regions, suggesting that there may be scope for the development of more environmental partnerships. 4

5 1. INTRODUCTION 1.1 Purpose and objectives 1. The purpose of the document is to report on progress in developing and implementing partnerships in the EECCA region and to provide background information for the discussion at the Conference of EECCA Environment Ministers and their Partners to be held in Tbilisi on October This paper discusses the concept of partnerships, and analyses available information on completed, ongoing or planned partnerships in the EECCA region since the 2002 Johannesburg World Summit on Sustainable Development (WSSD) until now. 1.2 Background 3. As an outcome of the World Summit on Sustainable Development (WSSD), held in Johannesburg, in South Africa in 2002, partnerships - voluntary multi-stakeholder initiatives were launched to support the achievement of globally agreed commitments in the Johannesburg Plan of Action, Agenda 21 and/or the Programme for the Further Implementation of the Agenda As a part of the WSSD process, the Pan-European East-West Environmental Partnership for Sustainable Development was launched to provide a framework for the development and implementation of an EECCA Environment Strategy, which was further transformed into a partnership and adopted at the 5 th Environment for Europe Ministerial Conference in Kiev (21-23 May 2003). The Ministers highlighted that developing cooperation and partnership between EECCA and other UNECE countries is one of the priorities within the Environment for Europe process. They further noted that the overall objective of the EECCA Strategy is to contribute to improving environmental conditions and to implementing WSSD Plan of Implementation in EECCA by developing action plans and partnerships for the implementation at the national, sub-regional, bilateral and multilateral level. The Ministers also agreed that the Strategy will identify areas in which environmental actions are needed and in which partnership with EECCA countries could be reinforced. 5. Following decisions at the Kiev Ministerial Meeting, a Conference of EECCA Environment Ministers and their Partners will be held in Tbilisi, October 2004 to discuss the partnerships and action programmes elaborated over this period in order to implement the EECCA Environment Strategy, and to provide additional impetus for the development and implementation of the partnerships and action programmes. The 1 st Preparatory meeting held in April 2004 in Paris agreed that a progress report on partnerships that support implementation of the EECCA Environmental Partnerships Strategy should be prepared as a background document for the Tbilisi Ministerial. The 2 nd Preparatory meeting in September 2004 in Chisinau discussed the first draft and agreed on the approach and structure of the Progress report on partnerships to be prepared for Tbilisi. 5

6 2. DEFINITION, SCOPE AND PROCESS 2.1 Partnership definition 6. The term partnership is used in a variety of ways and in different contexts. For example the way the term is used in the work of the UN Commission on Sustainable Development (CSD) involves quite restrictive criteria that are not applied in many other contexts. As explained below, the approach adopted in this report is pragmatic and inclusive. This approach was endorsed by representatives at the 2 nd Preparatory Meeting for the Tbilisi Ministerial Conference in Chisinau, Moldova in September The concept of partnerships was an important part of discussion in the 2002 World Summit on Sustainable Development (WSSD). The Johannesburg Plan of Implementation recognised the potential contribution that partnerships could make to achieving agreed commitments and encouraged their development. CSD was designated by the Summit as the focal point for discussion on partnerships that promote sustainable development. In the context of WSSD and its follow up, partnerships for sustainable development are voluntary multi-stakeholder partnerships which contribute to the implementation of intergovernmental commitments in Agenda 21, the Programme for the Further Implementation of Agenda 21 and the Johannesburg Plan of Implementation. Partnerships are a complement to, but should not substitute for, inter-governmental commitments. At its 11 th session in 2003, the CSD adopted criteria and guidelines for the development of partnerships for sustainable development. Some of the key elements of the CSD definition of partnerships are as follows: x Voluntary x Multi-stakeholder x Contribute to the achievement of inter-governmental commitments in Agenda 21, the Programme for the further implementation of Agenda 21, and the Johannesburg Plan of Implementation x Complement but not substitute inter-governmental commitments x Oriented to sustainable development. 8. Many of the partnerships registered by CSD can be considered macro-partnerships in the sense that they provide a framework on which collaborative project-level relations ( micro-partnerships ) can crystallize and get implemented. Both the EECCA Environment Strategy and the EU Water Initiative are, in that sense, examples of macro-partnerships. The EU Water Initiative has developed its own terminology to refer to micro-partnerships, calling them building blocks. Those building blocks are generally compatible with the criteria put forward by CSD to identify partnerships. There remain doubts, however, as to whether loans provided on commercial (non-concessional) terms without any grant component could still be called partnerships, as they would not differ from a typical commercial transaction. 9. In Kiev, Ministers asked for the Tbilisi Ministerial Conference to review progress on the development of partnerships to achieve the objectives of the EECCA Environment Strategy. Taking the route of analyzing only CSD-registered partnerships would not leave much to be analyzed. The approach taken in this report is to equate partnerships with micro-partnerships" or building blocks rather than comply with the strict criteria put forward by CSD. Indeed this was the approach generally followed by respondents to the questionnaire that was used to collect information on partnerships. The report considers all projects, with clear financial indications, carried out in the EECCA region and focused on achieving the 6

7 objectives of the EECCA Strategy to be as partnerships for the purposes of this report. As a result, the following criteria for the partnerships were adopted: x x x x 2.2 Scope Partnerships should be voluntary initiatives/co-operation projects undertaken by governments and relevant stakeholders such as international institutions, non-governmental organisations, private sector; They should be focused on countries of the EECCA region and implemented internationally (through bilateral or multilateral programmes) or nationally/sub-nationally; They should contribute to achieving the objectives of the EECCA Environment Partnership Strategy and they should not substitute commitments made by Governments but supplement them; The partnerships should be completed, ongoing or planned since September 2002; and they should be initiatives/projects for which funding has been secured. 10. Following the decision of the 1 st Preparatory meeting held in Paris in April, the EAP Task Force Secretariat developed a questionnaire for partnership reporting, which was sent out to all partners at the beginning of May with a request to return it by 28 May The final deadline for information to complete the first draft was extended until 31 July The deadline for submitting information to be included into current report was passed on 17 September In addition, the Secretariat integrated information contained in a Status Report prepared by Denmark for the EECCA Component of the EU Water Initiative (ENV/EPOC/EAP/MIN(2004) The analysis covers the partnerships established in relation to the seven EECCA Strategy objectives, and their sub-objectives as well as their geographic focus, partners involvement (e.g. Governments, International/Facilitating Organisations, NGOs), types (e.g. capacity building, technical assistance, investments, transfer of technology) and financial resources. 12. Only those partnerships started after 2002 and for which basic information was provided were included in the current report. The projects/initiatives representing ongoing/established business as usual activities (e.g. Secretariat functions of Conventions and Protocols) or those going beyond the Strategy objectives (e.g. climate change issues overall) were not considered as partnerships in this report. Partnerships for which a budget, or the budgetary information was not included or was unclear, were excluded from the report. The number of partnerships covering a mix of EECCA and non-eecca are included when information on the financial aspects of the partnerships are clarified. The Secretariat also screened carefully all the received partnership formats to ensure that there was no double reporting of partnerships. Partners were informed about those partnerships that require additional information in order to be included in the report. Clarification of information is on-going process which will also cover in future such aspects as loans determination and financial contribution of the EECCA countries. 13. The Secretariat is developing a comprehensive database on partnerships addressing the objectives and areas of action of the EECCA Strategy. The database will enable an automatic collection and update of information on partnerships, provide an inter-active tool for communication between different partners as well as for monitoring progress on partnerships. This work will allow to prepare further reports and the final Partnerships progress report for the 6 th Ministerial Conference Environment for Europe to be held in Belgrade, Serbia and Montenegro, in A useful cross-check with the analysis of partnership may be obtained by comparing the results of Trends in Environmental Expenditure and International Commitments for the Environment in Eastern 7

8 Europe, Caucasus and Central Asia, , prepared by the OECD/EAP Task Force secretariat for the Kiev Ministerial meeting. Reporting from countries and institutions seems more extensive for the Trends compared to the Partnership report. Some of the Trends results are also presented in the report prepared for the Tbilisi Ministerial Conference, Taking Stock of Environmental Management Challenges in Eastern Europe, Caucasus and Central Asia. Some key points that emerge from this work are: x Domestic, rather than international, sources account for the largest share of environmental expenditures in most EECCA. In countries like Kazakhstan, Moldova, Russia, Turkmenistan and Ukraine domestic sources accounted for about 90% or more of environmental expenditures. On the other hand, in some countries (Kyrgyz Republic, Armenia and Georgia), domestic sources accounted for about only one-third of environmental expenditures. x There are no clear trends in environmental expenditures; most are allocated to operate and maintain deteriorating infrastructure, notably in the water sector; and there is very little capital investment. x Most expenditures are financed by the public sector. x The contribution of the private sector is small or uncertain. Similarly, and as indicated in Annex I, foreign direct investment to the region, both per capita and per unit of GDP, is much less than flows into central and eastern Europe. There is insufficient data to assess the environmental impact of these flows. x Donors have increased environmental assistance absolutely and as a proportion of Official Development Assistance/Official Assistance. x There seems scope to increase environmental assistance: it still represents a smaller share of total assistance in EECCA compared to other regions with similar income levels; and three donors (EC, US and Denmark) accounted for nearly 50% of environmental assistance,

9 3. PROGRESS ON PARTNERSHIPS 15. In Kyiv Ministers agreed that the EECCA Strategy should become an instrument for providing clear information about effective forms of cooperation to partners in the Environment for Europe process. Sharing information and monitoring the partnerships would help consolidate partners efforts in achieving progress, to use limited resources more efficiently, and to stimulate different and innovative forms of cooperation. 3.1 General overview 16. By 17 September 2004, information on 370 partnerships was submitted to the Secretariat. About 42% of the partnerships were reported in the format proposed by the Secretariat. The rest of the information was received in the form of project summaries and tables, which in most cases included similar information to format. Information on 300 partnerships (81% of the total received) was included in this overview. This includes partnerships developed and implemented in the EECCA region since September 2002 to September The partnerships that were not included are either duplicative or need further clarification and may be added to the report later in the process. 17. The reports and information on partnerships were received from 5 EECCA countries (Armenia, Azerbaijan, Moldova, Russia, Turkmenistan), 7 OECD partner countries (Denmark, Finland, Germany, the Netherlands, Norway, Sweden, the UK), the European Commission and from other partner organisations (UNECE, UNDP, UNEP RoE, WHO Europe, OECD/EAP Task Force, REC CEE, REC Central Asia, REC Russia, Global Water Partnership (GWP) Central Asia and the NGOs). The lack of input from EECCA countries and some donors indicate that information is not complete and that any conclusions should be regarded as tentative at this stage. Of the total number of partnerships included in this review, 66% are ongoing, 20% planned and 14% completed. 3.2 Link to the EECCA Strategy Objectives 18. All the EECCA Strategy objectives are the subject of some partnerships. The greatest number of partnerships contributes to the achievement of the Strategy objective 2.2. that is focused on the Municipal Water Supply and Sanitation. This area was indicated as a primary objective in 33% of the partnerships. Objective Integrated Water Resources Management (IWRM) was the focus of about 23% of partnerships reported. The third most frequent area for partnerships is Environmental Policy and Legislation (objective 1) covering 9% of the total. Least frequent are Transport Sector (objective 4.3), Agriculture (objective 4.4) and Urban Air Pollution (objective 2.1). 19. Environmental Legislation and Policies (objective 1) and Public Participation (objective 6.2) are most frequently mentioned as the secondary objective of partnerships (17% and 12% of the total number respectively). Environmental Monitoring and Information Management (objective 6.1), Waste and Chemicals Management (objective 2.3), Transboundary Issues and the Conventions (objective 7) were also a significant secondary objective. Overall Sectoral Integration, transport sector and agriculture are the least mentioned as secondary objectives for those partnerships reported. 20. When comparing the information only across the main seven objectives, Pollution Prevention (objective 2) and Natural Resource Management (objective 3) are still the most frequently addressed 9

10 Strategy objectives, due to their strong water components. However, in such a comparison, the Information, Public Participation, Education (Objective 6) reaches the level of Environmental Legislation and Policies (Objective 1) as the next most frequently addressed Strategy objective (with Education and Awareness Raising being one of the least addressed as a primary objective). The following graph shows in detail the distribution of different objectives/sub-objectives, broken down by primary and secondary objectives. Figure 1. Primary and secondary objectives of partnerships Env Leg and Policy Urb Air Pollution Municip (Rural) WS Waste&Chem Managem IRWM Biodiv&Ecosys Protec Overall Sec Integration Energy Sector Transport Sector Agriculture Fin Resources Mob&Alloc Env Monit&Info Managem Public Participation Educat&Awareness Raising Transbound&Conventions Primary Secondary Number of partnerships Note: A single objective has been identified as the primary objective, with one exclusion, whereas there may be more than one secondary objective. As a result, the number of primary and secondary partnerships is not same as the total number of partnerships analysed. 3.3 Geographic focus of partnerships 21. The distribution of partnerships by geographic focus shows that the majority of partnerships (42%) were implemented in individual EECCA countries. The partnerships implemented at the subnational/local level cover 31% of the total. 27% were focused on sub-regions and/or group of countries. The group of countries varies from two (of the same or different sub-regions) to seven (representing different sub-regions). Those partnerships focused on the whole EECCA region represent 11% of the total number of partnerships reported. 22. Partnerships with a focus on individual EECCA country are mostly implemented in Russia (41%), Ukraine (18%), and Kyrgyzstan (8%). Turkmenistan is least represented in this group with two partnerships reported so far. 71% of sub-national/local partnerships are implemented or planned in Russia. The following two graphs illustrate the geographical focus of partnerships. 10

11 Figure 2. Geographic Focus of Partnerships Number of partnerships (%) Whole EECCA region Sub-region or group of countries Individual EECCA country Sub-national/local Type of geographic focus Note: Some partnerships were reported as combining two geographic focuses (e.g. whole EECCA region and individual EECCA country) therefore the total sum of types of geographic focus is more than 100%. Figure 3. Participation of each country in partnerships by geographic focus 80 Quantity of partnerships, % Sub-region or group of countries Individual EECCA country Sub-national/local 0 Belarus Moldova Russian Fed. Ukraine Armenia Azerbaijan Georgia Country Kazakhstan Kyrgyz Rep. Tajikistan Turkmenistan Uzbekistan 11

12 23. Information on the countries of Central Asia shows that partnerships are most often developed at the sub-regional level, except Kyrgyzstan. For the countries of western EECCA, the preferences in the geographic focus varies. Russia implements mostly sub-national/local and national partnerships, Ukraine national, Belarus and Moldova are most frequently involved into sub-regional partnerships. Countries of the Caucasus region are most frequently involved in partnerships that are focused on the sub-region/group of countries. Armenia implements most partnerships with national geographic focus among Caucasus countries. 24. Some trends can be identified in partners preferences to implement partnerships in EECCA countries and sub-regions. For example, the partnerships focused on municipal water supply and sanitation (objective 2.2.) and waste and chemicals management (objective 2.3.) are mainly implemented or planned to be implemented in the Russian Federation, Ukraine and Moldova. The Central Asian region is mainly implementing partnerships on IRWM (objective 3.1). Biodiversity and ecosystem protection (objective 3.2.) are less addressed in Central Asia compared with other sub-regions of EECCA. 3.4 Stakeholder participation in the partnerships (Partners involved) 25. A significant majority of partnerships involve national or local EECCA government (96%). The International Financing Institutions (IFI) are involved in 23% of reported partnerships, the majority of which are focused on the investments into the water supply and sanitation sector. There is a question whether non-concessional loans should be considered to be partnership. International Organisations participate in 22% of the reported partnerships; professional organisations and scientific institutions are involved in 11%;the EECCA RECs in 10%; NGOs - in 12%;the private sector in 2 %; the mass-media in 1% only of reported partnerships % of partnerships have national or local EECCA governments as a lead partner. Based on the information received more than a half of these partnerships are government to government partnerships. The rest in this group includes as other partner International Facilitating/Cooperating organisations (EEA, OECD, OSCE, UNECE, UNEP, UNESCO, UNDP country offices, WHO), International donors or investors (EBRD, GEF, NIB, NEFCO, WB), NGOs, professional/scientific organisations and universities, RECs, consulting companies and local water utilities. NGOs are leading eleven partnerships, while the private sector is leading one of those reported. The figure below shows a distribution of partners' involvement by each partner category. 27. Information is not sufficient to analyse more specifically the number and leadership of partners involved in each partnership. 12

13 Figure 4. Partners involvement % Gov IF/CO REC IFI PSO/Univ Private sector Mass Media NGO Note: Gov. refers to local and national governments; IF/CO to International Facilitating/Cooperating Organisations and PSO/Univ to Professional/Scientific Organisations and Universities. 3.5 Types of partnerships 28. Most of the reported partnerships provide technical assistance and capacity building. Other most frequently used types of partnerships in EECCA are policy development and investments. Almost all partnerships implemented through investments address issues related either to water supply and sanitation (objective 2.2) or to integrated water resources management (objective 3.1). Institutional strengthening was most frequently considered as secondary (21%) type of partnership. Figure 5. Partnerships type Institutional Strengthening Categories of partnerships Policy Development TA and Capacity Building Technology Transfer Investment Primary Secondary Other Overall quantity of partnerships Note: The primary type of partnership is a singular category. The secondary type of partnership is multiple category. Therefore the number of secondary types of partnerships does not coincide with the total number of partnerships analysed. 13

14 3.6 Financial aspects of the partnerships 29. Since 2002, the overall amount of financial resources secured by reported partnerships in relation to all 7 objectives (including the sub-objectives) constitutes about EUR 4.38 billion. The partnerships primarily addressing water supply and sanitation (objective 2.2.) and IRWM (objective 3.1) reported the biggest shares of funding, approximately EUR million and EUR million respectively. Together they accounted for 96% of total reported partnership financing. These figures may include nonconcessional loans. 30. The share for the objective 2.3 (waste and chemical management partnerships) is about EUR million. The objective 3.2 (biodiversity and ecosystem protection partnership) reported so far of about EUR 36 million secured funding. EUR 27.3 million were secured for the objective 4.2 (sectoral integration: energy sector). EUR 17 million were allocated for objective 1 (Environmental legislation and policy). The objective 7 (transboundary issues and the conventions) was supported with approximately EUR 15 million. The rest of the partnerships reports on funding between EUR 1-8 million. The partnerships focused on the urban air pollution and overall sectoral integration report on the least shares of the resources EUR 277K and EUR 775K respectively. Figure 6. Allocation of finances to EECCA Strategy objectives 10,000,000,000 1,000,000,000 Total finances, 100,000,000 10,000,000 1,000, ,000 10, Objectives Note: The table is presented in a logarithmic scale. 31. In terms of geographic distribution of funding, the biggest share is allocated for individual EECCA countries and constitutes a total of about EUR 3 billion. From this amount approximately EUR 2 billion (67%) is used for ongoing and planned partnerships in the Russian Federation, mainly focused on municipal water supply and sanitation. About EUR 257 million (or 26% of the rest) is being spent in Ukraine, EUR 233 million in Azerbaijan and EUR 201 million in Kazakhstan (another 43% of the rest). Approximately EUR 100 million each (10%) were allocated for partnerships implementation in Armenia (EUR 105 million) and Uzbekistan (EUR 101 million). Based on the information received so far the least share of financial support is secured for Belarus and Moldova. No information was received on the financing of ongoing or planned partnerships in Turkmenistan as an individual country 14

15 Figure 7. Geographic distribution of finances 10,000,000,000 1,000,000, ,000,000 Finances total, 10,000,000 1,000, ,000 10,000 1,000 EECCA S ubreg./groups of countries Caucas us Central Asia Caucas us & C. As ia Individual countries overall Armenia Azerbaijan Belarus Georgia Kazakhstan Kyrgyz Rep. Geographic focus Moldova Russian Fed. Tajikistan Turkmenistan Ukraine Uzbekistan Note: The table is presented in a logarithmic scale. 32. Among partners reported, the major contributors to the partnerships funding are the European Union/TACIS programme, Germany, Denmark, Finland, Sweden, the UK, the Netherlands and Norway. It was not possible to calculate the relative financial contribution of EECCA countries, donors and other partners. Figure 8. Financial support addressing the objectives of the EECCA Strategy 10,000,000,000 1,000,000, ,000,000 Budget, 10,000,000 1,000, ,000 10,000 1,000 WB Mixed EU EBRD NIB Japan Switzerland Germany US A Denmark Finland S weden UK Country/Donor Note: The table is presented in a logarithmic scale. ISLAM Dev. Bank Netherlands Norway OS CE GE F NE F CO WHO WWF OS I IPEN Others 15

16 Annex 1: Foreign Direct Investment to the EECCA Region Foreign direct investment (FDI) in EECCA countries both per capita and per unit of GDP, are still well below FDI in the more advanced transition countries in CEE. Only Azerbaijan and Kazakhstan come close to the least advanced CEE countries. The main sectors attracting FDI in the region were telecommunications, beverages, commerce, banking, mining, oil and gas, metal processing, chemicals, and pharmaceuticals. No data is available that would allow analysis of the environmental impact of the FDI flows. Aggregated FDI data are presented below. Table 1. Foreign Direct Investment to the EECCA Region total accumulated stock, million ¼ share of GDP, average % per capita, average, ¼ as a share of GDP Armenia Azerbaijan Belarus Georgia Kazakhstan Kyrgyz Republic Moldova Russian Federation Tajikistan Turkmenistan Ukraine Uzbekistan Bulgaria Hungary Lithuania Romania Germany Portugal Source: IMF; UNCTAD. Notes: Inflows of FDI are comprised of capital received from an FDI enterprise by a foreign direct investor. There are three components in FDI: equity capital, reinvested earnings and intra- company loans data are estimates. Except in Turkmenistan, FDI in the region was attracted mainly by the countries, which are rich in energy resources, such as oil and coal. Three fourths of all inflows of FDI in the region flowed to Kazakhstan, Russia and Azerbaijan. Per capita disproportions in FDI patterns are also staggering. Russia received ¼ per capita per year on average, around the region s average. In contrast, on average, in two oil rich countries, Kazakhstan and Azerbaijan attracted ¼DQG¼SHUFDSLWDSHU\HDUZKLOH7DMLNLVWDQDQG Uzbekistan attracted respectively only ¼ DQG ¼ Presented data do not allow any judgement on the environmental effects of FDI distribution, as foreign investments in oil extraction may have both negative environmental effects (accelerated exploitation) and positive effects (more efficiency, less wastage). As a share of GDP, FDI accounted for 13.3% of the Azerbaijan s economy on average per year in the sixyear period. The next biggest recipients were Kazakhstan (7.2%) and Armenia (6.4%) in the same period. Uzbekistan is the smallest recipient with only 0.4% of GDP per year from FDI. Also at very low levels are Russia, Belarus, Tajikistan and Ukraine all at flow levels below 2% of GDP per year. 16