Analysis of Traffic Flows for TRACECA Countries and ... · Analysis of Traffic Flows for TRACECA Countries and ... 3.1.3 Inventory and SWOT analysis – scoping the TRACECA Transport

Analysis of Traffic Flows for TRACECA Countries and

Interregional Transport Dialogue between EU and NIS

121627 EuropeAid / 122883/C/SER/Multi

The EU’s TACIS TRACECA Programme for Armenia, Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Tajikistan, Turkey,

Turkmenistan, Ukraine and Uzbekistan

Interim Report 3

April 2009

Projected funded by the European Commission

Project implemented by

Louis Berger SAS in association with WSP Finland

Project Title: Analysis of Traffic Flows in TRACECA Countries and Interregional Transport Dialogue between the EU and NIS

Project Number: 121627 EuropeAid / 122883/C/SER/Multi

Countries: Armenia, Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Tajikistan, Turkey, Turkmenistan, Ukraine, Uzbekistan

EC Programme Manager Mrs Helisene Habart (until end of November 2008), Mr Roel Hoenders (Interim PM), Mrs Barbara Bernardi (from January 2009), Mr Leonidas Kioussis (Section Chief/Transport)

EC Consultant

Name: Louis Berger SAS in association with WSP

Project Office Address: TRACECA Permanent Secretariat, 8/2 T. Aliyarbekov Street, 1005 Baku – Azerbaijan

Tel: +994 12 498 56 73/ 493 60 07

Fax: +994 12 493 60 07

Head Office Address: Mercure III – 55 Bis Quai de Grenelle 75015 Paris France

Tel: +33 01 45 78 39 39

Fax: +33 01 45 77 74 69

E-mail: [email protected]

Team Leader: Ingrid Angela Gössinger TRACECA Permanent Secretariat 8/2 T. Aliyarbekov Street 1005 Baku – Azerbaijan Tel + 994 12 498 56 73 Fax + 994 12 493 60 07 [email protected]

Date of report: April 2009

Reporting period: 1 July 2008 – 31 December 2009

Authors of report: Project Team

Analysis of Traffic Flows in TRACECA Countries and Interregional Transport Dialogue between the EU and NIS 121627 EuropeAid / 122883/C/SER/Multi Implemented by Louis Berger SAS and WSP Finland

Interim Report 3

2

Table of Content 1 Project Synopsis 5

2 Summary of achievements 7 2.1 Lot 1 – Traffic Forecasting and Database 7 2.2 Lot 2 – Interregional Transport Dialogue 7 3 Project Activities during the Reporting Period and Planned Project Activities until the end of the Project 9 3.1 Lot 1 – Traffic Forecasting and Database 9 3.1.1 Data collection process, training of and support to Data Collection Experts 9 3.1.1.1 Special training session for Ministry of Transport of the Republic of Azerbaijan 9 3.1.1.2 Second Experts Working Session in Baku 9 3.1.1.3 Third Experts Working Session in Istanbul 10 3.1.1.4 Extraordinary meetings with Data Collection Experts 11 3.1.1.5 Outlook 11 3.1.2 Transport GIS Database “ECA- Data” 11 3.1.2.1 Outlook 13 3.1.3 Inventory and SWOT analysis – scoping the TRACECA Transport Corridor 13 3.1.4 Transport Demand and Scenarios 15 3.1.5 Transport Modelling (“ECA – Trans”) 16 3.1.5.1 Outlook 19 3.1.6 Transport Forecasts and Identification of Bottlenecks 19 3.1.6.1 Outlook 21


Interim Report 3

3

3.1.7 Coordination with other ongoing projects 21 3.1.8 Delivery of hard- and software fulfilling IT requirements 22 3.2 Lot 2 – Interregional Transport Dialogue 23 3.2.1 Support to Working Groups within the “Baku Process” 23 3.2.1.1 Third Meeting of the Regional EU - Black Sea / Caspian Basin Expert Working Group on Civil Aviation at Lake Issyk-Kul 23 3.2.1.2 First meeting of the Working Group on Transport Infrastructure in Brussels 24 3.2.1.3 Meeting of the PS IGC in Brussels 26 3.2.1.4 Outlook 26 3.2.2 Organisation of the Anniversary Conference in Baku 26 3.2.3 Organisation of First Investors’ Forum 27 3.2.3.1 Outlook 28 3.2.4 Identification of sustainable projects 28 3.2.5 Promotion of PPP 28 3.2.5.1 Outlook 30 3.2.6 Coordination with IFIs 31 3.2.6.1 Outlook 32 3.2.7 Support to the progress report on TRACECA Action Plan 32 3.2.8 Support to the development of a TRACECA Investment Fund 33 3.2.9 Support to the development of a TRACECA Business Advisory Council 33 3.2.9.1 Outlook 33 3.2.10 Coordination and support to TRACECA / EU 33 3.2.10.1 Communication with TRACECA PS and National Secretaries 33


Interim Report 3

4

3.2.10.2 Coordination with and support to EC Programme Managers 34 3.2.10.3 Development of a database and maps of ongoing and planned transport projects in the TRACECA region 34 3.2.10.4 Publishing of visibility materials 34 3.2.10.5 Support to the Restructuring of the TRACECA Permanent Secretariat 35 3.2.10.5.1 Outlook 36 4 Deviation from original planning and reasons 38 5 Contract and Budget Administration 39 6 Annexes 40


Interim Report 3

5

1 Project Synopsis

Project Title: Analysis of Traffic Flows for TRACECA Countries and Interregional Transport Dialogue between EU and NIS

Project Number: 121627 EuropeAid / 122883/C/SER/Multi

Countries: Armenia, Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Tajikistan, Turkey, Turkmenistan, Ukraine, Uzbekistan

Contract volume: Project duration: Contracting Authority: Consultant:

€ 3.187.200 24 months European Community, represented by European Commission Louis Berger SAS in association with WSP

Project objectives: The overall objective of the project is to facilitate regional cooperation in the field of transport, by capacity building and training measures, development of transport forecasts and investment appraisals in the TRACECA region and through effective regional transport dialogue with the Black Sea/Caspian Sea countries and their neighbours, in the framework of TRACECA and the “Baku initiative”. Project purpose: The two main purposes of the project are: I. Provide and develop planning and performance measurement tools for effective trade and transport forecast in the TRACECA countries; II. Promote regional transport dialogue between the EU and the Black Sea/Caspian Sea basin littoral states and their neighbours, and promote coordination of regional transport initiatives and links with International Financial Institutions. Those two purposes are covered by two project components called Lot 1 and Lot 2.


Interim Report 3

6

Planned outputs: Lot 1 • Support to data collection process provided and DCEs trained • Transport GIS Database “ECA-Data” set up • Inventory and SWOT analysis established • Transport demand determined and three scenarios built • Transport modelling (“ECA-Trans”) • Coordination with other ongoing projects • Status of hard- and software procurement updated Lot 2 • Working Groups within the “Baku Initiative” supported • Ministerial Conference organised • Sustainable Projects identified • Coordination and Support to TRACECA/EU provided • Support to the progress report on TRACECA Action Plan provided • Development of a TRACECA Investment Fund supported • Development of Business Advisory Council supported • Coordination with IFIs ensured

Project activities: Lot 1 • Establish and support data collection process, recruit and train DCEs • Establish transport GIS database “ECA-Data” • Prepare inventory and SWOT analysis and develop a corridor model • Determine transport demand • Carry out traffic forecasting • Perform transport analysis • Coordinate with other ongoing projects • Develop a TRACECA database • Identify bottlenecks and projects

Lot 2 • Organise Expert Working Groups meetings • Organise Ministerial Conference on Transport Cooperation between EU-Black Sea-Caspian littoral States

and neighbours • Identify and promote sustainable transport projects and initiatives • Support to the coordination with TRACECA National Secretaries, EC managers • Provide support to TRACECA coordination activities • Private-Public Partnerships promoted and 2 coordination meetings with IFIs organised • Annual progress reports on both TRACECA programme • Support to the EC programming process


Interim Report 3

7

2 Summary of achievements The following highlights were achieved during the reporting period: 2.1 Lot 1 – Traffic Forecasting and Database • Data collection workshops were held in Baku and in Istanbul. Furthermore, a special training session for

the Azerbaijan Ministry of Transport was arranged along with extraordinary sessions in Kiev and Bucharest. Training of the data collection experts (DCEs) has now been essentially completed.

• Building of the TRACECA Spatial database “ECA-Data” is nearly complete (subject to further data

updates from the DCEs). The spatial geometries of the TRACECA networks have been also defined and the attribute data has been linked with the geometrics.

• The TRACECA freight model “ECA-Trans” has been calibrated. The freight demand (the base year and

the forecasting years) was assigned on the networks with a view to minimizing the system costs. The preliminary results have been analysed.

• The hard and software related to the tender “Supply of GIS and Traffic forecast software and equipment

for the TRACECA Permanent Secretariat in Baku” has been delivered. 2.2 Lot 2 – Interregional Transport Dialogue • A report about reform and restructuring of the TRACECA PS, including a new PS structure, budget

reform suggestions according to the needs and new challenges of the extension of the TEN-T networks towards ENP and Central Asian countries has been delivered and presented at the 1st Infrastructure WG October 2008 in Brussels.

• An outline for the TRACECA Investors’ Forum has been delivered and IFIs, commercial banks and

operators contacted and visited to understand their investment priorities and appetite for bankable infrastructure projects along the Corridor.

• An evaluation mechanism for identification of strategic infrastructure projects has been developed and

disseminated in form of a template to TRACECA countries by the EC. • A status quo review of foreign investment and PPP projects in the TRACECA arena has been

documented and a collection of countries’ transport strategies, action plans, as well as national legislation was launched.

• A reference list of EC and other donor funded transport projects has been compiled in order to provide

an overview of activities and players operating along TRACECA; the information was also used for promotional materials.


Interim Report 3

8

• Visibility methods and materials of TRACECA PS, including the webpage and printed materials, have been assessed and newly published (updated TRACECA map, “10 Years TRACECA MLA Poster”, booklets, revision of website).

• Liaison with ongoing TRACECA projects and regularly promoting TRACECA at conferences and

meetings on transport and infrastructure financing along the TRACECA Corridor.


Interim Report 3

9

3 Project Activities during the Reporting Period and Planned Project Activities until the end of the

Project 3.1 Lot 1 – Traffic Forecasting and Database 3.1.1 Data collection process, training of and support to Data Collection Experts The availability of data is the basis for the planning tools to be developed by Lot 1 (i.e. the database and the transport forecasting model) in terms of network description, traffic forecasts, analysis methods, and reporting systems. Local data collection efforts are essential in providing representative and accurate data to support the planning process (see status of data collection per country in Annex 20). To support these efforts a series of data collection workshops were held in Baku and in Istanbul. Furthermore, a special training session for the Azerbaijan Ministry of Transport was held along with a couple of extraordinary sessions in Kiev and Bucharest. 3.1.1.1 Special training session for Ministry of Transport of the Republic of Azerbaijan A briefing session was held at the Ministry of Transport in Azerbaijan on 8 July 2008. Head of Administration of the Ministry of Transport of the Republic of Azerbaijan, Mr Javid Najafov, opened the seminar. He was supported throughout by Mr Elmar Farajov, Head of TRACECA and International Projects Unit. The overall objective of this seminar was to brief the ministry about the transport data collection activities underway. Some 20 participants covering all transport related sectors in Azerbaijan attended (see list of participants in Annex 1). In all, four technical sessions were held. They covered project objectives and organisation, project asks and schedules, database structure and management tools, and data collection definitions including entities and geometric elements. The entities covered were roads, rail, ports and waterways, airports, investment projects, socio-economic and general data, and background geographical data for visualisation purposes. The attributes describing each of these entities were specified in terms of traffic flows and technical parameters of the infrastructure. The main outcomes of the seminar were two-fold. The Ministry of Transport acquired a better appreciation of the TRACECA transport database currently under development and its input data requirements. And as a by-product the briefing session furthered co-operation and dialogue between the project’s national data collection expert and the authorities responsible for the transport data. This reinforces good data collection procedures that are vital for the success of the database. Furthermore, the ministry was represented at the 2nd TRACECA spatial data management working session on data collection that was held in Baku on the following two days. 3.1.1.2 Second Experts Working Session in Baku The second in a series of data collection working sessions was held at the TRACECA Permanent Secretariat in Baku on 9 and 10 July 2008. The overall objective of this two-day seminar was to reinforce good data collection procedures with a new focus on Internet data entry techniques. Mr Rustan Jenalinov, TRACECA Secretary General, Mr Akif Mustafayev, National Secretary of Azerbaijan, and the Project Team Leader


Interim Report 3

10

opened the seminar. Some 30 participants, a two person team comprising the data collection expert and a representative from the relevant supporting authority, from each of ten countries attended (see list of participants in Annex 2). Six technical sessions were held. General matters related to project tasks and schedules as well as past experience in data collection, in terms of problems and solutions, were discussed first. This then lead to more specific technical aspects including the TRACECA spatial web-server, data collection web forms and geometric data aspects. Main conclusions of the seminar focused on improving data collection procedures in terms of: • Institutional arrangements • Data aspects (e.g. node definitions and transport modes) • Scope • Data collection priorities • Data entry procedures • Management of data tables • Sustainability of data acquisition In terms of dissemination, all participants were provided with the PowerPoint presentations (Lot 1 Tasks and TRACECA Spatial Database: Geometrics and Node Types) as well as a listing of Internet links to the web forms that can be used for testing the data entry tables. The sustainability of data acquisition was stressed in terms of continuation, progress, and development of the entire TRACECA transport system. 3.1.1.3 Third Experts Working Session in Istanbul The third in a series of data collection working sessions was held in Istanbul on 17 and 18 November 2008. The overall objectives of this two-day seminar were to • Provide an overview of the transport forecasting model and its capabilities • Bring all countries up to speed with the data collection and to focus on future data distribution tools • Prioritise the identification of national projects and • Ensure sustainability and outline future targets. Some 30 participants, for the most part a two person team comprising the DCE and a representative from the relevant supporting authority, from each of ten countries attended. In all, ten technical sessions were held. Day 1 was devoted to freight transport modelling while Day 2 dealt with spatial data management. The modelling component described the TRACECA transport model (“ECA-Trans”) in terms of software, structure (supply, demand and functions) and usage including a live demonstration of the model’s usage (network modifications and traffic assignment procedures). The database component (“ECA Data”) focussed firstly on the priority need to identify national transport projects particularly in reference to strategic transport axes. Then the progress in data collection by country was described leading to a round-table discussion of experiences and definition of solutions to expedite data collection. Two presentations (Turkey and Romania) gave examples of “best practise”. This was followed by a description of future tools to make data entry by the DCEs as convenient as possible. Main conclusions of the seminar focused on improving data collection procedures in terms of the need to speed up data collection efforts and the identification of ways to achieve this. As a priority, strict deadlines


Interim Report 3

11

were established for the identification of national projects and for the provision of data to be used for fine-tuning the transport forecasting model. The Team Leader and the Project’s Lot 2 team used the opportunity to disseminate initial information on forthcoming requirements for preparation of attractive infrastructure project proposals. Based on the March 2008 decision by EC to extend TEN-T to ENP- and Central Asian countries, all TRACECA countries were to prepare and submit eligible proposals for infrastructure projects. The eligibility in this context is referring to • location on one of the (TRACECA / South-Eastern) corridor’s strategic axes, • bankable projects and attracting the engagement of investors and IFIs, • possible PPP finance models and • preference for international/regional projects. Participants, who also included some National Secretaries (Moldova and Romania) and Assistants to National Secretaries (Armenia, Turkey, Georgia, Kazakhstan, and Kyrgyzstan), were informed about preparatory steps and the template (see Annex 9) to be filled out for each specific investment project proposal. In terms of dissemination, all participants were provided with the PowerPoint presentations by mail and hardcopy. 3.1.1.4 Extraordinary meetings with Data Collection Experts An extraordinary session was held on 23 September 2008 for the DCE/Regional Coordinator in Kiev. The purpose of the visit was to discuss data collection progress and possible problems. The meeting was held at the Ministry of Transport of Ukraine and the participants were the data collection expert Mr Leonid Chupryn, Expert of National Secretariat of PS, Mrs Tetyana Dyachenko, and Lot 1 database expert Mr Matti Pesu. Prior to the meeting, Mr Chupryn and Mrs Dyachenko had provided a good and extensive dataset. In the discussion it was agreed that the state of the data collection and the quality of the provided data are both good. It was also agreed, that the last missing part of the data (pipelines) would be provided soon. No major problems regarding the data collection were presented. 3.1.1.5 Outlook Any further individual training will be carried out, if required, on an as needed basis. 3.1.2 Transport GIS Database “ECA- Data” During the reporting period, the following tasks have been carried out: • Training of the local data collection experts has been provided by means of meetings and seminars • Continuing the support for local data collection experts in all possible questions and problems that they

have faced during data collection • Continuing the validation of the incoming data from the DCEs • Giving feedback relying on the issues that have come up during validation and progress tracking


Interim Report 3

12

• Building the TRACECA Spatial database in terms of defining the spatial geometrics of the TRACECA networks and linking the attribute data with the geometrics

• Providing the TRACECA network data into the transport modelling process • Preparing the Internet server for database dissemination • Tracking the progress of each TRACECA country’s data collection situation. Each country is assessed on

a continuing basis on the data quantity and quality provided. The data collection status as of 1 December 2008 was as follows:

o Data collection is almost complete and the data quality good in Romania, Ukraine and Georgia.

These countries have performed their data collection in a very rigorous way. Majority of the data has been gathered and clear reports about the status for the missing data have been provided. Some data is still missing from Romania and Georgia, while Ukraine has gathered it all.

o Data collection is partially done but still in progress while data quality is good in Turkey, Bulgaria,

Azerbaijan, Moldova. Some entities of the data are thoroughly collected, but big gaps can also be found. Data has been collected in a systematic fashion.

o Some data has been delivered but the data quality is low in most cases in Tajikistan, Armenia,

Kazakhstan, and Kyrgyzstan. These countries have provided some data but some critical lacks in amount and quality have occurred.

o No data has been submitted from Uzbekistan. There are continuous significant problems in getting

the data collection underway.

Exhibit: Workflow for data collection and building of the database


Interim Report 3

13

3.1.2.1 Outlook During the upcoming period, the following tasks will be carried out: • Validation, progress tracking and feedback for the remaining data inputs from the DCEs • Providing the remaining parts of the TRACECA network data into the transport modelling process • Input of the traffic flows modelling results to the spatial database • Installing the spatial database to be disseminated via internet server

Exhibit: System Architecture for Data Management and Dissemination 3.1.3 Inventory and SWOT analysis – scoping the TRACECA Transport Corridor In order to assist in identifying transportation issues to tackle and actions to include in the TRACECA development plans a review of existing transport conditions for each sector (land, sea and air) as well as the overall economic situation was carried out. SWOT (the measurement of strengths, weaknesses, opportunities


Interim Report 3

14

and threats) was the tool used. This provided input to developing the transport model and identifying strategies for improving freight mobility. There are important points to keep in mind about the context of the SWOT analysis undertaken. First, it was international/regional in scope. Urban transport systems, therefore, were excluded from consideration. Second, the SWOT analysis serves as a preliminary assessment of existing and expected, future conditions with the view to giving an initial overview of transportation issues facing the TRACECA Region. Main sources of information for this analysis were existing reports, expert advice, and ongoing continuous data collection and evaluations. The analysis focused on macro-economic conditions, regional transport in general, rail transport, sea transport, road transport, and combined transport including terminals and ports. As a conclusion, summary sheets were produced for each. Table 1:

Positive Negative

Strengths Weaknesses

The region’s strategic position at the crossroad for transit traffic between Europe and Asia and connections to international corridors (e.g. pan-European)

Poor technical condition and level of maintenance of the available transport infrastructure

High level of availability of transport infrastructure in most countries

Level of Service inc congestion & traffic bottlenecks

Insufficient coordination among transport modes and between countries (inc tariff policies)

Poor safety record

Lack of efficient and trained staff

Low quality transport network connections to the corridor in some countries

Opportunities Threats

Infrastructure improvements The Region being circumvented by international traffic flows (e.g. the future implementation of North-South transport corridor by Russia-Iran-India)

New services Delayed reforms, restructuring and modernization of the sector or some of its elements


Interim Report 3

15

Development of intermodal logistic chains Regional conflicts which interrupt the transport services with neighboring countries

Restructuring of the sector through privatisation and public-private partnership (including BOT)

Affordability

Table 1 SWOT Analysis, Regional Transport 3.1.4 Transport Demand and Scenarios The aim was to develop a base for forecasting future trade and transport flows. Future scenarios that were developed in terms of exogenous and endogenous factors would drive the model forecasts and provide a realistic frame for the outputs. In addition to a “basic” scenario, two alternative scenarios were developed; a “minimum” and “high oil price” one. In the minimum scenario the growth rates are smaller mainly because the transition process towards exploiting market mechanism is delayed. In the “high oil price” scenario the growth rates will increase in oil exporting countries and will decrease in oil importing countries. The most important assumption behind the basic scenario is that in the most TRACECA countries the positive development, the transition process, still continues and spreads to the whole area. The investment climate still improves. Foreign direct investments (FDI) now concentrate on energy sector and in natural resources. In the basic scenario it is assumed that in these sectors the FDI continues and acts as a catalyst for other related FDIs. The decrease of corruption, liberalisation of the economy, the development of legislation, the integration to the international economy e.g. through WTO membership, the cheap and productive labour force, the privatisation of production, the structural and institutional reforms in the economy, in government and in banking sector will lead to the basic scenarios high growth rates. The growth creates possibilities to entrepreneurship. The production diversifies. In the minimum scenario the basic scenarios positive transition process stops or even partly retreats. The progression of this process can be followed on an annual basis by transition indicators of EBRD and by Transparency International’s Corruption Perception Index. The high oil price scenario is based on the International Energy Agency (IEA)’s estimate that during next 7 – 8 years it is needed daily 37.5 million barrels of new oil to the market. One third of this fulfils growing demand and two thirds fulfils present productions drained oil resources. However, new schemes can produce only 25 million barrels. Over demand of the oil will raise the oil prise from which we already have experienced. If the oil price in 2011 – 2030 is over € 200 per barrel, the productivity and the GDP growth rate in the oil producing and exporting TRACECA countries will be at least 2 percentage points higher than in the basic scenario. In the oil importing TRACECA countries growth rates will be 0.25 – 0.5 percentage points lower compared to the basic scenario. High oil prices of this scenario will change the world and TRACECA countries in many ways. The prices of the many products and services connected to the oil will be higher. Travelling and international trade will decrease compared to the basic scenario. This is a medium and a long term scenario. In a very long run winners are probably those countries, which adapt best to the energy prices.


Interim Report 3

16

3.1.5 Transport Modelling (“ECA – Trans”) The freight model utilises STAN software. The model components are networks, the demand and the functions. Networks represent the infrastructure and services that form the supply side of a transportation system: • modes which specify how transportation activities are performed • nodes and links which represent the spatial layout of the transportation system and • transfers which capture the intermodal trans-shipment operations characteristic of such systems.

The demand for transportation is defined by the particular products or groups of products to be analysed, the production and consumption zones that make up the region under study, as well as the demand for each product, that is, the quantities of each product to be moved from one zone to another. The functions link the supply and demand components together. Functions capture the criteria used to determine how traffic is moved over the network, and include factors such as transport costs, risk of damage, reliability, price of goods (commodity groups), lead time and frequency of vessels with regular departures. The following modes are defined in the model. Table 2:

Transport mode code in model Road L Rail R TRACECA Port mode P Truck-Ferry, Ro-Ro F Rail-Ferry, Ro-Ro E Bulk (sea) B Oil Pipeline O Gas Pipeline G FRISBEE port mode1 H FRISBEE port mode2 X FRISBEE Lo-Lo, (sea) A FRISBEE Flight U FRISBEE Inland Waterway I FRISBEE Car and Truck ferry C

Table 2 Transport modes within ECA-Trans During the reporting period, the following tasks have been carried out: • Completing the networks of each TRACECA country (nodes, links and transfers). These were then

joined to “FRISBEE” road network that covers Western Europe, Scandinavia and part of Russia


Interim Report 3

17

Table 3: ECA-Trans road network

• Defining the sub-areas of TRACECA countries • Defining the functions of the TRACECA freight model • Disaggregating the country to country matrices (based on the UN Comtrade Statistics) to TRACECA

sub-areas by commodity groups on the basis of the population of sub-areas and for oil the location of oil refineries

DestinationOrigin Armenia AzerbaijanGeorgia KazkhstanKyrgystan Moldova Tajikistan TurkmenisUzbekistanBulgaria Romania Turkey Ukraine Total

Armenia 48 4 0 1 0 2 1 1 0 0 22 79Azerbaijan 285 106 7 0 131 10 7 6 80 388 38 1 059

Georgia 74 92 15 0 0 3 72 3 62 6 125 57 509Kazakhstan 15 226 44 268 31 157 21 385 1 747 348 623 2 866

Kyrgystan 0 2 1 163 0 24 2 28 2 1 27 4 254Moldova 2 5 4 24 1 0 0 3 14 156 28 129 366

Tajikistan 0 0 0 28 3 0 19 3 118 4 175Turkmenistan 169 369 101 133 2 0 0 45 189 3 492 4 499

Uzbekistan 2 27 6 319 65 4 10 154 406 418 1 412Bulgaria 16 11 98 24 1 24 1 3 4 1 748 112 2 041Romania 7 5 198 36 0 427 9 53 911 2 498 424 4 568

Turkey 695 408 697 132 107 72 281 176 1 568 2 350 6 486Ukraine 137 422 312 828 38 671 40 133 211 596 626 2 390 6 404

Table 4: Trade flows between TRACECA countries (million USD in 2006), Source: UN Statistics


Interim Report 3

18

Table 5: Freight flows between TRACECA countries in 2006, except gas (1000 tons) • Calibrating the TRACECA freight model based on the data available so far • Assigning the freight demand (the base year and the forecasting years) on the networks with a view to

minimizing the system costs

Figure 6: Assigned transport volumes on rail network and on maritime links (Rail-ferry and Ro-Ro), export and import of TRACECA countries in 2006, all products except gas, 1000 tons/a. Domestic transport not included.

• Analysing the preliminary results. The freight demand matrices of 2006 (flows) for every commodity in the system are based on the trade flow data and are in line with the respective economic forecasts.

destination origin Armenia Azerbaijan Georgia Kazkhstan Kyrgystan Moldova Tajikistan TurkmenistanUzbekistan Bulgaria Romania Turkey Ukraine Total

Armenia 0 17 1 0 0 0 1 0 1 0 0 17 37Azerbaijan 0 536 41 13 0 359 3 2 8 175 713 58 1 910

Georgia 43 26 8 0 0 2 8 2 164 6 220 36 514Kazakhstan 1 58 42 457 67 180 9 626 3 2 097 251 1 285 5 079

Kyrgyzstan 0 0 0 59 0 11 0 19 1 1 25 2 119Moldova 1 2 2 14 1 0 0 2 8 89 23 73 215

Tajikistan 0 0 0 22 4 0 11 3 67 3 109Turkmenistan 20 156 217 14 2 0 0 99 95 22 624

Uzbekistan 2 4 4 100 21 2 6 6 249 92 486Bulgaria 7 6 177 14 1 20 1 2 2 376 1 438 61 2 104Romania 1 1 438 7 0 501 0 1 7 1 103 2 821 482 5 362

Turkey 0 169 97 187 41 24 23 74 50 590 709 328 2 292Ukraine 116 209 249 312 17 753 60 58 69 1 176 804 2 663 6 486


Interim Report 3

19

0200 000400 000600 000800 000

1 000 0001 200 0001 400 0001 600 000

Road Rail Sea Oil pipe

Ton mileages in the whole systemmillion tonkm

2006

2020

2030

Figure 7: Preliminary results: ton-km of export and import of TRACECA countries (domestic transport excluded) • Reporting and presentations (e.g. Istanbul seminar) The model has been checked and it is functioning. Due to missing data the calibration has been limited to determining that the orders of magnitudes of the traffic volumes and costs are correct. The transport costs for several transport routes have been studied and compared to (confidential) data available to the consultant. The results are consistent. The final calibration of the model is possible only after sufficient data in terms of consistency and coverage has been collected to support the calibration. 3.1.5.1 Outlook During the upcoming period, the following tasks will be carried out:

• Updating the data (from the experts of TRACECA countries) to the freight model • Fine-tuning the model • Carrying out new assignments (the base year and the forecasting years) • Continued analysis of the results • Installing the Spatial Web Server at the PS in Baku

3.1.6 Traffic Forecasts and Identification of Bottlenecks Based on and integrated with the modelling work, current and future (based on the increases in travel demand produced by the transport demand scenarios) bottlenecks are pinpointed and examined through the use of performance indicators; primarily, mobility – speed, delay and reliability. Preliminary results were presented at the Istanbul Seminar.


Interim Report 3

20

The following Figure depicts three routes:

• Route 9: China/Kazakhstan border – Astana – Moscow – Minsk, by Train • Route 10: China/Kazakhstan border – Almaty – Actybinsk – Kiev, by Train • Route 11: China/Kazakhstan border – Almaty – Aktau – Baku – Ilyichevsk – Kiev, by train and Rail-Ferry

Figure 8: Comparison of Alternative Routes The transport costs along these routes are summarised below.

Table 9: Total transport time by route

0

50

100

150

200

250

300

350

China/Kaz. Border - Astana -Moscow - Minsk

China/Kaz. Border - Almaty -Actyubinsk - Kiev

China/Kaz. Border - Almaty -Aktay - Baku - Ilyic. - Kiev Kiev

Route9 Route10 Route11

hour

lead time handling time at ports


Interim Report 3

21

3.1.6.1 Outlook Analysis of the transport conditions will continue as part of the modelling work based on the new assignments programmed as noted above during the fourth reporting period. 3.1.7 Coordination with other ongoing projects The work is being coordinated with other relevant ongoing (e.g. “Improvement of Maritime Links between TRACECA and TEN Corridors”) and past projects (e.g. “TEN Naxis”) as far as possible through direct contacts to coordinate and utilize methods developed and data sources that are applicable. Representatives from relevant supporting authorities including a few TRACECA National Secretaries also attended the 3rd DCE Working Session in Istanbul. This provided an opportunity to obtain first hand information about ongoing projects in the respective TRACECA country. Furthermore, the TF Project seeks to keep close coordination with activities of CAREC and ADB. In this context, project representatives were also invited to the “7th Ministerial Conference on Central Asia Regional Economic Cooperation” from 19 to 21 November 2008 in Baku, which put a strong focus on transport and general environmental and supply issues. Within the CAREC region and cooperation system there is a trend to move “from Planning to Projects” so that the CAREC countries, the private sector, and multilateral partners have programmed USD 14 billion for priority investments. By 2020, the six CAREC Corridors are expected to have improved to adequate transport standards. An urgent complementary measure mentioned is the “one stop shop” approach for border procedures and other trade and transit issues, as without such smooth operation the benefits from improved infrastructures would be seriously diminished. The “Potential Impact of the Global Financial Crisis on CAREC Countries and Key Markets” was also a key topic addressed in the scope of the conference. The Project sent via email useful links to TRACECA National Commissions and forwarded some interesting information for further consideration on • ADB Handbook on PPP http://www.adb.org/Documents/Handbooks/Public-Private-

Partnership/default.asp • CAREC Transport Sectors for comparison with to be established Priority Axes in the TRACECA

Corridor • Cooperation on legal developments in transport regimes • Participation in CAREC Partnership Forum The Project suggests the PS to attend these meetings, in particular when they are organised in Baku. The Project also liaised with the “Partnership and Cooperation Agreement Project” implemented through the National Coordination Unit in Baku. The core topics are the approximation of legislation as stipulated by the PCA Agreement as well as programming and supervisory measures for direct budget support. In the context of legal approximation there are the following transport sectors addressed • Road – new regulations and secondary legislation needs to be developed to complement the law

adopted in April 2008, such as working conditions of drivers, working time mentoring through ‘tachographs’ as well as technical inspection of vehicles.


Interim Report 3

22

• Railways – modernisation of infrastructure and rolling stock and approximation of legislation to the acquis are pending issues, especially when taking into consideration the importance of the strategic East/West Axis.

• Maritime – rules for inspection of ships and prevention of maritime pollution need to be adopted as well as the monopoly of Caspian state shipping companies terminated, in order to allow for the participation of private sector in a market with extremely high growth potential.

• Air – adoption of ICAO procedures for investigation of incidents and accidents as well as the “policy of open skies” need to be adopted by national legislation.

• Services of general economic interest – especially (public/private) road transportation services need improvement to international standards, be it the underpinned legislation or the quality and availability of services.

The Project contacted the PCA team in order to start communication and cooperation between TRACECA in general and the PS in particular. Such practice is suggested in future for PS practice. The first practical participatory steps by the Projects are scheduled for January 2009 on Road Transport regulations. 3.1.8 Delivery of hard- and software fulfilling IT requirements The tender “Supply of GIS and Traffic forecast software and equipment for the TRACECA Permanent Secretariat in Baku” (Publication Reference: EuropeAid/126287/C/SUP/AZ) was successfully launched and concluded. Delivery details are as follows: • GIS database software delivered - Mapinfo Professional and MapXtreme.Java.Edition • Transport Forecasting software - VISSUM software delivered for use in forthcoming projects • Equipment for the TRACECA PS - all equipment has been delivered except for a copy machine, Canon

iR3035N, which has been communicated to the supplier for action. A printer was mistakenly delivered instead. The process is underway to exchange the delivered printer with the offered copy machine.


Interim Report 3

23

3.2 Lot 2 – Interregional Transport Dialogue 3.2.1 Support to Working Groups within the “Baku Process” In general, the Project prepares the Working Group meetings and is responsible for the organisation and all logistical and financial aspects. Its team also manages all last minute changes for flights and hotel bookings, handles post-deadline replies by National Commissions and also organises as well as revises all translations from and to Russian/English languages. EC officials of DG EuropeAid, DG RELEX and DG TREN in close cooperation with the Team Leader draft the agendas, choose the speakers, and most importantly suggest the themes for further Working Group meetings. The Project’s key and short term experts made substantial contributions to the meetings, including all fields according to Lot 1 and Lot 2 as well as others such as on finance and institution building aspects. Up to the end of this reporting period, four Working Group meetings were organised (October 2007 in Chisinau on Aviation, May 2008 in Odessa on Maritime Safety, July 2008 at Lake Issyk-Kul on Aviation, October 2008 in Brussels on Infrastructure). 3.2.1.1 Third Meeting of the Regional EU - Black Sea / Caspian Basin Expert Working Group on Civil

Aviation at Lake Issyk-Kul A strong commitment for strengthening safety and aviation cooperation was the main outcome of the third meeting of the TRACECA (EU Black Sea/Caspian Basin) Expert Working Group on Civil Aviation which was organised by the European Commission on 15 July 2008 at Lake Issyk-Kul in the Kyrgyz Republic. The meeting was attended by representatives from TRACECA countries (see list of participants in Annex 4) as well as from the TRACECA Permanent Secretariat and the European Commission. The Working Group took note of the significant progress made. This includes several agreements between the EU and the partner countries of the region (Armenia, Kazakhstan) which bring existing bilateral air services agreements in line with Community law by removing nationality restrictions. Such a horizontal air services agreement with the Kyrgyz Republic was signed on 1 June 2007. These agreements enhance the legal certainty of operations between the EU and the partner countries in the region and are a first step toward closer aviation relations. The Working Group also discussed the proposal of a European "Common Aviation Area" with the neighbouring countries of the EU. The Common Aviation Area provides the opportunity to join the single aviation market and the Community aviation structures and aims at the approximation of aviation regulatory rules. The EU is negotiating such an agreement with Ukraine, and Georgia has also expressed its interest in a Common Aviation Agreement. The meeting confirmed the need to enhance and maintain high levels of aviation safety and security. Views were exchanged on the possible ways to enhance aviation safety in the region, including through technical assistance projects co-financed by the EU. The European Commission announced the launch of the new project "TRACECA Civil aviation safety and security" in 2009 with a budget of 5 million Euro.


Interim Report 3

24

The Expert Working Group concluded that a fully pan-European approach is needed to ensure the long-term sustainable development of aviation relations between all countries involved. To this end, a tailor-made network of regional and bilateral relations which takes into account the interests of each country should be further developed. A first step in this regard should be the enhancement of safety standards. The Project translated all participants’ presentations and distributed them partly by email and partly by hardcopy prior to the meeting. The organisation and logistics of the meeting were handled in team by the Project’s Logistics and Finance Officers from Baku who also masterly handled the host country’s last minute decisions and information about the hotel venue. Participants were not content with the host country’s choice of conference venue and suggested that no more one-day meeting should be organised at such a distant location. 3.2.1.2 First meeting of the Working Group on Transport Infrastructure in Brussels The first meeting of the Working Group on Transport Infrastructures with the Black Sea - Caspian Basin countries was organised by the European Commission on 8 October 2008 in Brussels. DG AIDCO and TREN co-chaired the meeting. Infrastructures experts from Armenia, Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Turkey, Ukraine and Uzbekistan as well as from the TRACECA Permanent Secretariat and the TRACECA National Secretaries attended the meeting. Representatives of EBRD and EIB also participated. Representatives from Tajikistan did not participate in the Working Group meeting (see list of participants in Annex 5). The meeting took note of the following presentations: • Extension of TEN-T: new developments, planning, implementation of infrastructure projects, • European Neighbourhood Investment Facility – objectives, methodology, conditions for identification of

projects and next steps, • Future development scenarios driving the model forecasts and preliminary results from the modelling

effort: overview of the transport bottlenecks for the TRACECA Corridor (presented by TF Project, see presentation in Annex 6),

• Approach towards the TRACECA Business Advisory Council (presented by TF Project, see Annex 7) • TRACECA and PPP – Infrastructure development opportunities (presented by TF Project, see Annex 8) • IFI (EBRD/EIB) presentations – the banks' project and financing approach to TRACECA, • The Moldova PPP show-case for the TRACECA Corridor, • A PPP show-case by Kazakhstan. The following conclusions and actions were decided upon, based on the discussions held at the session of the Working Group. The participants 1. Elaborated the first steps of a methodology for axis/projects identification and prioritisation (data needs,

feasibility and bankability). This methodology is based on the conclusions from the High Level Group (HLG) on the extension of the major Trans-European transport axes to the neighbouring countries and regions, as well as on the TRACECA Long Term Strategy;

2. Agreed to establish, at a first stage, a short list of priority axis/projects, based on the above-mentioned

HLG methodology and TRACECA Strategy, updating the list of projects enclosed to the Report of the HLG. Contributions were expected to be sent to the European Commission before the end of 2008;


Interim Report 3

25

3. Understood the possibility for the EC to support preparatory stages for pre-identified projects, in order

to submit them for potential financing by the IFI's (mainly EBRD and EIB); 4. Exchanged views on the relevance of the Public Private Partnership (PPP), as offering opportunities for

the development of transport infrastructure; 5. Expected contributions from the Neighbourhood Investment Facility to pool grant resources of the

Community and the Members States to leverage loan financing, for eligible countries; 6. Took note of the European Commission's intention to call for a second meeting of this working group in

the light of progress in the identification of the TRACECA infrastructure projects and in view of the preparation of a TRACECA Investors Forum. A tentative date could be on February 2009.

The Project’s presentation on the BAC and PMU initiated a heated discussion on the reform and new requirements of the TRACECA Permanent Secretariat of the Intergovernmental Commission amongst National Secretaries, the Secretary General and the European Commission. With the consent of several TRACECA countries and the EC, the Project underlined that the new PS should act efficiently as a recognized international transport corridor authority that is able to • stimulate co-operation among TRACECA member countries • promote optimal integration of TRACECA with TEN • identify factors constraining the development of trade and transport systems • collect effectively transport volumes data as currently conducted by Lot 1 of the Traffic Flows Project

through a TRACECA wide Database Collection Experts network • promote TRACECA projects as means to attract funding from IFIs and private investors • define the scope of the initiatives, activities and accountabilities • create a realistic programme for PPP development • develop guidelines for legal approximation for PPP legislation • manage the programme as a cross-border regional strategy endorsed by Governments, IFIs and EC • identify priority axes based on 2020 transport volume projections • create MoUs to reinforce the commitment of key stakeholders to PPP development and implementation

on suitable PPP projects • integrate national PPP units into the development process • monitor progress of projects • disseminate information to potential operators, IFIs, private sector banks and government agencies • and support syndication of investment consortia and act as a catalyst for the establishment of

implementation agreements. Despite the conclusions of the Astana IGC Meeting, the TRACECA Investment Fund is not taken into consideration at this stage as this would require even more responsibilities and skills within the PS. This would include the full infrastructure project cycle, including contractual, procurement and financial management aspects which cannot be covered by the present setup of the PS. Based on the conclusions and decided actions of the 1st Infrastructure Working Group, the Project was tasked by the European Commission to elaborate the first steps of a methodology for axis/projects identification and prioritisation (data needs, feasibility and bankability). This methodology is based on the conclusions from the High Level Group on the extension of the major Trans-European transport axes to the neighbouring


Interim Report 3

26

countries and regions, as well as on the TRACECA Long Term Strategy. At a first stage, the Project created this template and an introduction for a short list of priority axis/projects (see template and instructions in Annex 9), based on the HLG methodology and TRACECA Strategy. In its 19 December communication to all TRACECA countries, this template was sent to all TRACECA countries, including Turkmenistan. The EC expected the countries’ replies before the end of January 2009. 3.2.1.3 Meeting of the PS IGC in Brussels The Project also organised for the PS the Meeting of the PS IGC in Brussels and the Project Team attended the morning session of the 9 October. The Traffic Flows Project was the only TRACECA Project invited to this meeting. The Project prepared a presentation about the project status (see Annex 15) which the Team Leader did not present as scheduled for the second part of the meeting. The Project team (including the Director, Team Leader, Lot 1 and 2 Managers, Finance Expert, Logistics and Finance Officers) did not feel welcome as the PS’ main liaison project at the meeting (e.g. it did not receive PS document folders that were prepared for all participants) and the Project Director and Team Leader announced their team’s absence to the Secretary General prior to the start of the session. After prior clearance with DG AIDCO and DG RELEX the Project team did not attend the second part of the meetings. During the afternoon the SG prepared the distribution of a very biased evaluation of the project prepared by a recently dismissed Traffic Flows project expert. The distribution of this document was stopped by the EC and its utilisation was very negatively commented by several National Secretaries. 3.2.1.4 Outlook The EC also requested the Project to support preparatory stages for pre-identified projects, in order to submit them for potential financing by the IFIs. After submission of projects by countries and efficient desk research, the Project’s expert team will undertake country visits during the final project semester. A follow-up meeting of the Infrastructure Working Group was decided to be held in Romania in February 2009 in the light of progress in the identification of the TRACECA infrastructure projects and in view of the preparation of the first TRACECA Investors’ Forum. According to its terms of reference, the Project will organise the meeting, invite appropriate speakers and prepare substantial topical presentations (a presentation on TRACECA and Private Sector Banks is foreseen). 3.2.2 Organisation of the Anniversary Conference in Baku The Anniversary Conference of TRACECA Member States held on 4 December 2008 in Baku, was organised and hosted by the Depositary Country, the Republic of Azerbaijan. The Team Leader was invited to several coordination meetings with the Government of the Republic of Azerbaijan, including with the Deputy Prime Minister, the Minister and Deputy Ministers of Transport and representatives of the Deputy Prime Minister’s office. Almost daily communication and meetings were conducted with the National Secretary of Azerbaijan, Mr Akif Mustafayev, throughout the last weeks before the Anniversary. A series of ad hoc meetings with him and informal consultations led to the solution of several issues concerning the participation of some countries, the agenda, the documents and the question of their adoption. It is due to Mr Mustafayev’s transparent and open work style as well as his fast access to highest government offices that made the Project’s cooperation and liaison with the EC successful.


Interim Report 3

27

The Ministry of Transport organised a working session one day prior to the Anniversary Conference which was opened by Deputy Minister of Transport, Mr Musa Panakhov, and chaired by Deputy Minister of Foreign Affairs, Mr Kalaf Khalafov. During this working session all countries could address their suggestions for revisions to the official draft documents. The working session was led in an efficient diplomatic manner. The EC through the Traffic Flows Project offered financial support for the events, yet the Government of Azerbaijan decided to cover all the costs for the preparations and conduct of the conference, including the invitation to all participants (see list of participants in Annex 10). 3.2.3 Organisation of the First TRACECA Investors’ Forum The planning and preparation for the first TRACECA Investors’ Forum was started during the reporting period. The Forum is scheduled to take place in the last reporting period. Together with the Finance Expert, the Team Leader contacted and also met with IFIs (EBRD, IBRD, EIB, ADB, WB, IFC, IDB), commercial banks (Macquarie Bank, Sumitomo Mitsu Bank, VTB King William, Royal Bank of Scotland, Renaissance Capital, ABN AMBRO, BNP Paribas Paris, Societe General, Kreditanstalt fuer Wiederaufbau, Bank Austria, Raiffeisen Bank, ING) and contractors (Bouygues, Alcatel, Bechtel London, Mott MacDonald, Hochtief, Balfour, KBR California, Skanska, Impregilo Milan, Basic Element Moscow, Strabag) to prepare them for the upcoming forum and their participation and raise their appetite for TRACECA projects. The Team Leader and Finance Expert went to Washington, London, Kiev and Brussels for their meetings. Further meetings with commercial banks in Moscow, Vienna and London are scheduled. The results of these meetings were presented at the first Infrastructure Working Group as well as at the next Infrastructure Working Group meeting in Bucharest. The Forum will provide a platform for investment opportunities in the development of the Trans-European Networks’ extensions on the Southern Corridor, TRACECA route. It will enable an exchange of views on the EC’s strategy for enhancement and renewal of infrastructure in the Highways, Railways, Maritime and Aviation sectors. It will enable attendees to meet and network with influential decision makers in order to debate and understand the project opportunities available. Speakers and attendees will include Government Ministries, Banks, Contractors, Developers, and Infrastructure Operators. At the Forum the Project will present the future plans for sustainable infrastructure investment to enable the TRACECA Corridor to compete effectively and win increased market share through improved co-modality, cross border logistics and upgraded infrastructure. The focus is on achieving a high quality, competitive, environmentally sustainable Southern Corridor, overcoming both the problems and challenges facing the route. The Project will seek to present a unified and sustainable infrastructure investment strategy which addresses future market requirements of different modes and builds momentum to implement the necessary investments to make this vision a reality. It will aim to develop a realistic, long-term plan for financing each project with a strong business case as the foundation for the framework of projects, which require funding. The Forum will explain the benefits of the TRACECA Corridor. Speakers will take account of the technical challenges and the need for interoperable systems to improve cross-border services and keep operating costs


Interim Report 3

28

down whilst proposing enhancements to the Corridor’s technical advantage in relation to reliability, safety and security. There will be a strong emphasis on developing an integrated pan-continental approach. The Project will debate the large financial outlays required, including the potential for PPP as the mechanism for making cross border intermodality a reality on the TRACECA Corridor and address in detail the financing, planning and delivering of major infrastructure projects on the route and explain the business models for achieving funding, including the rules and procedures for accessing EU, IFI and Private Sector funds. The Forum will discuss how the current economic climate will affect the traffic forecasts and growth potential of the Corridor. The Project will also take account of the role of each Government in financing infrastructure projects and also the need to achieve a sufficiently long term approach from Politicians to attract Private Investors. Market confidence will need to be building through effective consolidation, cooperation and the will to reconstruct the TRACECA Corridor. The role of Infrastructure managers will be vital in ensuring in delivering quality, cost effective services to operators in order to maximise customer retention. 3.2.3.1 Outlook A second round of contacts is planned to introduce the countries’ priority infrastructure projects to the above mentioned IFIs, commercial banks and operators during the forth reporting period. 3.2.4 Identification of sustainable projects As mentioned above, initial information was presented during the DCE seminar in Istanbul in November 2008. In December, the EC formerly requested the TRACECA countries through the MoTs, NS and country representations in Brussels, to fill out the template (see Annex 9) on infrastructure priority projects by end of January 2009. The EC also proposed that the proposals would be presented at the Bucharest Infrastructure Working Group meeting in February 2009 and selected bankable proposals should be chosen for presentation at the 1st TRACECA Investors’ Forum. The application template provides for a straight forward and thorough review of all technical parameters that would characterize an infrastructure project. A key criterion is the location of the proposed project at one of the “strategic axes” of the TRACECA Corridor. However, such axes have not been agreed upon, and it will be difficult to objectively assess if a proposed project is located at a strategic axis or not. The Project had suggested defining such axes similar to the CAREC axes and sub-axes scheme (see Annex 14). Based on the computation of data collected from DCEs as well as from publicly available sources, the Traffic Flows Project’s Lot 1 team will provide forecasts until 2020, which should make decisions on interregional strategic axes transparent and adoptable within the TRACECA environment. This issue was also discussed in a meeting between PS and Project Experts. 3.2.5 Promotion of PPP The Project presented a report (see Annex 11) and also prepared a presentation for the first meeting of the Working Group on Infrastructure in Brussels. The purpose of the report was to provide an overview of the


Interim Report 3

29

value of Public Private Partnership (PPP) in the context of transport infrastructure projects of TRACECA. It provided • confirmation of the commitment to PPP of the EC and IFIs • the challenges faced by TRACECA regarding successful PPP implementation • an overview of PPP and examples of where PPP has been used previously in TRACECA member

countries • the status of PPP environment in TRACECA countries • an action plan to develop PPP capability Significant progress has been made since the launch of TRACECA in 1993, and latterly TACIS, to create and develop transport infrastructure in the Caucasus and Central Asia. This has resulted in improved regional development and transport connections to the European TEN-T corridors. PPP is a strategy to be considered to enable the EU and TRACECA to identify and package “bankable” regional infrastructure and transport projects which are capable of being financed by an IFI or on a co-financing basis. The challenge for the EC, TRACECA member countries, IFIs and the other stakeholders is to create the regulatory, legal, market, financial and political environments in which PPP can be successful. This challenge is in the context of both national and cross-border projects requiring the co-ordinated development of initiatives. To develop effective PPP strategies requires the development of industry knowledge, governance, and regulatory, legal and institutional frameworks to meet the following challenges: • TRACECA countries have limited experience of implementing PPP strategies. The challenge is to

develop within each country a PPP unit which acts as a knowledge hub and which is the first point of contact for advice

• Cross-border projects require PPP development to be consistence across all TRACECA member countries. The challenge, supported by the EC1, is to develop a consistent and co-ordinated regional approach to PPP strategy, knowledge, governance, and regulatory, legal and institutional frameworks. Of particular note is the importance of creating transparent and effective concession, foreign investment and PPP Law. This will be critical for cross-border projects

• SPV (and Promoter) needs to ensure that the consortia has the strength in all aspects of managing the concession, including risk mitigation throughout the asset life-cycle

• Assembling an effective SPV with appropriate funding will ensure that a viable and robust business model delivers the concession agreement. The challenge for IFIs and governments is to create an investment environment with transparent and mitigated risk.

The Project recommends the creation of an environment for IFI investment as public and private investment in PPP projects is dependent on there being clear and transparent risk and reward on the projects. This is assessed on a project-by-project basis through due diligence and risk analysis. The EIB2 states that “the role played by finance in a PPP is key to the risk sharing arrangement between the public and private sectors. In most major PPPs, the private sector is responsible for raising the finance necessary to construct and operate infrastructure. The public sector’s payment is based on the services delivered, in terms of volume, quality or a combination of these factors. This means that if the private sector

1 http://ec.europa.eu/ten/transport/external_dimension/doc/2005_12_07_ten_t_final_report_en.pdf “Networks for Peace and Development: Extension of the major trans-European transport axes to the neighbouring countries and regions”, November 2005. 2 http://www.eib.org/attachments/press/2008-005-fact_sheet_epec_en.pdf


Interim Report 3

30

cannot meet service standards, its investment is at risk. This gives the financial incentive to ensure that risks are well managed, and service quality is maintained.” For IFIs to invest in PPP projects the political, legal, technical, financial and environmental risks need to be clear and transparent. This requires effective risk identification with probabilistic impacts defined and risks allocated to those stakeholders best places to manage them. The key challenges are: • detailing the generic PPP risks, country specific and project specific risks on TRACECA projects • developing robust risk management tools and processes for national and cross-border projects • developing a generic process for the identification of PPP project risks (and opportunities) that can be

applied to TRACECA projects • developing risk management processes to procure effectively PPP projects and • clearly understanding the capacity of the stakeholder to carry risk and who is best placed to manage

them. The Project also suggested a way forward and further development of the PPP strategy for TRACECA which requires the following actions that are dependent on constructive discussions with key stakeholders, particularly related to • defining the medium- and long-term activities to be undertaken to develop PPP capability in TRACECA • creating a master programme of TRACECA PPP initiatives, actions and accountabilities to ensure the co-

ordinated implementation of initiatives in the region and across stakeholder groups • identifying the dependencies linking the decision-making processes of stakeholders to ensure

integration • identifying the constraints imposed by stakeholders related to, for example, unchangeable processes and

time scales • assigning accountability to specific stakeholder groups the development of the processes, documentation

and commitments to deliver consistently successful PPP projects. 3.2.5.1 Outlook The Project proposed a high-level indicative programme over the short-term. 1st quarter: • Release of a national PPP programme of projects • Detail the formal IFI strategy for involvement in TRACECA 2nd quarter: • Detail the programme of regulatory and legal development in support of PPP in TRACECA countries • Develop Memoranda of Understanding (MoU) as required between key stakeholders e.g. appropriate

IFIs, EC and TRACECA country central Government Ministries, and other to be defined • Create a PPP Unit in all TRACECA countries • Implement PPP skills development sessions in all TRACECA countries • Conduct inter-country staff sharing and knowledge transfer sessions across projects and across countries • Implement an external marketing and communication strategy for TRACECA for PPP


Interim Report 3

31

3rd quarter: • Develop standardised approach for TRACECA PPP projects via standardised PPP process, standardised

risk allocation models, project selection criteria and tendering processes • Continue with PPP skills development and transfer A medium- and long-term programme is required to formalise the development of PPP and assign accountability. In order to gain an overview of the status of PPP laws in TRACECA countries, the Project initiated a survey in December 2008 and requested the Project’s DCEs to collect and submit by end of December 2008 the • National Transport Strategy • National Action Plan • Status of concession and PPP relevant laws. The Project will compile such information and complement missing data from public and web sources. The results should be presented at the Bucharest PPP Workshop in February 2009 for review with the participants and to raise awareness for necessary intervention - especially in the light of EC focus on regional / trans-national infrastructure projects. 3.2.6 Coordination with IFIs The Project prepared a report which was presented to the EC and TRACECA countries with the purpose to provide an overview of the respective transport strategies, investment priorities, investment criteria and current and planned projects of the major International Financial Institutions who are operating in the TRACECA region (see Annex 12). Four IFIs were covered – the World Bank Group (IBRD, IDA, IFC), the European Investment Bank and European Bank for Reconstruction and Development. For each IFI, the following was included: • Summary infrastructure and transport strategy for the TRACECA network • Project cycle as it relates to investment projects in each of the TRACECA member countries; • Investment appraisal considerations, covering investment conditions, criteria and main products; • A list of current and future projects which each IFI is currently involved in financing or is considering

financing in the future.

Although much has been achieved through the TRACECA programme, there is a desire on behalf of the EU and TRACECA to make further and quicker progress, in particular, in the identification and packaging of “bankable” regional infrastructure and transport projects which are capable of being financed by an IFI or on a co-financing basis. The paper provided an overview of the current financing activities for investments in the TRACECA region for infrastructure and transport. For the four areas covered for IBRD, IFC, EIB and EBRD, the following was noted:


Interim Report 3

32

• IFI Transport strategies and priorities in the region. Information has been taken and summarised from the relevant transport strategy documents made available by the IFIs on their web site. The information given is at a high level only;

• IFI Project Cycle. Each IFI discloses its outline project cycle. The project cycle is important to understand

as it impinges on how TRACECA needs to be able to work closely with IFIs, especially at the early stage in the project cycle for any TRACECA originated project which is to be presented to an IFI for consideration. The objective is for TRACECA to identify and prepare a project concept which would be acceptable to an IFI for subsequent carrying out of a full feasibility study leading to the preparation of a comprehensive project appraisal report for use by the decision making bodies of the IFI. Apart from IBRD/IDA, full examples of project reports and outputs from each stage are not disclosed on the website. In contrast, IBRD/IDA publishes key documents such that the reader can see each of the main outputs during the project cycle at the front end leading up to the investment decision, for example, the required content for a project appraisal report which is to be considered for financing by the Board.

• IFI Investment considerations and products. A summary is provided of the main criteria which the

respective IFI takes into account when considering whether or not to invest in a project together with the types of products.

• IFI Infrastructure and Transport projects. For each IFI, a list of current, past and pipeline of future

projects is provided. All project data was sourced from IFI websites. The project data is provided in country order. Projects are also identified which involve co-financing between two or more IFIs. In addition, there are a number of projects which have involved close cooperation between IFIs and the EU. Lastly, there are also projects identified which form part of the TEN-T transport network and the Pan European corridors.

3.2.6.1 Outlook The Project will continue its cooperation and information exchange with IFIs and will connect to the country teams in each TRACECA country during the country visits on priority infrastructure investment projects. It will further lobby TRACECA in IFIs action planning and connect the National Commissions with IFIs. The Project will also keep including IFIs on its participants’ and speakers’ lists at EC funded TRACECA events. 3.2.7 Support to the progress report on TRACECA Action Plan In the framework of the implementation of the strategy of IGC TRACECA for the period up to 2015, the PS will send out its regular request to MLA countries in January 2009 for providing feedback on progress with various activities, as stipulated by the Action Plan 2008-2009. The template requests two inputs per action, firstly information on implementation progress, and deviations from original plan including reasons. Besides the review of implementation progress, the template also requests numbers for import, export, and transit volumes, as well as passenger transport quantity per transport mode for 2008. In order to ensure comparability, measurability and feedback at highest standards by countries, the Project further developed the template without turning it into a complicated, user-unfriendly form that is comparable to a simple log-frame approach. The template format was sent to PS.


Interim Report 3

33

3.2.8 Support to the development of a TRACECA Investment Fund As already stated in our last Interim Report and again supported by the assessment of PS reform needs, the establishment of an Investment Fund should be targeted only at a later stage for TRACECA. It first needs to implement a robust Project Implementation Unit (PMU) that is capable of identifying, preparing and lobbying projects and their implementation by IFIs and the private sector. It would also need a professional fund administrator, probably supervised by an international board of bankers and representatives of the EC. Also, the current financial and economic climate does not favour the establishment of such a fund and no funding sources can be expected in the near future. As noted above, the legal bases as well as business standards need to be first improved and guaranteed in the region. 3.2.9 Support to the development of a TRACECA Business Advisory Council The Project addressed an extensive part to the assessment and possible shape of a Business Advisory Council (BAC) in its last Interim Report in which the types of services and the scope of consultative work as well as its operation as a “virtual body”, and not the creation of an additional institution, were suggested. The involvement of IFIs in the BAC shall be used to participate in the identification of bankable projects in order to build an initial success story of first infrastructure projects that will create a pull-effect for further development and implementation of professional investment plans. In our further assessment (see Annex 7) in the scope of the planned reform and restructuring of the PS it was underlined that first the new PS structures need to be in place that can successfully coach and interface with such a body with regard to TRACECA activities and priorities before a serious attempt for setting up a BAC. The Project recommends gradually extending TRACECA Infrastructure Working Group meetings step-by-step to a BAC and start increasingly involving the business sector to these meetings. 3.2.9.1 Outlook In the scope of the forthcoming activities of the TRACECA Reform Group for reshaping the PS as well as the establishment of the BAC will be discussed in a wider forum and through an iterative process. The first reform group meeting under the Baku conclusions (see Annex 19) is planned for February 2009 in Bucharest. 3.2.10 Coordination and support to TRACECA / EU The Project coordinated with the TRACECA PS and all National Commissions, EC and EC funded new and outgoing TRACECA projects as well as EC programmes in MEDA countries. 3.2.10.1 Communication with TRACECA PS and National Secretaries Liaison with the TRACECA PS and its staff has been manifold. Meetings with the PS were formal and irregular; no regular information exchange with SG and his team on substantial corridor issues was possible, without the SG’s prior consent and only in the presence of a protocol writer. Informal information exchange was possible with the SG’s assistant (exchange of documents, contacts to TRACECA experts, website management) and some of his experts (e.g. new TRACECA map, translation of technical terms into Russian).


Interim Report 3

34

The Project team communicated on a daily basis and on various levels with the National Commissions (National Secretaries, their assistants and experts) and exchanged views on possible restructuring of the PS. 3.2.10.2 Coordination with and support to EC Programme Managers The Team Leader held regular contacts to DG EuropeAid, DG TREN, DG RELEX, EC Delegations in Armenia, Azerbaijan, Kazakhstan, Ukraine, Turkey, and Georgia, as well as National Coordination Units in almost all TRACECA countries and the two Europa Houses in Turkmenistan and Uzbekistan. The EC Delegation in Baku and its Head of Delegation, Ambassador Alan Waddams, were particularly involved during the preparations of the Baku Anniversary Conference in December. There was substantial interest by the British Embassy in Baku in TRACECA and the Team Leader discussed TRACECA’s involvement in the “Caspian Maritime Shipping Initiative”. The Economic as well as Political Dimensions of the OSCE (Headquarters in Vienna and Baku Office) also were briefed by the Team Leader about TRACECA and its activities. 3.2.10.3 Development of a database and maps of ongoing and planned transport projects in the

TRACECA region A list of EC and IFIs funded ongoing and planned Technical Assistance and Infrastructure projects by has been developed and updated during October and November 2008. This list was also used for the new TRACECA Map with project references as well as the poster. Updating the status of EC funded projects is an ongoing effort. During the reporting period a new TRACECA map in two versions (with and without information about EC funded projects) was designed and prepared. The Project had experienced difficulties during the preparation period, because some TRACECA countries did not provide the changes in their maps in time and the PS was withholding the electronic version until such last inputs were provided. The map from Kyrgyzstan, for example, happened to arrive three days after the design of the TRACECA map was redone by the Project (design and copying from scratch) and basically ready for printing. Thus, the Project again had to make last minute changes before releasing the map for production. After the Baku Conference, two mistakes were communicated to the Team Leader by National Commission representatives, which were corrected. The newly revised map can be downloaded or requested in hardcopy from the Project.3 3.2.10.4 Publishing of visibility materials A poster entitled “10 YEARS TRACECA MULTILATERAL AGREEAMENT 1998-2008” was prepared during October and November 2008 and printed for the Baku Ministerial Conference. The history of TRACECA conferences, memberships, Working Group meetings as well as EC funded Technical Assistance and Investment Projects are listed on this poster (Annex 16). Additionally, the following items were prepared and produced for the jubilee event:

3 Requests can be sent by email to Mr Jafar Samandov, Lot 2 Assistant, at [email protected].


Interim Report 3

35

• booklet entitled “Strategy of the Intergovernmental Commission of TRACECA for Development of the International Transport Corridor EUROPE-CAUCASUS-ASIA (TRACECA) for the Period up to 2015”

• booklet entitled “Action Plan for Implementation of the Strategy of IGC” • CD containing all the above mentioned information was issued by the Project including:

o relevant EC documents o official TRACECA documents o TRACECA maps (see Annex 17 and 18) o TRACECA EC project list

For printing the maps, Strategy, Action Plan and CD, the Project received offers from three different printing houses. The most favourable offer was accepted based on price and time frame of production. Quantities ordered were • TRACECA map with projects 1.500 units (1.000 units folded and 500 units unfolded); • TRACECA map without projects 1.500 units (1.000 units folded and 500 units unfolded); • Poster 10-YEAR TRACECA MULTILATERAL AGREEMENT 500 units; • Action Plan for 2008-2009 300 units; • IGC Strategy 300 units; • CD with information 100 units.

The visibility materials and CDs partly were distributed among the participants of the Ministerial Conference, TRACECA National Secretaries, PS and EC Delegations in Kazakhstan, Ukraine Georgia, Moldova, EC TRACECA Projects as well as in EC DG RELEX, EuropeAid and TREN. The remainder will be used for further publicity and dissemination (215 maps each