DESIGNING BD2 PROJECT – WHAT DID WE DO AT THE CO CROATIA? UNDP/GEF “COAST” PROJECT CASE

1. DESIGNING BD2 PROJECT – WHAT DID WE DO AT THE CO CROATIA? UNDP/GEF “COAST” PROJECT CASE EE PRACTICE COP MEETING Bratislava, Sept. 27 – 28, 2005 by Sandra Balent Environment Progamme Associate UNDP Croatia

2. Conservation and sustainable use of biodiversity on Dalmatian coast through greening coastal developmentPROJECT OF THE GOV. OF CROATIA (MEPPPC) AND UNDP/GEF

4. GEF BD2 – COAST Croatia GEF/UNDP COAST project – BD SP2 BD2 objective: “...to integrate BD conservation in agriculture, forestry, fisheries, tourism and other production systems and sectors to secure national and global environmental benefits...” COAST project objective: “To effecitvelly transform actions, practices and approaches of private operators in the tourism, agricultures and fisheries sectors in the four coastal counties, in part by influencing the banking sector, and thereby mainstram BD conservation into these sectors.”

5. GEF BD2 – COAST Croatia There are 4 integrated and inter-related outcomes: • BD-friendly development is demonstrated in four small but globally important productive landscapes • An improved investment climate is formed across the four counties for BD-friendly enterprises • Compliance with BD-related regulations has increased significantly across all sectors in the four counties • A national level enabling environment is formed that appreciates, supports, institutionalises and disseminates BD-friendly development in coastal areas.

7. GEF BD2 – COAST Croatia How did we get there? (Through PDF A and PDF B, of course... ;-) The PDF B (March 2004 – May 2005): • Analyses of problems and barriers at the sectoral level • Possible solutions to problems (using tools and drivers) • Drafting project brief accordingly Through PARTICIPATION and PARTNERSHIP: • Mix of expert-work (group of 23 guided by the project manager) – local and national-level experts (a few intn.) • Sectoral Focus groups – 8 workshops (tourism, fisheries&mariculture, multi-sectoral, banks, PAs) • Meetings and consultations at national, county and local level (over 250)

9. GEF BD2 – COAST Croatia Innovative and demonstrative aspects of the project strategy (BD-mainstreaming): • Demonstrating barrier removal and change • Modifying the banking and loans sector to ensure financial sustainability • Using secondees to mainstream BD into the work-programmes of key organisations (ownership and sustainability) • Directly catalysing pro-BD initiatives by local stakeholders • Comprehensive partnership building and exploiting a participatory approach • Targeting the EU accession process

10. GEF BD2 – COAST Croatia Why the banking sector? TWO (of 5) barriers identified are: • unsupportive investment climate for private sector • lack of financial/fiscal incentives ...AND • SMEs are important stakeholders across the coast • An optimal way to influence them is through the capital supply – from banks (90% of all finance available) but also from public sector credit schemes • At present, available fiscal tools are considered administratively complex and inaccessible to SMEs

11. GEF BD2 – COAST Croatia ...AND why BANKS? Important bank stakeholders are keen to cooperate (10 commercial banks, the national development bank “HBOR” and Croatian Association of Banks – representing 83,5% of total assets of Croatian banking sector) Banking sector as the key entry point for BD mainstreaming into local economic development, at present is unaware of BD-issues and unable to assess investment risks associated with environmental impacts

13. GEF BD2 – COAST Croatia ...SO WE DESIGNED THE PROJECT AS... Project Outcome 1: BD-friendly development demonstrated in four demo-sites. Demonstration of how to remove barriers to mainstraming BD into economic activities at the local level. Demonstrate benefits in terms of BD and for the economy. Project Outcome 2: An improved investment climate is formed across the four counties for BD-friendly enterprises. Aims to make the private sector more willing to invest in BD-friendly production and to increase the supply of BD-friendly loans.

14. GEF BD2 – COAST Croatia What is BD-friendly investment? • Sustainable tourism facilities (trails, visitor centres, visits to sites) • Restoring abandoned land with traditional species/cultures, restoring terraces, hedges, rubble walls and combine them with eco-tourism • Developing organic farming and indigenous branding • Relocating fish-farms, expanding shellfish farms • Investing in smart fishing gear

15. GEF BD2 – COAST Croatia • HOW we make SMEs to invest in BD? • Increase the availablity of affordable capital • Develop market premiums for BD producst, incentives • Incetive tools: certification schemes (BD-friendly tourism operators, organic produce, smart fish catches...) • Support integration of PAs into tourism packages in a BD-friendly way, increase revenues from PAs • Improve the approval process for BD-frinedly investment • Increase demand for capital and provide technical support for new activities, for loan applications • Targeted awareness campaigns • Increase consumer demand for BD-frinedly services and products

16. GEF BD2 – COAST Croatia How we work with banks to increase the supply of BD-friendly loans: • Develop programme of loans focussing BD-friendly investments • Training banks’ staff, develop guidelines for banks • Incorporate BD considerations into banks’ lending practices • Explore banks’ potential to develop a green niche • Develop a system of partial guarantees to reduce the risks banks face when lending for BD-friendly investments ...We focus on modifying investments in order to be BD-friendly

17. GEF BD2 – COAST Croatia • All nice, and then we got the comments ... • 1. The terms of partial risk guarantees have not been negotiated? • It is a process. Requires time. The bank is not ready to invest much into negotiations before having a committed partner and before having performed an assessment of market potential. The bank has procedures and wants to be very sure and at low risk. • Start early. • Create partnership and trust. • Engage an excellant finance specialist who “talks their language”. (count it costs! $$$) • Build on already proven concepts familiar to banks (energy efficiency partial risk guarantees fund...)

18. GEF BD2 – COAST Croatia 2. It is not clear that the proposed banking reforms have been reviewed in the context of the safety and the soundness of the overall banking system? Of course they have. We haven’t explained it clearly and straight away. DO IT! AND Be absolutely sure you know what you mean by using specific words and concepts. Do not be general nor vague. Be very specific and backed by data and facts.

20. GEF BD2 – COAST Croatia OTHER TIPS... • Competent, experienced, dedicated, full-time project manager • Project office in the project area and in already functional unit • Flexible and operational team, supported by UNDP CO (DEX) • Participatory approach and transparency – time and resources! • Project visibility and PR strategy Critical: a high-level political support (NPD) appointed by national agency (MEPPPC)

21. THANK YOU!