Western Balkans: Chaotic, opaque selection process for EU infrastructure funding needs major improvements

The WBIF was set up by the European Union, international financial institutions (IFIs), bilateral donors and the governments of the Western Balkans in 2009 and provides finance and technical assistance for investments, mostly in infrastructure, but also energy efficiency and private sector development. It’s a key vehicle for delivering EU funding under initiatives like the Economic and Investment Plan, and at least 50 per cent, or EUR 3 billion, of the EU’s new Reform and Growth Facility is also to be disbursed through the WBIF. 

To enable countries to propose projects for funding, the WBIF has created a project selection process that involves each country creating lists of priority projects called Single Sector Project Pipelines which are then combined into a unified list called a Single Project Pipeline. Projects from the list that attract ‘sponsorship’ from one of the international financial institutions can then be put forward for WBIF financing, subject to further screening and selection. 

Unlikely that the best projects are being put forward

In our new briefing, From quantity to quality: How to improve the infrastructure project selection process under the Western Balkans Investment Framework? we’ve taken a look at how the project pipeline lists are created, with a deeper look at North Macedonia. We’ve found a surprisingly chaotic situation which casts serious doubt on whether the best projects are being put forward for financing. 

Obviously the WBIF’s selection process does not solely rely on the countries’ prioritisation, but the problem is that neither the national-level project selection process nor the WBIF assessment are transparent or based on clear criteria. 

The national processes result in ridiculously long lists of projects which cannot possibly all be implemented. For example, North Macedonia’s latest list has 181 projects while Montenegro’s has 154 and Bosnia and Herzegovina’s has 143. It is impossible for the public to understand how they were chosen and which ones are the real priorities.

And the WBIF does not publish any information about projects before it approves them for funding, nor is it clear what criteria are used to assess them. In previous meetings with the European Commission, we’ve heard claims that the projects are all well-known because they are selected from existing national strategies. However, deeper examination of the WBIF rules and the lists shows that this is not necessarily the case. And national strategies are frequently outdated or do not contain details about individual projects.

The Commission has also shared that something called the EU Greening Facility helps to assess the projects’ environmental credentials, but we’ve approached them twice by email and so far received no response.

A deep dive on North Macedonia

We took a deeper look at North Macedonia after a December 2022 state auditor’s report heavily criticised the project selection process for the list adopted earlier that year. But what we found also reflects a lack of clarity on the EU level about how the project selection should be done.

Our main finding is that the entire process is plagued by inconsistencies between sectors and ministries, with different selection methodologies for the creation of the Single Sector Project Pipelines for e.g. energy and transport. This makes it impossible to understand how some of the projects were categorised and prioritised. 

For most sectors there are sectoral working groups to discuss and prioritise the projects but not all of them are active and most do not include civil society. For the energy sector, no working group exists, so project selection is done entirely behind closed doors by the relevant ministry negotiating with the relevant companies.

As a result of this untransparent process, North Macedonia’s Single Project Pipeline includes some projects that do not really make sense. An illustrative example is the Gas Interconnection Republic of North Macedonia – Republic of Kosovo, which is claimed to have a high maturity level of 4, yet Kosovo’s Energy Strategy does not foresee the project going ahead at all.

How the ranking impacts on projects’ financing prospects is also unclear since, for example, financing has been secured for the ‘mature’ transport project Construction of new motorway section A2 Bukojcani – Kicevo even though it is near the end of the list with a fairly low ‘strategic relevance’ score and a modest maturity level ranking of 2.

In addition, a highly controversial road project was added to the list of mature projects in the most recent list: Construction of state road R1209, Section Tetovo – Border crossing with Kosovo (Prizren). The road is supposed to go through the heart of the Shar Planina National Park and is strongly opposed by the national park authorities. It has the lowest maturity level ranking 1 and had no project documentation prepared at the time of the approval of the list. It also has a very low ‘strategic relevance’ score, yet it is on the list of mature projects, indicating political prioritisation rather than a genuine strategic assessment.

No fewer than 73 of North Macedonia’s 181 ‘priority’ projects are in the transport sector, and these are mostly for roads, showing a massive inter-sectoral imbalance and failure to promote modal shift.

Fossil fuel infrastructure projects costing between EUR 1.4 and 1.8 billion are also on the list, while only EUR 215 million worth of much-needed grid improvements are included, and energy efficiency projects are limited to EUR 50 million. 

Worryingly, even more money is now expected to be set aside for fossil fuels than was the case in 2022, when the related projects looked set to cost EUR 1.2 to 1.6 billion.

An obvious imbalance is also visible in the renewable investments: at least EUR 1.3 billion is intended for investments in climate-vulnerable, biodiversity-damaging hydropower, while only EUR 400 million are planned for investments in solar and wind together.

The way forward

In order to overcome these issues, the European Commission needs to update the WBIF methodology for creation of the sectoral and single project pipelines and require the establishment of sectoral working groups and proper regulation of their work. A cap on the number of projects per pipeline would also help to ensure governments truly prioritise.

In addition, the working groups’ activities have to be transparent and participatory, and project selection to include various relevant stakeholders, in order to ensure the selection of projects that are actual strategic priorities. To ensure this, the groups need to include academics and CSOs at the very least, but also the final draft single project pipeline has to go through proper public consultation before it is sent for government adoption.

The existing single project pipelines need to be revised through an updated process before future financing decisions are made through the WBIF. This will probably speed up the implementation of projects and reforms in the recipient countries as efforts will not be spread out over such a large number of projects.

The greening component of WBIF financing also needs to be more transparent, with a clearer emphasis on modal shift in transport and more support for circular economy investments such as waste prevention, re-use, recycling and composting. 

Financial support for new fossil fuel installations in the Western Balkans must be discontinued, including a halt to technical assistance or financing for gas projects, or any projects that extend the lifetime of existing fossil fuel infrastructure. Ambitious targets for deep renovation of buildings, prioritising the integration of heat pumps, heat storage systems, and other sustainable renewable energy-based technologies for production and storage of electricity and heating, should be supported to increase the share of sustainable renewables and implement energy savings in different sub sectors.

Only by implementing these measures can we be sure that real priority projects are being put forward by the countries and ensure the most appropriate use of limited EU public funds.