Dear Mr. Chairman, Minister Cerovski, Deputy Minister Datsov, Ladies and Gentlemen:

I am pleased to welcome you to this conference on the financing of the water and wastewater sector in Bulgaria.  This is an important forum on an important topic and I’m glad to welcome such a group of distinguished representatives from the Government, the private sector, the municipalities, water operators, the EU, and the international financial institutions (IFIs).

I would also like to thank the United States Agency for International Development (USAID) for providing the necessary funding for organizing this conference.

This conference is an important forum to initiate an open and productive exchange of ideas on ways to support the reforms in the water and waste water sector in Bulgaria over the next 10 years.  The sector is indeed at a critical juncture.  While most Bulgarians are served with good quality water through a network of some fifty utilities throughout the country, the sector faces high investment needs to meet urgent rehabilitation requirements and to meet EU standards. Total investment needs to bring the sector to European standards over the coming ten years are estimated in the order of seven billion Euro. Part of the investments are based on the commitments undertaken by Bulgaria when closing the environmental chapter as part of the EU accession process.  Other investments are urgently required due to limited resources which were made available for sector maintenance and developments over the last years.  The vast rehabilitation and the maintenance needs were only partially covered by the recent World Bank-supported water project which was completed in 2002.  As a result, some sixty percent of water supply in Bulgaria continues to be unaccounted for.  And in the waster water sector, only about 35 percent of waste water is treated.  We hope that this conference can help come up with workable suggestions and proposals for meeting these very high investment needs.  This will involve continued government involvement in setting the right framework for the sector, and developing a financing strategy which involves the government, municipalities, water utilities, private sector, EU and IFIs alike, working in close partnership.

With this background in mind, we see the goals of this conference as three-fold.  First, to present and discuss the Government strategy and priorities for development of the water and wastewater sector.  The Government strategy for development of the sector was approved by the Council of Ministers on March 18. This important document was developed and approved together with the draft law on a Water and Wastewater Sector Regulator. Subsequently the draft law was submitted to Parliament and is currently reviewed by its commissions. We look forward to the presentations and discussions at this forum on these important documents which would provide the basis for the sector reforms over the next years.

As the second goal for the conference we see a joint assessment of the sector investment needs and a review of the different financing options and remaining gaps.  As I mentioned, the investment needs in the water and wastewater sector over the next years are very high.  We look forward to having productive discussions in identifying these investment needs, the sources of funding and the support to be provided by each of the partners involved in the development of the sector.

And thirdly, we see this conference as providing a forum at which the government, municipalities, water companies, private sector, EU, and the international financial institutions can discuss views on the sector reforms and their potential roles.  This forum comes at a critical juncture when the Government is finalizing its sector reform strategy and is embarking on a number of important projects to prepare the country for EU accession.  Putting together all the players will allow us to identify the roles each of us can play in this important process by bringing project development and management skills, as well as funding for specific projects as needed.

We also see the conference as an opportunity to present the preliminary findings and conclusions of a study prepared by my colleagues at the Bank on the financing of the water and waste water sectors in Bulgaria.  The study looks at the current legal framework, investment estimates and sources of funding and suggests approaches for the optimal utilization of resources available to Bulgaria. These sources of funding include EU grants, the Government budget, private sector funding, the IFIs, an investment surcharge in the water tariff, and special investment mechanisms established by the Government.  Each of these sources has its opportunities and limitations and through the study we aim to suggest a mix which may best serve the needs of the Bulgarian water and wastewater sector.

Support for the water and waste water sector fits well in the World Bank support strategy for Bulgaria over the coming years. This builds on our considerable involvement in the water sector through our recent water sector project which closed in 2002, and which supported initial rehabilitation needs of some 21 water utilities during the second half of the nineties. The project made important contributions in replacement of pipes, pumps and water meters, but could only meet a small part of the vast rehabilitation and maintenance needs of the sector. The study which we will be discussing during this conference builds on our experience in the project and the sector, and would help us set our future priorities and areas of potential involvement in the sector. Looking ahead, the Bank stands ready to support Bulgaria’s investment needs in the sector.  This is fully in line with our overall objectives to help raise living standards of all Bulgarians and to support Bulgaria’s EU accession.  And it supports our strategy to help Bulgaria absorb the considerable EU resources for infrastructure development, through capacity building and development of the appropriate co-financing mechanisms.  As part of this effort, we are working closely with the Government in preparing a project which would support the investment needs of the water and waste water sector. As the World Bank Group, which also involves the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA), this also involves developing the necessary frameworks for public-private financing mechanisms and to attract private sector funds on a non-recourse basis. We look forward to discussing these options in the course of this conference.

In closing, let me wish you successful and productive discussions over the coming two days in support of the reform efforts of this important sector.

Thank you.

Sofia

May 31, 2004