Report from the Commission to the Council and the European Parliament relative to the implementation of Council Decision 98/729/EC of 14 December 1998 amending Decision 97/256/EC so as to extend the Community guarantee granted to the European Investment Bank to cover loans for projects in Bosnia and Herzegovina
Date: 2000-03-03
Institutions: European Commission
Subjects: Bosnia and Herzegovina, EIB loan, European Investment Bank, credit guarantee, economic infrastructure

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 03.03.2000
COM (2000) 115 final

REPORT FROM THE COMMISSION TO THE COUNCIL
AND THE EUROPEAN PARLIAMENT

relative to the implementation of Council Decision 98/729/EC of 14 December 1998
amending Decision 97/256/EC so as to extend the Community guarantee granted to the
European Investment Bank to cover loans for projects in Bosnia and Herzegovina

1.

INTRODUCTION

The present report is established in the framework of Council Decision 98/729/EC of 14
December 19981 relative to the extension to Bosnia and Herzegovina of the general
Community guarantee to the European Investment Bank (EIB) against losses under loans for
projects outside the Community laid down in Council Decision 97/256/EC of 14 April 19972.

According to Article 1 paragraph 5 of Decision 98/729/EC the Commission has to submit to
the European Parliament and the Council, at the latest by the end of 1999, a report on the
implementation of the decision, including an assessment of its impact, and taking into account
the evolution of the economic and financial situation in Bosnia and Herzegovina as well as
the commitment level of EIB loans.

Due to the reasons specified under point 3 below there was no activity under the Bosnia and
Herzegovina envelope until the end of November 1999, at which time it became clear that one
loan would be approved by the EIB’s Board of Directors before the year-end. It was therefore
considered advisable to slightly postpone the present report in order to being able to include
this recent development in the implementation of the facility.

2.

LEGAL FRAMEWORK

in order to enable the EIB to contribute to the international efforts for

Council Decision 98/729/EC was made on an exceptional basis and conceived as a special
action,
the
reconstruction and improvement of infrastructure in Bosnia and Herzegovina by supporting
projects of mutual interest to the Community and the country in general infrastructure,
including transport, energy and the environment.

The Decision specifies that

– the Community guarantee to the EIB against losses under loans for projects in Bosnia and
Herzegovina is restricted to 70% of the aggregate amount of the credits opened, plus all
related sums;

– the overall ceiling for credits opened in Bosnia and Herzegovina is equivalent to

€

100

million.

– the overall ceiling covers a period of two years as from 22 December 1998; if on expiry of
this period, the loans granted by the EIB have not attained the ceiling, the period shall be
automatically extended by six months.

On 24 March 1999 the EIB’s Board of Governors authorised the Bank to lend on the basis of
the Council Decision. The guarantee contract between the Commission and the EIB on the
general Community guarantee to the EIB against losses under loans for projects outside the
Community covered by Council Decision 97/256/EC was correspondingly adapted.

1

2

OJ. L 346 of 22 December 1998, p. 54f.
OJ. L 102 of 19 April 1997, p. 33f.

2

3.

IMPLEMENTATION

Article 1 paragraph 4 of Decision 98/729/EC lays down that the Community guarantee shall
be conditional upon clearance in full by Bosnia and Herzegovina of its outstanding financial
obligations towards the EIB and the Community. In October 1999 Bosnia and Herzegovina
settled all its arrears (
7.7 million) on the 2 EIB loans granted to Bosnia in 1977 and 1982,
within the framework of the former Yugoslavia Financial Protocols3.

€

the EIB immediately concluded its initial
Following the clearance of the loan arrears,
appraisal of a project on the financing of a series of priority investment schemes to improve
and rehabilitate Bosnia and Herzegovina’s national road network.

€

the investment

122 million, of which the Bank will finance

schemes submitted to the Bank amount

to
The combined cost of
approximately
60 million. In accordance with
Article 1 paragraph 4 of Decision 98/729/EC and pursuing the appropriate procedures, the
loan could benefit from an interest rate subsidy of 2% financed from Community budgetary
resources under Council Regulation 1628/96 of 25 July 1996 (OBNOVA)4, as last amended
by Regulation 2454/99 of 15 November 19995, relating to aid for Bosnia and Herzegovina,
Croatia, the Federal Republic of Yugoslavia and the former Yugoslav Republic of Macedonia.

€

The financing proposal for the project envisages, at this stage, the financing of four sub-
projects:

Federation of Bosnia and Herzegovina:

(1)

(2)

the building of an expressway by-passing Sarajevo to channel traffic in a north-south
direction along the E 73 (Pan-European Corridor V) connecting the port of Ploce,
Mostar, Sarajevo and Tuzla. Particularly in the summer months, transit traffic is
hindered by local city traffic;

the reconstruction of the Capljina bridge located on the Neretva river linking the town
of Capljina with the E 73 (Pan-European Corridor V) connecting Mostar to Ploce. The
bridge was destroyed during the hostilities, and the provisional single-lane wooden-
decked bridge would be replaced by a bridge made of pre-stressed concrete elements;

Republika Srpska:

(3)

the building of a portion of an expressway on road E661 (access to Pan-European
Corridor X) north of Banja Luka, between Klasnice and Gradiska, providing a link
with Croatia and Central and Western Europe. The expressway will replace an
existing, overburdened narrow road; or

(4)

the rehabilitation of various stretches of roads in the Republika Srpska of primary
national and international importance, essentially on Pan-European Corridor V.

3

4

5

These loans concerned the Power Transmission Network project of 1977 and the Electric Energy
Management System project of 1982.
OJ. L204 of 14 August 1996 p. 1f.
OJ. L299 of 20 November 1999, p.1.

3

The project, in accordance with Article 1 paragraph 4 of the Decision, is of mutual interest to
the Community and to Bosnia and Herzegovina in the area of transport infrastructure. It is
implemented within the framework of the reconstruction and recovery programme agreed for
Bosnia and Herzegovina for the period 1996-99. It strongly assists the reconstruction process
in Bosnia and Herzegovina, as it adds additional international very long-term finance which
otherwise Bosnia and Herzegovina would be unable to attract.

The financing proposal for the project, an EIB framework loan of
60million for Bosnia and
Herzegovina’s national road network, has been approved by the EIB’s Board of Directors on
7 December 1999. Subject to the successful completion of due diligence, the signature of the
corresponding loan contracts is expected to take place in early 2000.

€

4