Addressing Historical
Environmental Damages in
Privatization
Bulgaria’s Road Towards Improved Environmental
Management
Adriana Damianova
Environment and Socially Sustainable Development
Europe and Central Asia , World Bank
Managing for Development Results
Second International Roundtable, Marrakech,
February 4-5, 2004
Addressing Historical Environmental
Damages in Privatization
World Bank assistance
 Environment
Remediation Pilot
Project: WB Loan US$16 Million
(Copper smelter /UM Belgium, privatization 1998)
 Environment and Privatization
Support Adjustment Loan: WB Loan
US$50 Million (Oil Refinery, Steel Mill, Open
Copper Mine, Fertilizer Plant, and Pharmaceutical
Plant privatized in 1999-2000)
Addressing Historical Environmental
Damages in Privatization
Managing the desired outcomes by
 Timely response to key inter-sector priorities and
investment needs
 Applying innovative approaches and involving key
stakeholders
 Managing implementation (define responsibilities,
commitment to design outcomes, continuity, flexibility to
evolving needs)
 Define and agree on measures for sustaining project
outcomes
Addressing Historical Environmental
Damage in Privatization
Issues and challenges
 Inherited pollution problems posing significant
risks to human health in industrial hot spots
(Pirdop-Zlatiza)
 Increasing awareness of social and
environmental risks and public pressure
 Weak governance structures and regulatory
framework to deal with environmental
uncertainties in the privatization
 Resistance of reputable investors (e.g. UM) to
commit to environmental compliance unless
stock pollution issues are resolved
Addressing Historical Environmental
Damage in Privatization
The privatization and support of the WB
provided a “window of opportunity” for
the Government to:
 Eliminate policy and regulatory
roadblocks and reach agreement on
corporate compliance with environmental
standards;
 Improve investment climate, re-capitalize
enterprise assets and contribute to
economic growth.
Addressing Historical Environmental
Damages in Privatization
Key design and implementation principles of ERPP:
 Accountability and transparent use of public
resources allocated for clean up of historical
pollution
 Environmental damages assessed based on risk
assessment methodology (EIA , Environmental
Remediation and Compliance plans); public
involvement
 Cost effective remediation techniques based on
elimination of environmental risk
 Clear implementation procedures, institutional
responsibilities, transparent procurement,
accountability, monitoring environmental
performance
Addressing Historical Environmental
Damages in Privatization
Implementation documents
 Sales Purchase Agreements include
environmental plan for compliance based on
standards acceptable to regulator and regulated
entity
 Implementation Agreement with agreed
performance indicators to show implementation
progress
 Agreement on inter – agency implementation and
post- privatization oversight (structure,functions
responsibilities, reporting etc.)
 “After-care program” for sustainability of project
measures agreed prior to completion
Addressing Historical Environmental
Damages in Privatization
Enabling legal and regulatory framework in place:
 Privatization Act and by-laws
 Environmental Protection Act
 Water Act
 EIA Regulation
 Regulation on Principles and Procedures for
Determining State Liabilities for Historical
Pollution
 Methodology and Guidance on Past
Environmental Pollution
Addressing Historical Environmental
Damages in Privatization
Build partnership between stakeholders/
beneficiaries:

Ministry of Environment and Waters and Regional
Environmental Inspectorates
 Ministry of Finance
 Privatization Agency
 Municipalities
 Enterprises
 Investors (UM)

Local population
Addressing Historical Environmental
Damages in Privatization
Lessons learned from ERPP
 Identification of environmental problems must be
done at the outset of privatization process
 Implementation responsibility handed over to
private owner
 Information on enterprise environmental
performance is key (environment audits/ EIA) and
should be included in privatization documents
 Involvement of all stakeholders and public at
large is critical for sustaining project outcomes
 Negotiations on environmental conditions should
be included in the negotiations of individual sales
Addressing Historical Environmental
Damages in Privatization
Lessons learned from ERPP
 Implementation of clean up programs requires
continuous post-privatization oversight
 Bank support facilitates effective collaboration
and public-private partnership for environmental
management
 Corporate businesses act in more responsible
manner to social and environment issues in a
transparent environment
 The project model enhanced transparency and
public access to information on corporate
environmental performance
Addressing Historical Environmental
Damage in Privatization
Policy Outcomes:
 Integrating environmental issues in structural
reforms (accompanying operations FESALI and II, follow
up operation PALI)




Policy improvements and instruments for
addressing environmental issues in privatization
Institutional capacity and enhanced publicprivate partnership in environmental
management
Enhanced role of environmental agencies and
improve institutional coordination
Better collaboration with donors
Addressing Historical Environmental
Damages in Privatization
Economic benefits

Increased interest from reputable FDI in
privatization of large industries
 Increased environment investments from private
sector and contribution to clean up cost in a cash
strapped economy
 Higher budgetary revenues and economic growth
boosted by more viable private sector
 Improved corporate governance
 Cost saving by linking environmental compliance
and industrial restructuring
Addressing Historical Environmental
Damages in Privatization
Social and environmental benefits

Protection of human health and sensitive
ecosystems from excessive pollution
 Mitigation of risks posed by past pollution
 Environmental monitoring and compliance with
environmental standards of industries improved
 Partial offset of adverse social impact of
privatization by prolonged demand for new jobs
and new employment opportunities for local
population
Old Slag Dump
Rehabilitation
Contaminated waste
excavated and sites cleaned
up
November 1999
September 2002
Clean-up of
Old Sulfuric Acid Plant
Old sulfuric acid plant
demolished and site
decontaminated
October 1997
November 1999
Closure of the “Blue
Lagoon”
“Blue lagoon” encapsulated and revegetated
June 1999
December 2002