Ljubljana: the EU’s Energy Outpost

The SCEE region is continuing to draw in the rest of Europe. The seating in Ljubljana, Slovenia of the EU Agency for the Cooperation of Energy Regulators – ACER means a key (the key?) energy institute is now located in the region.  While it beat out Romania and Slovakia for the title, it serves as an essential placement of a key institution away from Brussels. Whether this removes the Brussels group think from the agency remains to be seen, but it can only bode well to help re-balance the EU’s overally Western orientated energy policy and decision making tilt.

There can be something said about geographic location, besides the old adage of location, location, location. In the US the establishment of New York as the finance capital of the country and Washington D.C as the political capital was done on purpose. It remains to the be seen whether ACER develops into something with substantial influence of power, or as one friend called it, a paper tiger.

The location (although previously decided to be somewhere in the SCEE region) can act as an influence itself to instill some comprehension of the issues facing the region. The obvious lack of actual interest in the SCEE region from Brussels (as displayed over Nabucco and post 2009 gas crisis projects) can only be improved. Maybe to create policy reorientation takes sending bureaucrats to an isolated outpost.  Hopefully Ljubljana can instill a sense of geopolitics and create awareness of the differences between old and new member states .

Just as Czarist Russia and pioneer America set about establishing outposts to claim their territories, the EU is now establishing its agencies in this rough and tumble region. For us savages, or those that have gone native, we can only hope that a sense of place can rub off on those working in ACER and those visiting the agency.

Controlling corruption: How many people does it take?

corruption 2

The flurry of corruption related stories and even ‘counter’ stories about corruption in Hungary, the question arises as to how many people are enough to begin to tackle corruption. The answer for Hungary is 26 people. From Hungary Around the Clock,

The Bureau for Public Procurement and Protection of Public Interests, the so-called anti-corruption office, is to open on March 1, 2010.

It will consist of 26 people and will be allowed to fine organisations that gain illegitimate advantage.

With the weekend arrests and allegations of corruption at BKV and at Budapest Airport (who would have thought?) it remains to be seen whether 26 people is enough. Maybe this amount is only for state owned companies.

Absorbing the cold and not EU money

“Designing a policy without ensuring the necessary finances for its implementation, however, is akin to setting out naked for a polar expedition.”

Ready for Global Warming

Just picture that. You got your sled, you got your chocolate you even have your fury boot and mittens on. But you got no hat, no coat and no pants. This is the picture that CEE Bankwatch Network and Friends of the Earth Europe provide us with their study on the failure of New Member States to absorb funding for renewable energy and energy efficiency. You may have some comforts, but you are going to get cold. The graph below describes the significant deficient in absorption.

I recently interviewed some people concerning energy efficiency for a project that I’m working on. The ability to effectively finance energy efficiency projects was a top concern of theirs. This included coming up with schemes for banks to increase their lending and for governments to institute effective policies.

The results of this study indicate the severity of the problem to effectively find ways to manage already existing, or matching, money for projects. It doesn’t appear to be just finding the funding sources, according to this study, the funding is there. In order for these programs to be effective the institutional capacity must be there.

Graph from Bankwatch and Friends of the Earth
Souce: CEE Bankwatch Network and Friends of the Earth

Overall, the study provides a nice assessment of the barriers existing in each country. And according to them, when you get down to the reasons, climate mitigation projects are not seen as a priority.

I think this explanation is too broad to be accurate. Maybe a better core reason, or explanation, is that energy efficiency isn’t as appealing as other projects, or energy subsidies that can be handed out. The concentration by policy makers has been on supply side ‘greening’ while little has been done for demand side ‘greening’. For anyone looking at the numbers and the payback of energy efficient technologies it is profitable. Therefore simple economics are not the reason for the failure to institute widespread programs. We can only hope the politicians and heads of institutions don’t wait too long before bringing us the clothes so we don’t have to stand around naked.

Is Orban riding with Putin?

I actually had a mouthful of apple juice when I read the following. “You will be surprised; the Russians will help Hungary,” Hungrian PM ‘heir designate’ Viktor Orban told MTV on November 25th. This is after his return from Russia where he met Prime Minister Putin.

I managed to not spit out the juice all over my computer, but where’s Orban’s new found love of Russia coming from? Or is he just jealous that Gyurcsány was invited to a private dinner with Putin on Tuesday night? Seriously, I assume that isn’t the case, but Orban also positively mentioned Russian assistance in building and refurbishing Paks nuclear power plant. While it is true Hungary is heavily reliant on Russia for its energy supply (gas supply and nuclear technology) the question becomes why this discovery of Russia as a long lost love? (Why he’s on Putin’s scooter?) Or should we just assume it is diplomatic niceties? Does Orban figure he has more to gain by just being nice to the neighborhood boss? Either way we won’t have that long to wait, the elections are expected in the spring.

Hungary fell behind Slovakia, now Bulgaria? Country gets ‘Smack Down’

smackdownThe economic rise of Slovakia, surpassing Hungary with better salaries and the adoption of the Euro, was embarrassing for Hungary.  After the fall of Communism the more advanced economic system in Hungary combined with rapid (and successful) privatization of key industries should have meant Hungary would continue to lead economically and politically. With the current path Hungary has chosen, it would seem that Bulgaria will soon surpass Hungary for less corruption, a better investment climate and a more sane political environment. Hungary will then have to try hard to maintain its lead over the non-EU Balkan countries.

This week I was at the Energy Forum, attending by a range of government representatives, energy companies and various energy institutes. I attended a forum with Janos Koka, former Economics Minister and now Parliamentary leader dealing with Nabucco, and I was able to ask him the question of whether these recent events against investors in Hungary were an indication of things to come in the future Fidesz government (Orban didn’t take any questions at this event). His response was very kind and I think represented him wanting to preserve Hungary as a stable country for investment rather than making political points.  He said during the time that Fidesz served from 1998 to 2002 they did not take action against investors, so he wouldn’t expect them to punish investors if they came to power. Rather, the noise (and some action) that is being made is for their voters, rather than an actual policy of investor punishment.

Koka’s words, if true, could continue Hungary’s path of economic development. However, maybe this current anti-investor era is representative of a more systemic problem that must be resolved first. That is maybe it is the very traits that made a ‘free market’ system work within the confines of a Socialist economy that has seen Hungary continue to fall behind regional peers. Evasion of authorities, corruption and the lack of political cooperation in the center have all meant the people of Hungary have been ill served by their leaders. Everyone, including the people, whether due to economic survival or greed, have sought to serve themselves. The result is corruption and economic takings that fail to serve the common good of the country thereby denying the advancement of the common and individual good.

The fact that 2 out of 3 Hungarians believe the transition to democracy is a failure only underscores the failed chances to create substantial reforms and improvements in the country. Now even Hungary’s friends and the companies that did believe in Hungary are worried about maintaining the limited improvements the country has made. Following my lead, the embassies of the US, Belgium, France, Netherlands, Japan, UK, Germany, Norway and Switzerland have issued a joint statement on transparency in Hungary.

It is therefore with great concern that we hear of significant new instances of non-transparent behaviour affecting investors in such areas as public utilities, broadcasting, and elements of the nation’s transport infrastructure. These reports could hinder the investment for which Hungary, like every other country, is competing.

This statement is called a ‘smack down’. That is, ‘Hungary you better wake up and cut out your petty stealing because if you don’t nobody is going to do business with your ass’, or as the diplomats said, “foreign investors will make their own decisions about where they will commit their resources.” And as you can see, over in Bulgaria the new Borisov government is doing pretty well at cleaning the country up. Fidesz can say they will be prosecuting the Socialists when they come into power (like in Bulgaria), but if they are still taking from investors (e.g. Pecs, radio stations, utilities) then even Albania will be looking a better bet.