Preliminary assessment of the first payment request of Romania

15 September 2022 Positive preliminary assessment of the satisfactory fulfilment of milestones and targets related to the first payment request submitted by Romania on 31 May 2022, transmitted to the Economic and Financial Committee by the European Commission Executive summary In accordance with Article 24(2) of Regulation (EU) 2021/241, on 31 May 2022, Romania submitted a request for payment for the first instalment of the non-repayable support and the first instalment of the loan support. The payment request was accompanied by the required management declaration and summary of audits. To support its payment request, Romania provided due justification of the satisfactory fulfilment of the 14 (fourteen) milestones and targets of the first instalment of the non-repayable support and the 7 (seven) milestones of the first instalment of the loan support, as set out in Section 2.1.1 and Section 2.2.1 of the Council Implementing Decision of 3 November 2021 on the approval of the assessment of the recovery and resilience plan for Romania1. For 1 (one) target covering a large number of beneficiaries, in addition to the summary documents and official listings provided by Romania, Commission services have assessed a statistically significant sample of individual files. The sample size has been uniformly set at 60 which corresponds to a confidence level of 95% or above in all cases. Upon receipt of the payment request, the Commission has assessed on a preliminary basis the satisfactory fulfilment of the relevant milestones and targets. Based on the information provided by Romania, the Commission has made a positive preliminary assessment of the satisfactory fulfilment of all 21 milestones and targets. The milestones and targets positively assessed as part of this payment request demonstrate significant steps in the implementation of reforms and investments laid down in Romania’s Recovery and Resilience Plan. These include, among others: sustainable transport, decarbonisation and road safety, electricity market reform, replacement of coal in the energy mix, government cloud architecture, improving tax and tax administration processes, developing pre-hospital medical infrastructure, stepping up the fight against corruption, and reform of the compulsory education system to prevent and reduce early school leaving. By the transmission of this positive preliminary assessment and in accordance with Article 24(4) of Regulation (EU) 2021/241, the Commission asks for the opinion of the Economic and Financial Committee on the satisfactory fulfilment of the relevant milestones and targets. 1 ST 12319/21. 1 Contents [Non-repayable support] ................................................................................................................... 4 Related Measure: Sustainable transport, decarbonisation and road safety / Railway infrastructure development and rail traffic management .................................................................................... 4 Related Measure: Decommissioning of coal-fired power-production capacity ............................... 9 Related Measure: Development of a unitary framework for defining the architecture of a government cloud system .......................................................................................................... 11 Related Measure: Transition to EU 2025 connectivity targets and stimulate private investment for the deployment of very high-capacity networks.......................................................................... 14 Related Measure: Ensuring cybersecurity of public and private entities owning critical value infrastructure ............................................................................................................................ 15 Related Measure: Reform of the public pension system ............................................................. 17 Related Measure: Reform of the public pension system ............................................................. 19 Related Measure: Improving tax and tax administration processes, including through the implementation of integrated risk management ......................................................................... 21 Related Measure: Development of pre-hospital medical infrastructure ...................................... 23 Related Measure: Stepping up the fight against corruption ......................................................... 24 Related Measure: Monitoring and implementation of the plan ................................................... 26 Related Measure: Monitoring and implementation of the plan .................................................. 29 Related Measure: Reform of the compulsory education system to prevent and reduce early school leaving....................................................................................................................................... 32 Related Measure: Supporting educational establishments with high risk of drop-outs ................. 34 [Loan support] .................................................................................................................................. 36 Related Measure: Strengthening the regulatory framework for the sustainable management of the water and wastewater sector and accelerating public access to quality services under European directives ................................................................................................................................... 36 Related Measure: Performance-based quality management in transport - Improving institutional capacity and corporate governance ............................................................................................ 38 Related Measure: Financial instruments for the private sector - Portfolio guarantee for resilience .................................................................................................................................................. 44 Related Measure: Financial instruments for the private sector - Climate Action Portfolio Guarantee ................................................................................................................................. 46 Related Measure: Financial instruments for the private sector - Recovery Venture Capital Fund .. 49 Related Measure: Financial instruments for the private sector - Energy efficiency investment in the residential and buildings sector .................................................................................................. 52 Related Measure: Streamline governance of research, development, and innovation .................. 54 2 3 [Non-repayable support] Related Measure: Sustainable transport, decarbonisation and road safety / Number: 69 Railway infrastructure development and rail traffic management Name of the Milestone: Adoption of the strategy for the development of railway infrastructure 2021-2025 and application of the action plan Qualitative Indicator: Adoption of the strategy for the development of the railway infrastructure by the Government Decision no. 985/2020 (secondary Time: Q4 2021 legislation), adoption of the action plan and start of implementation Context: Milestone 69 is part of a reform which aims to support the transition towards sustainable and smart mobility by developing and improving the strategic, legal and operational framework of the transport system in Romania. This reform includes 6 sub-reforms linked to a total of 13 milestones and targets, covering the period from Q4 2021 to Q2 2026, which aim to: (i) introduce a legislative package to implement a new taxation system in line with the polluter pays principle and other principles of environmental taxation; (ii) develop alternative fuels infrastructure for road vehicles; (iii) introduce a National Road Safety Strategy; (iv) develop the Intelligent Transport System strategy and legislative package; (v) strengthen the efficiency and competitiveness of railways in Romania and; (vi) further develop waterborne (inland waterways and ports) transport in Romania. Milestone 69 calls for the adoption of the strategy and action plan for the development of railway infrastructure for the years 2021-2025, which must identify responsible authorities/actors, deadlines for implementation, financial allocations and indicators. The milestone also requires the approval of the Investment Plan for the development of transport infrastructure for the period 2020-2030, which shall prioritise rail investments and European Rail Traffic Management System (ERTMS) operationalization. Evidence provided: In line with the verification mechanism set out in the Operational Arrangements, the following evidence was provided: 1. Summary document duly justifying how the milestone (including all the constitutive elements) was satisfactorily fulfilled. 2. Copy of the adopted strategy and a link to the website where the strategy can be accessed. 3. Copy of the adopted action plan and a link to the website where the action plan can be accessed. 4. Copy of the approved investment plan for the development of transport infrastructure for the period 2021-2030 and a link to the website where the investment plan can be accessed. 5. Copy of the Government Decision No. 985/2020 published in the Official Journal No. 1236 confirming the adoption of the strategy by the Romanian Government. 6. Copy of the Government Decision No. 1302/2021 published in the Official Journal No. 1257 confirming the adoption of the action plan by the competent authority and updated by Government Decision No. 652/2022 in the Official Journal No. 491. 7. Copy of the Government Decision No. 131 published in the Official Journal No. 1258 4  confirming the adoption of the investment plan by the Romanian Government. The authorities also provided: 8. Explanatory Note for the Investment Plan for the development of transport infrastructure for the period 2021-2030. 9. Explanatory Note for the action plan for the development of the rail infrastructure and the modal shift of the passenger and freight flows towards rail transport. 10. Timetable for the tendering of Public Sector Contracts in railways (freight and passengers) during the period until end 2023 with multi-criteria analysis of organisational scenarios. 11. Explanatory note on the Public Service Contract. 12. ERTMS action plan. Analysis: The requirements of the milestone have been addressed as follows: 1. The adopted action plan identifies:  responsible authorities / actors by identifying the national interests in rail and issues related to the harmonisation of those interests with European rail transport The authorities/ actors responsible for measures to increase the administrative capacity of state- owned railway companies are listed on pp.63-64 of the action plan in a table listing each measure, the responsible authority and the deadline for implementation. Elaborated in line with the corporate governance legal framework, these measures, as highlighted in the action plan, contribute to ensuring stable management and financial and non-financial key performance indicators for the railway companies, increased managerial transparency, and simplified operational procedures for project implementation, among others. The responsible authorities as described are the Ministry of Transport and Infrastructure, Executive Directors of the railway companies, Administration Boards or the General Meeting of Shareholders and others.  deadlines for implementation The deadlines for the implementation of measures to increase the administrative capacity of state-owned railway companies as listed on pp.63-64 of the action plan are set between December 2021 and October 2022.  financial allocations The financial allocation per project is listed on p.23 of the action plan, in a table that details the projects by name, type of intervention, cost estimates with and without VAT and the financing source (RRP, 2021-2027 Operational Program of Transportation, 2014 – 2021 Large Infrastructure Operational Program or Connecting Europe Facility).  indicators The indicators to monitor the performance of the national rail transport system are listed on p. 64 of the action plan:  number of passengers carried compared to other modes of transport  volume of services in rail passenger traffic (passenger-km, fare trip) compared to other 5  modes of transport  commercial speed of passenger trains, including by category of service  rail passenger modal shares in different market segments, such as: o land passenger transport on inter-urban routes (including individual transport) o public land passenger transport on inter-urban routes  gross tons transported compared to other modes of transport, of which: o in containers o in isolated wagons  volume of benefits in rail freight traffic (ton-km, tariff path) compared to other modes of transport  commercial speed of freight trains, including by service category  commercial speed of goods, including by category of service  rail freight modal shares in different market segments, such as: o freight transport on interurban inland routes (including inland waterways) o inland freight transport on inter-urban inland routes 2. The Ministry of Transport and Infrastructure together with the National Railway Company (C.N.C.F. C.F.R. SA) has defined a methodology with clear indicators and criteria for prioritising rail infrastructure investments as well as the institutional arrangements necessary for the implementation of this mechanism and the preparation of investment projects. The investment plan adopted by Government Decision 1312/2021 sets out a mechanism with clear indicators and criteria for prioritising rail infrastructure investments. This mechanism prioritizes rail investments, taking into account all the available sources of financing, with a focus on the completion of line modernization projects on TEN-T network and pan-European corridors. This is illustrated on p.127 of the investment plan, in a table listing the prioritised and ranked rail projects located on the core network. The action programme details the institutional arrangements necessary for the implementation of this mechanism and the preparation of investment projects on pp.62 to 68 by detailing how the administrative capacity of the Ministry of Transport and Infrastructure will be increased to implement the action programme. 3. The adopted action plan includes:  a system with indicators for prioritising investments; The indicators to prioritise investments are listed on p.23 of the action plan updated by Government Decision 652/2022: - The objective of economic efficiency: developing a rail transport system that generates benefits greater than the costs incurred; - The objective of fairness: the costs and revenues of a transport system will be fairly distributed among citizens, industries and geographical areas; - Safety objective: transport infrastructure and services will be provided in such a way as to protect people against injury or death; - The objective of integration: the transport system will enable people (including those with reduced mobility) to travel comfortably and safely, using a variety of modes of 6  transport and minimise freight transport costs; Environmental objective: the transport system will protect the environment by supporting social and economic development for the benefit of both the present generation and the future.  a structure responsible for project preparation; The structure of CFR SA for the implementation of the action plan is detailed on pp.90-91 of the action plan updated by Government Decision 652/2022 and in the railway Strategy which identifies responsible authorities/ actors (p.39), objectives (p.72), measures and costs for implementation (annex 22).  measures to increase rail freight traffic by a minimum of 25 % in 2026 compared to 2020; These measures are listed on pp.61-68 of the action plan updated by Government Decision 652/2022:  Measure 1: Increasing commercial speed and settling travel times  Measure 2: Attractive infrastructure charges  Measure 3: New railway agreements with industrial railway lines  Measure 4: Promoting an attractive transit policy  Measure 5: Decarbonisation of road transport in line with the “polluter pays” principle to stimulate the transition from freight to rail transport  Measure 6: Transition of goods to and from Ukraine and the mobility of goods and people in the context of the reconstruction of Ukraine The action plan also foresees impact assessments to monitor how these measures are contributing to increasing rail freight traffic with the 25% increase target in mind (p.96).  dedicated measures in view of reaching a target of an increase in the number of railways passengers by an average of 25% compared with 2021 baseline; These measures are listed on pp.38 to 58 of the action plan updated by Government Decision 652/2022:  Measure 1: Increasing commercial speed and settling travel times  Measure 2: Increasing the convenience of travel and the quality of transport services