“Engelsova”, “Pirinska”, “Prvomajska”, “Tikveshka”, “Vardarska”

MUNICIPALITY OF NEGOTINO PROJECT APPRAISAL DOCUMENT FOR RECONSTRUCTION OF STREETS “VELJKO VLAHOVIC”, “ENGELSOVA”, “PIRINSKA”, “PRVOMAJSKA”, “TIKVESHKA”, “VARDARSKA”,

Municipal Services Project Improvement Municipal “GJOKO MISHEV”, “VANO TASHEV” AND PART OF STREET “MARKSOVA”

Skopje March 2021

Table of Content

Summary ...... 8 1 Project description ...... 10 1.1 General Information on the municipality of Negotino ...... 11 1.2 Demographic and economic profile ...... 11 1.2.1 Demographic table ...... 11 1.2.2 Gender and age ...... 13 1.2.3 Minority repartition ...... 14 1.2.4 Economy and employment ...... 15 1.2.5 Relevant extracts of the municipality’s documents about the project ...... 16 1.3 GENERAL DESCRIPTION OF THE PROJECT ...... 16 1.3.1 General description ...... 16 1.3.2 Area concerned by the project ...... 17 1.3.3 Current situation ...... 18 1.3.4 Project goals and project beneficiaries...... 27 1.3.5 Knowledge and experience of the municipality of Negotino ...... 27 1.3.6 Conclusions ...... 28 2 Social assessment ...... 30 3 Environmental Impact ...... 36 3.1 LOCATION OF PROJECT SITE ...... 37 3.2 MAIN PROJECT ACTIVITIES WITH ENVIRONMENTAL IMPACT ...... 38 3.3 MAIN ENVIRONMENTAL IMPACT AND SENSITIVE RECEPTORS ...... 39 3.4 ENVIRONMENTAL MITIGATION PLAN FOR THE PROJECT: RECONSTRUCTION OF EIGHT STREETS IN MUNICIPALITY OF NEGOTINO ...... 43 3.5 ENVIRONMENTAL MONITORING PLAN FOR THE PROJECT: RECONSTRUCTION OF EIGHT STREETS IN MUNICIPALITY OF NEGOTINO ...... 46 4 Technical solution ...... 49 4.1 Description ...... 50 4.2 Analysis and evaluation ...... 62 4.3 Conclusions and recommendations ...... 62

4.4 Alternative solutions ...... 62 Financial analysis ...... 63 5.1 Project cost ...... 64 5.2 Credit capacity ...... 64 5.3 Loan repayment ...... 65 5.4 Review of the municipal account ...... 66 5.5 Analysis of the financial feasibility of the project ...... 68 5.5.1 Time horizon ...... 68 5.5.2 Limitations of the analysis ...... 68 5.5.3 Initial investment ...... 68 5.5.4 Inflation ...... 68 5.5.5 Discount rate ...... 69 5.5.6 Projection of operating cash flows ...... 69 5.6 Costs ...... 69 5.7 Sensitivity analysis ...... 71 5.8 Conclusions...... 71 6 Cost-benefit analysis ...... 73 6.1 General information ...... 74 6.1.1 Framework of the analysis ...... 74 6.1.2 Limitations and constraints of the study ...... 74 6.1.3 Scope ...... 74 6.2 Identification of the relevant costs and benefits ...... 74 6.2.1 Project costs ...... 74 6.2.1.1 Economic valuation of the costs ...... 75 6.2.2 Quantifiable benefits ...... 76 6.2.3 Unquantifiable benefits ...... 77 6.3 Other assumptions ...... 77 6.4 Valuation of the costs and benefits ...... 78 6.6 Results from the cost-benefit analysis ...... 78 6.7 sensitivity analysis ...... 79 6.8 Conclusion ...... 79

7 Risk analysis ...... 80 Technical risks to the municipality ...... 81 Financial risks to the municipality ...... 81 Recommendations ...... 83 8 Annex ...... 85 8.1 Decision of the Municipality of Negotino for loan ...... 86

List of Tables

Table 1. Basic demographic and economic data about Negotino ...... 12 Table 2. Urban and rural repartition...... 13 Table 3. Age distribution by gender ...... 13 Table 4. Population by ethnic groups in Negotino ...... 14 Table 5. Active business legal entities for 2019 ...... 15 Table 6. Active business legal entities by sector 2019 ...... 15 Table 7. Unemployment by gender (December 2020) ...... 16 Table 8. Detailed information about the local streets ...... 18 Table 9. Implemented investment projects...... 28 Table 10. Project general activities and environmental impacts ...... 38 Table 11. Estimated quantities of the generated different waste streams during reconstruction activities as per the BoQ of the Main Project ...... 41 Table 12. Administrative numbers of Decisions for approval of the EIA Elaborates for all 4 streets ...... 41 Table 13. Project technical documentation ...... 50 Table 14. Technical details of the local streets according the detail designs ...... 52 Table 15. Estimated project costs ...... 64 Table 16. Operating revenues of the Municipality Negotino for the year 2020 ...... 65 Table 17. Presentation of the loan terms ...... 65 Table 18. Loan amortization plan ...... 66 Table 19. Review of revenues and expenditures ...... 66 Table 20. Long term loans ...... 67 Table 21. Accounts payable/receivable ...... 67 Table 22. Servicing of municipal obligations in MKD ...... 68 Table 23. Price for maintenance of the street planned for reconstruction ...... 69 Table 24. NPV analysis (in MKD) ...... 70 Table 25. Sensitivity analysis ...... 71 Table 26. Calculation of percentage of supplies and labor in each street works ...... 75 Table 27. Economic valuation of the investment outlay (in MKD) ...... 76 Table 28. Number of vehicles owned by the residents ...... 76 Table 29. Summary of comparisons between the “without” and “with the project” scenarios ...... 78 Table 30. Cost-benefit analysis (in MKD) ...... 78 Table 31. Sensitivity analysis ...... 79 Table 32. Technical risks ...... 81

List of Figures

Figure 1. Map of Municipality Negotino and RNM ...... 11 Figure 2. Chart for population by gender ...... 13 Figure 3. Chart for population by age ...... 14 Figure 4. Micro location of the streets ...... 17 Figure 5. Photos from existing situation of the local street “Veljko Vlahovic” ...... 19 Figure 6. Photos from existing situation of the street “Pirinska” ...... 20 Figure 7. Photos from existing situation of the street “Prvomajska” ...... 21 Figure 8. Photos from existing situation of the street “Tikveshka” ...... 22 Figure 9. Photos from existing situation of the street “Vardarska”...... 23 Figure 10. Photos from existing situation of the street “GjokoMishev” ...... 24 Figure 11. Photos from existing situation of the street “VanoTashev” ...... 25 Figure 12. Photos from existing situation of the street “Marksova” ...... 26 Figure 13. Micro and macro location of the sub-projects locations (marked with red) ...... 37 Figure 14. Transverse section of the local street “Veljko Vlahovich” ...... 54 Figure 15. Transverse section of the local street “Engelsova” ...... 55 Figure 16. Transverse section of the local street “Pirinska” ...... 56 Figure 17. Transverse section of the local street “Prvomajska” ...... 57 Figure 18. Transverse section of the local street “Tikveshka” ...... 58 Figure 19. Transverse section of the local street “Vardarska” ...... 59 Figure 20. Transverse section of the local street “GjokoMishev” ...... 60 Figure 21. Transverse section of the local street “VanoTashev” and part of the local street “Marksova” ...... 61

Abbreviations

CBA Cost and Benefit Analysis EIA Environmental Impact Assessment ENPV Economic Net Present Value ERR Economic Rate of Return ESARNM Employment service agency of Republic of North Macedonia H&S Health and Safety IRR Internal Rate of Return MIRR Modified Internal Rate of Return MKD Macedonian Denar MKS EN Macedonian Standard MSIP Municipal Service Improvement Project NGO Non - Governmental Organizations NPV Net Present Value PAD Project Appraisal Document RNM Republic of North Macedonia SSO State statistical office of Republic of North Macedonia VAT Value Added Tax

Summary

This project is about reconstruction of 9 (nine) local streets in the Negotino. The total estimated amount of the project is 19,893,030.30 MKD (323,463.90 EUR) with included VAT 18 % and will be provided from the Second Municipal Services Improvement Project (MSIP 2) sub-loan. The Decision of the municipal Council for borrowing No. 08-84/6 dated 29.01.2021 is in amount of 19,893,030.30 MKD, so there is no need for co-financing from the municipality of Negotino. The importance of the project comes from the need to improve the quality of life of the citizens of municipality of Negotino. This project will improve the road infrastructure and the quality of life of the citizens and business sector from the municipality which use these local streets.

The Project is in-line with the Strategy for local economic development of Negotino municipality for the period 2015 – 2020 and the Annual program for local economic development of Negotino municipality for 2021. This project will contribute towards achieving the vision of the municipal administration for providing full coverage of transport infrastructure throughout the municipal territory. The Mayor and the municipal administration strive to achieve full coverage of a transport and other communal (utility) infrastructure throughout the municipal territory. It can be inferred that the implementation of the Project will undoubtedly contribute towards improvement of the quality of life and well-being of the citizens of the Municipality Negotino. Municipality has implemented various similar Projects in the past, some of which in collaboration with international institutions, which implies that is able to implement large construction Projects such as this one.

The necessity from this project was in accordance with the need for satisfying the public interest in the area of capital projects. On 29.12.2020 the administration of Negotino municipality organized public hearing about this project. This public hearing confirmed and concluded this project for reconstruction of the local streets to be realizing with the financial sources from the borrowing.

In addition, The Project will cause significant unquantifiable benefits such as increasing the traffic safety and comfort, increasing the traffic capacity and communications, ensuring a feeling of security by pedestrians, enhancing the commercial activities, as well as extending the outdoor social and recreational activities for the residents living on the streets. Additionally, the implementation of the Project is expected to lead towards reduction of the municipal costs for constant repairs of the streets. Once the Project is implemented, the Municipality will spend less money for repairs and reallocate them to other municipal services. Flood control will not only reduce the municipal spending, but also private spending on repairs, thus enabling reallocation of the funds to other more beneficial, i.e. productive use. The implementation of the Project is also expected to increase the property value for houses and other residential or commercial objects on the streets, thus increasing the growth of revenues from property taxes.

Furthermore, it is very difficult to relate the benefits of Projects of this kind with the economic development and poverty levels in a certain Municipality in a short-term. However, taking into account that increasing the quality of the transport infrastructure and increase in productivity is linked with decreasing poverty, the Project will definitely have a wide positive impact on the economic growth and the poverty level, not only in a short term but also in the longer term perspective.

1 Project description

1.1 GENERAL INFORMATION ON THE MUNICIPALITY OF NEGOTINO Municipality of Negotino is located in the central part of the RNM in the middle of the Povardarie area. It belongs to Vardar Region and as a separate natural area it belongs to Tikves–Raecki micro region. It covers the eastern part of Tikves valley, spreading out onto the two banks of Vardar River. The Municipality of Negotino is bordering with the Municipality of Stip to the North, Konce to the East, Demir Kapija to the Southeast, Kavadarci to the South, Rosoman to the West and Gradsko to the Northwest. Municipality of Negotino covers an area of 414 km2 populated by 19,212 inhabitants living in the town of Negotino and in the other settlements.

Figure 1. Map of Municipality Negotino and RNM

Municipality of Negotino is located about 150 meters above sea level. Being part of Tikves and Povardarie area, the territory of the Municipality of Negotino is under the impact of the mediterranean climate penetrating from the South through Demir Kapija ravine and under impact of the continental climate penetrating from North through Veles valley. Negotino comprises 426 km2 with 19,212 citizens in 5,898 households and 18 settlements as per the latest census from 2002.

1.2 DEMOGRAPHIC AND ECONOMIC PROFILE 1.2.1 Demographic table Considering the SSO data, the following table shows infrastructure, education and economic indicators for the municipality of Negotino and the RNM. There are 35 health and social institutions in municipality of Negotino. There are 13 primary schools and 1 high school. Namely, in 2019/2020 there are 11

1679 pupils attending the primary school. Also, there are 802 business subjects. Table 1 presents the basic demographic and economic data about municipality of Negotino.

Table 1. Basic demographic and economic data about Negotino Municipality Indicators Unit RNM Negotino Demography Area km2 426 25,713 Total population Number 19,212 2,022,547 Settlements Number 13 1,792 Population density Number 45 79 Total dwellings Number 7,369 698,143 Total households Number 5,898 564,296 Average households members Number 3.26 3.58 Education Primary schools Number 13 987 High schools Number 1 130 Children at age 6-14 that attend Number 1,679 187,240 school in school year 2019/2020 Population literacy at age 10 and Number 16,401 1,693,044 more Infrastructure Local roads km 85 9,878 Bridge on local roads Number 5 513 Water supply, sewerage and waste Number 4 260 management institutions Health and social institutions Number 35 3,246 Economy Active business subjects Number 802 75,914 GDP per capita MKD N.A. 331,982 Employment Total unemployed Number 1,359 155,575 Source: SSO – Makstat data base, Census 2002 and Employment Service Agency of RNM (ESARNM)

According the last data from the Employment Service Agency of RNM (ESARNM) the total unemployed in municipality of Negotino is 1359 i.e. municipality of Negotino is one of the municipality with the high number of unemployed people compared to other municipalities in the Vardar region. The GDP per capita is not calculated because there are no available data on the municipality contribution. The population density is lower in Negotino municipality than the average population density for RNM for 2002 when the last census was conducted.

The prevailing population is the urban one, whereby around 68% of the total population is settled in the urban area of Municipality Negotino. In the next table are presented details about urban and rural repartition.

Table 2. Urban and rural repartition Negotino RNM Repartition Number Percent Number Percent Urban 13,064 68 1,169,032 57.8 Rural 6,148 32 853,515 42.2 Total 19,212 100 2,022,547 100 Source: SSO – Makstat data base

1.2.2 Gender and age According to the Census in 2002, the total number of inhabitants in the municipality of Negotino is 19,212 inhabitants, living in 5,898 households i.e. 3.26 residents per household. The population density is 45 inhabitants per km2. In the next figure we present population by gender by years (2005; 2017; 2018 and 2019) about Negotino. The statistical data on gender structure in 2005 shows that male are represented with 49.30% and the female are represented with 50.70%. Also, in the next table we presents the age distribution by gender of total population in municipality of Negotino.

Figure 2. Chart for population by gender 51.00%

50.50% 50.70% 50.50% 50.48% 50.52% 50.00%

49.50% 49.52% 49.48% 49.50% 49.30%

49.00%

48.50% 2005 2017 2018 2019

Male Female

Source: SSO – MakStat database

Table 3. Age distribution by gender 0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ Total 1051 1255 1461 1548 1521 1416 1440 1440 1501 1464 1357 972 857 1919 Male 546 626 737 787 810 733 757 741 803 749 706 485 421 876 Female 505 629 724 761 711 683 683 699 698 715 651 487 446 1043 Source: SSO - MakStat data base, Census 2002 13

The following figure represents the age distribution in the total population. The analysis of data shows that municipality of Negotino has a share of population younger less than 15 years (19.61%), whereas persons 65 and older have a share of 15.61% in 2019 and 9.99% in 2002. In 2019, the number of population 15-64 is by 0.06 pp. less compare to the population on same age in the RNM.

Figure 3. Chart for population by age 80.00%

70.35% 69.30% 69.24% 70.00%

60.00%

50.00%

40.00%

30.00%

19.61% 16.21% 20.00% 15.14% 14.48% 15.61% 9.99% 10.00%

0.00% 0 - 14 15 - 64 65 + Negotino 2002 Negotino 2019 RNM 2019

Source:SSO - MakStat data base

1.2.3 Minority repartition Majority of population in the municipality of Negotino are Macedonians with 92.50% from the total population. Serbians with 3.30 are the second population in terms of representation in the municipality of Negotino, Albanians are 0.10%, Roma are 2.40%, Turkish are 1.30%, while the others are 0.40% which are members of other national groups. Table 4 presents the population of municipality of Negotino by ethnic groups. Table 4. Population by ethnic groups in Negotino Macedonians Albanians Turkish Roma Serbians Other Number 17,771 19 250 461 634 77 % 92.50% 0.10% 1.30% 2.40% 3.30% 0.40%

Source: SSO - MakStat data base, Census 2002

1.2.4 Economy and employment In the municipality of Negotino there are 802 active business legal entities, which is 1.06% of the total active business legal entities in RNM. It is obvious the domination of the micro businesses shares of 68.24% in RNM and also 68.45% in Negotino. Micro and small business legal entities in RNM, Skopje region and in Negotino are 97% of the total active business legal entities. Table 5. Active business legal entities for 2019 Total Micro Small Medium Large RNM 75,914 51,800 22,579 936 599 Negotino 802 549 238 13 2 Source: SSO - MakStat data base

The number of legal entities by sector in RNM and Negotino is presented in the next table. The companies in Negotino are mostly concentrated in wholesale and retail trade (29.9% of total), transport and storage (18.6% of total) and manufacturing (14.2% of total). Table 6. Active business legal entities by sector 2019 RNM Negotino

Total 75,914 802 Agriculture, forestry and fishing 2,605 31 Mining and quarrying 221 2 Manufacturing 8,362 114 Electricity, gas, steam and air conditioning supply 224 1 Water supply, sewerage, waste management and remediation 260 4 activities Construction 5,270 48 Wholesale and retail trade; repair of motor vehicles and 23,140 240 motorcycles Transportation and storage 5,780 149 Accommodation and food service activities 4,777 49 Information and communication 2,041 8 Financial and insurance activities 470 2 Real estate activities 645 0 Professional, scientific and technical activities 7,636 57 Administrative and support service activities 1,962 7 Public administration and defense; compulsory social security 264 2 Education 1,289 10 Human health and social work activities 3,241 35 Arts, entertainment and recreation 1,753 23 Other service activities 5,974 31 Source: SSO - MakStat data base

Regarding the limitations of the data for the unemployment in municipality of Negotino, in the next table we present available data about the unemployment by gender for the RNM and Negotino. Table 7. Unemployment by gender (December 2020) Total Male Female RNM 155,575 77,751 77,824 Percentages 49.98% 50.02% Negotino 1,359 690 669 Percentages 50.77% 49.23% Source: ESARNM

1.2.5 Relevant extracts of the municipality’s documents about the project The project Reconstruction of streets “Veljko Vlahovic”, “Engelsova”, “Pirinska”, “Prvomajska”, “Tikveshka”, “Vardarska”, “GjokoMishev”, “VanoTashev” and part of street “Marksova” unite the strategic goals of the Strategy for local economic development of the municipality of Negotino in the field of infrastructure and local economy, by setting conditions for local economic development of rural areas. This project is accordance with the Strategy for local economic development of the Municipality of Negotino. Regarding the above this project under consideration of this PAD was planned to be implemented with sub-loan. On 29.01.2021 the municipal Council adopted a Decision for a prioritization of this project for long run borrowing from the World Bank’s MSIP II 02/2018 No. 09-1097/1. The necessity was justified in the Decision with the need for satisfying the public interest in the area of capital projects. The maximal amount for borrowing was decided to be 19,893,030.00 MKD with maturity of 9 years inclusive of the 3- years grace period and an interest rate equal to what the RNM pays to the World Bank already. On 29.12.2020 at the Center of culture “Aco Gjorgjev” in Negotino is organized public hearing about this project. Present were employees in the municipality and representatives from the interested citizens. Responsible for the project from the municipality of Negotino first explained the financial technicalities of the possible borrowing and after explained the technical part of projects. Also the strategic dedication of the municipality for improvement of the infrastructure of Negotino was explained. Citizens started the discussion by pointing the hot spots with the local streets needs in their interest. In total 37 persons were present to the public hearing as presented by the List of attendees. After the public hearing it was concluded and confirmed the project Reconstruction of streets “Veljko Vlahovic”, “Engelsova”, “Pirinska”, “Prvomajska”, “Tikveshka”, “Vardarska”, “GjokoMishev”, “VanoTashev” and part of street “Marksova” to be treated with the financial sources from the borrowing.

1.3 GENERAL DESCRIPTION OF THE PROJECT 1.3.1 General description In general, this project includes reconstruction of existing 9 (nine) local streets with total length of 2.65 km (2650 meters) in the urban area of Negotino municipality and they are: - Reconstruction of street “Veljko Vlahovic”. The total length is 300 meters; - Reconstruction of the street “Engelsova”. The total length is 310 meters; - Reconstruction of the street “Pirinska”. The total length is 250 meters; 16

- Reconstruction of the street “Prvomajska”. The total length is 400 meters; - Reconstruction of the street “Tikveshka”. The total length is 300 meters; - Reconstruction of the street “Vardarska”. The total length is 320 meters; - Reconstruction of the street “GjokoMishev”. The total length is 320 meters and - Reconstruction of the street “VanoTashev” and part of the street “Marksova”. The total length is 450 meters.

1.3.2 Area concerned by the project Locations of the streets are presented in the next figures. The streets are part of the Detailed Local Urban Plans (DLUPs) for the local communities, adopted by the municipal council. The DLUPs of the local communities were used as the base for preparation of the technical documentation and the detailed designs. Figure 4. Micro location of the streets

All 9 (nine) streets have functionally storm-water drainage i.e. the existing storm-water drainage satisfied the standards for accepting the storm water from the surface of the streets. The atmospheric waters will be transfer through the new designed transverse and longitudinal slopes, and will be accepted into the existing water drainage system who is in function and satisfied the needs for atmospheric drainage. In the next table we present detailed information for the 4 (four) streets covered with this project.

Table 8. Detailed information about the local streets Storm-water Length street Sidewalks Street drainage (m) (Yes/No) (Yes/No) “Veljko Vlahovic” 300 Yes Yes “Engelsova” 310 Yes Yes “Pirinska” 250 Yes Yes “Prvomajska” 400 Yes Yes “Tikveshka” 300 Yes Yes “Vardarska” 320 Yes Yes “GjokoMishev” 320 Yes Yes “VanoTashev” and part of the street “Marksova” 450 Yes Yes Source: Detailed designs for reconstruction

1.3.3 Current situation All local streets are located in the urban area of Negotino municipality. Regarding the fact that all local streets have not been refurbished more than 10 years, so the streets are damaged andare in poor condition, the reconstruction of them is necessary. The final asphalt layer is damaged, also there are longitudinal and transverse cracks and big potholes. This damages on the local streets create problem for normal and safety flow of traffic. Namely, this current situation of the local streets also create additional problem on the vehicles which use this road i.e. vehicles has defects which produce costs related to repairs. The reconstruction of the all local streets refers on reconstruction/rehabilitation of the existing asphalt roadway structure. In the following figures we presented the current condition for all local streets.

Figure 5. Photos from existing situation of the local street “Veljko Vlahovic”

Figure 6. Photos from existing situation of the street “Pirinska”

Figure 7. Photos from existing situation of the street “Prvomajska”

Figure 8. Photos from existing situation of the street “Tikveshka”

Figure 9. Photos from existing situation of the street “Vardarska”

Figure 10. Photos from existing situation of the street “GjokoMishev”

Figure 11. Photos from existing situation of the street “VanoTashev”

Figure 12. Photos from existing situation of the street “Marksova”

1.3.4 Project goals and project beneficiaries This project will improve the living standards of the citizens which live by the above streets, and will enable them to fulfill their obligations and needs easier and faster. Namely, all local streets have important role in the normal functioning of the traffic in urban areas. Also these 9 (four) local streets indirectly are connection with important institutions and facilities who serve a large number of citizens, as they are primary school, Public health institution, Museum of the town and others. Also, with the use of this reconstructed9 (nine) local streets the citizens will get the opportunity for easier access to necessary institutions and facilities. Reconstruction of these streets will improve the traffic safety and will avoid possible accident that can be caused by poor conditions. Implementation of the activities in the project will contribute to improve the quality and safety transport and economic development within the municipality of Negotino. The implementation of the project is also expected to increase the property value of houses and other residential or commercial objects on the streets, thus increasing the growth of revenues from property taxes. The objectives of the technical solution of the project are as follows: - To provide traffic comfort, convenience and safety for the pedestrians and traffic by improving the surface on the streets and sidewalks, as well as their carrying characteristics; - To ease traffic on the local streets, thus improving safety and reliability for the traffic participants and good movement and - To satisfy various social, recreational and others needs of the citizens in the urban communities. The purpose of this project is to improve the road infrastructure and raise the quality of life of the citizens and the business sector of the municipality of Negotino who use these local streets. Additionally, the implementation of the project is expected to lead towards reduction of the municipal costs for constant repairs of the local streets. Once the Project is implemented, the Municipality will spend less money for repairs and reallocate them to other municipal services. The direct beneficiaries of this project are more than 2000 citizens which everyday use these local streets for fulfilling their needs and responsibilities, all business located in this areas and all children’s, students and teachers from the school who is located in these areas. Namely, the indirect beneficiaries of this project are the citizens of the other settlements in municipality of Negotino which use these local streets in their daily functioning and other citizens which have relatives and friend which live in this area.

1.3.5 Knowledge and experience of the municipality of Negotino The knowledge and experience needed for successful implementation of the Project are related to project management, technical knowledge, and execution of procurement practices. The Municipality Negotino, the competent authority in this Project, has participated in a wide variety of large construction or other type of Projects with different investors, whereby the Municipality allocated the land and provided the investors with technical services, and gained in return new businesses on its territory or improved housing facilities, schooling facilities, wastewater networks, and treatment. The Municipality has implemented several Projects for improving municipal services supported by the Japanese Government, UNDP, USAID, Swiss Agency for Development and Cooperation and others. It can be inferred that the Municipality is able to contribute with the necessary experience to large construction Projects such as the reconstruction of various streets in the urban districts of the Municipality Negotino. It can be concluded that the municipality is the required knowledge and experience required for implementation of project for reconstruction of local streets in the municipality of Negotino, envisaged to be financed from the World Bank Second MSIP funds to the Government of the RNM. In the next table we present the 27

implemented investments projects from the municipality of Negotino.

Table 9. Implemented investment projects Implementation Number Municipality Project name Financing source Budget (Euro) period Reconstruction of sewage and water system on the street : 11 Octomber Negotino-new sewage system in 1 Negotino Ministry of Transport and communication 2012 77,380.00 total lenth of 270.96m and water system in lenth of 273.32 Constriction of pipe line and infrastructural object 2 Negotino Ministry of Transport and communication 2015 78,958.00 Tank V= 210 m³ Pepelishte Construction of sewage system in village Tremnik and first phase water pretretmant with two flukes : 1 fluke 3 Negotino with lenth of 762,25 m and second fluke with lenth of Ministry of Transport and communication 2013 206,540.00 920,65 m or total lenth of 1.682,90 m, and sewage lenth of 2.304,27 m Reconstruction of the road Timjanik -Dolni Disan in 4 Negotino AFPZRR 2014 219,760.00 total lenth of 1040m Agency for financial support of agriculture and 5 Negotino Parttee arangement in vilage Dolni Disan 2014 118,139.00 rural development Agency for financial support of agriculture and 6 Negotino Construction of Gordni Disan veshje 800m 2015 309,131.00 rural development 7 Negotino Construction of Gorni Disan Veshje 638 World Bank 2016 232,976.00 8 Negotino Construction of Gordni Disan veshje 460m AFPZRR 2018 115,137.00 9 Negotino Construction of Gorni Disan Veshje 787 AFPZRR 2018 364,584.00 10 Negotino Street in vilage Tremnik 1km AFPZRR 2018 170,668.00 ,, Protection of the water resources by reducing the IPA CBC Cross Border Programme Greece- 11 Negotino human environmental footprint” with the acronym 2018 207,967 RNMacedonia ,,WA-mbrella”Sewage system in village Timjanik "Energy efficiency in the cross-border region as an IPA CBC Cross Border Programme Greece- 12 Negotino indicative factor for environmental policy" with the 2018 315,979.00 RNMacedonia acronym "ENPOL - EE" Support and development of bee economy in cross IPA CBC Cross Border Programme Greece- 13 Negotino 2016 272,489 border region BEE CONOMY RNMacedonia Total 2,689,708.00 Source: Municipality of Negotino

1.3.6 Conclusions The project is in line with the strategic priorities of the municipality of Negotino and will contribute to achieving the vision of the municipal administration for improvement the local road infrastructure in all settlements and communities of Negotino municipality. The relevance of this projects results arises from the fact that population in the municipality is affected by damaged road infrastructure. The proposed technical solution for the project is in accordance with the existing standards and regulations for such kind of projects. The project is of high priority to the municipality, the Mayor, the city Council and its citizens. The municipality has the required knowledge and experience for successful implementation and management of the project, has technical knowledge, as well as knowledge and experience for execution of procurement procedures. Municipality of Negotino has implemented a variety of similar projects in the past, in cooperation with international institutions, which means that the municipality is capable to carry out this infrastructural project.

2 Social assessment

2.1 SOCIAL STUDY

The study is based on the methodological concept of the World Bank summarized as Five Entry Points, One Result. The concept requires exploration of five components: social diversity and gender, institutions, rules, and behavior, stakeholders, participation and social risk.

The assessment involved a review of relevant data and documents of the municipality of Negotino: socio- demographic profile of the municipality, socio-economic data, key project documents, the municipal strategic documents, results from surveys conducted with citizens of the municipality of Negotino (in the process of preparation of local development plans), as well as the World Bank guidelines for the assessment of the social impact of the project. Due to time constraints and constraints imposed by the COVID-19 pandemic, the evaluation relied to the largest part on secondary data obtained from the Municipality of Negotino and the State Statistical Office. 2.1.1 Social diversity and gender

According to the Census data from 2002, 19.212 citizens are living in the municipality of Negotino, 9.777 (51 %) male and 9.435 (49 %) females. The majority of the population (68%) lives in the urban area of the municipality, while the rest population lives in rural settlements.

The share of the population of the Municipality in the total population of the country is 0.95%. Concerning the ethnic affiliation of the citizens, the prevailing population in the Municipality Negotino are Macedonians, representing 92.5% of the total population, followed by Serbs with 3.3%, then Roma with 2.4%, Albanians with 1.6%, Turks 1.3%, and other nationalities with 4.7%.

Average population age is 35.7 years, up to 20 years are 27.7% of total population of Negotino, up to 40 years are 57.9% of total population of Negotino, more than 60 years are 14.5% of total population of Negotino. There are 5.898 households with the average number of household members of 3.26 persons, which is a number below the national average, which is 3.58.

Out of the total number of active population, 4.865 inhabitants are employed, while 4.672 inhabitants are unemployed. The unemployment rate is 44.4 and is 16.54% higher than the average unemployment rate at the national level, which is 38.1%. The employment rate is 36.2%. Out of the total number of employees, 64.6% are men and 35.4% are women, while 52.8% of the unemployed are men and 47.2% are women.

The significance of the project “Reconstruction of streets Veljko Vlahovik, Engelsova, Pirinska, Prvomajska, Tikveshka, Vardarska, GjokoMishev, VanoTashev and part of Marksova” is evident when taken into regard the specific settlement structure of the municipality. Municipality of Negotino is located in the central part of the Republic of North Macedonia in the middle of the Povardarie area. It belongs to Vardar Region and as a separate natural area it belongs to Tikves–Raecki micro region. It covers the eastern part of Tikves valley, spreading out onto the two banks of Vardar River. The Municipality of Negotino is bordering with

the Municipality of Stip to the North, Konce to the East, Demir Kapija to the Southeast, Kavadarci to the South, Rosoman to the West and Gradsko to the Northwest. Municipality of Negotino covers an area of 426 km2 and consists of 13 settlements.

This Project is intended to be implemented in the urban area of the municipality and will cover 2.540 m length of the targeted streets.

The citizens who live on these streets are considered as direct beneficiaries of the Project. The citizens of these streets will have improved road safety and improved access within the communities they live in. Taking into regard the present poor condition of the streets the realization of the project will significantly improve street safety and minimize the high cost of repairing damage to cars that pass through these streets daily.

The direct beneficiaries of this project are more than 200 families who live there, and about 2000 citizens who everyday use these local streets for fulfilling their needs and responsibilities. Then all businesses located in these areas are also considered as direct beneficiaries.

There are important institutions and facilities located near these local streets that serve a large number of citizens and they are Elementary school, Public health institution, City Museum.

Therefore, are levant target group expected to benefit from the project is the children, their parents living and studying in targeted streets as well teachers, health workers and other employed staff in these institutions.

The indirect beneficiaries of this project are the citizens of the other settlements primarily Disan and Timjanik which use these local streets in their daily functioning which implies that the implementation of the project will have a wider indirect benefit on the community living in the Municipality Negotino.

With regards to gender issues, the project is expected to benefit citizens of all genders. There are no specific aspects of the project that could provide unjustified benefit or harm to members of all genders.

The construction traffic control plan (CTCP) design for temporary traffic regulation for the streets will be part of the contractor’s obligation and that will be stated in the Bidding documentation, while refurbishment of the permanent traffic signalization signs and markings including the traffic design if required is an obligation of the Municipality of Negotino, and will be performed immediately after the reconstruction of the streets. This information is confirmed by the Negotino Municipality.

The implementation of the Project will undoubtedly contribute towards increasing traffic safety and comfort, increasing the traffic capacity and communications, ensuring a feeling of security by pedestrians, enhancing the commercial activities, as well as extending the outdoor social and recreational activities for the residents living on the streets. This in turn will increase the quality of life and well-being of the citizens. 2.1.2 Institutions, rules, and behavior

According to the documents provided by the Municipality of Negotino, the citizens identify the development of the municipal road infrastructure as one of the key development priorities. According to Article 22 of the Law on the Units of Self-Government, the building, maintenance, and reconstruction of 31

local roads is the responsibility of the Municipality. Based on previous experience with other development projects, the municipal administration can manage the realization of the project. The Municipality has implemented several Projects for improving municipal services supported by the UNDP, USAID, SDC, and others.

The project's implementation is not expected to cause any resistance or tension between the citizens regarding the fact that four streets and citizens living there will be the direct beneficiaries of the project. The project represents a part of a strategic orientation for development of the municipal infrastructure. Hence, it is an identified priority of the municipality to work on upgrading the street infrastructure for the improvement of the quality of life of the citizens. The project represents a response to identified citizen needs and priorities. 2.1.3 Stakeholders

There are several relevant stakeholder groups for the implementation of the project. The first stakeholder group is the local authorities, i.e., the Mayor, the Municipal Council, and the municipal administration of the Municipality of Negotino. The Municipal Council of Negotino has 15 members, 8 are from the SDSM and its coalition and 7 are from VMRO and its coalition. The decision for borrowing 08-84/6 dated 29.01.2021 was supported by the majority members of the Council, which means that a political consensus is achieved on this issue. There is a strong commitment on behalf of the municipal bodies and administration members to the development of the project and continuous upgrading of the infrastructure in the municipality.

The citizens of the targeted streets represent another relevant stakeholder group. There are strong interest and support on behalf of this stakeholder group for the realization of the project. The citizens have frequently submitted their complaints about the current situation in the streets that are subject to this Appraisal, which again implies that the citizens are fully in favor of the Project.

Considering that the principles of participatory democracy have been respected for this project, as well as the importance of improving the living conditions of the citizens, the CSOs are also expected to support the project.

Local businesses are also relevant stakeholders, as street reconstruction will mean better and easier access to their services.

It can be concluded that this project has the support of all relevant stakeholder groups, without any risks that that support might change with the realization of the project. 2.1.4 Citizens engagement

According to the Law on Local Self-Government (Article 25), citizens can participate in the decision-making processes at the local level through citizen initiatives, citizen gatherings, and local referendums. Furthermore, each citizen has the right to suggest proposals to the municipal bodies. According to Article 30 from the Law on Local Self-Government, the Municipality is obliged to consult the citizens (through the organization of public debates, surveys of citizens' opinions, and calls for proposals) in the process of development of local policies and strategic documents. 32

The municipal government also regularly carries out consultations with citizens to prepare annual work programs, municipal budgets, and other relevant policies and activities. The Municipality of Negotino is committed to regular communication of municipal decisions and actions to its citizens. Relevant municipal information, documents and news are published on the Municipality website www.negotino.gov.mk.

The municipality has well established practice of citizens’ engagement activities in monitoring project implementation process. This includes placement of feedback drop box, annual public consultations, as well as municipal practice of “open doors” which allows citizens’ to schedule an appointment with the Mayor on their request. The municipal web site also represents one channel for communication with the citizens and offer possibility for citizens to report local communal problems in the area of street lighting, streets, roads and sidewalks, water supply and sewerage, environment.

This participative practice ensures the possibility of residents to influence on necessary changes if they arise during the implementation of the project if need. All these channels as well as direct contacts with municipal administration were used by the citizens in the for submitting their complaints about the current situation in the streets that are subject to this Appraisal and will be used during implementation of the project.

On 29 December 2020, the administration of the Municipality of Negotino organized a public hearing about the project. The public hearing was attended by citizen residents of the streets, representatives of the public institutions, the private sector and other interested stakeholders. The participants were informed about the financial technicalities of the possible borrowing and explained the technical part of project, by Ms. Vaska Jovanova representative from the Municipality. Also was explained the strategic dedication of the municipality for the improvement of the local infrastructure. In total 37 participants (out of which 17 women) were present at the public hearing. After the public hearing, it was concluded that the project “Reconstruction of streets Veljko Vlahovik, Engelsova, Pirinska, Prvomajska, Tikveshka, Vardarska, GjokoMishev, VanoTashev and part of Marksova” to be treated with the financial sources from the borrowing. The representative from the municipality, Ms. VaskaJovanova expressed positive conclusions from the public debate, suggesting that the citizens will continue to be most transparently involved in the whole process during the project implementation and their remarks will be considered to find a positive solution of the same.

The municipality has implemented many projects for improving municipal services in cooperation with national and international institutions and municipalities. It has experience in managing different foreign- funded projects and programs. It can be concluded that the municipality is the required knowledge and expertise required for the implementation of the project for “Reconstruction of streets Veljko Vlahovik, Engelsova, Pirinska, Prvomajska, Tikveshka, Vardarska, GjokoMishev, VanoTashev and part of Marksova”, envisaged to be financed from the Second MSIP funds to the Government of the RNM.

The project is expected to positively impact the overall quality of life of the citizens of the municipality and is recognized as such by the citizens.

2.1.5 Social risks

The assessment of potential social risks regarding the implementation and the project's impact did not identify significant issues that could jeopardize the project's realization. Urban planning is one of the key issues raised by the citizens, while also emphasizing the necessity of reconstruction of the streets in the urban districts that are subject of this Appraisal in particular. The project enjoys the support from the current Municipal Council and municipal administration, from citizens are not expected to have an impact on the realization of the project, apart from small delays in the execution of activities. The frequent complaints by the citizens of the urban districts about the current state of the streets that are a subject of this Appraisal, implies that the citizens are supporting the initiative for reconstruction.

The municipal government is committed to continuously work on developing the municipality infrastructure, which is planned in the annual work programs of the Municipality, local development strategic documents, and action plans.

Since the streets that are subject to this Appraisal are set on municipal property, no expropriation issue is expected to be raised. 2.2 OTHER FIELDS OF CONSIDERATION

The project is expected to increase the accessibility of municipal services to citizens living in the urban settlements of Negotino. Furthermore, the project is expected to positively impact access to the transport of people and goods. 2.3 RESETTLEMENT ISSUES

The project does not involve any resettlement nor land acquisition issues; the project consists of reparation of existing road infrastructure owned by the municipality, without any widening or other route alterations.

2.4 CONCLUSION ON THE PROJECT POTENTIAL SUCCESS AND RECOMMENDATION

The project is in line with the strategic priorities of the municipality of Negotino in particular Strategy for Local Economic Development (2015-2020) and will contribute to achieving the strategic aim of the municipal administration for improving the local infrastructure in all settlements and communities of Negotino municipality.

There are no significant social risks for the implementation of the project. The municipal authorities demonstrate a strong commitment to the realization of the project and the continuation of the development of the road infrastructure in the municipality. The project also enjoys the strong support of the citizens of all genders, as indicated by the surveys of public opinion regarding local development priorities.

Expected project results are:

➢ Increasing traffic safety and comfort of the citizens, ➢ Increasing the traffic capacity and communications, ensuring a feeling of security by pedestrians; 34

➢ Extending the outdoor social and recreational activities for the residents living on the streets; ➢ Increase the quality of life and well-being of the citizens.

3 Environmental Impact

The project consists of several sub projects with activities on reconstruction of eight streets in the city Negotino, Municipality of Negotino. The total length of the streets to be reconstructed is 2540 m, as follows:  “Pirinska” (240m), “Vardarska” (300m), “Veljko Vlahovikj” (290m), “Engelsova” (300m), “Tikveshka” (290m), “Prvomajska” (400m), “Gjoko Mishev” (300m), “Vano Tashev” (300m) and part of the street “Marksova” (120m). The current condition of the asphalt on the targeted streets is pretty damaged, which impairs the safety of road users, and increases the possibility of damage to vehicles transiting through the streets. On some parts of the streets the curbs are also damaged, so their replacement is planned too. The drainage of the streets is regulated superficially with its longitudinal and transverse slopes, whereby the atmospheric waters are collected in the existing drainage system. Leveling of manholes and gutters to the required height according to a project will be done.

3.1 LOCATION OF PROJECT SITE All streets included in this project are located in urban area of the southwestern part of the city Negotino, Municipality of Negotino. The routes of the streets are in a populated area, with a number of buildings that are up to the very edge of the Project scope. Around the project streets, there are living about 1000 citizens in 250 households (individual residential buildings) which everyday use these local streets for fulfilling their needs. Nearby the streets about 50-150m are located the following facilities and buildings: city park, elementary school “Goce Delcev”, and the city hospital, as presented in Figure 13. Figure 13. Micro and macro location of the sub-projects locations (marked with red)

3.2 MAIN PROJECT ACTIVITIES WITH ENVIRONMENTAL IMPACT The general construction activities and their adverse environmental impacts are shown in the following table 10.

Table 10. Project general activities and environmental impacts

Reconstruction of streets in Municipaly of Negotino

Planned project activities during Planned project Duration impact Planned project Preparatory work activities during during activities during Construction phase Construction Operational phase phase

- Marking the route; - Setting of Short term within - Traffic on the route asphalt layers ( Municipality of - Machine removal and scraping - Maintaining the BN16) Negotino of existing asphalt; alignment in - Generation functional condition, - Removing of existing and and placement of new kerbs; - Timely removal of transportation all detected of construction

Reconstruction of streets in Municipaly of Negotino

Planned project activities during Planned project Duration impact Planned project Preparatory work activities during during activities during Construction phase Construction Operational phase phase - Dust clearing and emulsion waste material irregularities - spraying. to landfill defects

The negative impacts that may arise from the above project activities will be of local importance within the Municipality of Negotino and short-term. They are presented and explained in the following chapter.

3.3 MAIN ENVIRONMENTAL IMPACT AND SENSITIVE RECEPTORS The expected environmental impact during the construction phase will be local, short term and will not have significant adverse environmental impact. Incompliance with OH&S requirements, increased level of noise, improper waste management and possible air and water emissions could be the main environmental and social issues to be taken into consideration. Sensitive receptors are the local population who lives/work nearby the route and workers involved in the construction phase. The Contractor must provide marking, securing and application of good construction practice in order to minimize the possible risk of injures of workers and local population during construction work. In this line, the Contractor should prepare and imply OH&S Plan, including community safety measures, considering the communicated needs of the local population. Considering the current situation with pandemic COVID- 19 infective disease in the country, in addition to the measures for safety and protection at work, the OH&S plan should also include measures for prevention of COVID 19. The Contractor is required to follow/update and implement the measures that are currently in force and adopted by the Government as binding at national level, as well as the Guideline considerations provided by the World Bank through the MSIP2/PIU. Official site for information related to COVID 19 on national level is www.koronavirus.gov.mk. The citizens should have available public complaint’s Dropbox at the administrative building of the Municipality Negotino with efficient feed-back mechanism. Another important step is preparation of Traffic Management Plan providing easy access of the local population to their homes and businesses. The Plan should include the re-routing directions and works time schedule. At the places where the works are performed and at the prescribed access points, the Contractor should place all the prescribed signs according to the traffic project, approved by the competent institutions, as well as given for inspection by the Supervising Engineer. It shall be developed in prior consultation with the Municipal administration, aiming to propose most adequate solutions for movement of the local business needs, population and access of the construction mechanization to the project sites. Prior to the commencement of the reconstruction activities, the Municipality of Negotino should prepare Information Note/Press to inform the wider public about the planned activities, the date and time of their start. Informing the wider public should be done through a Notice / Announcement that will be published 39

on local media (TV, radio, bulletin board in the municipal building and the website of the municipality (https://negotino.gov.mk/), social media, as well as information notices on public places, such as local markets, shops, ambulances, bus stops, etc. This is very important especially prior the asphalting of the streets. In case the Contractor needs to place a camp for keeping and maintaining the mechanization equipment, worker’s facilities for accommodation, catering and bathrooms, etc., it shall ensure that wastewater collection and treatment (communal as well as washout of the mechanization), hazardous materials storage, clearing of soil and vegetation and collecting any waste generated, shall be rehabilitated without any damage to the environment. Air emissions such as fugitive dust emission from cleaning of the road before emulsion spraying; fugitive dust emissions from construction activities during removal of the existing asphalt layer, exhaust gases from construction machinery and transport vehicles (CO , NOx, PAH, SO and suspended particulates 2 2 PM , PM ), fugitive emissions of volatile organic compounds from the deposition of the bitumen 10 2.5 emulsion and the asphalt mixture are expected. From the above-mentioned emissions, the fugitive dust has the greatest meaning. During the reconstruction of the roads, sources of air pollution are construction machinery (trucks and excavators), which will be used for supply of raw materials, scrape the asphalt, etc. In order to reduce air emission impact, the Contractor should implement mitigation measures given in the Environmental Mitigation Plan. As result of usage of the heavy construction machinery and equipment in open area, the sensitive receptors will be exposed on increased level of noise and vibrations. According to the level of sensitivity prescribed by the Rulebook for locations of the measurement stations and sites (O.G. No.120/2008) and Rulebook on the limit values of noise in the environment (O.G. No.147/2008), the project locations belong in area with II degree of noise protection (noise limit values are 45dBA for night and 55dBA for day and evening). The Contractor’s machinery and equipment (trucks, excavator, loaders) will not exceed level of generated noise higher than 85dB and 102dB respectively, in compliance with the Rulebook on closer types of special noise sources as well as conditions that need to be fulfilled by facilities, equipment, installations and equipment, installations and devices that are used in open space in terms of noise emission and noise protection standards (O.G. No.142/2013) during the working hours from 07 to 19. The Contractor shall submit to the Supervisor for approval a list of intended machinery for use, with data on relevant technical features concerning air and noise emissions in the environment. Preventive measures for noise reduction within the project locations in the settlement are given in the Environmental Mitigation Plan. All project locations are in urban area in surrounding of the river Vardar (at distance of 3km) as well river Timjanik (Negotinska) at distance of 1 km, which is right tributary of Vardar River. The vicinity of the river should be taken into account due to potential adverse impacts of the sub-projects to water quality (improper waste management – disposal of waste streams along the rivers). The water characterization of the Vardar River at the measurement point near Municipality of Negotino is III class according the Decree for categorization of watercourses, lakes, accumulations and groundwaters ("Official Gazette of RM" No. 18/99). The possible risk of further water pollution can occur if Contractor doesn’t respect the requirements of proper waste management (temporary or final disposal of generated waste near/ in the river basin).

During the project activities, different waste streams could be found on the reconstruction sites, mainly waste from demolition, communal waste generated by the workers, presented in the following table 11. The generated waste streams should be selected and classified according to the List of types of waste (Official Gazette of the Republic of Macedonia No. 100/05). For proper waste management (according the national waste legislation and good practices), it is essential for the Contractor to prepare and implement the Waste Management Plan (WMP). The Contractor shall collect, transport and dispose the inert waste in the Landfill Bucheto (about 6 km from the Project location) as well communal waste through the PE Komunalec Negotino. Keeping records of temporary and final disposal of waste shall be done by the Contractor.

Table 11. Estimated quantities of the generated different waste streams during reconstruction activities as per the BoQ of the Main Project Type of waste and Code Old asphalt Old concrete ______17 03 02 (mostly curbs) Street name and Quantities 17 01 01 Pirinska 1600m2 50m Vardarska 2060m2 100m Veljko Vlahovikj 1850 m2 60m Engelsova 1765m2 55m Tikveshka 2390m2 60m Prvomajska 2499m2 100 GjokoMishev 2031m2 100m VanoTashev” and part of the 2950m2 100m street “Marksova” In case of incidents, such as spill out of oils, lubricants, fuel, other substances that may be considered as hazardous waste, the Contractor shall proceed with authorized entity for handling of such waste of the liston:http://www.moepp.gov.mk/wp-content/uploads/2014/11/Registar-za-Transport-opasen otpad.pdf. At a location where construction activities are planned to be carried out, no endemic or protected species of flora/fauna have been identified, as well as characteristic natural habitats that would be directly endangered, thus no impact on biodiversity is expected. Vegetation removal is not planned. The nearest natural protected area is at a distance of 7km from the project site, thus negative adverse impacts are not envisaged over this site. The area of 22.41 km2 called “Orlovo Brdo” has been proclaimed as Monument of Nature in 2003. The Environmental Impact Assessment Reports for all sub-projects were prepared. The EIA Elaborate/Reports were approved by the Mayor of the Municipality of Negotino. The details are presented in the following table 12.

Table 12. Administrative numbers of Decisions for approval of the EIA Elaborates for all 4 streets

Name of street Approval number of Decision for EIA Elaborate

Pirinska UP1 No. 11-297 from 29.09.2020 – Municipality of Negotino

Vardarska UP1 No. 11-303 from 29.09.2020 – Municipality of Negotino

VeljkoVlahovikj UP1 No. 11-299 from 29.09.2020 – Municipality of Negotino

Engelsova UP1 No. 11-131 from 29.09.2020 – Municipality of Negotino

Tikveshka UP1 No. 11-296 from 29.09.2020 – Municipality of Negotino

Prvomajska UP1 No. 11-298 from 29.09.2020 – Municipality of Negotino

GjokoMishev UP1 No. 11-300 from 29.09.2020 –Municipality of Negotino

VanoTashev” and part of the UP1 No. 11-130 from 29.09.2020 – Municipality of Negotino street “Marksova”

The EIA Elaborates were prepared in accordance with national regulation and contain description of the main project goals, main project activities, photos of the locations where the project activities will be performed and the environmental mitigation measures. The proposed mitigation measures are presented in Environmental Management Plan (Tables of Mitigation and Monitoring Plans), which should be implemented by the Contractor. The Supervisor has main obligation of providing monitoring of their implementation, but also relevant municipal inspectorates, such as environmental, communal and construction.

3.4 ENVIRONMENTAL MITIGATION PLAN FOR THE PROJECT: RECONSTRUCTION OF EIGHT STREETS IN MUNICIPALITY OF NEGOTINO

Potential impact Impact scale Proposed mitigation measures Responsibility Project activity: Preparatory phase - Marking out the route for reconstruction of eight streets in Municipality ofNegotino ✓ Preparation, approval and implementation Traffic Management Plan together with the municipal staff prior to the start-up of activities; ✓ Provision of the information via municipality web site (https://negotino.gov.mk/)social media about the construction activities – start and finish of work and duration of work; • Setting up a Dropbox for complaints and praise in a publicly accessible place in the municipal administrative building of municipality of Negotino and introducing a mechanism for feedback and response.

✓ Preparation, approval and implementation of the OH&S Elaborate with community safety Possible adverse social measures, including measures/plan for prevention of COVID -19 for the construction site, and health impact to the ✓ Application of good practice for marking out the construction sites including: population and to the • Ensure the appropriate marking out the construction site; • Contractor; employed personnel due • Placement of attention signs especially for limitation of speed driving near the • Supervisor to: construction sites, where appropriate; • Municipality • Non-compliance with Local • Warning tapes and signage need to be provided; staff strict OH&S standards Short term/minor • During construction activities access to the family houses, commercial buildings, public (Communal and work procedure – Inspector and buildings, etc. should be provided; Injury near the Labour construction site • Forbidden entrance of unemployed persons within the warning tapes; /Construction • Inappropriate public • Health and Safety measures should be applied: a) Security measures like: perimeter Inspector) access to households, fence, life jackets, use of proper protective clothing and equipment by employees, commercial objects etc. warning signs for the public around the construction site; b) Maintain a good level of personal hygiene-have on site installations for washing, cleaning; c) Health protection, first aid kits and medical service on sites d) Apply the emergency and normal first aid procedure for any injury if such occur through construction work; • The street and around sidewalks/ small roads should be kept clean; • The mobile toilet should be placed on the construction sites; • Machines should be handled only by experienced and trained personnel, thus reducing the risk of accidents; • Constant presence of fire-fighting devices should be ensured in case of fire or other damage;

Potential impact Impact scale Proposed mitigation measures Responsibility • All workers must be familiar with the fire hazards and fire protection measures and must be trained to handle fire extinguishers, hydrants and other devices used for extinguishing fires; • Larger quantities of flammable liquids should not be kept on the sites along the construction sites. Project activity: Construction phase - Reconstruction of eight streets in Municipality of Negotino • Construction materials should be stored in appropriate places covered to minimize dust; • Vehicles and construction machinery will be required to be properly maintained and to Possible emissions by comply with relevant emission standards; transportation vehicles • Use of standardized fuels for the mechanization and switching off engines of the and impact on air mechanization when it is not in work, for reducing gas emissions; •Contractor quality due to: Local • Vehicles that perform transport of gravel, grit, soil should be covered or closed; •Supervisor - gases emissions of Short term during • Usage of protective masks for the workers if the dust seems to be appeared; •Municipal staff dust-suspended the construction • Restriction of the vehicle speed (30-40 km/h) within the construction location; (Environmental particulates Minor • Use of sprayers that do not contain chemicals and are on a water base – for reduction of Inspector) - emissions by the mobile the dust; sources (vehicles and • Reconstruction site, transportation routes and materials handling sites should be water- construction machinery sprayed on dry and windy days; of CO , NOx, PAH, SO2) 2 • Burning of debris from ground clearance not permitted.

• The level of noise should not exceed the limits of the Rulebook on the limit values of noise •Contractor Possible noise in the environment (O.G. No. 147/2008), for the project locations belonging in area of II disturbance as a result degree of noise protection: 45dBA during the night and 55dBA during the day; •Supervisor of outdoor equipment Local • Use of appropriate and technically functional equipment and mechanization, possessing usage and Short term /major Statement of Compliance for noise generation in open space below 85/102 dB (A); transportation vehicles •Municipal staff • The construction work should be not permitted during the nights, the operations on site shall driving to the sites (Environmental be restricted to the hours 7.00 -19.00; Inspector) Possible environmental • Possible hazardous waste (motor oils, vehicle fuels, lubricants) should be collected impact on water bodies separately and authorized company should be sub-contracted to transport and dispose the Local • Contractor Vardar and Timjanik hazardous waste; Short • Supervisor could occur due to • Dismantling of the equipment (fuel reservoirs, boiler) should be done by trained persons in term/Medium • Municipal staff contamination from the order to avoid the potential effects of oil spills on soil, which would contaminate the significance (Environmental spillage of materials underground water; Inspector) such as vehicle fuel, • The temporary/final disposal of the waste along the rivers Vardar and Timjanik is prohibited. motor oils and

Potential impact Impact scale Proposed mitigation measures Responsibility lubricants, illegal waste disposal, etc.

Possible adverse • Identification of the different waste types at the reconstruction site (soil, sand, bottles, • Contractor environmental impact food, parts of pipes, paper, broken concrete etc…); • Supervisor and health effects could Local • Classification of waste according the national List of Waste (O.G. No.100/05) • Municipality be occurred as a result Short term /major • The main waste would be classified under the Waste Codes: 17 03 02 – old asphalt, old staff of generation of the concrete waste from curbs -17 01 01 and small amount of solid municipal waste could (Communal different waste streams. be found (food, beverages) as well as packaging waste (paper, bottles, glass, etc.). Inspector)

• Collection, transportation and final disposal of the inert waste in the Landfill Bucheto at about 6 km from the Project location and communal waste by the PE Comunalec – • Municipality Negotino staff • Transportation and Handover papers shall be kept and provided as proofs; (Communal • The materials should be covered during the transportation to avoid waste dispersion; Inspector) The inappropriate Local • Burning of construction waste should be prohibited; • PE Comunalec waste management short term/ major • If hazardous waste (motor oils, vehicle fuels) occur it should be collected separately and Negotino

authorized collector and transporter should be sub-contracted to transport and finally dispose the hazardous waste, from the list on: http://www.moepp.gov.mk/wp- content/uploads/2014/11/Registar-za-Transport-opasen-otpad.pdf • Fulfillment of the Annual Report for non-hazardous waste management by the Mayor of Municipality and reporting to the Ministry of Environment and Physical Planning; • Minimization of the construction area as much as possible (carefully planning and design of the project activity for a certain period of time) • Removal of curbs, gutters, manholes, demolition of fences and buildings and similar • Contractor Possible impacts on Local/ short obstacles should be done in such a way that it does not affect the aesthetic appearance • Supervisor landscape and visual term/certain to of the road and the surrounding area; • Communa aspects happen, minor • Full clean-up of the construction site immediately after accomplishment of l Inspector impact reconstruction activities; /Environmental • Collection of the generated waste on daily basis, selection of waste, transportation and Inspector final disposal on appropriate places

3.5 ENVIRONMENTAL MONITORING PLAN FOR THE PROJECT: RECONSTRUCTION OF EIGHT STREETS IN MUNICIPALITY OF NEGOTINO Where Responsibility How When What is the Why is the is the parameter to be Parameter is to be parameter to is the parameter to be parameter to monitored (frequency of Construction Operation monitored? be monitored? be monitored? measurement)? monitored? Project activity: Preparatory phase - Marking out the route for reconstruction of eight streets in Municipality of Negotino The safety

protection measures To prevent health and applied for the At the beginning of the safety risks – workers and local Contractor /Supervisor On the pre- construction works mechanical injuries population. Environmental Inspector construction Visual check (first day) focused on the To be in compliance Application of /Inspector for communal site preliminary measures; with national preventive measures work at the Municipality occupational health against COVID-19 by and safety regulation all workers on the and OH&S standards site Project activity: Construction phase - Reconstruction of eight streets in Municipality o fNegotino Safety traffic flow through the To ensure the good Contractor/ Supervisor settlements and On the During the working day traffic flow through the Environmental inspector provided safe construction settlements in and /or Communal accesses to site Visual check Municipality Negotino Inspector at the households and Municipality of Negotino commercial objects Review the noise level To protect the workers technical against Exposure of loud On the commencement specifications exposure to loud noise Contractor /Supervisor noise On the of works; of the used taking into account the Environmental Inspector from vehicles construction for all vehicles and vehicle technical specifications /Inspector for communal machinery and sites equipment mechanization of the equipment and work at the Municipality electric tools and equipment time duration of the for their use work outdoor outdoor

Where Responsibility How When What is the Why is the is the parameter to be Parameter is to be parameter to is the parameter to be parameter to monitored (frequency of Construction Operation monitored? be monitored? be monitored? measurement)? monitored? Contractor Monitoring of Company authorized to the noise In case there are To monitor if the noise performed environmental On the levels dB (А) complaints from the local level is above/or below noise level measurements construction Noise level with population and in the acceptance noise sub-contracted by the site appropriate accordance with the level for specific type of Contractor Supervisor

monitoring national legislation area Environmental Inspector to devises collect the noise level measurements Review the documentation To separate hazardous Primary selection of On the – identification from the non-hazardous the waste streams as At the beginning of work construction of the waste waste as well as inert Contractor Supervisor they are generated with new material/s site type according from biodegradable at the spot the List of waste waste Positive waste Authorized Contractor for Review the management in line collection and Collection and transportation with the environmental transportation of hazardous transport as well On temporary Before the transportation list and and waste waste (if any occurs) storage of hazardous storage of the hazardous waste conditions at requirements. Not to subcontracted by the waste (if any occur). locations (if there is any) the storage dispose the hazardous Contractor, Environmental

facility waste on the municipal inspector from Municipality landfill. Visual Not to leave the waste monitoring on the spot (especially and reviewing After the collection and not in greenery) to Collection the transportation of the avoid the Contractor transportation and On the site transportation solid waste on a regular environmental and Supervisor final disposal of the and disposal basis each day health impacts to the Communal inspector solid / inert waste lists from the residents to have the licensed waste real data for generated subcontractors waste streams and to

Where Responsibility How When What is the Why is the is the parameter to be Parameter is to be parameter to is the parameter to be parameter to monitored (frequency of Construction Operation monitored? be monitored? be monitored? measurement)? monitored? improve the waste management Preserved water Near the Visual checks During the project In order to prevent Contractor courses (rivers project sites of the rivers, activities (twice a month) additional pollution of Supervision Vardar and Timjanik) records for the riverbeds Environmental and /or visual Communal Inspector inspections Operation phase: Everyday use of eight streets in Municipality of Negotino Regular maintenance On the Visual check Seasonal check of streets Traffic and public safety Contractor during Mayor of and cleaning of the affected damage construction phase Municipality streets streets of Negotino and PE Comunalec Negotino

4 Technical solution

4.1 DESCRIPTION The9 (nine) local streets are in urban area of Negotino municipality and they are part of the local road network in the municipality of Negotino. All 9 (nine) local streets are important for normal functionality of the traffic in municipality of Negotino. In the next table we present the submitted project technical documentation needed for implementation of this project. Table 13. Project technical documentation Name of the street Documentation - Detail design for Reconstruction of street “Veljko Vlahovic” with technical number P-43/19; - Technical review of the detail design for Reconstruction of street “Veljko “Veljko Vlahovic” Vlahovic”, with technical number 266/2020; - Elaborate for environmental protection with approval No. 11-299 from 29.09.2020 –Negotino municipality and - Certificate no. 11-313 from 30.09.2020 for approval of reconstruction of line infrastructure facilities. - Detail design for Reconstruction of street “Englesova” with technical number P-43/19; - Technical review of the detail design for Reconstruction of street “Engelsova” “Englesova”, with technical number 273/2020; - Elaborate for environmental protection with approval No. 11-301 from 29.09.2020 –Negotino municipality and - Certificate no. 11-315 from 30.09.2020 for approval of reconstruction of line infrastructure facilities. - Detail design for Reconstruction of street “Pirinska” with technical number P-38-2/20; - Technical review of the detail design for Reconstruction of street “Pirinska”, “Pirinska” with technical number 263/2020; - Elaborate for environmental protection with approval No. 11-297 from 29.09.2020 –Negotino municipality and - Certificate no. 11-316from 30.09.2020 for approval of reconstruction of line infrastructure facilities. - Detail design for Reconstruction of street “Prvomajska” with technical number P-39-1/20; - Technical review of the detail design for Reconstruction of street “Prvomajska” “Prvomajska”, with technical number 264/2020; - Elaborate for environmental protection with approval No. 11-298 from 29.09.2020 –Negotino municipality and - Certificate no. 11-314from 30.09.2020 for approval of reconstruction of line infrastructure facilities. - Detail design for Reconstruction of street “Tikveshka” with technical number P-12-2/20; - Technical review of the detail design for Reconstruction of street “Tikveshka” “Tikveshka”, with technical number 265/2020; - Elaborate for environmental protection with approval No. 11-296 from 29.09.2020 –Negotino municipality and - Certificate no. 11-312 from 30.09.2020 for approval of reconstruction of line infrastructure facilities. - Detail design for Reconstruction of street “Vardarska” with technical number P-13-1/20; - Technical review of the detail design for Reconstruction of street “Vardarska” “Vardarska”, with technical number 267/2020; - Elaborate for environmental protection with approval No. 11-303 from 29.09.2020 –Negotino municipality and - Certificate no. 11-309from 30.09.2020 for approval of reconstruction of line infrastructure facilities. “GjokoMishev” - Detail design for Reconstruction of street “GjokoMishev” with technical number P-13-2/20; 50

- Technical review of the detail design for Reconstruction of street “GjokoMishev”, with technical number 262/2020; - Elaborate for environmental protection with approval No. 11-300 from 29.09.2020 –Negotino municipality and - Certificate no. 11-310 from 30.09.2020 for approval of reconstruction of line infrastructure facilities. - Detail design for Reconstruction of street “VanoTashev and Marksova” with technical number P-38-1/20; - Technical review of the detail design for Reconstruction of street “VanoTashev” and “VanoTashev and Marksova”, with technical number 268/2020; Marksova - Elaborate for environmental protection with approval No. 11-302 from 29.09.2020 –Negotino municipality and - Certificate no. 11-311from 30.09.2020 for approval of reconstruction of line infrastructure facilities.

Namely, as basic parameters for the detail design are used all available substrates and data, from which are receiving information for the current situation of the local streets, and they are: o Project scope from the Investor; o Updated geodetic substrate; o Valid legal and technical regulations and o All legal and by legal acts which regulate this kind of projects. The technical documentation for all local streets contain all necessary documents according the Construction law of RNM i.e. the technical documentations are prepared in accordance with the positive legal regulations in the RNM. The above local streets have total length of 2.65 km or 2650 meters and they are in accordance with the Detail Urban Plan (DUP). According the Construction law this streets are objects from the second category and the streets are access streets. Along the streets there are residential buildings. Namely, the above local streets indirectly are connection with important institutions and facilities who serve a large number of citizens, as they are primary school, Public health institution, Museum of the town and others. The last reconstruction of the streets had been performed more than 15 years ago, so the reconstruction of this street is required. The final asphalt layer is damaged with visible longitudinal and transversal cracks, and potholes due to its exploitation period and as well as new installations. These damages on the local streets create problem for normal and safety traffic flow for all users pedestrians and vehicle driving. The aim of the project is to reconstruct the asphalt roadway structure of the streets. The data for the underground installations are attached to the technical designs and this will be the contractor’s responsibility to coordinate and accomplish all necessary investigation before commencing the works in order to avoid possible damages of the utilities during the reconstruction of the streets. The CTCP (construction traffic control plan) plan design for temporary traffic regulation for the streets will be part of the contractor’s obligation, while the refurbishment of the permanent traffic signalization signs and markings including the traffic design if required is an obligation of the Municipality of Negotino, and will be performed immediately after the reconstruction of the streets. More detailed technical data for the reconstruction of the each local street is described in the following table.

Table 14. Technical details of the local streets according the detail designs Name of the Length General information about the reconstruction Roadway structure Drainage street (km) The reconstruction of this street refers on reconstruction of the asphalt roadway structure. The designed street width is adopted The drainage of the atmospheric waters according the existing width of the street in order the reconstruction According the detail design is planned from the roadway asphalt surfaces will of the roadway to be performed between the existing concrete curbs. rehabilitation of the street with: Reconstruction of be performed with the performed The width of the street is variable (around 6.0 m). The designed speed - scratching existing asphalt layer 0-10cm street “Veljko 0.30 longitudinal and transverse slope of the is 40.00 km/h. The axes of the new designed street is in accordance Vlahovich” road. The water from the roadway will be with the existing situation of the street. Limit values of thedesigned - Bituminized bearing course BNHS 16 A accepted in the existing street drainage longitudinal slopes are: imin=1.08 % and imax=10.54 %. Limit values of (thickness 7 cm) system. the designed transverse slopes are ipmin=2.00% and ipmax=5.03%. It is used one sided transverse slope. The reconstruction of this street refers on reconstruction of the asphalt roadway structure. The designed street width is adopted The drainage of the atmospheric waters according the existing width of the street in order the reconstruction According the detail design is planned from the roadway asphalt surfaces will of the roadway to be performed between the existing concrete curbs. Reconstruction of rehabilitation of the street with: be performed with the performed The width of the street is variable (around 5.0 m). The designed speed street 0.31 - scratching existing asphalt layer 0-10cm longitudinal and transverse slope of the is 20.00 km/h. The axes of the new designed street is in accordance “Engelsova” - Bituminized bearing course BNHS 16 A road. The water from the roadway will be with the existing situation of the street. Limit values of the designed (thickness 7 cm) accepted in the existing street drainage longitudinal slopes are: imin=0.50 % and imax=6.54 %. Limit values of system. the designed transverse slopes are ipmin=1.00% and ipmax=5.00%. It is used one sided transverse slope. The reconstruction of this street refers on reconstruction of the asphalt roadway structure. The designed street width is adopted The drainage of the atmospheric waters according the existing width of the street in order the reconstruction According the detail design is planned from the roadway asphalt surfaces will of the roadway to be performed between the existing concrete curbs. rehabilitation of the street with: Reconstruction of be performed with the performed The width of the street is variable (around 6.0 m). The designed speed - scratching existing asphalt layer 0-10cm the street 0.25 longitudinal and transverse slope of the is 40.00 km/h. The axes of the new designed street is in accordance “Pirinska” road. The water from the roadway will be with the existing situation of the street. Limit values of the designed - Bituminized bearing course BNHS 16 A accepted in the existing street drainage longitudinal slopes are: imin=1.50 % and imax=7.68 %. Limit values of (thickness 7 cm) system. the designed transverse slopes are ipmin=2.00% and ipmax=11.00%. It is used one sided transverse slope. The reconstruction of this street refers on reconstruction of the According the detail design is planned The drainage of the atmospheric waters Reconstruction of asphalt roadway structure. The designed street width is adopted rehabilitation of the street with: from the roadway asphalt surfaces will the street 0.40 according the existing width of the street in order the reconstruction - scratching existing asphalt layer 0-10cm be performed with the performed “Prvomajska” of the roadway to be performed between the existing concrete curbs. longitudinal and transverse slope of the

The width of the street is variable (around 6.0 m). The designed speed - Bituminized bearing course BNHS 16 A road. The water from the roadway will be is 40.00 km/h. The axes of the new designed street is in accordance (thickness 7 cm) accepted in the existing street drainage with the existing situation of the street. Limit values of the designed system. longitudinal slopes are: imin=1.20 % and imax=5.00 %. Limit values of the designed transverse slopes are ipmin=1.00% and ipmax=4.00%. It is used one sided transverse slope. The reconstruction of this street refers on reconstruction of the asphalt roadway structure. The designed street width is adopted The drainage of the atmospheric waters according the existing width of the street in order the reconstruction According the detail design is planned from the roadway asphalt surfaces will of the roadway to be performed between the existing concrete curbs. rehabilitation of the street with: Reconstruction of be performed with the performed The width of the street is variable (around 6.0 m). The designed speed - scratching existing asphalt layer 0-10cm the street 0.30 longitudinal and transverse slope of the is 40.00 km/h. The axes of the new designed street is in accordance “Tikveshka” road. The water from the roadway will be with the existing situation of the street. Limit values of the designed - Bituminized bearing course BNHS 16 A accepted in the existing street drainage longitudinal slopes are: imin=0.23 % and imax=12.76 %. Limit values of (thickness 7 cm) system. the designed transverse slopes are ipmin=1.50% and ipmax=3.50%. It is used one sided transverse slope. The reconstruction of this street refers on reconstruction of the asphalt roadway structure. The designed street width is adopted The drainage of the atmospheric waters according the existing width of the street in order the reconstruction According the detail design is planned from the roadway asphalt surfaces will of the roadway to be performed between the existing concrete curbs. rehabilitation of the street with: Reconstruction of be performed with the performed The width of the street is variable (around 6.0 m). The designed speed - scratching existing asphalt layer 0-10cm the street 0.32 longitudinal and transverse slope of the is 40.00 km/h. The axes of the new designed street is in accordance “Vardarska” road. The water from the roadway will be with the existing situation of the street. Limit values of the designed - Bituminized bearing course BNHS 16 A accepted in the existing street drainage longitudinal slopes are: imin=2.12 % and imax=13.32 %. Limit values of (thickness 7 cm) system. the designed transverse slopes are ipmin=1.00% and ipmax=8.00%. It is used one sided transverse slope. The reconstruction of this street refers on reconstruction of the asphalt roadway structure. The designed street width is adopted The drainage of the atmospheric waters according the existing width of the street in order the reconstruction According the detail design is planned from the roadway asphalt surfaces will of the roadway to be performed between the existing concrete curbs. rehabilitation of the street with: Reconstruction of be performed with the performed The width of the street is variable (around 6.0 m). The designed speed - scratching existing asphalt layer 0-10cm the street 0.32 longitudinal and transverse slope of the is 40.00 km/h. The axes of the new designed street is in accordance “GjokoMishev” road. The water from the roadway will be with the existing situation of the street. Limit values of the designed - Bituminized bearing course BNHS 16 A accepted in the existing street drainage longitudinal slopes are: imin=1.00 % and imax=10.65 %. Limit values of (thickness 7 cm) system. the designed transverse slopes are ipmin=2.50% and ipmax=6.00%. It is used one sided transverse slope. The reconstruction of this street refers on reconstruction of the The drainage of the atmospheric waters Reconstruction of asphalt roadway structure. The designed street width is adopted According the detail design is planned from the roadway asphalt surfaces will the street according the existing width of the street in order the reconstruction rehabilitation of the street with: be performed with the performed “VanoTashev” of the roadway to be performed between the existing concrete curbs. - scratching existing asphalt layer 0-10cm 0.45 longitudinal and transverse slope of the and part of the The width of the street is variable (around 6.0 m). The designed speed road. The water from the roadway will be street is 40.00 km/h. The axes of the new designed street is in accordance - Bituminized bearing course BNHS 16 A accepted in the existing street drainage “Marksova” with the existing situation of the street. Limit values of the designed (thickness 7 cm) system. longitudinal slopes are: imin=0.30 % and imax=9.68 %. Limit values of

the designed transverse slopes are ipmin=1.00% and ipmax=3.05%. It is used one sided transverse slope.

Source: Detail designs of streets

In the next figures we present the characteristic cross profiles of the all local streets:

Figure 14. Transverse section of the local street “Veljko Vlahovich”

Figure 15. Transverse section of the local street “Engelsova”

Figure 16. Transverse section of the local street “Pirinska”

Figure 17. Transverse section of the local street “Prvomajska”

Figure 18. Transverse section of the local street “Tikveshka”

Figure 19. Transverse section of the local street “Vardarska”

Figure 20. Transverse section of the local street “GjokoMishev”

Figure 21. Transverse section of the local street “VanoTashev” and part of the local street “Marksova”

4.2 ANALYSIS AND EVALUATION In the municipality of Negotino there are 85 km asphalted. Thus, this project will contribute to improve the situation with more quality and safety of the network of local streets in Negotino municipality. It is assumed that all construction works will be performed in a period of 6(six) months.

4.3 CONCLUSIONS AND RECOMMENDATIONS For this project, the potential underground installations and the surrounding facilities should be taken into consideration, as well as the traffic safety, possible reduction of noise emission and taking care of the physical environment during reconstruction, although it is a construction in the urban area. Namely, wherever there are no planned traffic details in the detail design, our recommendation is that a proper horizontal and vertical signalization must be implemented on the local streets. Special attention is recommended as per the detail design during the reconstruction of the local streets to the underground cadaster in order to prevent the risk of cutting the potential underground networks. The detail design contains the technical details of this project as well as all the information on the cost’s calculation.

4.4 ALTERNATIVE SOLUTIONS Municipality of Negotino is obliged to provide safety and comfort traffic for the citizens of the all settlements. Alternative solution is to repair of the damaged parts/potholes of the local road. This alternative solution is simpler and cheaper, but this alternative solution has the following risks: - This solution is short-term related to the quality compared with the solution presented in the detail design; - This solution produces bigger costs for the municipality of Negotino related to the maintenance of the local road; - The vehicles which use this road will have defects which produce costs related to repairs and - This solution will not provide the necessary safety and comfort traffic for the citizens of municipality of Negotino.

Financial analysis

Тo assess the profitability of sub-projects, financial analysis section of the project appraisal document will present the following information:

• PROJECT COST • CREDIT CAPACITY • LOAN REPAYMENT • REVIEW OF THE MUNICIPAL ACCOUNT • FINANCIAL ANALYSIS • SENSITIVITY ANALYSIS

5.1 PROJECT COST The Municipality of Negotino Council decision number 08 -84/6 dated 29.01.2021, approves the request for an MSIP 2 loan for capital investment. The project envisages the reconstruction of 9 streets in the Municipality of Negotino in the total length of 2.650 m, intending to provide better living conditions. The total estimated project cost is 19.893.030 MKD (323.464 EURO), including VAT. The basic project designs present the division of these costs into Preparatory works and Upper layer works. The sidewalks are in very good condition, and there is no need for their reconstruction. The Table 15 presents the estimated cost breakdown and the total value of the MKD and EURO investment.

Table 15. Estimated project costs Length of Preparatory Upper Name of the street the Total in works layer street Total VAT Total with VAT Euro 1. Veljko Vlahovic 300 246.700 1.605.850 1.852.550 333.459 2.186.009 35.545 2. Еngelsova 310 237.250 1.460.425 1.697.675 305.582 2.003.257 32.573 3. Pirinska 250 218.680 1.352.300 1.570.980 282.776 1.853.756 30.142 4. Prvomajska 400 316.540 2.262.100 2.578.640 464.155 3.042.795 49.476 5. Тikveska 300 301.150 2.016.275 2.317.425 417.137 2.734.562 44.464 6. Vardarska 320 268.500 1.769.950 2.038.450 366.921 2.405.371 39.112 7. Gjoko Mishev 320 265.600 1.734.350 1.999.950 359.991 2.359.941 38.373 8. Vano Tashev & Marksova (one 450 362.680 2.440.150 2.802.830 504.509 3.307.339 53.778 part) Тotal 2.650 2.217.100 14.641.400 16.858.500 3.034.530 19.893.030 323.464 Source: Projects’ technical documentation

The investment costs breakdown by categories shows that the major part of the investment costs is the replacement of the Upper layer (87%) and the remaining for the preparatory works (13%). It is assumed that the procurement activities will take 4-6 weeks, and the construction works will last approximately 2-3 months. Therefore, we envisaged that the activities might take place during April – July 2021, which means that all the investment, as mentioned earlier costs will be carried out during 2021.

5.2 CREDIT CAPACITY The maximal credit capacity of the Municipality of Negotino based on 2020 financial data is MKD 94.432.202 (Euro1.535.483), while the annual debt servicing cannot exceed MKD 28.329.661(Euro 460.645). Operating revenues and expenditures by accounts are presented in the following table. It is visible that Municipal Property tax revenues and a portion from the VAT compose a significant part of the Municipality of Negotino operating revenues.

Table 16. Operating revenues of the Municipality Negotino for the year 2020 Account Description Amount 71 Tax revenues 61.545.613 72 Non-tax revenues 6.314.181 731 sale of capital assets 0 733 Land sales and non-material investments 13.649.237 741.115 Earmarked donations from VAT revenues 29.497.932 Total operating revenues (MKD) 111.006.963 Total operation revenues (Euro) 1.804.991 Repayment of annual installment (MKD) 2.549.878 Remaining principal Debt (MKD) 14.024.883 Тotal Debt 16.574.761 Тotal Debt (EURO) 269.508 Total operating revenues – Debt (MKD) 94.432.202 Total operating revenues – Debt (Euro) 1.535.483 Max debt service (30% of total operating revenues - debt) MKD 28.329.661 Max debt service (30% of total operating revenues - debt) Euro 460.645 Source: Municipality of Negotino

The Municipality of Negotino has one long term loan from the MSIP World Bank to reconstruct the water supply system. The total annual annuities for this loan are 2.549.878MKD. In January 2021, according to the information received from the Municipality, the entire remaining debt for this loan amount s 16.574.761MKD.

The loan for this new project is calculated in the amounts MKD 19.893.030 including VAT. This amount is in the frame of the municipality credit capacity as presented above. Therefore, it can be inferred that the Municipality has the financial capacity to repay the loan.

5.3 LOAN REPAYMENT According to the municipal decision, the loan shall be carried for 12 years, with a grace period of 3 years (2021 – 2024), and the repayment will start in Q3 2024. The interest rate1 is fixed at 3%, and the payment is semi-annually. The assumed date of disbursement of the loan is 15 April 2021. The annual payment has been calculated to MKD2.210.337 (Euro 35.940) (see Table below). Table 17. Presentation of the loan terms Loan repayment Unit Values Amount of loan MKD 19.893.030 Interest rate % 3 Duration of loan Year 12 Grace period Year 3 Annual payment MKD 2.210.337 Source: Own presentation based on the data received by the Municipality

1The realistic interest calculated for the loan will be EURIBOR 6 months+1. On 27th of December 2020 EURIBOR 6 months was -0.508%1. Thus, 6-month EURIBOR+1=0.492% 65

During the 3-year grace period, the Municipality will only repay the interests in an amount of 596.791MKD. The following Table presents the loan amortization plan.

Table 18. Loan amortization plan Principal & LOAN INTEREST PRINCIPAL Year Interest Period with grace 12 19.893.030 596.791 596.791 1 / 2021 Interest rate 3% 19.893.030 596.791 596.791 2 / 2022 Amount 19.893.030 19.893.030 596.791 596.791 3 / 2023 Period w/o grace 9 19.893.030 596.791 2.210.337 2.807.128 4 / 2024 Start 15.Apr.2021 17.682.693 530.481 2.210.337 2.740.817 5 / 2025 End 15.Apr.2032 15.472.357 464.171 2.210.337 2.674.507 6 / 2026 13.262.020 397.861 2.210.337 2.608.197 7 / 2027 11.051.683 331.551 2.210.337 2.541.887 8 / 2028 8.841.347 265.240 2.210.337 2.475.577 9 / 2029 6.631.010 198.930 2.210.337 2.409.267 10 / 2030 4.420.673 132.620 2.210.337 2.342.957 11 / 2031 2.210.337 66.310 2.210.337 2.276.647 12 / 2032 4.774.327 19.893.030 24.667.357 Source: Own calculations based on the data received by the Municipality

5.4 REVIEW OF THE MUNICIPAL ACCOUNT Based on the analysis of the municipal data for the revenues and expenditures over the last three years (2018-2020), the operational costs for the Municipality Negotino as a whole are financed from the operational revenues. One part of the net surplus supplements the financing of the municipal capital expenditures. This means that the Municipality is able to settle its operational costs and thereby provide consistent operation and maintenance of the municipal infrastructure.

As presented earlier, the Municipality has one long term loan with the remaining debt of 16.574.761 MKD. This debt will be repaid in 2027.In addition, with appropriate financial policies, the Municipality has decreased its high accounts payable from -50 million in 2018 to -13 million in 2020 (please see Table 21). The Table 19 presents the revenues and expenditures for the last 3 years, as per the Municipality's finance department report.

Table 19. Review of revenues and expenditures Municipality Negotino 2018 2019 2020 Average 71 TAX REVENUES 48.477.749 43.731.169 61.545.613 51.251.510 72 NON-TAX REVENUES 3.961.115 4.752.181 6.314.181 5.009.159 74 TRANSFERS AND DONATIONS 35.708.168 110.277.836 76.678.924 74.221.643 TOTAL OWN SOURCE REVENUE (Tax + Non-Tax) 88.147.032 158.761.186 144.538.718 130.482.312 TOTAL OPERATING REVENUE 88.147.032 158.761.186 144.538.718 130.482.312 40 SALARIES AND ALLOWANCES 21.506.504 21.575.835 22.497.665 21.860.001 42 GOODS AND SERVICES 44.911.191 34.161.359 34.200.034 37.757.528 46 SUBSIDIES AND TRANSFERS (expenditure) 6.913.809 48.957.407 15.496.461 23.789.226 TOTAL OPERATING EXPENDITURE 73.331.504 104.694.601 72.194.160 83.406.755 OPERATING SURPLUS (REV-EXP) 14.815.528 54.066.585 72.344.558 47.075.557 73 CAPITAL REVENUES 15.193.906 15.061.984 13.649.237 14.635.042 66

48 CAPITAL EXPENDITURES 17.650.744 22.370.237 58.764.326 32.928.436 NET CAPITAL DEFICIT (REV-EXP) -2.456.838 -7.308.253 -45.115.089 -18.293.393 45 INTEREST 26.762 56.795 41.959 41.839 49 REPAYMENT OF PRINCIPAL 2.805.988 4.080.925 2.549.878 3.145.597 DEBT SERVICE (Interest and Principal repayment) 2.832.750 4.137.720 2.591.837 3.187.436 NET OPERATING SURPLUS 9.525.940 42.620.612 24.637.632 25.594.728 (OPERATING SURPLUS - CAPITAL DEFICIT - DEBT) Source: Municipality Negotino, Finance department and own calculations

It is to be concluded that the Municipality's operating revenues are bigger than the operating expenditures, and the revenues completely finance the expenditures. Also, it is visible that revenues and expenditures are stable and balanced in the analyzed period 2018 – 2020.

A loan from the MSIP 2 World Bank aimed to reconstruct the water supply system of 30.091.941MKD. The repayment period is 13 years and three years of the grace period. The installment is payable every 6 months; each installment amounts to 1.274.939 MKD and annually 2.549.878 MKD. The remaining debt is16.574.761MKD. The loan repayment started on 10.02.2018, and the installment is due on 10.08.2027; 6.5 years are remaining.

Table 20. Long term loans MSIP 2 World Bank (10.02.2015- 10.08.2027) 30.091.941 Outstanding amount in MKD 16.574.761 Interest rate 2 % Installment 1.274.939

Total installments per annum 2.549.878 Source: Financial information from Municipality of Negotino

The Municipality’s accounting system is cash-based, and for this analysis, in defining the operational flow, the short-term and long-term municipal receivables are taken into account.

Table 21. Accounts payable/receivable Average 2018 2019 2020 (2018-2020) Accounts Payable 71.434.090 35.139.421 31.280.775 45.951.429 Accounts Receivable 21.116.126 11.248.475 17.745.010 16.703.204 Net Accounts Payable -50.317.964 -23.890.946 -13.535.765 -29.248.225 (Payable - Receivable) Source: Municipality Negotino, Finance department

Based on the received municipal data for the period 2018-2020, it is visible that the accounts payable in 2019 have decreased more than one half compared to 2018. Thus, this demonstrates the policy of appropriate planning and keeping the expenditures in the frame of the Municipality's fiscal capacities.

Thus, the net operating surplus in 2019 and 2020 is higher than net accounts payable, as illustrated in the following Table. Consequently, we can conclude that the Municipal capacity to regularly service its long-term debts can be assessed as “not at risk.”

Table 22. Servicing of municipal obligations in MKD 2019 2020 Net operating surplus 2019-2020 42.620.612 24.637.632 Net accounts payable 2019 -2020 -23.890.946 -13.535.765 Net operating suffice after deducting net accounts payable 18.729.666 11.101.867 Assessment “Not At Risk.” “Not At Risk.” Source: Own calculation based on municipality data

The property taxation in the Municipality of Negotino generates stable incomes. In the last years, the tax collection is high and has potentials for further increasing trends. The Government announcement for a legislative amendment to allow increased property taxation will provide additional opportunities for an increment of the gross amount of collected property taxes.

5.5 ANALYSIS OF THE FINANCIAL FEASIBILITY OF THE PROJECT The overall financial analysis is based on additional savings generated by the potential projects. The analysis is focused on the benefits to the local population by the sub-projects and the borrowing entity, i.e., Municipality of Negotino. The Internal Rate of Return (IRR) and the Net Present Value (NPV) are calculated. In general, a project is considered acceptable if: • IRR> 5% • NPV>0

5.5.1 TIME HORIZON For this kind of infrastructure project, the time horizon is 30 years. For this loan the time horizon is 12 years; there are 3 years of grace period included; and the interest rate is calculated at 3%.

5.5.2 LIMITATIONS OF THE ANALYSIS The main limitation of this analysis is the fact that for this kind of project, some of the benefits can’t be expressed in monetary terms. First, the nature of the project is such that it is difficult to quantify the project's direct financial benefits. Second, in some cases it is difficult to identify and differentiate the bearer of the impacts. Namely, the citizens will not feel directly the pecuniary benefits. The Municipality will repay the loan, and the Government will take the currency risk.

5.5.3 INITIAL INVESTMENT The amount of the initial investment outlay has been estimated at MKD19.893.030 including VAT. The basic project design presents these costs' division into the following categories: Preparatory and Upper layer work. Therefore, the Municipality's investment cost is equal to the discounted value of the future debt payments.

5.5.4 INFLATION Due to the de facto fixed exchange rate and the legal obligation of the National Bank of the Republic of North Macedonia to maintain the price stability in the country, the inflation rate is assumed to remain stable at 2% on an annual level. The NPV is calculated on this assumption.

5.5.5 DISCOUNT RATE The projected cash flows will be discounted using the cost of capital. For most of the projects, the only financing source will be the loan from the World Bank. For this analysis, a discount rate of 5% is adopted.

5.5.6 PROJECTION OF OPERATING CASH FLOWS According to the technical documentation, this project refers to the reconstruction of 8 streets. Therefore, the main monetary benefit generated by the implementation of the project is saved costs for street maintenance and eventually reparation of the vehicles damaged by the current poor street conditions.

5.6 COSTS Investment cost The amount of the initial investment outlay as mentioned above has been estimated at MKD19.893.030including VAT.

Recurrent Costs Municipality Negotino informed us that recurrent costs for the maintenance of the streets refers to filling the holes. Therefor the reconstruction of the upper layer of the streets will decrease the costs for maintenance. The expenditures for winter maintenance of the streets will remain the same and will not be affected.

Costs for the reparation of the streets subject to this appraisal

The program for the reconstruction of streets of the Municipality of Negotino is budgeted to 1.298.000 (1.100.000 MKD + VAT) which is sufficient for maintenance of 733m2 of damaged streets per year. The Municipality is paying 1.770 MKD (1,500 +VAT) for the reconstruction of 1m2 of the street upper layer. Following this logic for the project streets of length of 2.650 m the available budget is sufficient to repair only 53m2 of holes.

The total length of the streets in the Municipality of Negotino is 38.900m, only 3.000m of the streets are recently reconstructed and we can assume those streets will not require recent maintenance. Therefore, the available amount for maintenance of the project streets would amount to 95.813MKD per year. The Municipality is aware that the amount of the available budget is not sufficient for proper and regular maintenance of the streets and therefore they are in very bad conditions with many holes. The calculation is presented in following Table:

Table 23. Price for maintenance of the street planned for reconstruction The total length of Budget available for Price per streets reconstruction in MKD m2 MKD m2 35.900 1.298.000 1.770 733 2.650 95.813 1.770 53 Source: Own calculation based on data from Municipality Negotino

Savings in the reparation costs Reconstruction of the streets will reduce the costs for their reparation, and it will decrease expenditures of the citizen and the Municipality. Less money will be spent on street repairs and possible car damages. The estimation of annual savings in 2021 on maintenance costs for the projects’ streets amount to 95.813 MKD.

These savings are based on the municipality budget planned for reparation of streets and the cost paid by the Municipality for the same services in the previous years. The savings for the following years are adjusted by calculating 2% inflation rate on an annual level.

Other assumptions In this particular case, we used the Modified Internal Rate of Return (MIRR). In theory and practice, MIRR is a better decision- making tool when measuring the investment attractiveness of a particular project rather than IRR. Thus, we used MIRR to show the desirability of the investment. Additionally, MIRR more accurately reflects the cost and profitability of a project. There are several problems with the IRR; MIRR resolves two of them. First, IRR assumes that interim positive cash flows are reinvested at the same rate of return as that of the project that generated them. MIRR finds only one value, while more than one IRR can be found for projects with alternating positive and negative cash flows, which leads to confusion and ambiguity.

In our analysis, while calculating NPV (see Table 23), there are cash flows with alternating signs (negative cash flows followed by positive cash flows), so the IRR can generate multiple rates of return that will make the NPV equal to zero. This is unhelpful when trying to evaluate the project. Thus, we use MIRR because it gives a more realistic evaluation of the project. In our case, the calculations showed that the MIRR is a negative value, adding to a conclusion that the project is commercially non-viable.

Results of the financial analysis The financial appraisal based on the above assumptions and applying the 5% discount rate gives negative NPV of MKD- 15.509.178 or Euro -252.182 and negative MIRR of -7,2% presented in Table 24.

The results imply that the project is commercially non-viable.

However, implementation of the project will bring other benefits for the citizens. This will reduce vehicle operating costs and increase the quality of life and satisfaction of the citizens and contribute to increasing the value of the property in this part of the Municipality. Indirectly these improvements will bring added value back to the budget of the Municipality. Quantification, calculation, and monetary presentation of these values will be possible if the Municipality possesses valid statistical data. Moreover, the decision-makers should consider that the implementation of the project brings substantial immeasurable benefits and social benefits.

Table 24. NPV analysis (in MKD) Nominal Capital Saving in year Interest repayment Total cost maintenance Cash flow 1 2021 596.791 596.791 95.813 -500.978 2 2022 596.791 596.791 97.729 -499.062 3 2023 596.791 596.791 99.684 -497.107 4 2024 596.791 2.210.337 2.807.128 101.678 -2.705.450 5 2025 530.481 2.210.337 2.740.818 103.711 -2.637.107 6 2026 464.171 2.210.337 2.674.508 105.785 -2.568.723 7 2027 397.861 2.210.337 2.608.198 107.901 -2.500.297 8 2028 331.551 2.210.337 2.541.888 110.059 -2.431.829 9 2029 265.240 2.210.337 2.475.577 112.260 -2.363.317 10 2030 198.930 2.210.337 2.409.267 114.505 -2.294.762 11 2031 132.620 2.210.337 2.342.957 116.796 -2.226.161 12 2032 66.310 2.210.337 2.276.647 119.131 -2.157.516

13 2033 121.514 121.514 14 2034 123.944 123.944 15 2035 126.423 126.423 16 2036 128.952 128.952 17 2037 131.531 131.531 18 2038 134.161 134.161 19 2039 136.845 136.845 20 2040 139.581 139.581 21 2041 142.373 142.373 22 2042 145.221 145.221 23 2043 148.125 148.125 24 2044 151.087 151.087 25 2045 154.109 154.109 26 2046 157.191 157.191 27 2047 160.335 160.335 28 2048 163.542 163.542 29 2049 166.813 166.813 30 2050 170.149 170.149 NPV MKD using 5% -15.509.178 NPV Euro using 5% -252.182 BCR 0,1576 MIRR using 5% -7,20% Source: Own calculations based on the data received by the Municipality

5.7 SENSITIVITY ANALYSIS The sensitivity analysis was performed using variations of 10% for both costs and benefits. This does not influence significant change in NPV, i.e., the NPV remains negative. The NPV is more sensitive to change in costs. Sensitivity analysis results are shown in Table below.

Table 25. Sensitivity analysis Baseline Benefits Costs -10,00% +10,00% -10,00% +10,00% MKD NPV -15.509.178 -15.694.701 -15.323.655 -15.129.885 -15.888.471 Еuro NPV -252.182 -131.976 -108.798 -115.226 -125.548 Source: Own calculations based on the data received by the Municipality

5.8 CONCLUSIONS The project's total value is 19.893.030 MKD including VAT and the assumption is that the project’s costs will be fully covered with this loan. According to the existing regulation, the project’s cost is lower than the borrowing capacity of the Municipality.

The analysis of the project's financial feasibility showed that NPV is negative, implying that the project is financially non- feasible. However, implementation of the project brings substantial immeasurable benefits such as: lowers potential spending 71

on repairs of damaged vehicles by streets in poor condition, etc. Increases the value of the property being connected with new streets and indirectly contributes to increased tax incomes to the municipal budget. Most importantly, it improves the quality of life of the residents and ensures safety movement of the children, students, elderly people, and those with special needs.

Once the project is implemented, the Municipality will spend less money on repairs. Moreover, the estimated savings for annual maintenance and repairs are sufficient to cover bigger part (¾) of the loan's interest. Additional benefits will be considered in the analysis presented in the cost-benefit analysis chapter.

6 Cost-benefit analysis

6.1 GENERAL INFORMATION

6.1.1 Framework of the analysis

The initial step in testing the economic viability of a project is to identify, quantify and value the economic costs and benefits. We expect that this study, together with the financial appraisal, will provide a sufficient basis for the decision-makers to decide on the project's acceptability.

The main principles to be used in the appraisal are the following: - Loan costs (interests) are omitted; - The benefits and costs are presented in constant value, i.e., increases of prices are excluded in the analysis; - Taxes are excluded from the investment value; - A discount rate of 5% is applied.

6.1.2 Limitations and constraints of the study

The reconstruction of the streets brings many benefits to the local population. This is mostly related to savings in Vehicle Operating Costs (VOCs), and benefits that cannot be estimated in the analysis and refer to the improved quality of life for the citizens, increased road safety, accessibility for persons with disabilities, and the elderly. Additionally, improved infrastructure will eventually influence the increased market valuation of the surrounding properties and long-term increased incomes to the Municipal budgets.

6.1.3 Scope

In the beginning, it is necessary to define the scope of the cost-benefit study. Since this is a municipal project and taking into account that the project's subject is the reconstruction of eight streets in Negotino, it is the Municipality that acts as a borrower, we find it most appropriate that the point of view of the Municipality will be taken. This means that the project's positive and negative impacts within the Municipality only, will be taken into consideration.

6.2 IDENTIFICATION OF THE RELEVANT COSTS AND BENEFITS

Public infrastructure projects, especially street construction or reconstruction, have direct and indirect benefits. The street, provides an opportunity to raise the local population's quality of life and opportunities for improved hygiene of the streets. It can be said that when calculating, Cost-Benefit Analyzes (CBA) have financial benefit and future social development components. The CBA will be built upon the financial appraisal of the project. The items previously valued at market prices will be estimated using their economic values. The main principles to be used in the appraisal of some specific items are given below.

6.2.1 Project costs

The project's costs were elaborated in the previous chapter and consist of the investment outlay and the recurrent, i.e., operations and maintenance costs. The VAT of the investment is not considered the economic cost and therefore is not included in the cost-benefit analysis.

6.2.1.1 Economic valuation of the costs

The economic valuation of the costs considers the investment outlay of reconstruction of the street. The project 's financial costs are used as a basis to estimate its economic costs by correcting the non-skilled labor component of the investment. The percentage of labor in this project is presented below in the Table 26. Preparatory works consists 100% of labor and amount to 2.217.100 MKD while the upper layer consists 77% of supplies (11.285.035 MKD) and 23% of labor and services (3.356.365 MKD). Combined both preparatory works and upper layer the total project consist of 67% supplies (13.316.341 MKD) and 33% labor and services (6.576.689 MKD). The labor component of the projects’ investment value will be subject of economic valuation with a shadow wage that takes into account the current unemployment level in the country by applying the Conversion Factor equal to 0.6. The Supplies which include purchasing of material and transportation will be adjusted by usage of Conversion Factor equal to 0.9. (Presented in Table 27)

Table 26. Calculation of percentage of supplies and labor in each street works

Source: Projects’ technical documentation

In the economic analysis, however, we should consider the social opportunity cost of labor. The use of shadow wages accounts for the social cost of using labor, net of all the benefits derived from additional employment and, in principle, no further assessment is necessary of effects in secondary markets. The social opportunity cost of labor is its alternative use without the project. Choosing the appropriate shadow wage then means understanding the social opportunity cost of labor, which depends upon the peculiarity of the local labor market.

The table below represents the investment outlay using conversion factors as well as VAT excluded. The Project involves civil works and supplies. Taking into account that civil works mainly involve unskilled labor, a conversion factor of 0.6 is used. Purchasing of materials and transportation has traded and untraded component therefore a conversion factor of 0.9 is used. Based on this assumption the total economic investment value without VAT and using conversion factors amounts 13.500.610 MKD.

Table 27. Economic valuation of the investment outlay (in MKD) Amount Convergence Description without VAT factor Economic value Civil works (labor component only) 5.573.465 0.6 3.344.079 Supplies including purchasing of material and transportation 11.285.035 0.9 10.156.531 Amount in MKD 16.858.500 13.500.610 Source: Own calculations based on the project’s technical documentation and Table 26

6.2.2 Quantifiable benefits

The main monetary benefits generated by the implementation of this project are savings in the streets repairing costs as well as savings in vehicle operating costs (VOCs).

1) Savings in recurrent municipal costs The monetary benefit in the form of savings in the repairing costs was elaborated in the previous chapter. Mainly, if the project is implemented, the expectation is to reduce the current repairing costs; thus, the expectation is that they will amount to 81.197 MKD without VAT (81.197 +VAT=95.813 MKD).

2) Savings in the vehicle operating costs (VOCs) According to the information from Municipality of Negotino, the residents in these streets possess 314 light vehicles registered in the Municipality (both commercial and private). The average age of the vehicles is around 10-15 years. According to the Municipal estimation the average daily traffic (ADT) on the local streets that is subject is around 600 vehicles, including residents and vehicles in transit, mainly commuting to the nearby school (traffic count done by the Municipality).

Table 28. Number of vehicles owned by the residents Name of the street Length of the street Number of vehicles per street 1. Veljko Vlahovic 300 30 2. Еngelsova 310 52 3. Pirinska 250 38 4. Prvomajska 400 37 5. Тikveska 300 / 6. Vardarska 320 50 7. Gjoko Mishev 320 46 8. Vano Tashev & Marksova (one part) 450 61 Тotal: 2.650 m 314 Source: calculations provided by the Municipality Negotino

In order to calculate the VOC methodologically, we use the econometric results within the Study Local Road Surfacing Criteria from June 2004 prepared by Applied Pavement Technology, Inc. for the US Department of Transportation. This methodology shows the relation between the VOCs per mile. It is calculated within 20 years period with the average daily traffic (ADT). Thus, for 1,000 ADT, the VOCs are calculated around US$900,000 per mile for a period of 20 years.

The 2.650 m of streets under this project calculates 1.65 mile, given that one mile is 1.609 meters. Thus, in one year, the VOCs for 1,000 vehicles for crossing these local streets daily would be about: US$900,000/20years*1.65 mile = US$74.250; or US$ 37.125 for 500 vehicles. The implementation of this project is expected to improve the local infrastructure, and we can expect around 1/3 of the costs to be lowered due to better road conditions; thus, the economic benefit with this project would be around US$37.125 *1/3= US$12.357 annually or 626.175 MKD (Exchange rate, date 04.02.2021 1US$ - 50.6 MKD). The savings from VOCs are estimated to 626.000 MKD with no VAT. This amount could be even higher having in mind the big holes in the street that are visible even in the photographs enclosed.

6.2.3 Unquantifiable benefits

Besides the major quantifiable benefits, there are also some important immeasurable benefits that are expected to result from the implementation of the project and that need to be taken into consideration. Some of these immeasurable benefits refer to:

1) Increasing traffic safety and comfort for the street users The main danger of transport infrastructure, which is poor in quality, is the likelihood of a traffic collision. The project's implementation is expected to maximize the surface's technical life, and their carrying characteristics can be improved by providing transport infrastructure in alignment with competent traffic engineering. Thus, increasing the traffic comfort by improving the surface on the streets

2) Increasing the traffic capacity and communications The implementation of the project is expected to have a positive impact on the improved flow of traffic and improved transportation system and on the communications in the same Municipality. Poor quality of the transport infrastructure causes additional fuel consumption costs in traffic congestions and a fall in of productivity.

3) Public goodwill of the municipal administration The implementation of the project and improved street infrastructure is expected to result with fewer complaints and to improve the population’s perception and confidence.

4) Municipal benefits The implementation of the project is expected to improve local public finances. Once the road infrastructure is improved, the Municipality will spend less money for repairs and will be able to reallocate these funds to other municipal services. Some of the possibilities might be improved road quality, improved traffic by placing road signs, etc.

5) Socio - economic impact The principal socio-economic benefit of the implementation of the project is the increase in the value of properties. If the road infrastructure is improved, an increase in the value of the property is inevitable. Improved utility services of the properties can significantly increase the land value to the benefit of the owners and also to the local community due to the ability of the municipal authorities to increase the valuation of the property tax base within the Municipality. Given that the property will increase in value, households will have the incentive to invest further in their housing − so improvements in sanitation and garbage collection follow the street infrastructure improvements.

6.3 OTHER ASSUMPTIONS

The inflation rate is neglected in calculations, as well as loan service costs. The time horizon is 30 years, and the discount rate of 5% is calculated as in the financial analysis.

6.4 VALUATION OF THE COSTS AND BENEFITS

The following table presents in one place the summary of comparisons between the situation without and with the project.

Table 29. Summary of comparisons between the “without” and “with the project” scenarios Quantification of project Without the project With the project benefits • Current/higher amount of the municipal and • Reduction in spending on repairs; private spending on repairs; • Lower VOCs; • 81.197MKD per • Current VOCs; • Increased traffic safety and comfort; annum saving on • Current/higher level of danger for pedestrian and • Increased traffic capacity and communication; street repairs car accidents; • Removed disruption to transport services; • VOC 626.000MKD • Current/lower market value of streets’ nearby • Municipal finances will improve; real estate; • Increase property value; • Increased pollution and negative influence on the • Minimized risks from flooding of the streets; health of the population and the eco-system; • Minimized health and safety hazards; Source: Own analysis based on the information received by the Municipality

6.6 RESULTS FROM THE COST-BENEFIT ANALYSIS

The economic appraisal gives a positive ENPV 1.660.937MKD or 27.007Euro using 5% discount rate (see Table 30 below). Additionally, the calculations showed that the EMIRR is 1.44% (using 5% discount rate). These results imply that the project implementation is economically acceptable. Table 30. Cost-benefit analysis (in MKD) Nominal Capital Saving on Saving in Total year repayment Total costs VOC maintenance revenues Cash flow 1 2021 0 626.000 81.197 707.197 707.197 2 2022 0 626.000 81.197 707.197 707.197 3 2023 0 626.000 81.197 707.197 707.197 4 2024 1.500.068 1.500.068 626.000 81.197 707.197 -792.870 5 2025 1.500.068 1.500.068 626.000 81.197 707.197 -792.870 6 2026 1.500.068 1.500.068 626.000 81.197 707.197 -792.870 7 2027 1.500.068 1.500.068 626.000 81.197 707.197 -792.870 8 2028 1.500.068 1.500.068 626.000 81.197 707.197 -792.870 9 2029 1.500.068 1.500.068 626.000 81.197 707.197 -792.870 10 2030 1.500.068 1.500.068 626.000 81.197 707.197 -792.870 11 2031 1.500.068 1.500.068 626.000 81.197 707.197 -792.870 12 2032 1.500.068 1.500.068 626.000 81.197 707.197 -792.870 13 2033 626.000 81.197 707.197 707.197 14 2034 626.000 81.197 707.197 707.197 15 2035 626.000 81.197 707.197 707.197 16 2036 626.000 81.197 707.197 707.197 17 2037 626.000 81.197 707.197 707.197 18 2038 626.000 81.197 707.197 707.197 19 2039 626.000 81.197 707.197 707.197 20 2040 626.000 81.197 707.197 707.197 21 2041 626.000 81.197 707.197 707.197 22 2042 626.000 81.197 707.197 707.197 78

23 2043 626.000 81.197 707.197 707.197 24 2044 626.000 81.197 707.197 707.197 25 2045 626.000 81.197 707.197 707.197 26 2046 626.000 81.197 707.197 707.197 27 2047 626.000 81.197 707.197 707.197 28 2048 626.000 81.197 707.197 707.197 29 2049 626.000 81.197 707.197 707.197 30 2050 626.000 81.197 707.197 707.197 MKD ENPV 1.660.937 Euro 27.007 EIRR 1,44% BCR -1,57 Source: own calculations based on the data received by the Municipality

6.7 SENSITIVITY ANALYSIS

The sensitivity analysis was performed using variations of 10% for both costs and benefits. According to the sensitivity analysis shown in Table 31 below, the ENVP is positive in any scenario. Hence, the ENPV is comparably sensitive to the change of the costs and benefits.

Table 31. Sensitivity analysis Benefits Costs

-10% +10% -10% +10% ENPV (MKD) 1.660.937 573.801 2.748.073 2.581.979 739.895 NPV (Euro) 27.007 9.330 44.684 41.983 12.031 Source: Own calculation based on the data received by the Municipality

We should also reconfirm that there are some additional benefits that were not measured in this analysis. If the project is not going to be implemented, the Municipality will face increase in the maintenance costs as the streets will deteriorate further.

6.8 CONCLUSION

The project will definitively improve the quality of life of the citizens, which supports the key functions of the Municipality. Improved infrastructure will also create monetary benefits (savings) assigned to the project.

No doubt, that improvement of local infrastructure is essential for the further development of the Municipality Negotino. The quality of the infrastructure is often part of the criteria accounting for top places in international city rankings based on their quality of life, attractiveness to business, etc.

Investment in infrastructure generates value that exceeds the initial investment – up to 3 to 4 times. This includes wider economic benefits (example: increased connectivity. Once the project is implemented, the Municipality will spend less money on repairs and will reallocate the savings on further improvements of road infrastructure and to other municipal services. The project's implementation is also expected to increase the property value for houses and other residential or commercial properties, thus increasing the growth of revenues from property taxes.

Therefore, this project will have a vast positive impact on the economic growth, local development, and poverty alleviation in the Municipality Negotino in the longer-term perspective.

7 Risk analysis

TECHNICAL RISKS TO THE MUNICIPALITY The term risk of the project refers to any unexpected or unforeseen events arising from side effects or adverse results of the project. At the basis of any well-defined project there is a problem that needs to be solved. Each project is followed by external and internal risk factors as a result of technical-technological, commercial, financial, legal, contracting and other aspects of the project. Risk events are related to natural disasters, environmental protection, legal restrictions, monetary and fiscal effects, contract clauses, project solutions and specifications, procurement and supply, applied technology and the performance of the project. Reconstruction of the local streets contains general risk related to the increased traffic through the settlements during reconstruction. Transportation of materials shall bring temporary bigger density of vehicles through the road leading to the sites. Quality planning, correct calculations, and good start of the management precondition risks during the project implementation. The criteria that need to be taken into consideration in terms of project implementation are related to quality, costs and deadlines for reconstruction. The investor is interested in criteria such as costs of project implementation, terms for the project completion and meeting the required performance parameters. Risks during project implementation are present in the following table.

Table 32. Technical risks Risks Possible mitigation actions Risks with documentation Meetings with the city administration and other institutions that already have done some road construction works in the past. Risk with the tendering for potential Preparing project appraisal study, review of investor documents, engaging experts for procurement and contract preparation Risk with potential contractor, the Preparing prequalification meetings and proper contract or the interpretation of information for interested contractors, engaging certain parts of the agreement experts in preparation of contract Risk for quality performance of Engaging experts in preparation of contract, preparing activities by the contractor during performance check lists, active monitoring of construction construction Risk of increasing the investment Not extending the projected timeframe for value of the projected budget reconstruction, better planning

FINANCIAL RISKS TO THE MUNICIPALITY Every project that is subject to financial and economic analysis brings potential risk due to the fact that analysis is based on predictions and assumptions that should be met during the life cycle of the project. The financial and the analysis of the economic viability of the project are based on some assumptions. But, in order to improve the estimates and provide the decision-makers with a broader information basis, the analysis could be extended, by involving assumptions different from the ones used. This would enable us to predict development of the project under different conditions. The analysis of the financial and economic feasibility of the project showed that NPV and MIRR are negative implying that the project is financially and economically non-feasible. However, implementation of the project brings substantial immeasurable benefits, such as: increasing the traffic capacity and communications, ensuring safety movement of the residents especially children, students, elderly people and those with special needs, enhancing the commercial activities, improving efficiency of spending at the private and municipal level, as less money will have to be spent on repairs of vehicles, etc.

Once the project is implemented, the municipality will receive more revenues from taxes and reallocate them to other municipal services. The implementation of the project is also expected to increase the property value for houses and other residential or commercial objects on the streets, thus increasing the growth of revenues from property taxes. According to all of these financial and economic benefits, there is no risk that will endanger the implementation of the project activities. Moreover, the municipality has implemented various similar infrastructural projects in the past, some of which in collaboration with international institutions, which implies no risk for the municipality to be able to implement investment project such as this one.

Recommendations

The global concept of the project fits well to provide better services to the citizens of Negotino. This include providing traffic comfort, convenience and safety for the pedestrians and traffic by improving the surface on the local streets, to ease traffic on the streets, thus making the municipality more attractive for new inhabitants and by that increasing the value of the property. The Municipality also demonstrate sound financial planning and management providing long term development and financing strategies. Therefor increasing the confidence in their capacities to service this loan and to implement the project. The all assumptions were done carefully by consulting similar projects and documents available at the time of preparing this project appraisal and by consulting administrative staff from the municipality of Negotino. This project definitely has different multiplicative positive direct and indirect effects on the citizens of Negotino municipality.

Thus, the recommendation after appraisal is to proceed with this project.

8 Annex

8.1 DECISION OF THE MUNICIPALITY OF NEGOTINO FOR LOAN

The PAD was prepared by: Association for Democratic Initiatives (ADI)

Consultants: Goce Dimovski, PhD c. Consultant Team Lead. Katica Mihajlovic, Consultant for Social impact. Marko Acevski, Consultant for EIA. Lindita Zuferi, Consultant for financial analyses.

ADI would like to express many thanks for their generous and immense contribution, to official representative from Municipality of Negotino and World Bank’s MSIP team – PMU office, Skopje, RNM.