MUNICIPALITY OF LIPKOVO
PROJECT APPRAISAL DOCUMENT
REGULATION OF PART OF MATEJACHKA RIVER
Municipal Services Improvement Project Services Municipal
World Bank World
Skopje, October, 2019
1 Table of Contents Summary ...... 8 1 Project description ...... 10 1.1 General information on the municipality of Lipkovo ...... 11 1.1.1 Demographic profile ...... 13 1.1.2 Economic and social profile ...... 15 1.2 General description of the Project ...... 18 1.2.1 Current situation ...... 18 1.2.2 Future situation ...... 19 1.2.3 Project goals ...... 20 1.2.4 Project beneficiaries ...... 21 1.2.5 Financial data ...... 21 1.2.6 Knowledge and experience of the Municipality of Lipkovo ...... 21 1.2.7 Conclusions ...... 23 2 Social assessment ...... 24 2.1 Social study ...... 25 2.1.1 Social diversity and gender ...... 25 2.1.2 Institutions, rules and behavior ...... 26 2.1.3 Stakeholders ...... 27 2.1.4 Citizens engagement ...... 27 2.1.5 Social risks ...... 28 2.2 Other fields of considerations ...... 28 2.3 Resettlement issues ...... 29 2.4 Conclusion on the project potential success and recommendation ...... 29 3 Environmental assessment ...... 31 3.1 Project activities with environmental impact ...... 34 3.2 Sensitive receptors and environmental impacts from the Project ...... 34 3.3 Environmental mitigation plan for the project for regulation of Matejachka River ...... 39 3.4 Environmental monitoring plan for the project for regulation of Matejachka River ...... 42 4 Technical solution ...... 45 4.1 General ...... 46 4.1.1 Street Lighting ...... 52 4.2 Alternative solutions ...... 53 4.3 Benefits ...... 54 4.4 Exploitation and maintenance ...... 54 5 Financial analysis ...... 55 5.1 Project cost ...... 56 5.2 Loan repayment ...... 57 5.3 Review of the account ...... 57 5.4 Analysis of the financial feasibility of the project ...... 60
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5.4.1 Time horizon ...... 60 5.4.2 Limitations of the analysis ...... 60 5.4.3 Initial investment...... 60 5.4.4 Projection of operating cash flows ...... 60 5.4.5 Operating costs ...... 61 5.4.6 Replacement costs ...... 61 5.4.7 Inflation ...... 62 5.4.8 Discount rate ...... 62 5.4.9 Residual value ...... 62 5.4.10 Results of the financial analysis ...... 63 5.4.11 Sensitivity analysis ...... 65 5.5 Conclusion ...... 65 6 Economic cost and benefit analysis ...... 66 6.1 General information ...... 67 6.1.1 Scope and purpose of the analysis ...... 67 6.2 Identification and valuation of relevant costs and benefits ...... 67 6.2.1 Costs ...... 67 6.2.2 Quantifiable Benefits ...... 68 6.2.3 Valuation of benefits ...... 71 6.2.4 Unquantifiable benefits ...... 71 6.3 Results from the cost-benefit analysis ...... 73 6.4 Sensitivity analysis ...... 74 6.5 Conclusion ...... 74 7 Risk analysis ...... 75 7.1 Technical risks for the municipality ...... 76 7.2 Financial and cost-benefit risks for the municipality...... 76 8 Recommendations ...... 78 9 Annex ...... 80 9.1 Decision of the Municipality of Lipkovo for long-term loan ...... 81 9.2 Decision for determination of locations for demolition waste ...... 82 9.3 Table for Matejachka River ...... 83
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List of Tables Table 1 Altitude, area, population, and agricultural structure of settlements in the municipality ...... 12 Table 2 Households and dwellings ...... 13 Table 3 Population literacy ...... 14 Table 4 Main macroeconomic indicators ...... 15 Table 5 Activity of population ...... 16 Table 6 Active business entities by size and years for Lipkovo and East Region situation as at 31 December ...... 17 Table 7 Planned activities for Matejachka River ...... 34 Table 8 List of sources of noise, vibration and non-ionizing radiation ...... 36 Table 9 The estimated values of generated waste streams (according to the Detailed Design) ...... 37 Table 10 Hydrology study flows ...... 47 Table 11 Project cost ...... 56 Table 12 Cost per category of activity ...... 56 Table 13 Loan amortization plan ...... 57 Table 14 Credit capacity ...... 57 Table 15 Review of revenues and expenditures ...... 58 Table 16 Llong term loans...... 59 Table 17 Account payable/receivable ...... 59 Table 18 Repayment capabilities ...... 59 Table 19 - Repayment capabilities ...... 60 Table 20 Municipal savings ...... 61 Table 21 Operating costs ...... 61 Table 22 Amortization plan ...... 62 Table 23 Financial analysis ...... 64 Table 24 Sensitivity analysis ...... 65 Table 25 Economic value of the project ...... 67 Table 26 Economic value per category for street construction ...... 67 Table 27 Operating costs for road maintenance ...... 68 Table 28 Savings in municipal funds – economic value ...... 68 Table 29 Flooding events ...... 70 Table 30 Economic value of the damages and losses ...... 71 Table 31 Quantification of the benefits ...... 71 Table 32 Cost and benefit analysis ...... 73 Table 33 Economic Sensitivity analysis ...... 74
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List of Figures Figure 1 Municipality Lipkovo on the map of the Republic of North Macedonia ...... 11 Figure 2 Settlement within the Municipality of Lipkovo ...... 11 Figure 3 Population estimates by age 2005-2017 ...... 13 Figure 4 Population estimates by age 2005-2017 ...... 14 Figure 5 Number of births and deaths 2013-2017 ...... 14 Figure 6 Internal migration 2013-2016 ...... 14 Figure 7 Students in primary school by school year ...... 16 Figure 8 Students in secondary school by school year ...... 16 Figure 9 Str. Watershed area of Matejachka River ...... 18 Figure 10 Watershed of Matejachka River ...... 32 Figure 11 Aerial picture of the location, with site borders ...... 33 Figure 12 Matejachka River ...... 33 Figure 13 Left bank of the Matejachka River, near the bridge, future access to the quay, potential temporary disposal site for the excavated material ...... 35 Figure 14 Current look of the site ...... 37 Figure 15Watershed of Matejachka River ...... 47 Figure 16 Location of the works ...... 48 Figure 17 Layout - works area ...... 49 Figure 18 Cross sections ...... 50 Figure 19 Typical cross-section of new designed riverbed ...... 51 Figure 20 Details for the construction works ...... 51 Figure 21 Street lightning ...... 52 Figure 22 Gabions example ...... 53
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Abbreviations EIA Environmental Impact Assessment m.a.s..l. meters above the sea level (altitude) PAH Polycyclic Aromatic Hydrocarbons
CO2 Carbon Dioxide
NOx Nitrogen Oxide
SO2 Sulphur Dioxide
PM10; PM2.5 Particulate Matters, size 10 and 2.5 micrometers, or less H&S Health and Safety DD Detailed Design MKD Macedonian Denar MKS EN Macedonian Standard NGO Non - Governmental Organizations CBA Cost and Benefit Analysis NPV Net Present Value ENPV Economic Net Present Value IRR Internal Rate of Return ERR Economic Rate of Return MIRR Modified Internal Rate of Return MEIRR Modified Economic Internal Rate of Return O.G. Official Gazette of RM p.p. Percentage points
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Summary
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With the Decision of the Council of the Municipality of Lipkovo of 19.02.2019, an agreement for implementation of the capital project for Regulation of Matejachka River is given. This Project is a priority of the Municipality, included in the Strategy for rural development of Municipality of Lipkovo 2014-2019. The total value of the MSIP Project is 13,995,582.00 MKD. The Regulation of the river will be provided in the area of the bridge on the regional road R 2133 Nikushtak – Lipkovo. The length of the riverbed, subject to this Project is 310 m. It will become concrete bedding channel, construction of pavement on the left bank, street lights, landscape architectural structuring, assembling of urban equipment and planting of new trees next to the pedestrian path. Financial analysis showed negative NPV and MIRR, however the economic cost-benefit analysis (CBA) showed that the project is acceptable and desirable for implementation according to the methods used. Implementation of the project will generate savings of the municipal expenses for cleaning and maintenance and opportunity will be created to reallocate these funds to other purposes. Implementation of the activities in the project will contribute to the improvement of the quality of live by increased flood protection, and protection of the environment in the municipality of Lipkovo. Furthermore, it will contribute to efficient spatial planning and protection of natural resources.
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1 Project description
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1.1 General information on the municipality of Lipkovo The municipality of Lipkovo is located in the North part of the Republic of North Macedonia, on the slopes of Skopska Crna Gora (Karadak) Mountain, as well as in the lower parts of Kumanovo valley. It is a middle-sized rural municipality that extends from north to south. Its settlements’ areas belong to the basin region of rivers Lipkovska, Lojanska and Vaksinska. To the north, it borders with the municipalities of Vitina in Kosovo, municipality of Presevo in Serbia, to the east with the municipality Kumanovo, to the south with the municipalities of Aracinovo, Gazi Baba and Butel (as part of the city of Skopje) and to the west with the municipality Cucer-Sandevo. (see Figure 1 and 2). Figure 1 Municipality Lipkovo on the map of the Republic of Figure 2 Settlement within the Municipality of North Macedonia Lipkovo
The municipality covers an area of 268.8 km2 and has a total of 27.058 inhabitants according to the 2002 census. It consists of 22 settlements: 15 lowlands, 5 hilly and 2 mountainous. The municipality has an average altitude of 624m.a.s.l. There is a warm humid continental climate with an average annual temperature of 11.2°C. The hottest month during the year is August with maximum temperature 32.30C and minimum temperature 16.20C. The coolest month is January with maximum temperature 4.20C and minimum temperature -3.30C. Lipkovo has a significant amount of rainfalls through the year. The average value is 554mm, with maximum picks in May and October. Average annual relative humidity is 72%. As a result of low temperatures in the region, the icing period lasts 166 days per year and there are approximately 20 days with snow. Very frequent is the occurrence of fog especially in the winter. The climate in combination with the hydrographic and spatial conditions is favorable to the development of agriculture and farming. Suitable soils with high value and irrigation water potential contributes to the cultivation of vegetables, orchards and some industrial crops. Cattle farming is well developed, and there are highland pastures for sheep breeding.
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Table 1 Altitude, area, population, and agricultural structure of settlements in the municipality Population Agricultural structure (ha) Absolute Area Settlements Cultivated altitude (km2) 1994 2002 Pastures Forests Total soil Municipality of 624 268.8 22,834 27,058 8,256 4,375 9,668 22,299 Lipkovo 1 Alasevce 450 27.7 157 126 129 51 82 262 2 Belanovce 940 9.4 11 7 138 48 698 884 3 Vaksince 480 17.5 2,242 2,479 798 431 409 1,638 4 Vistica 580 6.8 938 991 364 72 252 688 5 Glaznja 560 10.5 76 54 126 13 816 955 6 Gosince 975 12.9 643 424 321 175 756 1,252 7 Dumanovce 580 13.0 14 - 188 52 1,042 1,282 8 Zlokucane 820 2.2 29 12 58 12 141 211 9 Izvor 810 5.8 30 4 163 57 347 567 10 Lipkovo 420 13.4 2,331 2,644 459 256 222 937 11 Lojane 440 18.6 2,267 2,682 636 310 810 1,756 12 Matejche 480 34.1 3,126 3,394 1,226 484 1,527 3,237 13 Nikushtak 545 20.4 163 1,748 710 403 791 1,904 14 Opae 365 3.3 1,880 1,996 277 15 3 295 15 Orizari 400 4.9 1,841 2,094 245 224 - 469 16 Otlja 500 17.1 2,677 3,148 436 278 883 1,597 17 Rankovce 780 2.8 35 21 47 18 199 264 18 Ropalce 460 4.9 1,058 1,373 425 40 3 468 19 Runica 600 13.0 181 69 602 538 73 1,213 20 Slupchane 415 16.8 3,037 3,789 770 593 216 1,579 21 Straza 1,080 5.2 ------22 Strima 1,050 8.5 98 3 138 305 398 841 Source: Census of population, households and dwellings in the Republic of Macedonia, 2002 - Book X One of the main features of the municipality is the attractive artificial lakes Lipkovo and Glaznja. The first one is accumulated on the river Lipkovska, nearby the village Lipkovo. It was built in 1958 with an area of 0.4km2, able to accumulate 2,250,000m3 water. Besides the irrigation, the lake serves as an extraordinary fishing area for numerous fishermen from the city, but as well as for those who are coming from Skopje. The bigger lake Glaznja is located on 15km from Kumanovo, on the north-eastern slopes in Skopska Crna Gora. The lake accumulates 22,000,000m3 water. Its surface is 1km2, and it was built in 1973. The regional road network includes road R1104 from Skopje to Kumanovo passing through and Nikushtak., and the road R1233 that is connecting the rest of the villages in the municipality. Municipality is fully integrated into national electricity power grid by two overhead 110kV high voltage lines, and appropriate lines to all settlements. Dominant sectors in the economic development of the municipality are wholesale and retail trade, and manufacturing, followed by agriculture, tourism and services.
There are a numerous churches and monuments on the territory of the municipality which are considered as historical heritage. Some of them are protected by law: Monastery St.Mary in Matejche (XI century); Mullah Murad mosque Otlja; Halit Efendi Mosque in Slupcane, St. Mary Monastery in Matejche and many others.
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1.1.1 Demographic profile
According to the last revised Census of population and households (2005) in 2002, the total number of population in municipality of Lipkovo is 27.058 with 5,340 resident households, with an average of 5.1 members per household. The Census data shows that there were total of 5790 dwellings or 1.08 dwelling per household. In 2017, the total number of population has increased to 30.114 inhabitants. Also, the number of immigrants in the municipality is lower in comparison with the immigrants in 2002. In 2017 the difference between the total number of immigrants and emigrants was 38 emigrants more than the number of residents who immigrated in the municipality.
Table 2 Households and dwellings Total Average number of the Households Dwellings population household members 27,058 5,340 5,790 5.1 Source: State Statistical Office MAK Stat database 2019 The municipality of Lipkovo has 22 settlements. According to the last revised Census in 2002, most populated settlement is the settlement of Slupchane (3,789 inhabitants), followed by Matejche (3,394) and Otlja (3,197). According to the data estimates in 2017 there was a positive growth in the number of residents with an increase of 3056 inhabitants (11.29%) since 2002. The average annual increase of population in the municipality is 0.75%. The gender structure of population shows a constant trend in favor of male population. Of the total population 51.08% were male, while 48.92% were female, as of 2017 (State Statistical Office MAK Stat database, 2019). Figure 3 Population estimates by age 2005-2017 35000 29834 29917 30040 28188 29298 29433 29605 29744 30000
25000 14463 14527 14578 14634 14696 13847 14324 14383 20000
15000
10000 14341 14974 15050 15142 15217 15256 15283 15344 5000
0 2005 2011 2012 2013 2014 2015 2016 2017
total male female
Source: State Statistical Office MAK Stat database 2019 The following figure represents the age distribution in the total population. The analysis of data shows that the municipality of Lipkovo has a relatively higher share of population younger than 15 years (18.98%). In 2017, the number of population younger than 15 years was by 2.46 p.p. higher compared to the population on the same age in the Republic of North Macedonia. Whereas, the percentage of population 65 and older was by 1.83 pp lower compare to the population at the same age in the Republic of North Macedonia.
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Figure 4 Population estimates by age 2005-2017
3500
3000
2500 1524 2000 1280 1053 1086 1500 995 910980 1025 837 825 1000 592 512 14541648 498 377 1233 500 367 362 1051 932 103910391136981 422337 564 761552 261250 176333404379 543 341314
0 183 239206 1227
0
1-2 3-4 5-6 7-9
80+
70-74 10-14 15-19 20-24 25-27 28-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 75-79 unknown
2005 total 2017 male 2017 female
Source: State Statistical Office MAK Stat database 2019 Municipality of Lipkovo has a national growth of 6.97, and migration growth of -1.26 per 1000 inhabitants as of 2017. Figure 5 Number of births and deaths 2013-2017 Figure 6 Internal migration 2013-2016
398 264 370 352 365 363 245 347 224 198 182 160 147 156 146 176 160 175 169 160 144 91
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017
life births deaths Total Immigrants Total Emigrants
Source: State Statistical Office MAK Stat database 2019 Source: State Statistical Office MAK Stat database 2019 The rates of population movement considering natural growth, births, and migrations show positive trends. The average natural growth in the period between 2013 and 2018 is 210.
Most of the population in the municipality has Albanian ethical origin 97.4. There are only 0.6% Macedonians, 1.4% Serbs, six Bosnians, only one Vlachos and 0.6 % others. According to the official census data from 2002 the literacy rate in the municipality is 96.1%. Table 3 Population literacy Male Female Total Literate 10501 9858 20359 Illiterate 173 652 825 Total 10674 10510 21184 Source: State Statistical Office MAK Stat database 2019
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1.1.2 Economic and social profile Considering the State Statistical Office data for 2017, the following table presents infrastructure, education and economic indicators for municipality Lipkovo, Northeast Region and the Republic of North Macedonia. There are 17 health and one social institutions, 25 transport and storage institutions and only 1 water supply and sewage management institutions. There are 6 primary and one secondary educational institutions. Primary schools have total of 11 satellite schools in the municipality. There are 207 business subjects that operate in the municipality, while the GDP per capita is calculated on a regional level, since there are no available data on the municipality contribution.
Table 4 Main macroeconomic indicators Republic of Municipality Macroeconomic indicators Unit Northeast Region North Lipkovo Macedonia Demography Population Census 2002 Number 27,058 172,787 2,072,490 Natural growth % 6.9 4.3 2.67 Population density km2 112.0 50.2 78.6 Total households Census 2002 Number 5,340 46,296 564,237 Average households members Number 5.1 3.5 3.6 Census 2002 Total dwellings Number 5,790 59,488 698,143 Immigrated residents (within the Number 156 823 6704 country 2018) Emigrated residents (within the Number 183 934 7.915 country 2018) Infrastructure Local roads km 203 1,052 9,733 Health and social institutions Number 17 233 3,315 Transport and storage institutions Number 25 310 6,095 Water supply, sewage disposal and waste management Number - 14 306 institutions Education Educational institutions Number 17 82 1.025 Children at age 6-14 that attend Number 2,924 16,134 229,062 school in school year 2017/2018 Population literacy at age 10 and Number 20,359 140,437 1,693,044 more Census 2002 Economy Active business entities Number 207 4,159 70,710 GDP per capita MKD n/a 168,301 248,646 Employment (working population between 15 years and more) Total employed Number 5,254 60,020 728,666 Activity rate % 28.9 45.2 56.6 Employment rate % 7.2 23.2 71.0 Unemployment rate % 75.0 48.6 23.1 Total unemployed Number 11,134 16,937 218,450 Source: State statistical office, MAKStat database 2019 revised Census of population and households 2016
There are 10 health care institutions in the municipality of Lipkovo: 4 public and 6 private health clinics.
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The education in the municipality of Lipkovo is organized in 6 central and 11 district primary educational institutions. The number of enrolled primary school students has been declined by 762 students (20.7%) since 2012/2013. The number of enrolled secondary school students has declined by 34 students (6.3%) since 2012/2013. The municipality has relatively low rate of graduate students form tertiary education with total of 72 graduated students in 2016 and 50 graduated students in 2017.
Figure 7 Students in primary school by school year Figure 8 Students in secondary school by school year 2012/13-2017/2018 2012/13-2017/2018
4000 3686 3468 3298 600 541 535 527 535 496 507 3117 3007 2924 3500 500 3000 243 1906 400 279 255 254 2500 1777 1676 232 242 1594 1521 1494 2000 300 1500 200 1000 1780 298 272 281 1691 1622 1523 1486 1430 256 264 265 500 100 0 0
total female male total female male
Source: State Statistical Office MAK Stat database 2019 Source: State Statistical Office MAK Stat database 2019
The Municipality has Department for social and health protection that provides services to citizens at social risk. The Department administers grants one-off financial assistance or assistance in kind in accordance to the annual Program for activities in the area of social protection. The Mayor has a jurisdiction in adopting the decision for obtaining the right based on the proposal made by the Commission for Social Activities with the Council of the Municipality. According to the data from the last revised census 2005 activity rate is very low compared to the Northeast Region. While, the unemployment rate is higher compared with the Northeast Region and the Republic of North Macedonia.
Table 5 Activity of population Municipality Republic of North Northeast Region Lipkovo Macedonia Number Share Number Share Number Share All 5,254 28.9 60,020 45.2 743,676 47.2 Economically Employed 1,313 25.0 30,841 51.4 460,544 61.9 active Unemployed 3,941 75.0 29,179 48.6 283,132 38.1
Economically inactive 12,918 71.1 72,749 54.8 833,325 52.8 Source: State Statistical Office, MAKStat database 2005
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Table 6 Active business entities by size and years for Lipkovo and East Region situation as at 31 December 2013 2014 2015 2016 2017 2018 Total 237 221 216 217 207 210 micro 177 162 155 161 143 150 small 59 58 60 55 62 58 medium 1 1 1 1 2 2 large - - - - - 0 Source: State Statistical Office MAK Stat database 2019 The municipality has a negative investment climate with a decline of total active business entities in 2018 of 11.39% compared to 2013. Namely, there are 210 active business entities in the municipality, of which 150 (71.42%) micro and 58 (24.76%) small businesses, 2 (3.81%) medium and no large size enteties. The data comparison for active business entities at the end of 2018 shows that the municipality has a share of 4.88% in the total structure of active business entities of the Northeast Region.
Table 8. Active business entities by sectors of activity according to NKD Rev.2, by municipalities, by years, situation as at 31 December
2013 2014 2015 2016 2017 2018 Total 3,007 3,109 3,234 3,430 3,480 3,595 Agriculture, forestry and fishing 27 32 39 36 37 44 Mining and quarrying 6 5 6 3 2 4 Manufacturing 355 360 376 428 433 437 Electricity, gas, steam and air conditioning supply 3 4 5 7 9 10 Water supply, sewerage, waste management and remediation activities 7 9 10 6 3 5 Construction 238 235 242 266 275 289 Wholesale and retail trade; repair of motor vehicles and motorcycles 1,281 1,279 1,293 1,330 1,311 1,344 Transportation and storage 120 122 125 130 126 119 Accommodation and food service activities 251 286 298 317 309 319 Information and communication 50 51 52 56 63 66 Financial and insurance activities 17 17 20 22 25 24 Real estate activities 7 12 14 15 15 12 Professional, scientific and technical activities 191 223 261 287 326 335 Administrative and support service activities 60 65 65 64 80 87 Public administration and defense; compulsory social security 6 6 6 6 5 5 Education 39 40 45 46 46 53 Human health and social work activities 158 159 163 162 162 168 Arts, entertainment and recreation 42 33 35 38 48 54 Other service activities 149 171 179 211 205 220 Activities of households as employers ...... Activities of extraterritorial organizations and bodies ...... Source: State Statistical Office MAK Stat database 2019 The analysis of active business entities in 2018 shows that most important and dominant sectors are the wholesale and retail trade with 33.95%, followed by manufacturing 11.04%, Professional, scientific and technical activities 8.46%, accommodation and food service activities 8.06%, construction 7.30%, Human health and social work activities 4.24%, transportation and storage 3.01%, etc.
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Existing businesses entities in the Municipality of Lipkovo are: Ilirija Komerc, Agimi, Ramadani, Veseli DOEL, AD Opaje Doel. There are no banks or insurance companies in the municipality. There are five Post office branches on the territory of the municipality.
1.2 General description of the Project The municipality of Lipkovo is constantly investing in the local infrastructure. In 2018, the municipality adopted a decision for financing projects through borrowing within the framework of the Second Municipal Services Improvement Project (MSIP 2), Public call no. MISP2 02/2018 for submission of requests for use of funds from MSIP 2 envisaged in component A - Municipal investments by the Ministry of Finance of the Republic of North Macedonia. The decision anticipated Regulation of part of Matejachka River. The municipality has adopted a new decision for financing projects through borrowing within the framework of the Second Municipal Services Improvement Project (MSIP 2) no. 08-180/14 of 19.02.2019. The maintenance will be provided by the Communal Service Enterprise (CSE) “Pisha”. It will be responsible for cleaning of public areas, solid waste collection and snow cleaning. The CSE “Pisha” has 16 full time employees, of which 15 male and one female. 1.2.1 Current situation Matejachka River is one of the most important tributaries of the Lipkovska River. The waters from the watershed of Matejachka River flow downstream into Lipkovska River. In the upper course it has mountainous and in the downstream course to the estuary it has flat land character. The River has a length of 15.3 km up to the estuary in Lipkovska River, whereas the total area of the watershed is 19.25 km². Its water potentials are used for development in all sectors related to water: water supply, irrigation, tourism and recreation, fishing, forestry, livestock. The anthropogenic influences caused by the rapid urbanization of space resulted in frequent alteration of the riverbed, currently characterized by sharp curves with irregular geometry. The curving water flow of Matejachka River has negative effects on the riverbed, causing cases of river erosion, which occasionally leads to damages on some properties and buildings along the riverbed. The river flow meandering in the basin causes adverse morphological, hydraulic and ecological consequences, and deformations of the riverbed as a result of the disturbed hydrodynamic balance and the variable hydrological regime.
Figure 9 Str. Watershed area of Matejachka River
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Regulation of the Matejachka River is intended to prevent flooding of the households and agricultural land in the village of Matejche. Taking into consideration remarkable area of watershed and climate conditions of potential heavy rains, this project is creating the main benefit to the citizens in securing their dwellings, livestock breeding facilities, as well as arable land. Regional and local infrastructure, such as road R 2133 and the bridge in Matejche in particular, are exposed to permanent danger of being damaged. The existing riverbed is very often clogged with tree branches, plants and garbage, diverting the natural water flow and causing periodical overflow and flooding of the land on the riverbanks which is causing lot of problems to the local population. This situation will be overcome with construction of the pedestrian path on the left bank of the river with lighting that will stimulate the citizens to commonly use and maintain the newly created park. Approximately 3,394 inhabitants (of which 1736 male and 1658 female) will directly benefit from regulation of Matejachka River. There are approximately 150 residential and axillary facilities along both sides of the river with nearly 500 residents. More significant public objects in the vicinity of the quay are the village mosque which is at distance of approximately 150 and a primary school at the distance of approximately 600 m. The Regulation of the river will be provided in the area of the bridge on the regional road R 2133 Nikushtak – Lipkovo in a length of 310m, as a first phase of the total designed length of 648m. The municipality prepared ARAP (acquisition plan) for compensation of land owners that will be implemented prior the announcement of Tender documentation for the project and the works contract should be signed after the land acquisition is completed. Regulation of part of Matejachka River does not involve resettlement of citizens (See Annex 9.3). The implementation of works is in the central area of the village. Activities on removal of the existing vegetation, such as bushes and grass, excavation, installation of selected soil with compaction etc., will be implemented on the current riverbed that will require temporary traffic management not only in regard to the general safety, but also in prevention of long lasting stoppages when the vehicles, other than Contractor’s ones. Protection of the construction area and installation of the signs and markings for protection of residents during implementation of works will be under municipality and contractor responsibility and it will take place prior to the commencement of the construction works. 1.2.2 Future situation In general, the regulation of the river shall improve the hydraulic capacity of the riverbed, which will also mitigate the “unpredictable” behavior of the river during some periods of the year. According to the Design, works include cleaning and regulation of the riverbed of Matejachka River with construction of concrete bedding channel, construction of pavement on the left side of the riverbed, street lights, landscape architectural structuring, assembling of urban equipment and planting new trees next to the pedestrian path. This project envisages regulation of the riverbed of Matejicka River by placing a river concrete basin with a width of 7, 0 m, while at the bottom with a width of 4, 0 m. Walking path will be made of concrete paving blocks, and it will follow a slope of 2.9%. Lighting and planting of 32 deciduous trees are foreseen to be carried out along the walking path. Construction of the pedestrian path with lighting, will stimulate the population to commonly use and maintain the newly created park, and give an additional value to this investment. Well-arranged and maintained path will represent an opportunity for attracting visitors and tourists in Matejche.
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Exploitation of the riverbed means relaxed behavior of the local population in rational use of the water resources. All branching points of the irrigation water shall be out of the treated area, thus will create conditions for improved management. CSE “Pisha” will be responsible for maintenance related to cleaning of the riverbed, and pedestrian paths, which will be simple and easy. Generation of solid waste will be limited to small quantities, and CSE “Pisha” will have the obligation of regular collection of deposits of packages, and other small items. Lighting of the paths will be of durable LED fixtures that are energy saving and will not require frequent maintenance. However, in order to save energy, the local community may decide to limit the operation of lighting during the night. Lighting poles, candelabras, should be maintained against corrosion, according to the maintenance plan of CSE “Pisha”. It is foreseen that the project will create financial benefits such as savings in cleaning of dumpsites, maintenance of unwanted vegetation, and cleaning of waste water. The construction of pedestrian path, lightings and benches will give residents an urbanized space, welcoming children and youth. It is foreseen that the quay will have a potential of becoming a focal place and popular landmark for the community. 1.2.3 Project goals The project is in line with the strategic documents: “Strategy for rural development of Municipality of Lipkovo 2014-2019”, where, Strategic goal 2: Provision of easy and fast access for visitors to touristic attractions. Priority 2.1. Development of communal infrastructure, Measure 2.1.3: Regulation of riverbeds and lake sides. The project goals are:
• Improvement of quality of life of rural settlements • Improvement of competitiveness of rural settlements • Clean environment • Flood prevention • Mitigation of rural-urban migration • Development of tourism • Improved recreational possibilities, parks etc.
Implementation of the activities in the project will contribute to improvement of: the quality of live, clean environment in the municipality of Lipkovo, furthermore it will contribute to efficient spatial planning and protection of natural resources, etc. The proposed project is in-line with the positive laws and regulations in the country. More specifically with the Law on Waters (Official Gazette of the Republic of North Macedonia 87/08, 06/09, 161/09, 83/10, 51/11, 44/12, 23/13, 163/13, 180/14, 146/15 and 52/16) and the Law on Local Government (Official Gazette of the Republic of North Macedonia 5/02).
The project will contribute towards achieving the vision of the municipal administration for improvement of living conditions and protection of environment throughout the municipal territory.
It is of essential interest of the municipality of Lipkovo to improve the living conditions in all settlements within the municipality. Thus, regulation part of Matejachka River will indirectly contribute to creation of better living conditions for population in the municipality, support recreational activities of citizens, support development of tourism which can lead to development of micro and small economies, attract investments, and provide appropriate
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1.2.4 Project beneficiaries Overall the project will be beneficial to all residents in the municipality. More specifically, direct beneficiaries of the project are: - Rural community of Matejche, with approximately 3394 inhabitants who permanently live in the immediate vicinity. - The residents of the municipality of Lipkovo 27,068, - The total number of direct users’ approximately 500 citizens.
1.2.5 Financial data Upon the public call for submission of requests for use of funds from the Second Municipal Services Improvement (MSIP 2), Public call no. MISP2 02/2018, the municipality of Lipkovo adopted a decision for financing a project through borrowing. The project refers to Regulation of Matejachka River with financial structure as presented in the table below.
Table 9. Overview of investment costs Value (incl. Value (incl. VAT), VAT), MKD EURO Investment expenses: Regulation of Matejachka River 13,995,582.00 221,131.40
Total investment expenses: 13,995,582.00 221,131.40 Exchange rate 1 euro = 61,5 MKD
On 10th of August the Municipality of Lipkovo organized a public presentation of the proposed project with main stakeholders including the Mayor, representatives from communal service enterprise, private sector, non-governmental organizations and other members of the municipality representatives from local communities and public institutions. After which, on 22nd of October 2018, the Municipality Council held its 11st regular session. The Council members reviewed the proposed project and unanimously agree that it is in line with the municipal priorities and with the main strategic developmental goals, and adopted the following document: - Decision on long-term domestic borrowing of the Municipality of Lipkovo within the Municipal Services Improvement Project (MSIP2), adopted by the Council of the Municipality of Lipkovo at the 11st session held on 22.10.2018, with no. 08-1064/7. - Decision on long-term domestic borrowing of the municipality of Lipkovo within the framework of the Second Municipal Services Improvement Project - (MSIP2), adopted by the Council of the Municipality of Lipkovo at the 14th session held on 19.02.2019, with no. 08-180/14. It is assumed that all construction works will be conducted in a period of one year, which means that all the above investment costs will be made by November,2020.
1.2.6 Knowledge and experience of the Municipality of Lipkovo The knowledge and experience needed for successful implementation of the project are related to project management, technical knowledge and execution of procurement procedures. The municipality has implemented number of projects for improving municipal services in cooperation with national and international institutions and municipalities. It has
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experience in managing different EU funded projects and programs. The municipality currently is implementing developmental projects financed by different national and international institutions. It can be concluded that the municipality is the required knowledge and experience required for implementation of project for (re)construction of local streets in the municipality of Lipkovo, envisaged to be financed from the World Bank Second MSIP funds to the Government of the Republic of Macedonia.
Table 10 Implemented projects Project Implementa Budget # manager - Project name Financing source tion period (Euro) partner Construction of a part of IPA cross border cooperation the local road for Municipality program Bulgaria-Macedonia 1 tourism development 2012-2013 of Lipkovo Project request: based on water 2007CB16IPO007-2012-3 resources 491,875 Construction of a part of IPA cross border cooperation Municipality 2 the cultural center in program Kosovo-Macedonia 2014 of Lipkovo 250,000 settlement Matejche Project request: IPA/2014/352-573 Pipeline construction Municipality Lipkovo, Ministry of Municipality from harrow Glaznja to transport and communications, 3 2012-2014 of Lipkovo waste water treatment Ministry of environment and 135,5758 plant Lipkovo physical planning Pipeline construction from separating Municipality manhole to waste water Ministry of environment and 4 2015 of Lipkovo treatment plant in physical planning settlement Slupchane 943,089.4 (in progress) Extension of the primary Municipality 5 school "Faik Konica" in Japanizes Embassy of Lipkovo 2015 54,552.85 settlement Slupchane Construction of infrastructural facilities Municipality Swiss embassy and Municipality 6 (sport terrains and 2016 of Lipkovo Lipkovo placement of paving 79,349.59 bricks on the streets) Reconstruction of the Municipality primary schools in 7 NGO TIKA 2007 of Lipkovo settlements Ropalce 29,756.1 and Otlja Reconstruction of four Municipality 480,601.0 8 primary schools in World Banka MSIP 2016 of Lipkovo municipality Lipkovo Municipality Waste water treatment 1,250,000 9 EIB and Municipality of Lipkovo 2018 of Lipkovo plant for v.Lipkovo Co-financed by Ministry of Municipality Regulation of part of 270,968 10 Finance (World Bank) and 2017 of Lipkovo Lipkovska River Municipality of Lipkovo Municipality Regulation of part of Ministry of environment and 260,000 11 2018 of Lipkovo Slupchanska River physical planning Pipeline for water for Municipality Ministry of environment and 2,500,000 12 the settlements in the 2018-2019 of Lipkovo physical planning municipality of Lipkovo Total 7,965,950.94 Source: Department for Local and Economic Development of the Municipality of Lipkovo
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1.2.7 Conclusions The project is in line with the strategic priorities of the municipality of Lipkovo and will contribute to achieving the vision of the municipal administration for improvement of environmental natural water resources such as the resource of the Matejachka River. The relevance of the project results arises from the fact that population in the municipality is affected by the negative implications of low capacity of local streets to absorb the increased number of vehicles commuting in, through and out of the municipality. The proposed technical solution for the project is in accordance with the existing standards and regulations for these 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 Lipkovo has implemented a variety of similar projects in the past, including regulation of part of Lipkovska and Slupchanska River, in cooperation with international institutions implying that the municipality has the ability to carry out regulation of part of Matejachka river project.
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2 Social assessment
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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 data collection included desk-top review of the relevant documents such as: main project documents, the World Bank Guidelines for assessing the social impact of the project, statistical data about the municipality, municipal documents verifying citizen participation mechanisms, and an expert interview with municipal representatives. The assessment anticipates field research to get available information on interest and attitudes of stakeholders. Due to time limit and resources constraint, the research was reduced to relevant secondary data from the Municipality of Lipkovo and expert interviews. During the process of research, expert interviews were conducted with four municipal representatives. The interviews were conducted with the Head of Department for Communal Affairs, Urban Planning, Construction, Environmental Protection, Traffic, Roads, and Economic Development; Head of the Human Resources; Senior Public Procurement Officer; and Head of the Department for inspection works. Two of interviewees were female. They presented their expert opinion on the role and the influence of various stakeholders in the process of decision making relevant to the projects and provided the necessary data for conducting the desk research. This project was generated through an adopted practice of communication of municipality officials with citizens in local communities. The meetings took place in the villages of Lipkovo and Matejche, focusing on local problems and needs of citizens. Based on these meetings a list of priority projects for improvement of local development was created. This bottom up approach lead to identification of this project as municipal priority for completion. Additionally, the Mayor organized a meeting with the residents of the villages of Lipkovo, March 02nd, 2018 and with the residents of Matejche on August 10th, 2018, where the Municipal officials presented the project for regulation of part of Matejachka River. At the meeting the municipal officials gave an overview on the need to conduct the project, and presented the related technical, budget, expropriation plan, and legal issues. 2.1.1 Social diversity and gender The main priorities of the municipality of Lipkovo, are determined in the ““Strategy for the Development of Tourism in the Municipality of Lipkovo 2014-2019”” where, Strategic goal 2 defines: Provision of easy and fast access for visitors to touristic attractions. Priority 2.1. Development of communal infrastructure, Measure 2.1.3: Regulation of riverbeds and lake sides. Majority of population are Albanians they comprise 97.4%, and low participation of other ethnic groups, Macedonians 0.6%, Serbs 1.4%, others 0.6%, six Bosnian and one Vlach. According to gender structure, there is dominance of male population representing 51.1% of the total population (State Statistical Office MAK Stat database 2019). Regulation of the Matejachka River will contribute to increased safety and security of the inhabitants during rainy season by providing flood prevention and prevention of erosion of the riverbed. Residents, will have the opportunity stroll along the river and to have a relaxing gathering point. Mothers will have a place where they can take walk with babies and toddlers with the strollers. Residents from different social groups (minorities, gender, language, social, and economic status) who live in the settlements are subjects of this appraisal. The respondents did not identify increased presence of persons at social risk in the overall structure of residents near the Regulated River, subject of this project. The respondents share the opinion that the construction of pedestrian path, lightings and benches will give residents an urbanized space. Construction of pedestrian path will be of great benefit for persons in
[25] wheelchair and to a certain extent will increase mobility of persons with special needs. Also, well-arranged and maintained path will represent an opportunity for attracting visitors and tourists in the settlement of Matejche. In addition, it is very likely so to predict that the urbanized space will attract investments on private properties related to opening tee/coffee shops, restaurants or children’s playgrounds. Additionally, regulated riverbed will prevent the possible flooding and damages to the bridge from Regional Road R 1104 Skopje-Kumanovo as the most important arteries for residents’ connection to the cities of Skopje and Kumanovo. The reconstruction will instigate more investments in private businesses and residential houses. Namely, due to the fact that the construction is in the vicinity of the central area of the village of Matejche the municipality is expecting investments in residential and business facility along the new segment of the river. The investment will increase revenues from construction permits, property taxes, and from increased the value of the land and property. Finally, investment in local infrastructure and access to local services in a long run might improve economic activity of population, in particularly young persons and will increase the quality of life the permanent residents. 2.1.2 Institutions, rules and behavior According to respondents’ opinions the selected contractor must provide guarantees for the realization of the project. The municipal Council might request information from the Mayor in reference to the project’s realization at any time. In addition, based on experience with other projects and the overall infrastructure and institutional buildings in the municipality of Lipkovo, the municipal administration has the capacity to maintain the riverbed of Matejachka River after the implementation of the project. The municipality of Lipkovo has 32 employees, out of which 27 are male (or 84.37%), while 5 are female (or 15.62%) who have the required capacity and proven experience to monitor the progress of the project. The municipality is responsible for maintenance of the riverbeds. The maintenance will be conducted through engagement of the CSE “Pisha”. They will be responsible for cleaning the dirt, garbage collection and cleaning the snow on regular basis. The Enterprise has a capacity of 16 full time employees, of which 15 male and one female. The rural communities are not directly included in the maintenance but will contribute to maintenance of riverbed in good conditions by ensuring proper use and restriction of throwing garbage in the river bed. It is very important to state that the municipality has the intention to improve the local road network in the community, to invest in public infrastructure and in protection of environment through project such as: construction of local road Lojane-Tabanovce, reconstruction of the road Matejche - Vistica, construction of street and rainwater sewage in Slupcane, investment in construction of heating with oil for PPS “Faik Konica, street in urban block 75, construction of street in urban block 34, construction of streets with concrete paving blocks. These investments are supposed to overcome some of the prevailing problems, to improve the quality of life of permanent residents. By implementing these strategically important projects, the municipality is expressing its willingness to solve the issues of importance to citizens and to fully implement its mission of being loyal citizens’ service. The mayor and the municipality administration strive to achieve good municipal infrastructure. This approach will improve the health and wellbeing at municipal level through improved landscaping, creating space for socialization and organization of community life, residents who live in the village of Matejche will have well urbanized space along the River, with proper lightning, which will attract families, especially mothers, to spend quality social time with their children on the river bank especially during hot summers nights.
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2.1.3 Stakeholders There are several important stakeholders identified in the project. The interviewees fully agree that most influential stakeholders, participants in the process of decisions making, at the municipal level, are the mayor and the municipal council. Residents, as an organized group of stakeholders, articulate their opinions directly to the council and the mayor, through consultative meetings and debates with local government representatives, through local communities present in the municipality and they can influence the decision making process, as their opinions are always taken into consideration by the mayor and the council. The project was supported by all councilors (19) representing five political parties BDI 9, BESA 4, Alianca 3, DPA 2, PDA 2, and PDP 1 in the municipal council, which means that a political consensus was achieved on this issue and that the councilors considered the project as one of the top priorities of the municipality. The new decision adopted on February 19th, 2019 was also supported by all councilors. This indicates that the municipality has the required support for implementation of the project. The project will be beneficial for the whole community. The members of the Municipal Council and the Mayor are in favor of the project. Local residents were involved in a consultative process through their participation in public debates and public presentation of the project, participated in selection of priorities, and gave their support for the project. Due to its applicability to large number of municipal interest groups there was an overall consensus on implementation of project activities. The interviewees stated that there are no risks or problems that can endanger the realization of the projects nor exclusion of some social group from project benefits. The projects will be for everyone’s benefit and good. 2.1.4 Citizens engagement The project was generated through an adopted practice of communication of municipality officials with local citizens of urban communities. The public consultation meetings involving all representatives of key stakeholders in the Municipality of Lipkovo (i.e. mainly those who will be affected by the construction of the riverbed in one way or the other) were conducted along the river influence area. The key stakeholders included Municipality Leaders, working groups, service/utilities institutions, private sector, NGOs, and other community members. The main purpose of these meetings was to come together and discuss modalities of solving the problems likely to happen during and after construction of the riverbed. The aim of the meetings was to inform stakeholders on the intended works for regulation of part of Matejachka River, to receive their feedback on their views and inputs on the process, and to get insides on the views on how those issues can be amicably resolved in feasible and economical ways. The public meetings were held in 02nd of March 2018 in the village of Lipkovo with approximately 60 participants (23 female) and on 10th of August, 2018 in the village of Matejche with approximately 83 participants (36 female). The Public consultations were participatory meetings, organized by the Mayor, which involved exchange of ideas and discussions. Participants at the meeting in Matejche supported the idea for regulation of part of Matejachka River. Public announcements for the meetings were made on municipal Website, public spaces, and local media. The meetings and consultations included officials from the municipality, representative from Department for Communal Affairs, Urban Planning, Construction, Environmental Protection, Traffic, Roads, and Economic Development for projecting of the Municipality of Lipkovo, JKP, neighborhoods association representatives, and citizens that are affected by the project.
The municipality of Lipkovo officially communicates with the citizens in several ways. The most effective communication mechanism is the official website of the municipality of Lipkovo
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(http://www.komunaelikoves.gov.mk) and the official email addresses of the sectors and heads of the special units of the local administration, where citizens daily receive information, are being served, and post questions and receive answers. Additionally, the municipality uses Facebook social network, where the municipality mostly makes promotions, news releases, and shares information. Also, the Mayor has a practice of holding individual or group meetings with citizens. The meetings are held every Thursday with citizens who had a schedule appointment with the mayor. Occasionally, the municipality issues an official newspaper where all important activities, projects, meeting and decisions are published. The municipality has well established practice of citizens’ engagement activities in monitoring project implementation process. This includes placement of feedback drop box and annual public consultations with published results. These participative practices ensure the possibility of residents to influence on necessary changes if they arise during the implementation of the project if need. The municipality will take all actions possible to protect the investment. The project is expected to influence the overall wellbeing in the municipality, it is expected for residents to give full support during realization of the project.
2.1.5 Social risks High social risk for carrying out the project cannot be perceived. In the Municipality of Lipkovo, current municipal Council consist of (19) representing eight political parties BDI 9, BESA 4, Alianca 3, DPA 2, and PDP 1 member. The Mayor has the support of 12 council members, while 7 are in opposition. In spite of political division, the councilors cannot endanger the realization of the project because the project is targeting the whole community. The project is planned to be completed within period of 12 months from the day of signing the project, long before the scheduled local elections in 2021, which may bring political leadership changes in the municipality. The municipality prepared ARAP1 (acquisition plan) for compensation of landowners that will be implemented prior the announcement of the Tender documentation for the project and the works contract should be signed after the land acquisition is completed. The municipality has identified a wide range of priorities in many fields that are within the local government competencies such as construction or rehabilitation of communal infrastructure facilities, local economic development, increasing of employment rate, development of social services, support of entrepreneurship, protection of environment, tourism, use of renewable energy sources, etc. The budget of the municipality is designed to provide a high level of realization of capital investments in the part of the road and communal infrastructure. Key capital projects on which the Municipality pays great attention are the construction of reconstruction of the streets, upgrading of a water supply and sewage network, public lightings, and installation of photovoltaic system in the municipality, as the most important segments for improving and increasing the quality of the life of the citizens of the Municipality of Lipkovo. The implementation of the project will not cause significant traffic restrictions. Thus, it is not expected that the residents will experience discomfort and dissatisfaction during project implementation. Nonetheless, as discussed in the previous section on citizens’ engagement, the residence involvement in the decision making on the selection of project priorities was observed. Thus, the residents are fully informed of the intended construction of extension of the boulevard that is subject to this Appraisal. Therefore, there is no risk for resident to obstruct the implementation of project activities. 2.2 Other fields of considerations Regulation of the Matejachka River in the municipality of Lipkovo which is subject to this
1 See Annex 9.3
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Appraisal is expected to improve the overall wellbeing of residents in the village of Matejche as well as in other settlements of the municipality of Lipkovo. The implementation of the project, on the long-term basis, is expected to create savings in the municipal budget for the in cleaning of dumpsites, maintenance of unwanted vegetation, and cleaning of waste water. The implementation of the project is also expected to improve local public finances in a way that once the River is regulated, the municipality will have savings on repairs and maintenance of damages caused by outflowing of the river, will have lower costs on maintenance of the riverbed, which will allow their reallocation to other municipal priorities. The financial structure of this project, exceeds the current possibilities of the municipality, therefore using the World Bank funding advantages need to be take into account. Moreover, increased property value as a result of the improved infrastructure will result in growth of revenues from property taxes. 2.3 Resettlement issues The current project under assessment in the municipality Lipkovo does not causes any resettlement issues because it refers to regulation of Matejachka River segment in which is not inhabited and but it does include expropriation procedure. For this issues the Municipality has prepared ARAP - Abbreviated Resettlement Action Plan2. Construction of the riverbed will improve flood prevention, river erosion and other unwanted ecological phenomena in the municipality, will benefit the existing businesses, will contribute to attracting new business investments as well as will improve the image of the community. Constructed riverbed will prevent the river erosion and will bring property investments. The enlargement and increase in the number of businesses will open new jobs for the local population, will contribute to the employment of young people, will potentially increase the salaries and income of the local population, and will increase the value of the properties along and Regulated River. Therefore, the project will contribute to better livelihood and wellbeing in the municipality, will improve the environment with less polluted water and will improve the special organization in the Municipality.
2.4 Conclusion on the project potential success and recommendation The main drivers of the change that will bring about prosperity are the municipal authorities (mayors, councilors, school managers, and public enterprise managers) and the residents who have initiated and made the decision for seeking funding from the World Bank funded MSIP. Regulation of Matejachka River and construction of pedestrian path aims at flood prevention and erosion of river bed, as well as at improvement of quality of life and wellbeing of local citizens and citizens from the municipality of Lipkovo. The problem of unregulated riverbed exists for many years and has been noted in the strategic documents adopted by the municipality. Also, unregulated riverbed problem has been publicly declared and discussed on many occasions. The main beneficiaries of the regulation of the Matejachka River and construction of pedestrian path project are residents who live along the river, residents of Matejche as well as residents from the municipality of Lipkovo, as well as visitors and ex- patriots to the community. A part of the vulnerable groups such as small children and disabled persons will have a well arranged, prohibited for traffic space where they can safely enjoy the nature. Also, this will give opportunity for private small business investments to develop private lots into coffee shops or playgrounds. The construction will provide easy access to potential businesses and public objects located along the river, which will increase accessibility, earnings, land value and trade services. As a final point, construction will be beneficial for the local self-government for reduction of river maintenance costs and increased tax revenues. High socials risks for carrying out this project cannot be perceived. There are no issues
2 See Annex 9.3
[29] connected with ethnic distribution of population or inter-community rivalry, since the municipality invests efforts in provision of equal community development: The action will allow benefits to all ethnic and gender groups present in the municipality, as well as to all residents in Matejche and local communities connected with the river subject to the construction and the land ownership (expropriations) concerns will be resolved prior to commencement of the work for which the land owners received notarized contracts. Expected project results are: • Urbanization of the river bank, • Improved flood prevention and prevention of river erosion and other unwanted ecological phenomena, • Protection from damages as consequences of erosion on the facilities located in the vicinity of the river, • Improved quality of life and wellbeing of local citizens, • Created promenade, • Created safety conditions for pedestrians and bikers, • Improved spatial functionality achieved with development of pedestrian path, placement of benches and lightings. • Increased safety of children during time spent near the river bank, • Improved commercial activities and opportunities for balanced development.
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3 Environmental assessment
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The project main aim is to improve regulation of the riverbed of Matejachka River in the section passing through the village Matejche, Municipality of Lipkovo.
Figure 10 Watershed of Matejachka River
The watershed of Matejachka River is 19.25km2, with an average altitude difference of 1161m. It is one of the tributaries of the river Lipkovka. The aquatic potentials are used for development in all sectors related to water: water supply, irrigation, tourism and recreation, fishing, forestry, livestock. Due to the nature of the riverbed which often meanders, there are cases of river erosion, occasionally causing demolition of some buildings along the riverbed. This natural regime makes the river flow meandering in the basin and causes adverse morphological, hydraulic and ecological consequences. Deformations of the riverbed also appear, as a result of the disturbed hydrodynamic balance and the variable hydrological regime. Finally, the anthropogenic influences caused by the rapid urbanization of space are an additional reason for the frequent alteration of the riverbed, which is currently characterized by sharp curves with irregular geometry as presented on the below figure. This Project envisages regulation of the riverbed of Matejachka River in the length of 310m. It is a first part of the intended construction with a total length of 648m, as presented in Figure 11 below. The works contain cleaning and regulation of the riverbed of Matejachka River with construction of concrete bedding channel, construction of pavement on the left side of the riverbed, street lights and landscape arrangement. The area of this project construction is marked on the design drawings as chainage 0+338 to 0+648. Walking path will be performed of concrete paving blocks, and it will follow the natural slope of the riverbed of 2.9%. Lighting and tree planting are foreseen to be carried out along the walking path.
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Figure 11 Aerial picture of the location, with site borders
EIA Elaborate has been prepared by Enviro Resources, Skopje, in May 2018, and Approval has been issued, dated 25.06.2018 under No. УП1-11/4-832/2018 by the Ministry of environment and physical planning, Environmental department. Municipality of Lipkovo has obtained a Permit for water management (permit for regulation of the river and associated works) under number УП1-11/5-1132/2018 dated 31.10.2018 by the Ministry of environment and physical planning, Water department. The Project belongs to the Category B project.
Figure 12 Matejachka River
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3.1 Project activities with environmental impact The planned activities for regulation of the riverbed of Matejachka River and their potential environmental impact are given in the Table 7 below.
Table 7 Planned activities for Matejachka River Potential environmental Project Title Project Activities impact - Removal of the existing vegetation, such as Pollution of the water in bushes and grass; Matejachka River; - Excavation of soil with partial reuse for the Disturbance of the existing purpose of the river regulation; habitats in the watercourse; - Installation of selected soil with compaction; Regulation of - Installation of stone and gravel under the the riverbed of concrete foundations; Matejachka - Casting of concrete for reinforced walls, River and the bottom of the river; - Installation of paving concrete blocks (bekaton) over compacted gravel bed; - Installation of benches; Potential littering by communal - Installation of 11 candelabras, including waste during the exploitation. power and protective wiring; - Planting of 32 deciduous trees. During the project implementation, there could be short-term, local, and major health and safety and environmental impacts. Mainly, all construction activities will be located within and along the riverbed of Matejachka River, thus, the impact will be on local level with significance on water body, occupational health and safety for workers engaged by the contractor, increased level of noise and vibrations (produced by operation of heavy construction machinery) and improper waste management of the debris out of the riverbed before disposing to the landfill. Appropriate prevention and mitigation measures are proposed, aiming to minimize these impacts. In the operational phase, during the daily usage of the walking path, no adverse environmental impacts are expected. With the regulation of the riverbed of Matejachka River, the ability for deformation will be decreased, thus to prevent erosion, floods of the agricultural land and damages to the nearby properties. 3.2 Sensitive receptors and environmental impacts from the Project The project location, planned for implementation of the project activities, is located in the rural area of the municipality of Lipkovo, in the village Matejche.
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Figure 13 Left bank of the Matejachka River, near the bridge, future access to the quay, potential temporary disposal site for the excavated material
The good construction practice should cover several mitigation measures proposed mainly to overcome the occupational health and safety issues and waste management issues during the execution of the construction works in the riverbed and nearby of Matejachka River. The proper protection of workers from the disposal material, proper selection of waste at the spots and appropriate waste management plan are crucial measures to be applied. At the same time, the measures to avoid and minimize the health and safety risks for local inhabitants should be applied during construction work. The Contractor should prepare and implement the OH&S Plan with main aim to propose the preventive measures of possible injuries during construction works for the workers and local people. The Contractor should mark out and secure the site (placement of alert signalization, adequate warning tapes and information signs around etc.). The Information Note/Press is important and should be prepared and announced via local TV, radio or municipal web page http://www.komunaelipkoves.gov.mk/, prior the start of project activities in order to inform the general public for the duration and type of the project activities. Information notes shall be also placed at appropriate locations within the village, such as markets, bus stop, ambulance, central square, etc. The available public Complaints Dropbox within the municipal administration building and/or the local village shall also be used to initiate feedback from the community. 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. Construction phase During the construction phase, the operation of construction machinery and equipment can cause air emissions (CO , NOx, PAH, SO and suspended particulates PM , PM ) as result 2 2 10 2.5 of excavation and disposal of soil as well as combustion in the machinery. In order to reduce air emission impact, the Contractor should implement mitigation measures given in the Table A, Mitigation Plan. The supervision engineer will have a right to prevent operation of obsolete machinery that may cause harmful effect during the works.
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The operation of the heavy construction machinery and tools could generate 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 from 23.09.2008) and Rulebook on the limit values of noise in the environment (O.G. No.147 from 26.11.2008), the sub-project location has been identified with area of II degree of noise protection for which the noise limit values should not exceed 45dBA for night and 55dBA for day and evening. The national noise exposure limit values are in line with the WHO guideline values for community noise in specific environments as well as with IFC noise level guidelines provided in the General EHS Guidelines: Noise Management. The Contractor’ 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 (“Official Gazette of RM”, 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.
Table 8 List of sources of noise, vibration and non-ionizing radiation Source of Type of Equipment - Emitted noise Intensity of Emission emission emission device with a intensity (dB) vibrations periods (noise, description expressed and non- (number of vibration or of the through index ionizing hours per non-ionizing maximum value of the emitted day) radiation) power equipment radiation
Heavy Dredger vehicles Noise Bulldozer 85 dB / 8 Truck Construction Vibrating Noise 105 8 machinery roller
Procedure for providing construction materials (concrete, earth material, etc.) from the facilities (quarries, borrow pits) that have obtained IPPC permissions from Municipality or MoEPP shall be implemented. The materials that will be used in construction must have natural origin, and the sand must have an autochthonous origin.
Communal waste and demolition waste (removing of vegetation, excavation of soil material and mud, etc.) are the main waste streams generated during sub-project activities. In order to provide proper waste management, the Contractor should prepare and implement the measures given in the Waste Management Plan, followed by a proper record-keeping during the construction works. The Waste Management Plan should be developed based on the national waste related legislation (Law on waste – general waste management, List of waste – identification of non-hazardous and hazardous waste and its waste code) and taking into account the hierarchy of the waste management – selection on spot, recycle, re-use of waste, collection, transportation, treatment and final disposal. The estimated quantity of demolition waste generated during construction works is presented in Table 8 below. The Municipality has prepared a strategy (Decision for determination of locations for demolition waste under number: 08-447/6 dated 14.05.2019) about the disposal of these materials. The Municipality has allocated 5 dumpsites for the construction demolition waste, and the nearest locations shall be used for this Project:
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- Nikushtak, I.L.nb. 187, Cadaster plot 2545, place Buchuk and I.L. nb.214, Cadaster plot 2547, place Buchuk - 8km distance from project location; - Matejche, I.L. nb.442, Cadaster plot 2480, place Ruski kamen - 9km distance from project location.
Generation of communal solid waste during the construction is related mainly to the packaging material of the used materials and workers’ food and drinks. This general solid waste shall be disposed in the available 1.1 m3 containers throughout the village and further collected by the CSE “Pisha”.
Regarding oils from the machinery and other hazardous waste, the responsibility should be undertaken by the authorized company for hazardous waste management with signing a Contract between the Contractor and such Company.
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 list on: http://www.moepp.gov.mk/wp- content/uploads/2014/11/Registar-za-Transport-opasen-otpad.pdf.
Table 9 The estimated values of generated waste streams (according to the Detailed Design) Type of waste Waste code Quantity Excavated soil 17 05 04 1,593.60 m3 Soil mixed with vegetation (branches, 5,535.30 m2 x 10cm = 600 m3 20 02 01 grass, etc.) 10 willows, 6 poplars, 7 Trees acacias Mixed communal waste 20 01 01; 20 01 11 3 x 1.1m3
There are no registered endemic, protected, and endangered animal or plant species or protected areas and habitats in close and wider surrounding of the project location that will be negatively affected by the implementation of the project activities. During construction activities, import of any non-aquatic flora and fauna elements into water of the river Matejachka River or dry surfaces at the construction site are forbidden. Trees for removal are presented in the above table. Preferable specie for planting shall be Carpinus orientalis, or Salix.
Figure 14 Current look of the site
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To avoid water pollution, recommendations given in EMP should be followed. Due to the fact that construction works will be executed in the riverbed of Matejachka River, disposal of any waste stream is strictly forbidden and it should be visually monitored by the local environmental and communal inspectors. According to the stipulation in the Detailed Design, excavation of soil is limited to the alignment, without temporary diversion of the flow, meaning that the construction of the embankment shall be constructed separately for the left and right side allowing temporary flow through the part that is not under construction. In case construction activities have to be conducted within the water flow of the riverbed, the Contractor must propose a technical solution to the Supervisor which will introduce temporary redirection of the water flow. Afterwards, the riverbed has to be completely cleaned from the construction waste and materials, and only than to turn back the water flow into the riverbed. This process has to be conducted under the strict monitoring and approval of the Supervisor’ environmental expert. Regulation of the riverbed will not impact the water regime, because there will be no changes in the height level nor in the position of the riverbed, comparing with the current condition of the riverbed. With this project proposal, activities will be focused on regulation only of the riverbed aiming for better protection from erosion and flooding of the existing riverbed. Thus, there are not expected changes in the ecosystem of the river. Operational phase The project will introduce positive long term environmental and social impacts. The flow of the river will constantly be maintained in the constructed alignment, and prevent effusion. Visual effect of the landscape shall be improved, and the quay will be used by the local population for leisure purposes. Presence of the people at the location will generate small quantities of solid waste, collected in the bins along the pedestrian path, subject to maintenance by CSE „Pisha”. Overall environmental and H&S management The proposed mitigation measures are presented in Tables of Mitigation and Monitoring Plan which should be implemented by the Contractor. The Supervisor has main obligation of providing monitoring of their implementation. The good communication between: Contractor, Supervisor, Environmental Inspector, Communal Inspector, and other relevant persons from Municipality of Lipkovo (PM, Civil Engineer, Mayor) is essential for good, on time project implementation.
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3.3 Environmental mitigation plan for the project for regulation of Matejachka River
Potential impact Impact scale Proposed mitigation measures Responsibility
Project activity: Preparatory phase - Regulation of the riverbed of part of Matejachka River • Provision of the information via municipality web site ( http://www.komunaelikoves.gov.mk/ ) about the construction activities – start and finish of work for each day and location of activities and duration of work; • Information leaflets shall be also placed on several visible places along the project site a) OH&S issues containing telephone number for communication with public; within the municipal Possible adverse administration, a Complaint Dropbox shall be available and adequate response shall be safety and health performed on regular basis. impacts to the workers • Preparation and implementation of OH&S and community safety Plan, to be approved and and community due to: monitored by the Supervisor: - Location of Local/ short • Contractor o Adequate warning tapes and information signs on the Road R2133 in the vicinity of Matejachka River in the term/major with • Supervisor Matejche village; high significance the bridge over Matejachka River, and around the construction site need to be • Municipal staff - Possible injury to at river bed on provided and maintained during the construction works; (Construction and citizens due to ongoing Matejachka River o For the workers - the legally prescribed health and safety measures should be Communal works; in the village of applied, like: a) use of proper protective clothing and equipment by employees; b) Inspector/Environ - Non - compliance Matejche Maintain a good level of personal hygiene; c) Health protection-first aid kits and mental Inspector)
with national medical service on sites need to be provided during the works; occupational health and o The surrounding area (around river bed and along the Matejachka River) should be safety at work; Non - compliance with kept clean, without disposed waste. The waste needs to be immediately removed local community safety from the riverbed; regulations. o If possible, construction works to be organized in the summer time when the level of the Matejachka River is very low; o Organize 24-hour guard watch of the sites; o The sub-project sites should be lighted during the nights; o Limit the foot traffic between work areas and Matejachka River. Project activity: Construction phase - Regulation of the riverbed of part of Matejachka River b) Waste management • Preparation, approval and implementation of the Waste Management Plan including The possible adverse • Contractor – type of waste streams expected, waste codes (17.05.04; 20 02 01; 17.01.01; 20 01 01; environmental impact Bidder and health effects could Local/ short 20 01 11), separation of waste on the spot, responsible person/s for implementation of • Supervisor occur due to improper term/certain to WMP plan, taking care about the waste collection, transportation and temporary and final • Municipal staff waste management that happen, major waste disposal, define the sites for temporary disposal of waste before final disposal; – (Communal could cause direct and with high for trees, bushes, concrete residuals and soil, agreements with authorized waste Inspector/Environ indirect pollution on significance collection companies, check lists with keeping records on generated waste, records on mental Inspector) waters, soil and will transported waste etc.); • CSE “Pisha”
impact the air quality • Final disposal of the demolition waste at the landfill for inert waste in Nikushtak;
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Potential impact Impact scale Proposed mitigation measures Responsibility
• Small quantities oil, grease, construction material could be found after the finalization of the project and managed in accordance with national HW legislation (collection of hazardous materials, label as hazardous waste and give to the authorized company); • The contract with the CSE „Pisha” for waste collection and transportation of communal waste should be signed; • The materials should be covered during the transportation to avoid waste dispersion; • Burning of demolition waste is prohibited; • The materials that will be used in construction must have natural origin, and the sand must have an autochthonous origin. • Possible hazardous waste (motor oils, vehicle fuels) should be collected separately and 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.; • Construction methodology without diversion of the watercourse shall be implemented and no c) Water quality additional widening of the excavation, other than for construction of the embankment is Possible environmental allowed; Thus, the hydrological regime of the river must remain the same, with purpose to impact on the maintain the existing ecosystem/habitats. Matejachka River could • The temporary/final disposal of the waste along the riverbed is prohibited. Removed • Contractor Local/Short term/ occur due to ground vegetation and soil shall be immediately taken of the watercourse, and temporary stored on • Supervisor Medium contamination from the the designated area with the access by the loader and dump truck; • Municipal staff significance/ (Communal spillage of materials Low probability • In case construction activities have to be conducted within the water flow of the riverbed, the Inspector/Environ such as vehicle fuel, Contractor must propose a technical solution to the Supervisor which will introduce mental Inspector) motor oils and lubricants, temporary redirection of the water flow. Afterwards, the riverbed has to be completely different waste etc as cleaned from the construction waste and materials, and only than to turn back the water flow well turbidity of the water into the riverbed. • Complete cleaning of the riverbed from any materials after the construction works, aiming to keep the existing ecosystem. • Import of any non-aquatic floristic and faunistic elements into water of the Matejachka River or dry surfaces at the construction site is forbidden. d) Noise • The equipment shall comply with the Rulebook on closer types of special noise sources The construction as well as conditions that need to be fulfilled by facilities, equipment, installations and activities and traffic will Local/Short equipment, installations and devices that are used in open space in terms of noise • Contractor cause noise and term/ emission and noise protection standards; vibration due to the Medium • Supervisor • The level of noise should not exceed national limit values for noise level - the sub project machinery and vehicles significance/ • Communal sites are located in area with second degree of noise protection, which means that Inspector/Environ used for transport of the Certain to mental Inspector construction materials, happen should not exceed 45dB during the night and 55dB during the evening and day; transport of workers, • The construction work should not be permitted during the nights, the operations on sites and transport of waste shall be restricted to the hours 7.00 -19.00;
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Potential impact Impact scale Proposed mitigation measures Responsibility
produced in constructive • The vehicles that are excessively noisy shall not be operated until corrective measures phase have been taken.
• To minimize cleaning of the vegetation along the section by introducing construction e) Vegetation Local/ short methodology that is not allowing widening of the excavation belt; This construction For the purpose of the • Contractor term/certain to methodology presenting the minimum cleaning of the vegetation shall be presented and project, the vegetation • Supervisor happen, major approved by the Supervisor, prior to the start of the construction activities and along the section shall • Communal with high preparation/cleaning of the location site. Inspector/Environ be cleaned (trees, significance mental Inspector bushes etc) • Tree planting to be carried out according to the Main design, meaning 32 units of trees, such as Carpinus orientalis or Salix.
Operational phase of the Project • The project will improve deformation of riverbed and prevent erosion, floods and demolition of some buildings along the river, under responsibility of the CSE Pisha. • With the construction of walking path and placing urban equipment along the river, social aspect will be improved. • CSE “Pisha” will be responsible for placement of 5 small litter bins along the walking path, and their emptying, as well as maintenance of the hygiene of the path.
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3.4 Environmental monitoring plan for the project for regulation of Matejachka River
Where When Cost Responsibility What is the How is the parameter Why Operation parameter to be parameter to is the parameter monitored is the parameter on Construction Operations Construction phase monitored? be monitored? (frequency of monitored? Matejachka monitored? measurement)? riverbed Project stage: Preparation activities - Regulation of river bed of Matejachka River (site clean-up, and marking out the construction site) Documentation At the On and To provide good reviewed and commencement Preparation and around the construction Contractor approved by the of the implementation construction practices refer to Supervisor Supervisor and construction; of the OH&S site workers and Construction visual monitoring Every working Plan (Matejachka community Inspector performed day during the River) health and safety permanently project activities During the The safety Contractor construction To prevent protection On the Supervisor activities; health and measures construction Construction and Visual checks At the beginning safety risks – applied for the site at Communal of each working mechanical workers, locals Matejche Inspectors at the day during the injuries municipality Lipkovo project activities Visual Contractor On the monitoring /Supervisor/ Cleaning trees, construction performed At the beginning To minimize Municipal staff bushes, other site at permanently of construction cleaning of the (Communal and vegetation Matejachka Check the site works vegetation Environmental River and Inspectors) documentation For residual Contractor In the close Visual checks if materials /Supervisor/ Existence of area of To avoid and the area is immediately/ for Municipal staff dust generated Matejachka minimize injuries sprayed with dust generation (Communal and during the River and dust water in dry and every day after Environmental construction construction inhalation windy days competition of Inspectors) site work
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Project stage: Construction activities – Regulation of riverbed of Matejachka River
To ensure environmental Documentation protection In the Preparation and reviewed, Monitoring through proper riverbed of implementation approved by the regularly during waste Contractor Matejachka of Waste Supervisor and the project management /Supervisor River and its Management visual duration (according the Communal Inspector surrounding Plan monitoring waste streams management hierarchy)
To separate hazardous from Primary the non- At the beginning Contractor – selection of the Review the hazardous waste On the site of project Supervisor different waste documentation as well as inert activities Communal Inspector streams from biodegradable waste Authorized Contractor for Collection and To improve the Review the Before the collection and transport as well waste On safety transportation transportation of transportation of storage of management temporary list and the hazardous hazardous waste hazardous practice on storage conditions at the waste (if there is subcontracted by the waste (if any municipality and storage facility any) Contractor occurs) national level Environmental Inspector Collection On the sites Visual After the Not to leave the Contractor transportation and around monitoring of the collection and waste on the Supervisor and final the sites site and landfills transportation of spot to avoid the Communal Inspector disposal of the Local inert Reviewing the the solid waste environmental solid waste waste landfill transportation on regular base and health in Matejche and disposal each day impact on local and lists from the population Nikushtak contractor After the Fulfilled Annual To improve the Mayor of the Review of accomplishment Report on Local self- waste municipality Lipkovo/ documentation – the task of collection, government management on Ministry of Identification of collection, transportation administration local and national Environment and waste list transportation, and disposal of level Physical Planning temporary
[43] different waste disposal and To be in streams final disposal of compliance with waste national legal requirements Monitoring of the To ensure noise noise levels dB During the work level limits Contractor Noise Visual checks (А) with peaks, in cases according to Supervisor measurements on the site appropriate of public regulation as well Environmental monitoring complaints as noise Inspector devices exposure limits Ecosystem Along the Visual At the end of To prevent from Contractor, status within construction monitoring at the changes in the Supervisor, Matejachka line of the the end of the construction river ecosystem Communal inspector, River riverbed construction works, check due to changes Authorized works the natural of the water flow environmental condition of the inspector riverbed Proper To prevent implementation unnecessary Contractor Pollution of the Visual checks of works in During the pollution with Supervisor water on the site regard to works residues from Environmental watercourse construction Inspector diversion materials Project stage: – Operational phase of regulated riverbed Matejachka River Mayor of Visual, Maintenance of Prevention of the Matejachka Discharge of During the use the flora and pollution of the municipality River solid waste and by citizens vegetation Matejachka River Lipkovo/ wastewater CSE Pisha
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4 Technical solution
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4.1 General Municipality of Lipkovo is undertaking the necessary steps for the implementation of the Project with its initiation, public hearing of the concerned citizens, preparatory activities on property issues, as well as land survey, followed by the confirmation of the property ownership. The required technical documentation has been prepared according to the Law on Construction and the Urban Plan of Lipkovo Municipality, as a base for issuing of a building permit. Data on submitted technical documentation are the following: LI-I-469/18 by Hydro Energo Hydrology Study Engineering, Skopje 08-136/4-18 by GEO-AMJ, Surveying Elaborate, updated data for land property Kumanovo 08-478/4-18 by GEO-AMJ, Surveying Elaborate, numeric data Kumanovo Detailed Design for regulation of Matejachka River, 1310-06/2018 by VEKTOR TT, chainage 0+000 to 0+648 (including Structural and Kumanovo Electrical part) 08-128/2018 by MAKBAU, Revision on the Detailed Design (all parts) Kumanovo 05/2018 by Enviro resources, EIA Elaborate Skopje Approval of EIA Elaborate UP-11/4-832/2018 by MoEPP Water management permit UP1-11/5-1132/2018 by MoEPP UP1-4 no.18-01 (dated Building permit 15.02.2019) by Municipality of Lipkovo The design as well as all the obtained documents are treating works for regulation of the riverbed section of Matejachka River in urban area of v.Matejche, from chainage 0+000 to 0+648 (as presented in the design). It has to be notified that the Municipality of Lipkovo decided to split the work into two phases, according the available resources and capacity. The first phase is related to the part from the chainage 0+338km to 0+648km, where the area of the bridge of the road R 1233 over Matejachka River is included.
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Figure 15Watershed of Matejachka River
Subject of this Appraisal Document are the construction works for regulation of Matejachka River riverbed, section from chainage km 0+338km to 0+648km as a first phase of the works presented in the design. The existing riverbed is very often closed with tree branches, plants and garbage, cloaking the natural water flow and causing periodical overflow and flooding of the land on the riverbanks which is causing lot of problems to the local population. Calculation of the works is based on the conclusions of the hydrology study that is providing the following flows:
Table 10 Hydrology study flows Incidence Pe Qmax year mm m3/s 5 0.07 0.44 10 0.39 2.32 25 1.15 6.84 50 1.98 11.77 100 2.99 17.79 1000 7.53 44.73 10000 13.58 80.65
According to the best design practice, the flow of incidence in 100 of years 18 m3/s is taken as relevant for the dimensioning of the riverbed. The location of the works is presented on the following picture:
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Figure 16 Location of the works
In general, the complete regulation shall improve the hydraulic capacity of the riverbed, which will also reduce the “wild” behavior of the river in some periods during the year. As well, river area is included in the municipal strategy for environmental and touristic capacity development. According the Design, works are including cleaning and regulation of the river bed of Matejachka River with construction of concrete bedding channel, construction of pavement on the left side of the river bed, street lights, landscape architectural structuring, assembling of urban equipment and planting new trees next to the pedestrian path. Building Permit is issued by the Mayor of the Municipality of Lipkovo, related to all the designed works on 15.02.2019 under No. UP1-4 no.18-01.
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Figure 17 Layout - works area
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Existing watercourse is very changeable along the trace and is not under control, as it can be seen from the presented survey cross sections below: Figure 18 Cross sections
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Following the Hydrology Study, the Designer has foreseen trapezoidal riverbed cross-sections, with width of 4.0m of the bottom and maximum width of 7.0m at the top. Longitudinal slope of the riverbed is 2.9%.
Figure 19 Typical cross-section of new designed riverbed
The details for the construction works are as presented below:
Figure 20 Details for the construction works
The bottom RC slab is 20cm thick, laid on the bedding of compacted crushed stone (25cm) and supported by two longitudinal foundation RC beams. Under the foundation beams is also an improvement layer of crushed stone. [51]
The slopes are also RC slabs on bedding of compacted crushed stone, supported on the upper edge with longitudinal RC beams. All concrete slab elements shall be in sections, divided with construction joint at each 20m. The paving is width 3m, and is made of standard concrete blocks with thickness min. 6cm, laid on a send layer with thickness 5-7cm, over compacted crushed stone layer. The works shall be subject of implementation of valid standards and control procedures, all under control of the nominated Supervisor. For the concrete blocks the leading standard is MKS EN 1338:2006, and for the kerbs it is MKS EN 1340:2006. 4.1.1 Street Lighting Street lighting poles are 3m high, on a distance of 30m in-between. Each lighting pole will have luminaries installed on the console of 1m. The lights will be in LED technology, with a consumed power of 80W each. Activation of the lighting will be by the light sensor relay. The poles will be of three segments, diameter from 159 to 101mm, fastened on the anchor plate with concrete foundation. Corrosion protection of the poles shall be of warm zinc coating. Lighting shall be installed in the green belt, with a trench 80cm deep for cabling and grounding strip FeZn 30x4mm2.
Figure 21 Street lightning
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4.2 Alternative solutions Construction of the riverbed can have alternative in the basic approach by using various materials, such as: reinforcement fiber mash, mortared stone pitching, Reno mattresses, also known as gabions, and other. Due to the fact that in the project area there is reach flora of grass, bushes and trees, the gabions are seen as the most appropriate alternative versus the designed concrete based construction with full arrangement of the bottom. Gabions are block of stones packed in the mash installed on a prepared ground.
Figure 22 Gabions example
Use of natural materials is a challenge to the designers. There is also ability for easy adaptation to the soil settling, forming continuous protection blanket. Also, there is no need of labor intensive maintenance. Main disadvantages of using gabions in comparison with the selected option are: b) expected extended earthworks, i.e. additional excavation considering the widening of the watercourse due to the volume of gabion baskets; c) the maintenance need is reduced, but the bottom of the river remains suitable for intensive vegetation growth and difficult for cleaning which could produce sedimentation of material and reduce the capacity for accepting the incidental flooding waters; d) regarding the time for construction and impact to the environment, delivery of such volume of heavy material to the site, preparing and installations would require better access to the vehicles, i.e. intervention on the existing trees and adjacent agricultural land; e) the costs for construction - the increase of price for needed construction material; in this case, comparison between using reinforced concrete elements cast at site vs gabions results in increase of the material costs of more than 70% per m’ of treated riverbed - as presented in the next table, using average values of quantities and prices from the design:
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concrete elements, per m' riverbed: qty/m' units un.price [den] total/m' [den] concrete 2.32 m3 7000 16,205.00 reinforcement 97.23 kg 70 6,806.10 total: 23,011.10
gabions, per m' riverbed, elements dim. 100x50x200 (w/h/l) qty/m' units un.price [den] total/m' [den] 6.50 pcs 6200 40,300.00
4.3 Benefits Regulation of the Matejachka River is intended to prevent flooding of the households and agricultural land in the village of Matejche. Local infrastructure, such as road R 2133, and the bridge in Matejche in particular are exposed to permanent danger of being damaged. Taking into consideration remarkable area of watershed and climate conditions of potential heavy rains, this project is creating the main benefit to the citizens in securing their dwellings, livestock breeding facilities, as well as arable land. Additional value to the protective component is the construction of the pedestrian path with banks and lighting that will stimulate the population to commonly use and maintain the newly created park. Well-arranged and maintained path will represent an opportunity for attracting visitors and tourists in Matejche. 4.4 Exploitation and maintenance Exploitation of the riverbed means relaxed behavior of the local population in rational use of the water resources. All branching points of the irrigation water shall be out of the treated area, thus to create condition for improved management. Citizens, having opportunity to relax and practicing strolls along the river, will be in a position to maintain, and enhance the entire area by generating further ideas and projects. Maintenance itself is related to cleaning of the riverbed, and pedestrian paths, which will be simple and easy. Generation of solid waste will be limited to small quantities, and CSE “Pisha” will have the obligation of regular collection of deposits of packages, and other small items. Lighting of the paths will be of durable LED fixtures that are energy saving and do not require frequent maintenance. However, in order to save energy, the local community may decide to limit the operation of lighting during the night. Lighting poles, candelabras, should be maintained against corrosion, according to the maintenance plan of CSE “Pisha”.
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5 Financial analysis
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To assess the profitability of this project, the financial analysis section of the project appraisal document will present following information: • Project Investment cost; • Repayment obligation and schedule of MSIP2 loans; • Project related accounts information; • Analysis of the financial feasibility of the project; • Projections of revenues from the project; • Project Operation and Maintenance Cost; and • Results from project financial feasibility analysis, expressed through Internal Rate of Return and Net Present Value. 5.1 Project cost Subject of this analysis are the construction works for regulation of part of the Matejachka River riverbed, with a length of 310 m. The total value of the investment costs is equal to 13,995,582.00 MKD including VAT. The table 10 below presents the total project investment value while the table 11 presents breakdown of cost per category of project activity and total value of the investment.
Table 11 Project cost Project name Amount VAT Total amount Construction works for regulation of 11,860,662.00 2,134,920.00 13,995,582.00 Matejachka River riverbed Amount in MKD 11,860,662.00 2,134,920.00 13,995,582.00 Amount in EUR (euro=61,5 MKD) 192,856.29 34,714.15 227,570.44 Source: Project budget
Table 12 Cost per category of activity Matejachka River riverbed Construction works for regulation of Matejachka River riverbed Share
Preparatory works 2.46% Earth works 292,250.00 14.70% Concrete works 1,743,370.00 57.58% Reinforcement works 6,829,888.00 19.40% Urban equipment 311,800.00 2.63% Lightning 382,100.00 3.22% Total 11,860,662.00 100% VAT 2,134,920.00 Total with VAT 13,995,582.00 Source: Project budget The works are expected to last up to 10 months and the amount will be covered by the MSIP 2 loan. It is expected that investment disbursement will be made during 2019 - 2020 and the repayments will follow after the completion of works.
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5.2 Loan repayment The total amount of the loan is 13,995,582.00 MKD (€227,570.44) and it is equal with the investment value of the project. According to the Decision for borrowing number 08-180/14 adopted by the Municipal Council on 19.02.2019, the loan from MSIP 2 is expected to be carried for 13 years, with a grace period of 3 years and the repayment will start in 2023. For the purpose of this assessment we assume that interest rate is fixed at 3% and the payment is semi – annually. On the table below presented is loan amortization plan:
Table 13 Loan amortization plan LOAN INTEREST PRINCIPAL Principal & Interest Period with grace 13 = = = = =
Interest rate 3% 13,995,582.00 414,202.57 414,202.57 1 Amount 13,995,582.00 2 13,995,582.00 414,202.57 414,202.57 Monthly interest 0.00246627 13,995,582.00 414,202.57 414,202.57 3 1,399,558.20 6-month interest 0.02959524 13,995,582.00 414,202.57 1,813,760.77 4 1,399,558.20 Period w/o grace 10 12,596,024.00 372,782.32 1,772,340.52 5 15 Jan 2020 1,399,558.20 6 11,196,466.00 331,362.07 1,730,920.27 15 Jan 2033 1,399,558.20 7 9,796,908.00 289,941.82 1,689,500.02 1,399,558.20 8,397,350.00 248,521.57 1,648,079.77 8 1,399,558.20 6,997,792.00 207,101.31 1,606,659.51 9 1,399,558.20 5,598,234.00 165,681.06 1,565,239.26 10 1,399,558.20 4,198,676.00 124,260.81 1,523,819.01 11 1,399,558.20 2,799,118.00 82,840.56 1,482,398.76 12 1,399,558.20 13 1,399,560.00 41,420.31 1,440,978.51
13,995,582.00 17,516,304.11 Source: Own calculations
5.3 Review of the account Below on the table we will present financial information for the Municipality of Lipkovo based on the Budget realization for the year 2018.
Table 14 Credit capacity Account Description 2018 Amount
71 Tax revenues 16,348,694.00 713 Property tax revenues (part of the tax revenues) 4,805,061.00 72 Non-tax revenues 10,404,591.00 731120 Revenues from sales of capital goods owned by the municipalities 0.00 73 Land sales and non-material investments 2,732,905.00 741 Earmarked donations 40,395,007.00 741115 Earmarked donations from VAT revenues 29,263,330.00 Total operating revenues (Denar) 69,881,197.00
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Total operation revenues (Euro) 1,136,279.63 45 Debt (Denar) 29,389,469.00 Max borrowing capacity of the Municipality (Total operating revenues – Debt) (Denar) 40,491,728.00 Max borrowing capacity of the Municipality (Total operating revenues – Debt) (Euro) 658,402.08 Max debt service (30% of total operating revenues - debt) Denar 12,147,518.40 Max debt service (30% of total operating revenues - debt) Euro (euro=61,5 mkd) 197,520.62 Source: Financial information of Municipality of Lipkovo From the information presented in the Profit and loss statement it is clearly visible that tax revenues including VAT have most significant impact on the operating revenues of the Municipality of Lipkovo. In the review of the municipal revenues and expenditures for the period 2016-2019, budget projection for 2019 is also presented, in which a donation in the amount of 7,404.847.00 MKD, is included on the revenue side. This donation represents one-off amount from the Central Government, granted to the Municipality in order to improve its financial condition and to reduce the debt toward the business sector.
Table 15 Review of revenues and expenditures Projections for 2018 2017 2016 Average 2019 (2016 – 2018) Account Item Amount Amount Amount Amount
71 Tax revenues 19,950,000.00 16,348,694.00 15,071,158.00 13,114,745.00 16,121,149.25 72 Non tax revenues 10,700,000.00 10,404,591.00 3,379,801.00 957,439.00 6,360,457.75 74 Transfer and donations 42,633,454.00 40,395,007.00 36,711,799.00 35,575,722.00 38,828,995.50
Total operating revenues 73,283,454.00 67,148,292.00 55,162,758.00 49,647,906.00 61,310,602.50
40 Salaries and allowance for employees 16,815,812 15,166,702.00 14,899,415.00 14,265,900.00 15,286,957.25 42 Goods and services 16,717,000.00 14,499,593.00 11,524,379.00 10,924,114.00 13,416,271.50 46 Subsidies and transfers 4,613,000.00 3,115,902.00 2,094,533.00 286,986.00 2,527,605.25 47 Social transfers 500.00 279.00 0.00 0.00 194.75
Total operating expenditures 38,146,312.00 32,782,476.00 28,518,327.00 25,477,000.00 31,231,028.75 Net operating surplus 35,137,142.00 34,365,816.00 26,644,431.00 24,170,906.00 30,079,573.75
73 Capital revenues 3,027,205.00 2,732,905.00 2,438,714.00 16,324,990.00 6,130,953.50 45 Interest 23,778.00 438,363.00 0.00 0.00 115,535.25 48 Capital expenditures 32,764,847.00 25,993,358.00 27,121,514.00 39,564,635.00 31,361,088.50 Net capital deficit -29,761,420.00 -23,698,816.00 -24,682,800.00 -23,239,645.00 -25,345,670.25 49 Principal repayment 3,500,000.00 7,800,000.00 0.00 0.00 2,825,000.00
Net surplus 1,875,722.00 2,867,000.00 1,961,631.00 931,261.00 1,908,903.50 Source: Budget of the municipality
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Based on the analyzed data, it can be concluded that operating revenues of the Municipality exceeds the operating expenditures, and the expenditures are financed by the revenues. Also, it is visible that operating revenues are increased over the analyzed period of 2016 – 2018 and the operating expenditures are also increased over the analyzed period. The debt of the Municipality of Lipkovo is based on one long term loan from the MSIP 2 for reconstruction of four schools and installation of boilers for central heating in three schools in the municipality of Lipkovo. According to the loan amortization schedule it is expected that outstanding amount of this loan equal to 29,389,469.00 MKD will be fully repaid by 10.08.2028.
Table 16 Llong term loans Project for reconstruction of four schools and installation of boilers for 29,389,469.00 central heating in three schools in the Municipality of Lipkovo (2/2016 - 08/2028) Outstanding amount in MKD 29,389,469.00
Interest rate 6 month LIBOR + variable spread Source: Financial information of Municipality of Lipkovo Payable and receivable accounts based on the data from the finance department from the Municipality are presented in the below table. Operational surplus will be used to service liabilities on time. However, transfer from the Central government will further improve financial position of the Municipality of Lipkovo to service liabilities on time.
Table 17 Account payable/receivable 2016 2017 2018 Projection for 2019 Accounts payable 18,459,671.00 23,432,813.00 29,262,000.00 23,718,161.33 Accounts receivable 4,443,176.00 3,836,533.00 3,492,423.00 3,924,044.00 Net deficit -14,016,495.00 -19,596,280.00 -25,769,577.00 -19,794,117.33 Earmarked transfers 7,404,847.00 Balance -12,389,270.33 Total operating surplus 24,170,906.00 26,644,431.00 34,365,816.00 28,393,717.67 Net surplus 10,154,411.00 7,048,151.00 8,596,239.00 16,004,447.33 Source: Budget of the municipality Below in the Table 18, it is presented that in 2019 the Municipality will have obligation to repay current MSIP loan in amount of 2,938,948.00 MKD and to pay only interest for the potential loan in the amount of 414,202, assuming that loan would be approved in late 2019. After 3 years of grace period, starting from 2023 the Municipality will have obligation to service the potential loan in amount of 1,399,558.20 MKD and to proceed with payment of the current loan in amount of 2,955,696.00 so the total cost of Municipal debt would be 4,355,254 MKD. From the table below we may assume that there is no risk for the Municipality of Lipkovo to service the potential loan in due time.
Table 18 Repayment capabilities 2019 repayment Annual repayment Balance 2019 Balance 2019 16,004,447.33
MSIP 2 loan repayment in 2019 2,938,948.00 Total 13,065,499.33 Source: Own calculations
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Table 19 - Repayment capabilities Balance based on projection Annual repayment 2019 Balance 2019 16,004,447.33 2,938,948.00 13,065,499.33 “No Risk” Source: Own calculations It is to be concluded that after the earmarked donation, the overall financial condition of the Municipality will improve and the account payables will decrease for significant portion, thus the Municipality would be in financial position to service its liabilities. However, Municipality of Lipkovo will have to apply rigorous financial discipline considering unfavorable negative trend in receivables/payables ratio in order to achieve long – term sustainability. 5.4 Analysis of the financial feasibility of the project
The overall financial analysis is based on the savings that the potential projects will generate in the period between the state before and after the project. The analysis is focused on the benefits to the local population by the project and, rather than on the borrowing entity, i.e. Municipality of Lipkovo. The Internal Rate of Return and the Net Present Value are calculated. A project is considered as acceptable if: • IRR> 5% • NPV>0 5.4.1 Time horizon For this kind of an infrastructure project, time horizon is 30 years. The time horizon for the loan is 13 years. 5.4.2 Limitations of the analysis Main limitation of this analysis is the fact that for this kind of project such as regulation of riverbed, all benefits can’t be clearly expressed in monetary terms because majority of the social, environmental or health benefits will directly affect the local population or the business sector, while the cost of the investment itself will be borne by the Municipality. 5.4.3 Initial investment As already explained the initial investment will be 13,995,582.00 MKD (€227,570.44) including VAT. This is the total amount to be covered by a MSIP 2 loans. 5.4.4 Projection of operating cash flows According to the project, subject to this analysis, construction works for regulation of Matejachka River riverbed is planned. The financial benefits of this project will be expressed through savings in costs for cleaning of the deposits of different materials (silt, vegetation, communal waste, debris, etc.) along the riverbed. [60]
These deposits represent a threat to the regular flow and may cause flooding. After the regulation of the riverbed it will be cleared of the existing vegetation and the flow will be regulated There are two components in maintenance of the riverbed: cleaning of the deposits of dumped materials and removal of the unwanted vegetation in the watercourse. Both components are representing a direct task of the Municipality. The average municipal expenditures for cleaning of the dumpsites alongside riverbed are 92,513.33 MKD. These expenditures for the Municipality of Lipkovo are created due to the fact that it is responsible for maintenance of the watercourses and 80% savings will be achieved after regulation of the riverbed. The average municipal expenditures for maintenance of the watercourse are 30,120.00 MKD. This activity includes cutting and removal of unwanted vegetation and will be eliminated by regulating the riverbed. Separate problem that will be resolved is discharge of the wastewater directly into the river. Such pollution requires expenditures in the average of 60,113.33 MKD, due to the fact that Municipality of Lipkovo is responsible for cleaning the river. These expenditures will be eliminated after regulation of the riverbed and the savings will be achieved. The calculation is presented in the table below:
Table 20 Municipal savings Savings in cleaning of Maintenance of unwanted vegetation Cleaning of waste water dumpsites
Year Amount Year Amount Year Amount 2016 88,450.00 2016 28,750.00 2016 58,690.00 2017 90,230.00 2017 28,960.00 2017 59,870.00 2018 98,860.00 2018 32,650.00 2018 61,780.00 Average 92,513.33 Average 30,120.00 Average 60,113.33 80% savings 74,010.67 Source: Financial data from Municipality 5.4.5 Operating costs Operating costs must be taken into consideration for public lightning that will be installed alongside riverbed. According to the Detailed Design 11 led lights are planes with consumption of 80W that will be regulated by a sensor. In average total daily working hours are 8. Below on the table presented are operational costs for electricity:
Table 21 Operating costs Led lights Consumption Working Monthly Price in Total monthly Annual kWh hours per day consumption MKD consumption in consumption in in kW/H MKD MKD
11.00 0.08 8.00 214.13 10.18 2,180.61 26,167.26 Source: Own calculations 5.4.6 Replacement costs The replacement costs are planned for changing of LED lights after 15 years, as well as for part of the urban equipment as per details given in the Detailed Design. [61]
Costs for LED lights are 38,940.00 MKD for replacement of 11 led lights and 60,534.00 MKD for changing the part of urban equipment that will be placed alongside riverbed. 5.4.7 Inflation The rate of inflation is fixed at 2% due to the fact the currency exchange regime of Macedonia is fixed to the Euro. This will be taken into consideration when calculating the NPV. 5.4.8 Discount rate The projected cash flows will be discounted using the cost of capital. For most of the projects, the only source of financing will be the loan from the World Bank. For this analysis the discount rate of 5% is adopted. 5.4.9 Residual value The residual value is reflected in the net benefits from the project after the period of projection. It is usually appropriate to use the method of capitalization of the future benefits. Since the project are infrastructure projects and the amortization rate is 1% annually, the resident value of riverbed is calculated at 9,223,746.28 MKD, without taken into consideration the works for urban equipment and public lightning, which will be added in the financial calculation in the last year of the analysis.
Table 22 Amortization plan Value of the Amortization Amount regulated riverbed rate 13,176,780.40 1% 131,767.80 13,045,012.60 1% 131,767.80 12,913,244.79 1% 131,767.80 12,781,476.99 1% 131,767.80 12,649,709.18 1% 131,767.80 12,517,941.38 1% 131,767.80 12,386,173.58 1% 131,767.80 12,254,405.77 1% 131,767.80 12,122,637.97 1% 131,767.80 11,990,870.16 1% 131,767.80 11,859,102.36 1% 131,767.80 11,727,334.56 1% 131,767.80 11,595,566.75 1% 131,767.80 11,463,798.95 1% 131,767.80 11,332,031.14 1% 131,767.80 11,200,263.34 1% 131,767.80 11,068,495.54 1% 131,767.80 10,936,727.73 1% 131,767.80 10,804,959.93 1% 131,767.80 10,673,192.12 1% 131,767.80 10,541,424.32 1% 131,767.80 10,409,656.52 1% 131,767.80 10,277,888.71 1% 131,767.80 [62]
10,146,120.91 1% 131,767.80 10,014,353.10 1% 131,767.80 9,882,585.30 1% 131,767.80 9,750,817.50 1% 131,767.80 9,619,049.69 1% 131,767.80 9,487,281.89 1% 131,767.80 9,355,514.08 1% 131,767.80 Residual value Total amortization 9,223,746.28 3,953,034.12 Source: Own calculations 5.4.10 Results of the financial analysis The results of the financial analysis must be summed up through the main indicators NPV and IRR. In this financial analysis in order to have more accurate results, MIRR is used, because of improved accuracy compared with IRR, as MIRR measures the true rate of return. Major issue with IRR occurs when a project has different periods of positive and negative cash flows, such as this case. The IRR produces more than one number, causing uncertainty and confusion. MIRR also assumes that reinvestment of the cash flows at the cost of capital is practically possible and multiple rates of return don’t exist in the case of MIRR, so the issue is solved, making it better regarding measurement of the true rate of return. The results of this financial appraisal based on the presented information give negative NPV of -6,975,653.64 MKD and MIRR of 1.09%, which is clearly below the acceptable level. The discount rate as already explained is 5%, the rate of inflation is 2%, which is added to the savings and operational costs. However, other that benefits of savings, the benefits that are immeasurable in monetary terms can’t be taken into consideration, and will be elaborated below in the cost and benefit analysis.
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Table 23 Financial analysis Year Interest Principal Total Replacement Operating Residual value Total Cash flow investment costs costs municipal cost savings
2020 414,202.57 0.00 414,202.57 26,167.26 164,244.00 -276,125.83
2021 414,202.57 0.00 414,202.57 26,690.61 167,528.88 -273,364.30
2022 414,202.57 0.00 414,202.57 27,224.42 170,879.46 -270,547.53
2023 414,202.57 1,399,558.20 1,813,760.77 27,768.91 174,297.05 -1,667,232.63
2024 372,782.32 1,399,558.20 1,772,340.52 28,324.29 177,782.99 -1,622,881.82
2025 331,362.07 1,399,558.20 1,730,920.27 28,890.77 181,338.65 -1,578,472.39
2026 289,941.82 1,399,558.20 1,689,500.02 29,468.59 184,965.42 -1,534,003.19
2027 248,521.57 1,399,558.20 1,648,079.77 30,057.96 188,664.73 -1,489,473.00
2028 207,101.31 1,399,558.20 1,606,659.51 30,659.12 192,438.02 -1,444,880.61
2029 165,681.06 1,399,558.20 1,565,239.26 31,272.30 196,286.78 -1,400,224.78
2030 124,260.81 1,399,558.20 1,523,819.01 31,897.75 200,212.52 -1,355,504.24
2031 82,840.56 1,399,558.20 1,482,398.76 32,535.70 204,216.77 -1,310,717.70
2032 41,420.31 1,399,558.20 1,440,978.51 33,186.42 208,301.11 -1,265,863.82
2033 33,850.15 212,467.13 178,616.98
2034 99,474.00 34,527.15 216,716.47 82,715.32
2035 35,217.69 221,050.80 185,833.11
2036 35,922.05 225,471.82 189,549.77
2037 36,640.49 229,981.25 193,340.76
2038 37,373.30 234,580.88 197,207.58
2039 38,120.76 239,272.49 201,151.73
2040 38,883.18 244,057.94 205,174.77
2041 39,660.84 248,939.10 209,278.26
2042 40,454.06 253,917.89 213,463.83
2043 41,263.14 258,996.24 217,733.10
2044 42,088.40 264,176.17 222,087.76
2045 42,930.17 269,459.69 226,529.52
2046 43,788.77 274,848.88 231,060.11
2047 44,664.55 280,345.86 235,681.31
2048 45,557.84 285,952.78 240,394.94
2049 46,469.00 9,223,746.28 291,671.84 9,468,949.12 Discount rate 5% NPV -7,333,921.88
MIRR 0.86% Source: Own calculations
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5.4.11 Sensitivity analysis The sensitivity analysis is based on the previous tables of the financial analysis. Its usefulness resides in the analysis of the IRR and NPV indicators depending on variable parameters. The benefits and the costs generated by the project vary from -10% to +10%.
Table 24 Sensitivity analysis NPV -7,333,921.88
Benefits +10% Benefits -10% NPV -7,015,895.24 -7,651,948.51
Cost +10% Cost -10% NPV -8,598,757.38 -5,710,818.14 Source: Own calculations As a conclusion of the sensitivity analysis it can be checked if NPV remains negative without significant impact from the changes in the benefits and costs, however the NPV is most responsive in reducing the costs by 10%. 5.5 Conclusion The total investment is 13,995,582.00 MKD with VAT included and the investment will be covered 100% with loan. Following the analysis of the balance sheet and profit and loss statement, it is to be concluded that the Municipality of Lipkovo has borrowing capacity for regular servicing of the loan. Of what is presented in the financial analysis, it is to be concluded that the project in financial terms is non-feasible with negative values in NPV (-7,333,921.88) and positive in MIRR (0.86%). Benefits that are quantifiable are savings in cleaning of dumpsites, maintenance of the unwanted vegetation and cleaning if the waste water that is discharged in the rived. On the other hand, there are benefits that will be presented in the economic analysis such as: increased flood protection and improved social life and better communication of the residents.
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6 Economic cost and benefit analysis
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6.1 General information Having the available financial analysis of the project, the economic analysis should be conducted, in order for the economic viability of the project to be checked. In this section, economic cost and benefits will be identified and quantified, and calculation will be provided by calculating the ENPV and MEIRR. In the economic cost and benefit analysis, the following principals will apply:
• Interest and taxes are excluded; • Constant prices are applied to all costs and benefits, so the price increase is eliminated; • Discount rate is fixed at 5%. 6.1.1 Scope and purpose of the analysis The purpose of this economic analysis is to identify, quantify and value the economic impacts of a project, including all externalities that could be positive or negative. Previously, the financial analysis was based on a project point of view, while the economic analysis look at the project from a broader social point of view and takes into consideration all benefits that arise to the project intervention that were not quantified in the financial analysis. The scope of this analysis is Regulation of a part of the Matejachka River riverbed, which will bring many benefits primarily to the local residents and. The economic benefits are mainly by increased flood protection that will have positive impact on the local population.
6.2 Identification and valuation of relevant costs and benefits 6.2.1 Costs Project costs were presented in the financial analysis and in the economic analysis VAT will not be taken into consideration, so the cost structure for the project is:
Table 25 Economic value of the project Project name Amount Regulation of a part of the Matejachka River 11,860,662.00 riverbed Amount in MKD 11,860,662.00 Amount in EUR (euro=61,5 MKD) 192,856.29 Source: Project budget
Table 26 Economic value per category for street construction Regulation of a part of the Matejachka River CF Regulation of a part of riverbed the Matejachka River riverbed – economic value Preparatory works 292,250.00 0.70 204,575.00 Earth works 1,743,370.00 0.70 1,220,359.00 Concrete works 6,829,888.00 0.70 4,780,921.60 Reinforcement works 2,301,254.00 0.70 1,610,877.80 Urban equipment 311,800.00 1.00 311,800.00 Lightning 382,100.00 1.00 382,100.00 Total 11,860,662.00 8,510,633.40 Source: Project budget [67]
Financial costs need to be converted into economic cost, using standard conversion factors (CFs). Regulation of the riverbed, mainly consist of civil works, and the conversation factor is set at 0.7 in order to correct unskilled labor that is present in Lipkovo, which means the economic wage of unskilled labour is about 70 percent of the financial wage costs, however the conversion factor for urban equipment and lightning is 1.0, because involves usage of mechanization and purchasing of tradable goods.
Based on the table presented above the total economic value of the project after applying conversion factor is 8,510,633.40 MKD. Operating costs for repairs and maintenance are also converted to economic costs and are presented without VAT and with conversion factor of 1.0.
Table 27 Operating costs for road maintenance Led lights Consumption Working Monthly Price in Total monthly Annual kWh hours per day consumption MKD consumption in consumption in in kW/H MKD MKD
11.00 0.08 8.00 214.13 10.18 2,180.61 26,167.26 Without VAT 22,175.65 Source: Own calculations Replacement costs are also converted into economic costs and are presented without VAT and with CF of 1.0, because it involves purchasing of tradable goods. Costs for LED lights are 33,000.00 MKD for replacement of 11 led lights and 51,300.00 MKD for changing the part of urban equipment that will be placed alongside riverbed 6.2.2 Quantifiable Benefits In the financial analysis, financial benefit savings in costs for cleaning and maintenance are identified and values and also they will be presented from economic perspective. 6.2.2.1 Savings in municipal funds
As presented in the financial analysis the savings that will be achieved will be converted into economic value by presenting without VAT and with CF of 1.0, since it uses skilled labour and uses mechanization and highly tradable good. Table 28 Savings in municipal funds – economic value Savings in cleaning of Maintenance of unwanted Cleaning of waste water dumpsites vegetation
Year Amount Year Amount Year Amount 2016 88,450.00 2016 28,750.00 2016 58,690.00 2017 90,230.00 2017 28,960.00 2017 59,870.00 2018 98,860.00 2018 32,650.00 2018 61,78.000 Average 92,513.33 Average 30,120.00 Average 60,113.33 Without VAT 78,401.13 25,525.42 50,943.50 Source: Financial data from Municipality
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6.2.2.2 Economic savings due to Increased flood protection Procedure related to unique methodology for compensation of damages The regulation of Matejachka River riverbed is expected to control and protect local population from the flooding. Due to the time and budget constraints, it is not possible to do field work and to gather data and the basis for calculation is Unified Methodology for Damage Assessment which is adopted by the Government on the proposal of the Ministry of Finance, announced in the O.G. no.75 dated 09.09.2001. In accordance with the Law on Protection and Rescue, natural disasters are: earthquakes, floods, landslides, snowy avalanches and drifts, glacier, hail, drought, which with natural uncontrolled forces endanger the environment, human life and health, animal and plant life and cultural heritage. Damage to the property of the citizens, caused by natural disasters and other accidents, is defined by the Law on Protection and Rescue as immediate destruction and damage from natural disasters and other accidents, as well as the costs of the activities and the measures undertaken in removing and preventing destruction and damage to property, material goods, natural resources, cultural heritage and the environment, plants, injuries to humans and animals. The participation of the State Authorities in the compensation of damage caused by natural disasters is exercised through a decision of the Government on the amount of the compensation for the damage caused by natural disasters and other accidents, as well as by a decision of the Council of the local Self-Government unit that decides on the amount of the funds from the budget of the local Self-Government unit for compensation of damage from natural disasters and other accidents and distribution of humanitarian aid destined for the affected population. The assessment and determination of the amount of damage caused by natural disasters and other accidents is performed by commissions formed by the Government, the councils of the local Self-Government units and the management bodies in the trade companies, public enterprises, institutions and services. The assessment and determination of the amount of damage shall include the type, amount and amount of damage expressed in kind and value indicators, according to the area, activity, property, ownership, time and cause of the occurrence of the damage. The Law on Agriculture and Rural Development in Article 99 defines aid for losses sustained by natural disasters and adverse climatic events as aid to agricultural holdings for losses of agricultural plants and animals on agricultural property, as well as damage to greenhouses and greenhouses caused by adverse weather events. The maximum amount of aid will not exceed 100% of the determined loss of income from the sale of agricultural plants and animals, on agricultural property and damages to greenhouses. Law on Social Protection provides for one-time financial assistance in the amount of 30,000 MKD, which is granted to a person or family who is in a state of social risk, as well as a person or family due to a natural disaster or an epidemic. According to the Decree of the Government on the manner of work of the commissions for assessment and determination of the amount of damage caused by natural disasters and other accidents, the assessment is carried out according to the Uniform Methodology for the assessment of damages.
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The assessment should be carried out in the whole area that suffered damage and the commissions should ensure the completeness of the coverage, using the statistical circles of the State Statistical Office. The commissions evaluate the damage with direct insight into each asset and material good in the ownership of legal entities, independent experts of activities and citizens who have suffered any damage and for each examined asset should determine whether it has been damaged or destroyed, as stated in the decree. Generally, the price depends on the location of the property, whether it is a house or a building, by the type of construction. Additional factors are the market value of the property, that is, the amount per square meter will be needed to return it to its original state. An important factor is whether someone is permanently living on that property or not Article 5 of the Decree provides that for heavily damaged assets it is necessary to determine whether their damage is so much that it cannot be repaired, or the repair costs are so high that it is not worthwhile and should be treated in such cases as destroyed funds. Upon completion of the assessment, the commissions should calculate the costs necessary for each material good that should be brought into the original condition, i.e. in the situation before the occurrence of the impairment. The calculated amounts of damages are reduced by the value of the saved material, the value of which is calculated according to the Unique Methodology. Based on information received from Municipality of Lipkovo in the past several flooding events occurred causing damages to local population, but the information regarding the financial implication cannot be verified. On the table below presented are flooding events:
Table 29 Flooding events Year Number of Agricultural houses land affected affected in ha 1951 130 3.0 1961 170 4.0 1985 110 2.5 1997 95 1.5 2004 75 1.0 2009 115 2.5 2017 85 1.2 2018 60 1.0 Source: Data from Municipality Based on the table below and based on hydrological study which is part of the Detailed design where it is recommended riverbed to be regulated, experience from the past of climate change and flooding events in adjacent regions, Consultant assessed lowest costs and losses to the closest households and agricultural properties near to the area of river from the flood if it would happen. Regarding households’ damages consultant calculates one-time financial assistance in the amount of 30,000 MKD according Law on Social Protection. Lowest economic value of the damages and losses is presented on the table below and it is estimated that flood could happen every fifth-year. [70]
Table 30 Economic value of the damages and losses Economic savings Measuring Total Lowest value of compensation Total value of from flood damages unit value units per measuring unit damages/losses
Houses Number 90 30,000.00 2,700,000.00 Agricultural land m2 10,000.00 4.0 40,000.00 Income losses from kg 30,000.00 12.3 369,000.00 grain (kg) Total value in MKD 3,109,000.00 Source: Own calculations 6.2.3 Valuation of benefits On the table below it is presented comparison table of benefits without and benefits with implementation of the project, as well as quantification of the benefits.
Table 31 Quantification of the benefits Without the project With the project Quantification of benefits
Current flood protection; Increased flood protection; Savings in municipal funds 154,870.06 Current level of social life Increased level of social life MKD without VAT Current tourism potential Increased tourism potential Economic savings due to Increased flood protection 3,109,000.00 MKD
6.2.4 Unquantifiable benefits The other benefit that can’t be quantified and are immeasurable are important and have to be taken onto consideration for the decision-making process. Most important unquantifiable benefits are: 6.2.4.1 Environmental protection The project activities will contribute towards achieving the vision of the municipal administration for improvement of living conditions and protection of environment throughout the municipal territory and with fully implementation of the activities the positive impact for local population will be improvement of the quality of live by increased flood protection, and protection of the environment in the municipality of Lipkovo. Furthermore, it will contribute to efficient spatial planning and protection of natural resources. 6.2.4.2 Increased communication and social life By regulation of Matejachka River riverbed local population will have benefits due to the fact that regulation of the riverbed and placing urban equipment increase the communication of the residents and will create better social life by promoting clean and health environment. 6.2.4.3 Increased potential for economic growth Better infrastructure is one of the most important factors for economic growth. Also better infrastructure will increase the value of the properties and the land and will generate potential for tourism activities.
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6.2.4.4 Municipality benefits By implementing the project, the Municipality of Lipkovo will benefit in terms of better allocation of the funds, due to savings in cleaning and maintenance and also the confidence of the local population will increase.
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6.3 Results from the cost-benefit analysis Below on the table presented are results from economic appraisal of the benefits and the costs that the project will bring.
Table 32 Cost and benefit analysis Total Total Replacement Operating Year Interest Principal investment municipal Cash flow costs costs costs savings
2020 0.00 0.00 0.00 117,014.18 22,175.65 139,189.83 2021 0.00 0.00 0.00 139,189.83 117,014.18 22,175.65 2022 0.00 0.00 0.00 139,189.83 117,014.18 22,175.65 2023 0.00 851,063.34 851,063.34 139,189.83 -734,049.16 22,175.65 2024 0.00 851,063.34 851,063.34 139,189.83 3,109,000.00 2,374,950.84 22,175.65 2025 0.00 851,063.34 851,063.34 139,189.83 -734,049.16 22,175.65 2026 0.00 851,063.34 851,063.34 139,189.83 -734,049.16 22,175.65 2027 0.00 851,063.34 851,063.34 139,189.83 -734,049.16 22,175.65 2028 0.00 851,063.34 851,063.34 139,189.83 -734,049.16 22,175.65 2029 0.00 851,063.34 851,063.34 139,189.83 3,109,000.00 2,374,950.84 22,175.65 2030 0.00 851,063.34 851,063.34 139,189.83 -734,049.16 22,175.65 2031 0.00 851,063.34 851,063.34 139,189.83 -734,049.16 22,175.65 2032 0.00 851,063.34 851,063.34 139,189.83 -734,049.16 22,175.65 2033 139,189.83 117,014.18 22,175.65 2034 139,189.83 3,109,000.00 3,141,714.18 84,300.00 22,175.65 2035 139,189.83 117,014.18 22,175.65 2036 139,189.83 117,014.18 22,175.65 2037 139,189.83 117,014.18 22,175.65 2038 139,189.83 117,014.18 22,175.65 2039 139,189.83 3,109,000.00 3,226,014.18 22,175.65 2040 139,189.83 117,014.18 22,175.65 2041 139,189.83 117,014.18 22,175.65 2042 139,189.83 117,014.18 22,175.65 2043 139,189.83 117,014.18 22,175.65 2044 139,189.83 3,109,000.00 3,226,014.18 22,175.65 2045 139,189.83 117,014.18 22,175.65 2046 139,189.83 117,014.18 22,175.65 2047 139,189.83 117,014.18 22,175.65 2048 139,189.83 117,014.18 22,175.65 2049 139,189.83 3,109,000.00 3,226,014.18 22,175.65 Discount rate ENPV 4,730,695.53 5% MEIRR 7.93% Source: Own calculations
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The ENPV based on our assumptions in economic cost and benefit analysis is positive at 4,730,695.53 MKD and MEIRR is 7.93% using 5% discount rate. It is to be concluded that the economic analysis showed that this project is attractive with positive value of ENPV and MIRR. According to the economic analysis presented above, the decision makers have to take into consideration that many of the benefits can’t be quantified, such as: increased environmental protection, increased life and property protection from flood, improved communication and social life are precondition for exploring potential for economic growth in the future. 6.4 Sensitivity analysis The sensitivity analysis during economic appraisal was conducted in the same way as in the financial appraisal, by performing variations in benefits and costs by +/-10%.
Table 33 Economic Sensitivity analysis NPV 4,730,695.53
Benefits +10% Benefits -10% NPV 5,809,596.37 3,651,794.70
Cost +10% Cost -10% NPV 4,124,864.25 5,336,526.82 Source: Own calculations As a conclusion of the sensitivity analysis it can be checked if NPV remains positive without significant impact from the changes in the benefits and costs, however the NPV is most responsive in changes in the benefits by 10%. 6.5 Conclusion Following negative outcome from the economic cost benefit analysis, it is to be concluded that from economic perspective the project is non-viable. Implementation of the project is generating enough income showed through measurable benefits. Even though the quantifiable benefits represented through savings in cleaning and maintenance are not enough to justify the investment, there will be positive impact to the Municipality of Lipkovo and to local population, since flood protection will protect local population and on the other side Municipality of Lipkovo will generate savings in municipal funds. These benefits are crucial for local population, since the land value will increase, it will provide better communication and promote opportunity for tourism activities.
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7 Risk analysis
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7.1 Technical risks for the municipality
Stepwise implementation of the regulation of the Matejachka River must include care in regard to the continuity of the flow. Namely, with the construction of the part of the designed alignment, conditions for erosion of the next stage must be avoided, and possibility the water flow to escape of the original route and to endanger the downstream objects and properties. During the implementation of works, the Municipality of Lipkovo will have to provide visibility to the Project, in order risks related to the traffic to be avoided. Namely, the bridge over Matejachka River is on the important route that have to be functional without interruptions. Whenever necessary, temporary traffic warning by red / green flags to be introduced. Maneuvering space for the construction machinery and vehicles for delivery of construction materials is also interfering the local streets, and site organization must include appropriate measures, including warning plates and traffic signs. The construction site must be fenced and access, especially to the children to be fully prevented. Access to the entire length of the construction works must be maintained in order accidents to be avoided, since there will be diversion of the water flow. The state of the riverbed on the crossing with the bridge have big importance, and any erosion of the side slopes, or bridge construction is subject to permanent monitoring. During the exploitation, the riverbed should be maintained clean in order the works to remain protected against increased velocity of the water stream. The state of the works should be monitored constantly. Timely emptying of the solid waste bins by the CSE Pisha shall contribute to the protection of the pollution of the river. 7.2 Financial and cost-benefit risks for the municipality
Every project that is subject to financial and economic analysis brings potential risk due to the fact that these analyses are based on predictions and assumptions that should be met during the life cycle of the project. Financial analysis showed that provided financial support from the Central Government will facilitate the Municipality of Lipkovo to create sustainability in long term and will lead to financial consolidation by reducing the debt and it will also improve overall financial condition. However, Municipality of Lipkovo will have to apply rigorous financial discipline considering unfavorable negative trend in receivables/payables ratio. The financial analysis showed that project is not feasible following negative NPV and positive MIRR, but economic analysis showed that that implementation of the project will bring more benefits and positive value of ENPV and desirable MEIRR, hence the project is acceptable and desirable. With implementation of this project Municipality of Lipkovo will make savings in cleaning and maintenance of the regulated riverbed of Mathejachka River, as well as flood protections will be increased.
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The project that is subject to analysis will cost 13,995,582.00 MKD and will be covered with MSIP 2 loan with duration of 13 years with 3 years of grace period. The duration of the works will be up to 10 months.
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8 Recommendations
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The functionality of the regulated riverbed is possible only when it is kept clean and free of deposits of solids. Duty of the CSE Pisha will be to remove deposits of materials coming of the higher areas, after the rains and periods of increased flow. On this way the possibility of flooding will be fully prevented. Planting of typical and representative endemic vegetation along the expropriated belt shall enrich the visual effects and general landscape. Properly regulated riverbed joined with decorative vegetation shall make the promenade more attractive to the citizens. The new arrangement of Matejachka River is offering improvement of the social live in the village of Matejche. With the provision of technical improvement, follow up activities are becoming important component in the village. For energy saving purposes, the lighting of the arranged area should be limited until 23:00 hours. Young generation, through daily education process shall be advised on care on the decorative vegetation, and general improvements of the habits versus municipal infrastructure. This investment can be seen as an opportunity for classes in the outdoor conditions. Since the arranging of Matejachka River is envisioned to be stepwise, the local community has to be dedicated to the provision of further financial means allocated for the next step of the Project.
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9 Annex
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9.1 Decision of the Municipality of Lipkovo for long-term loan
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9.2 Decision for determination of locations for demolition waste
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9.3 Table for Matejachka River
Matejachka River 00,00m to 310,00m
Name and surname Cadas Is there Is it Area of How Cadastre Real Land Use Estimated Is What is the tral an leg total much Classificatio (Condition / value compens answer to the plot object al parce area is n and Use Purpose) ation compensatio that is deducte offered n offered demolis d (when) hed 01.Stojanoviq Stojadin 1512 There is / 55 54 0 гиз 31.374 no object 02.R.МАК/Iseni Fadil 1529 ,, / 454 55 зпо 31.955 03.Ramadani Jonuz 1516 ,, / 486 67 3 Ов/3 12.395 04.Ramadani Aliriza 1517 ,, / 1.478 69 0 зпо 40.089 05.Mihane Ramadani 1519 ,, / 1.519 49 0 Гиз 28.469 7 Зпз1 4.067 06.Ramizi Fejzula 1522 ,, / 538 109 0 гнз 63.329 07.Amidi Ibis 1522 ,, / 780 107 0 гиз 62.167 08.Jasari Rakip 1523 ,, / 1.264 187 0 Гиз 108.647 12 Гпз 6.972 1 гпз 581 09.Velickoviq Vlade 3170 ,, / 336 44 0 гнз 25.564 10.Stojanoviq Jovan 3169 ,, / 222 47 0 гнз 27.307 11.Ivica Stojanoviq 3135 ,, / 1.325 188 0 Гиз 109.228 12.R.МАК/Iseni Fadil 1529 ,, / 454 55 зпо 31.955 13.Aleksiq Branko 1524 ,, / 707 37 3 гиз 21.497 14.Osmani Djeladin 3166 ,, / 1.081 57 0 Runs in the water 10.545 15.Muharem Sadiki 3164 ,, / 1.404 1 0- unfinished гна 581 16.Muharemi Raime 3163 ,, / 882 13 0- unfinished гна 7.553 17.Ferid Muaremi 3162 ,, / 975 2 0 гиз 1.162 18.Nikoliq Jovica 3136 ,, / 2.773 90 0 Гиз/зпз 52.290 Total 16.733 1.251 677.727
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Име и Презиме Катас Дали Дали Површина Површина Класифик Во Проценета Дали е Кој е тарск има е на вкупна колку се ација реалност вредност понуден одговорот за а објект легал парцела одзема според употреба а понудената парце кој што ен катастар и на компенз компензациј ла се употреба земјиштет ацијата а одзме о (кога) (демол (состојба/ ира) намена) опис 01.Стојановиќ Стојадин 1512 Нема / 55 54 0 гиз 31.374 објект 02.Р.МАК/Исени Фадил 1529 ,, / 454 55 зпо 31.955 03.Рамадани Јонуз 1516 ,, / 486 67 3 Ов/3 12.395 04.Рамадани Алириза 1517 ,, / 1.478 69 0 зпо 40.089 05.Михане Рамадани 1519 ,, / 1.519 49 0 Гиз 28.469 7 Зпз1 4.067 06.Рамизи Фејзула 1522 ,, / 538 109 0 гнз 63.329 07.Амди Ибиши 1522 ,, / 780 107 0 гиз 62.167 08.Јашари Ракип 1523 ,, / 1.264 187 0 Гиз 108.647 12 Гпз 6.972 1 гпз 581 09.Величковиќ Владе 3170 ,, / 336 44 0 гнз 25.564 10.Стојановиќ Јован 3169 ,, / 222 47 0 гнз 27.307 11.Ивица Стојановиќ 3135 ,, / 1.325 188 0 Гиз 109.228 12.Р.МАК/Исени Фадил 1529 ,, / 454 55 зпо 31.955 13.Алексиќ Бранко 1524 ,, / 707 37 3 гиз 21.497 14.Османи Џеладин 3166 ,, / 1.081 57 0 Течну води 10.545 15.Мухарем Садики 3164 ,, / 1.404 1 0-неизград гна 581 16.Муареми Раиме 3163 ,, / 882 13 0-неизград гна 7.553 17.Ферид Муареми 3162 ,, / 975 2 0 гиз 1.162 18.Николиќ Јовица 3136 ,, / 2.773 90 0 Гиз/зпз 52.290 Вкупно 16.733 1.251 677.727
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