FOR OFFICIAL USE ONLY
Public Disclosure Authorized Report No: PAD3402
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
PROJECT APPRAISAL DOCUMENT
ON
PROPOSED LOANS
IN THE AMOUNT OF EUR 123.2 MILLION (US$134.0 MILLION EQUIVALENT) Public Disclosure Authorized TO
BOSNIA AND HERZEGOVINA, MONTENEGRO, AND THE REPUBLIC OF SERBIA
FOR THE FIRST PHASE OF THE SAVA AND DRINA RIVERS CORRIDORS INTEGRATED DEVELOPMENT PROGRAM USING THE MULTIPHASE PROGRAMMATIC APPROACH
WITH AN OVERALL FINANCING ENVELOPE OF US$332.4 MILLION
Public Disclosure Authorized July 9, 2020
Water Global Practice Europe and Central Asia Region
Public Disclosure Authorized
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
CURRENCY EQUIVALENTS Exchange Rate Effective April 30, 2020
Currency Unit = Euro (EUR) EUR 0.92 = US$1 US$1.09 = EUR 1
Fiscal Year January 1–December 31
ABBREVIATIONS AND ACRONYMS
AGN European Agreement on Main Inland Waterways of International Importance APCU Agriculture Project Coordination Unit BHMAC Bosnia and Herzegovina Mine Action Center BiH Bosnia and Herzegovina CAGR Compounded Annual Growth Rate CFU Centralized Fiduciary Unit CHS Community Health and Safety COVID-19 Coronavirus Disease 2019 CPF Country Partnership Framework DA Designated Account DWT Deadweight Ton EIRR Economic Internal Rate of Return ENPV Economic Net Present Value ESCP Environmental and Social Commitment Plan ESF Environmental and Social Framework ESIA Environmental and Social Impact Assessment ESMAP Energy Sector Management Assistance Program ESMF Environmental and Social Management Framework ESMP Environmental and Social Management Plan ESRS Environmental and Social Review Summary ESS Environmental and Social Standards EU European Union FASRB Framework Agreement on the Sava River Basin FBiH Federation of Bosnia and Herzegovina FM Financial Management GBV Gender-based Violence GDP Gross Domestic Product GEF Global Environment Facility GHG Greenhouse Gas GIS Geographic Information System GRM Grievance Redress Mechanism
GRS Grievance Redress Service IMAS International Mine Action Standards IMF International Monetary Fund IPF Investment Project Financing ISRBC International Sava River Basin Commission LAD Least Available Depth LMP Labor Management Plan M&E Monitoring and Evaluation MoAFW Ministry of Agriculture, Forestry and Water Management MoARD Ministry of Agriculture and Rural Development MoCTI Ministry of Construction, Transport and Infrastructure MPA Multiphase Programmatic Approach NGO Nongovernmental Organization O&M Operations and Maintenance OHS Occupational Health and Safety PAP Project-affected Person PDO Project Development Objective PIU Project Implementation Unit PMU Project Management Unit POM Project Operations Manual PPSD Project Procurement Strategy for Development PrDO Program Development Objective RAP Resettlement Action Plan RBMP River Basin Management Plan RFB Request for Bids RFP Request for Proposal RPF Resettlement Policy Framework RS Republika Srpska SCCF Special Climate Change Fund SDIP Sava and Drina Rivers Corridors Integrated Development Program SEP Stakeholder Engagement Plan SESA Strategic Environmental and Social Assessment SMEs Small and Medium Enterprises SOE Statement of Expenditures SOP Standard Operating Procedure STEP Systematic Tracking of Exchanges in Procurement TEN-T Trans-European Transport Network ToR Terms of Reference TSU Technical Service Unit TTFP Western Balkans Trade and Transport Facilitation Program VAT Value Added Tax WBIF Western Balkans Investment Framework
Regional Vice President: Anna Bjerde
Country Director: Linda Van Gelder
Global Director: Jennifer Sara
Regional Director: Steven Schonberger
Practice Manager: David Michaud, Karla Gonzalez Carvajal Berina Uwimbabazi, Luis C. Blancas Mendivil, Igor Task Team Leader(s): Palandzic, Darko Milutin
TABLE OF CONTENTS DATASHEET ...... 1 I. STRATEGIC CONTEXT ...... 7 A. Regional/Country Context ...... 7 B. Sectoral and Institutional Context ...... 10 C. Relevance to Higher Level Objectives ...... 13 D. Multiphase Programmatic Approach ...... 14 II. PROJECT DESCRIPTION ...... 21 A. Project Development Objective ...... 21 B. Project Components ...... 21 C. Project Beneficiaries ...... 26 D. Rationale for Bank Involvement and Role of Partners ...... 26 E. Lessons Learned and Reflected in the Project Design ...... 28 III. IMPLEMENTATION ARRANGEMENTS ...... 30 A. Institutional and Implementation Arrangements ...... 30 B. Results Monitoring and Evaluation Arrangements...... 33 C. Sustainability ...... 33 IV. PROJECT APPRAISAL SUMMARY ...... 33 A. Technical, Economic and Financial Analysis ...... 33 B. Fiduciary ...... 38 C. Legal Operational Policies ...... 40 D. Environmental and Social ...... 40 E. Other Corporate Mandates ...... 42 V. GRIEVANCE REDRESS SERVICES ...... 45 VI. KEY RISKS ...... 45 VII. RESULTS FRAMEWORK AND MONITORING ...... 48 ANNEX 1: Implementation Arrangements and Support Plan ...... 55 ANNEX 2: Detailed Project Design ...... 70 ANNEX 3: Detailed Economic Analysis ...... 76 ANNEX 4: Detailed MPA Program Framework for the SDIP ...... 89 ANNEX 5: Project Area Map ...... 91
. DATASHEET
BASIC INFORMATION BASIC_INFO_TABLE Country(ies) Project Name
Bosnia and Herzegovina, Croatia, Sava and Drina Rivers Corridors Integrated Development Program Montenegro, Slovenia, Serbia
Project ID Financing Instrument Environmental and Social Risk Classification
Investment Project P168862 High Financing
Financing & Implementation Modalities
[✓] Multiphase Programmatic Approach (MPA) [ ] Contingent Emergency Response Component (CERC) [ ] Series of Projects (SOP) [ ] Fragile State(s)
[ ] Performance-Based Conditions (PBCs) [ ] Small State(s)
[ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country
[ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster
[ ] Alternate Procurement Arrangements (APA) [ ] Hands-on Enhanced Implementation Support (HEIS)
Expected Project Approval Expected Project Closing Expected Program Closing Date Date Date
04-Aug-2020 30-Jul-2026 31-Dec-2030
Bank/IFC Collaboration No
MPA Program Development Objective The objective of the Program is to strengthen transboundary water cooperation and improve navigability and flood protection in the Sava and Drina Rivers Corridors.
MPA Financing Data (US$, Millions) Financing MPA Program Financing Envelope 332.40
Page 1 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Proposed Project Development Objective(s) The Objective of the Project (Phase I of the Program) is to improve flood protection and enhance transboundary water cooperation in the Sava and Drina Rivers Corridors.
Components
Component Name Cost (US$, millions)
Integrated Management and Development of the Sava River Corridor 102.23
Integrated Management and Development of the Drina River Corridor 23.21
Project Preparation and Management 17.25
Regional Activities 8.81
Organizations
Borrower: Republic of Serbia Bosnia and Herzegovina Montenegro
Implementing Agency: Republic of Serbia Ministry of Agriculture, Forestry and Water Management
Montenegro Ministry of Agriculture and Rural Development
Republika Srpska Ministry of Agriculture, Forestry and Water
Republic of Serbia Ministry of Construction, Transport and Infrastructure
MPA FINANCING DETAILS (US$, Millions)
MPA FINA NCING DETAILS (US$, Millions) Approved MPA Program Financing Envelope: 332.40
of which Bank Financing (IBRD): 302.80
of which Bank Financing (IDA): 0.00
of which other financing sources: 29.60
PROJECT FINANCING DATA (US$, Millions) FIN_SUMM_NEW
SUMMARY-NewFin1
Total Project Cost 151.50 Total Financing 133.99
Page 2 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
of which IBRD/IDA 133.99
Financing Gap 17.51
DETAILS-NewFinEnh1
World Bank Group Financing
International Bank for Reconstruction and Development (IBRD) 133.99
Expected Disbursements (in US$, Millions)
WB Fiscal 2020 2021 2022 2023 2024 2025 2026 2027 Year Annual 0.00 7.89 25.10 25.05 27.86 30.00 15.09 3.00
Cumulative 0.00 7.89 32.99 58.04 85.90 115.90 130.99 133.99
INSTITUTIONAL DATA
Practice Area (Lead) Contributing Practice Areas Environment, Natural Resources & the Blue Economy, Water Transport, Urban, Resilience and Land
Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks
SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT)
Risk Category Rating
1. Political and Governance ⚫ Substantial
2. Macroeconomic ⚫ Substantial
3. Sector Strategies and Policies ⚫ Moderate
4. Technical Design of Project or Program ⚫ Substantial
5. Institutional Capacity for Implementation and Sustainability ⚫ Substantial
6. Fiduciary ⚫ Moderate
Page 3 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
7. Environment and Social ⚫ High
8. Stakeholders ⚫ Substantial
9. Other ⚫ Substantial
10. Overall ⚫ High
Overall MPA Program Risk ⚫ High
COMPLIANCE
Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [✓] No
Does the project require any waivers of Bank policies? [ ] Yes [✓] No
Environmental and Social Standards Relevance Given its Context at the Time of Appraisal
E & S Standards Relevance
Assessment and Management of Environmental and Social Risks and Impacts Relevant
Stakeholder Engagement and Information Disclosure Relevant
Labor and Working Conditions Relevant
Resource Efficiency and Pollution Prevention and Management Relevant
Community Health and Safety Relevant
Land Acquisition, Restrictions on Land Use and Involuntary Resettlement Relevant
Biodiversity Conservation and Sustainable Management of Living Natural Resources Relevant
Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Local Not Currently Relevant Communities Cultural Heritage Relevant
Financial Intermediaries Not Currently Relevant
Page 4 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
NOTE: For further information regarding the World Bank’s due diligence assessment of the Project’s potential environmental and social risks and impacts, please refer to the Project’s Appraisal Environmental and Social Review Summary (ESRS).
Legal Covenants
Sections and Description The Project Implementing Entity in Republika Srpska in BiH shall maintain the Agriculture Project Coordination Unit (APCU) at all times during the implementation of the Project, with sufficient resources, competent staff in adequate numbers and responsibilities,all acceptable to the Bank and as set forth in the Project Operations Manual (POM).
Sections and Description The Project Implementing Entities in Serbia - Ministry of Agriculture, Forestry and Water Management (MoAFW) and Ministry of Construction, Transportation and Infrastructure (MoCTI) shall establish by not later than two months after the Effective Date, and thereafter maintain at all times during the implementation of the Project, a PIU within MoAFW and a PIU within MoCTI, with composition, resources, terms of reference and functions acceptable to the Bank.The MoAFW PIU shall be responsible for disbursement, monitoring and evaluation and safeguards compliance under Parts 1.1, 2, and 3 of the Project. The MoCTI PIU shall be responsible for disbursement, monitoring and evaluation and safeguards compliance under Part 1.3 of the Project.
Sections and Description The Project Implementing Entity in Montenegro - Ministry of Agriculture and Rural Development (MoARD) shall establish by not later than two months after the Effective Date, and thereafter maintain at all times during the implementation of the Project, a PIU within MoARD, with composition, resources, terms of reference and functions acceptable to the Bank.
Sections and Description Borrowers will submit annual work plans and budget plans to the Bank each year as outlined in the POM.
Sections and Description Borrowers will take all the necessary actions for the implementation of Part 4 of the Project in a manner satisfactory to the Bank and as outlined in the POM.
Sections and Description Borrowers will adopt their respective POMs two months following the effective date.
Conditions
Page 5 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Page 6 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
I. STRATEGIC CONTEXT
A. Regional/Country Context
1. The riparian countries of the Sava and Drina Rivers—Slovenia, Croatia, Bosnia and Herzegovina (BiH), Serbia, and Montenegro—aspire to consolidate economic growth and enhance their prosperity; the onset of the coronavirus disease 2019 (COVID-19) pandemic has increased the urgency of this goal. After a protracted six-year period of sluggish or negative economic growth linked to the 2009 global economic crisis, regional economic growth improved markedly between 2015 and 2019 and had gained a stronger footing—until the onset of the pandemic. Specifically, between 2008 and 2014, the economies of the riparian countries collectively contracted at an annual weighted average rate of −0.7 percent in real terms, whereas in 2014–19, the countries grew at an annual weighted average rate of 3.1 percent.1 Regional economic recovery was accompanied by gains in employment. Whereas unemployment rates deteriorated in all riparian countries between 2009 and 2014, by the end of 2019, unemployment rates stood below their 2009 levels in all countries.2 In the immediate aftermath of COVID-19, the riparian economies are expected to collectively contract at the weighted average rate of −6.3 percent in 2020, with individual country contractions ranging from −9.0 percent in Croatia and Montenegro to −3.0 percent in Serbia. Although growth is expected to resume promptly in 2021, at a weighted average rate of 5.8 percent for the Western Balkans region, the pandemic’s impact may be felt longer term through lower- than-expected rates of economic growth over the medium term, making regional economic development efforts all the more relevant.
2. Before the pandemic, the medium-term economic outlook for the Western Balkans region was favorable; greater policy efforts will be needed to restore these prospects. As of late 2019, the riparian countries were expected to grow at a weighted average annual rate of 2.9 percent through 2024.3 Likely higher levels of economic uncertainty going forward will need to be offset by mitigation measures, such as policies to boost regional trade and reduce the impact from other sources of risk, such as natural disasters. Deeper integration between the European Union (EU) and non-EU member states in the Western Balkans will help as well. While Slovenia joined the EU nearly 15 years ago, Croatia’s accession to the EU in July 2013 is relatively recent. The other riparians—BiH, Serbia, and Montenegro—are currently in various stages of EU accession. They seek convergence with EU living standards and its market- and rules-based systems and aim to become upper-middle-income societies in the medium term, on a path to high-income status in the long term. The Berlin Process, an initiative led by several EU member states to foster collaboration and development in the Western Balkans toward integration with the EU, and the resulting Connectivity Agenda for the Western Balkans illustrate that there is wide international consensus on the importance of this convergence. Economic and policy integration across the region is an important component of this endeavor.
1 International Monetary Fund (IMF) World Economic Outlook (April 2020). Country-specific compounded annual growth rates (CAGRs) of gross domestic product (GDP) in real terms during the periods cited were weighted by the countries’ 2019 GDP in current international dollars at purchasing power parity.2 IMF World Economic Outlook (April 2020). Data exclude Montenegro due to unavailability. 2 IMF World Economic Outlook (April 2020). Data exclude Montenegro due to unavailability. 3 IMF World Economic Outlook (October 2019).
Page 7 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
3. At the same time, the Sava and Drina have a proclivity for both dry spells and devastating floods—most recently occurring in 2010 and 2014.4 The 2014 Sava flood—the largest flood in a century— caused 79 casualties and damages totaling €1.5 billion in Serbia (4.7 percent of GDP), €2.0 billion in BiH (15 percent of GDP), and €300 million in Croatia (0.5 percent of GDP). In 2010, the Drina River Basin was flooded extensively—partly due to spilling hydropower reservoirs—and saw its highest water levels in 100 years. The trends and changes in mean values of precipitation, evapotranspiration, and discharges in this basin are well documented and indicate that climate change is expected to cause more intense flood and drought episodes, both in terms of scope and duration.5 Specifically, current climate change projections for the Sava River Basin foresee a rise in flood peaks of up to 8 percent and droughts occurring with increased frequency and intensity. While droughts are particularly unfavorable to navigation,6 they also negatively affect agricultural production, biodiversity, fisheries, and energy generation7 and raise water demand. Floods and droughts thus create risks for livelihoods and impose constraints on trade, food security, and productive investment. These climate change-related risks have led to increased receptivity for transboundary cooperation on flood protection and water resources management in the region and thus have served as the main impetus for this project.
Box 1: Lessons from the 2010 and 2014 floods on the Sava and Drina Rivers In late November and early December 2010, extreme rainfalls in Montenegro and East Herzegovina, where 100– 200 mm of rain fell in three days, led to devastating flood waves. Flood waves on the Drina tributaries (Piva, Tara, Cehotina, Lim, and Jadar) and the main course were exceptional (such that hydropower reservoirs could not retain them) and affected several towns in BiH (Foca, Gorazde, Zvornik, and Bijeljina) and Serbia (Priboj, Prijepolje, Ljubovija, and Banja Koviljaca). Some 3,000 buildings were flooded only in Serbia, from which more than 1,400 people were evacuated. Between May 14 and 19, 2014, the rainfall amount on the Sava River Basin was more than three months’ worth. More than 160,000 people were displaced, and 70 people were killed. Overall economic damages in excess of US$5 billion were registered. In both cases, the World Bank and other development partners responded rapidly to address emergency needs. In 2010, the World Bank restructured one of its ongoing operations to provide emergency financing for flood protection restoration in BiH. In 2014, two IBRD emergency loans were processed within months of the disaster to cover the most urgent priorities in BiH and Serbia and largely achieved their objective of emergency reconstruction. However, a consensus is now emerging within authorities of the various countries that the country-level ad hoc reconstruction efforts will not provide effective long-term flood protection to the basin’s people and economy. A more integrated flood management approach across sectors and countries is essential. For example, the Drina cascade of hydropower reservoirs located in Montenegro and BiH could be used to temporarily store the peak of the floods affecting BiH and Serbia. Similarly, the flood defense structures and approaches alongside the Sava main course must be harmonized between the Croatian and BiH sides to avoid a detrimental dyke height race.
4 Average annual temperatures in the region are projected to rise by about 1.8°C by 2050 (with the highest increases in the southern parts of BiH, Serbia, and Montenegro). Overall annual mean precipitation is expected to decrease by 10–20 percent. Precipitation is expected to become more variable, resulting in a higher number of days with intense weather events and dry spells becoming more severe and prolonged (by around five days). Available hydrological analyses estimate a decrease of 20–25 percent in runoff. Under these conditions, the frequency and severity of floods, droughts, and extreme weather are expected to increase. [Source: UNDP. 2013. Natural Disaster Risks and Risk Assessment in South East Europe]. 5 Milačič, R., et al., eds. 2015. The Sava River. The Handbook of Environmental Chemistry. DOI 10.1007/978-3-662-44034-6_2. Springer-Verlag Berlin Heidelberg. 6 Schwarz, U. 2016. Sava White Book. The River Sava: Threats and Restoration Potential. Radolfzell/Wien: EuroNatur/Riverwatch. 7 Thermal power plants need water for cooling purposes, while hydropower plants need water for electricity generation.
Page 8 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Sava and Drina Rivers Corridors Integrated Development Program (SDIP) will offer an opportunity to plan flood management activities and investments along the entire basin and the various sectors in a more integrated manner.
4. The hydraulic infrastructure in the Sava and Drina Rivers, while nominally extensive, has been poorly maintained and only partially modernized and expanded since the conflicts of the 1990s and the breakup of Yugoslavia, hampering regional economic integration and suppressing growth. Before the conflicts, the Sava River played an important role in the freight transport network of the former Yugoslavia, with an estimated 5.2 million tons of bulk cargo transported in 1990, when the river was navigable nearly 300 days per year. Since then, inland waterway traffic volumes along the Sava have plummeted. Years of neglect, a lack of avenues for lasting cross-border collaboration on waterway development projects—as the river is also the border between Croatia and BiH for much of its navigable fairway—and remnants from the war itself, in the form of land mines still present along the river’s right bank within BiH, have severely deteriorated navigation standards. Current water depths over much of the Sava’s fairway, particularly upstream from Serbia, are below 2 m, which is insufficient to allow for the safe navigation of vessels with at least 1,000 deadweight tons (DWTs) in cargo carrying capacity, a threshold broadly considered necessary to attain desirable levels of waterborne transport efficiency.8 Furthermore, navigability in the Sava is constrained to only 160 days per year at key bottleneck sections, and select river ports serving the Sava inland waterway freight market in Serbia (Sremska Mitrovica), BiH (Brčko Port), and Croatia (Slavonski Brod) are in need of modernization, improved multimodal connections, more environmentally responsive facilities, and throughput capacity expansion across commodity types— especially if navigation conditions improve. Not surprisingly, by 2008, freight transport on the river Sava was estimated at 500,000 tons, or about one-tenth of the freight activity of 1990. While volumes have partially recovered since then, to an estimated 877,000 tons in 2018, boosted by the recent improvements in regional economic growth, they are still a fraction of the trade activity once supported by this waterway, and the commodities being moved continue to be dominated by bulk cargo, with no incidence to date of container transportation on this corridor, unlike what similar waterway corridors elsewhere in Europe— most notably in this case, the Danube—have achieved. 9 Similarly, in the Drina, a sustained lack of maintenance and investments in upgrades to make infrastructure able to withstand climate change- related extreme weather events has reduced the capacity of the river’s cascade of reservoirs to be resilient to service disruptions and to safeguard nearby communities from climate-related risks, such as major flooding events (the devastating floods of 2014 being the most recent example).
5. The Sava River Basin has considerable untapped potential as an enabler of economic growth, regional connectivity, resilience to climate change risks, social cohesion, and job creation. Income per capita among the riparians ranges from US$6,000–9,000 (Serbia, BiH, and Montenegro) to US$15,000 (Croatia) and US$26,000 (Slovenia), signaling opportunities for income convergence. As the Sava flows from west to east, and via the Danube, connecting the region with other parts of Europe, the river offers a tangible opportunity to establish it as a core economic corridor and as a driver of low-carbon multimodal transportation. There is also an urgent need to pursue no-regret10 investments; for example, investments to help maintain the water flow at levels suitable for navigation (imperiled by recurring droughts), thereby
8 See annex 3 for further details on the relationship between inland waterway transport costs per ton-km and barge cargo carrying capacity in the European experience. 9 Annex 3 discusses in more detail the commodity and origin–destination composition of the current freight flows moved along the Sava River. 10 No-regret investments here refer to activities that are of high readiness and relevance in relation to the Project Development Objective (PDO) and country development goals.
Page 9 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
reducing flood risk and strengthening the social and economic resilience of the communities within the Sava’s catchment in the face of climate change. Similarly, the Drina River Corridor has significant potential for food production and tourism development, while the 2014 floods have shown the importance of improved management and protection of its existing reservoirs.
B. Sectoral and Institutional Context
6. Since the mid-1990s, several regional and international treaties and associated protocols have been established to underpin transboundary collaboration in the Sava River Basin, most notably the Framework Agreement on the Sava River Basin (FASRB). Signed in 2002 by the Sava riparians (at the time, the Republic of Slovenia, Republic of Croatia, BiH, and the former Federal Republic of Yugoslavia), the FASRB calls, among others, for cooperation among the signatory parties toward three main goals: (a) establishment of an international regime of navigation on the Sava River and its navigable tributaries; (b) establishment of sustainable water management; and (c) undertaking of measures to prevent or limit hazards, and reduce and eliminate adverse consequences, including those from floods, ice hazards, droughts, and incidents involving substances hazardous to water. The International Sava River Basin Commission (ISRBC) is a Zagreb-based regional institution established in 2005 to oversee implementation of the latter FASRB provisions on behalf of the signatory parties.11 Since inception, ISRBC has served as a platform for multilateral dialogue in the region, has supported basin development through planning (for example, by coordinating the development of a River Basin Management Plan, a Flood Risk Management Plan, and past feasibility studies for infrastructure provision and navigation capacity expansion), and has coordinated the delivery of practical tools such as a Geographic Information System (GIS), River Information Services, and a Flood Forecasting and Early Warning System for the Sava River Basin. In delivering on its mandate, ISRBC has historically collaborated with other international institutions, such as the European Commission in drafting the first Sava River Basin Management Plan of 2014 and the World Bank in establishing the Sava River Flood Forecasting System in 2018.
7. In addition to being part of the EU Core Trans-European Transport Network (TEN-T), the Sava is subject to the 1996 European Agreement on Main Inland Waterways of International Importance (AGN). This agreement designated the Sava River as an international waterway Class IV, a standard that mandates the provision of safe navigation conditions for vessels up to 1,500 tons in capacity and a draft of 2.5 m, over a period of at least 240 days per year. Operationalizing this mandate requires the consistent provision of least available depth (LAD) levels of 2.7 m. At present, however, these conditions are not met. Specifically, the Sava meets Class IV standard only through approximately the last 103 river km of its fairway—that is, at its most downstream and busiest section, between Šabac and Belgrade, all within Serbia. Upstream from Šabac, while there are sections that remain at Class IV, the river is operationally considered Class III standard, as navigation conditions are ultimately dictated by the weakest links in a given portion of the corridor, and the presence of bottlenecks—shoals, obstacles to navigation, sharp bends, and the like—limits corridor navigability even if river sections elsewhere nominally comply with AGN provisions. The Class III standard is consistent with navigation of vessels up to 700 tons in capacity, and, as noted earlier, only for approximately 160 days per year in some sections. The as-yet-unfulfilled
11 Montenegro gained sovereignty after ISRBC was established and cooperates on a technical level with the signatory parties to the FASRB based on a Memorandum of Understanding on cooperation between ISRBC and Montenegro, signed in Belgrade on December 9, 2013.
Page 10 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
goals of the AGN agreement offer, in effect, a road map for the Sava River Corridor to meet broader European standards for inland waterway connectivity.
8. Despite tangible accomplishments by ISRBC and the FASRB signatories, the continued need for improvement in water management among Sava-Drina riparian countries demonstrates the challenge of deepening regional coordination on shared natural resources. Both the Sava and Drina waterways have the particularity that critical portions of their length mark the border between riparian countries— for example, between Croatia and BiH in the case of the Sava, where the border splits the river down the middle of its navigable fairway. This renders most interventions in the Sava within the territories of Croatia and BiH transboundary by nature, making it necessary for infrastructure investments to be planned and executed in a coordinated manner on both sides of the border. In other words, transboundary collaboration is an essential condition for the development of this shared resource, and the lack of it has hampered regional economic integration and associated economic development to date. While failure to invest in infrastructure modernization and maintenance is the most visible cause of the reduced economic significance of the Sava and Drina waterways as regional resources, the lack of joint development initiatives and the regional collaboration is the ultimate binding constraint. The region’s recent and anticipated future exposure to climate change impacts and the increasing need to both adapt to and mitigate climate change risks further illustrate the urgency of regional collaboration—transboundary integrated approaches and activities—among the riparian countries.
9. In response to the above challenges, over the past 13 years, the World Bank has engaged the region extensively with policy advice, technical assistance, and investments. At the national level, the World Bank has supported water programs covering different sub-sectors. This includes water supply and wastewater programs (notably, in Croatia, BiH, and Montenegro), irrigation development programs (in Croatia, Serbia, and, most recently, BiH), the Croatia Inland Waters Project, the Serbia Flood Emergency Recovery Project, and the BiH Floods Emergency Recovery Project. Past World Bank activities at the regional level include the development of the Climate Adaptation Plan for the Sava River Basin and the Investment Priority Framework Project in the Drina River Basin. Importantly, the World Bank has also acquired experience with regional water resources projects in the Western Balkans outside the Sava River Basin, notably with the Global Environment Facility (GEF) funded Lake Shkoder Management Project involving Montenegro and Albania and the Neretva-Trebisnjica River Basin Management Project involving Republika Srpska (RS), Federation of BiH, and Croatia. Ongoing activities at the regional level include the Drina River Basin Management Project (Drina GEF) and the BiH Drina Floods Protection project. After years of engagement, the riparian countries are working with the World Bank to develop a regional investment program that can turn the recommendations from previous technical assistance at the national and regional levels into tangible outcomes on the ground.
10. The proposed SDIP supports integrated water cooperation, by investing in infrastructure improvements and complementary measures that take into account the current and expected impact of climate change. Specifically, the project intends to address the climate change-exacerbated risk of floods and droughts, thus increasing the resilience of the targeted areas’ economic activities and residents to these threats. Given the basin’s transboundary nature, this will be achieved by supporting coordinated development and management of shared water resources across countries in the basin. Broadly, SDIP will invest in the following areas:
• Inland waterway transport. Upgrading of the navigability of the Sava waterway, including— as a prerequisite—the removal of mines from the Sava’s right bank within BiH, and
Page 11 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
modernization of ports along this corridor to improve market access and reduce transport and logistics costs to/from lagging and leading regions—including supporting climate change mitigation by reducing greenhouse gas (GHG) emissions and local pollutants associated with the transportation of freight—and, in the long run, facilitate improved regional trade across countries.
• Environmental asset management and development. Simultaneously, the engineering design of the underlying navigation infrastructure interventions, such as dredging, riverbank protection, and river training works, would be adapted to also protect floodplains and revitalize wetlands. Such multipurpose interventions would boost sustainable tourism (including ecotourism), a sector with a large potential for job creation, and enable investments in other sectors such as irrigated agriculture and manufacturing.
• Flood protection. Investments to increase protection against floods as well as social and economic resilience to extreme weather events linked to climate change.
• Regional cooperation and institutional strengthening. Policy dialogue, consultations, preparation of basin plans and studies, and investments to strengthen the nexus between water resources management and economic cooperation.
11. Similarly, the coordinated development and management of shared water resources along the Drina River Corridor will integrate improved flood and drought management, (eco-)tourism development, agriculture, hydropower, and climate change adaptation. Three ongoing or recently closed complementary operations have supported the preparation of SDIP: (a) the GEF-Special Climate Change Fund (SCCF) financed Western Balkans Drina River Basin Management project, launched in 2017, which is developing a Drina strategic action plan, conducting studies (including engineering designs), and financing pilot investments for climate change adaptation that will generate multipurpose benefits and build resilience; (b) the Flood Emergency Recovery Project in Serbia (closed in October 2019); and (c) an Energy Sector Management Assistance Program (ESMAP) financed technical assistance project launched in 2018. In addition, lessons and results from these interventions are informing the preparation of some sub- projects under this program. Figure 1 illustrates the positioning of SDIP as a bridge toward a more integrated development approach for the Sava and Drina Rivers Corridors.
12. The integrated management and development approach envisaged in this program is one that will promote the coordinated and multisectoral planning and utilization of the water and related resources of the Sava and Drina Rivers Corridors to maximize economic and social benefits, without compromising the sustainability of these vital natural resources. This will be achieved progressively throughout the program as presented in Figure 1.
Page 12 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Figure 1. Positioning of SDIP in the World Bank’s Engagement in the Sava and Drina Rivers Corridors
Note: Demining of the right bank of the Sava River in BiH is expected to take place during Phase I. Since this is a prerequisite to civil works in the Sava fairway within Croatian and BiH territory on both sides of the border, any such investments in both countries effectively await demining. Croatia’s participation in SDIP as a borrowing beneficiary in support of Croatia-specific activities is subject to confirmation during Phase II preparation under the first phase of the Multiphase Programmatic Approach (MPA).
C. Relevance to Higher Level Objectives
13. SDIP is proposed as a two-phase program under the World Bank’s MPA instrument, to support long-term and climate-smart economic growth and regional cooperation. It is one of a series of World Bank-financed projects—ongoing and in preparation—that support similar objectives in the region. It directly complements the ongoing Western Balkans Trade and Transport Facilitation Program (TTFP - P162043), an MPA operation approved by the World Bank Board of Executive Directors in April 2019. TTFP aims to promote economic growth and regional economic integration in the Western Balkans by, among others, reducing road- and rail-based cross-border trade and transport costs. The World Bank is also preparing a regional digitalization project, supported by the Western Balkans Investment Framework (WBIF), designed to provide high-speed fiber optic connectivity across the region, and a railways sector MPA in Serbia to improve freight connectivity to/from regional trading partners and increase railway competitiveness as a green mode of transport. SDIP’s focus on transboundary inland waterway freight transport, flood protection, and river basin management at the regional level addresses complementary dimensions of integration. While their geographic scope and list of participating countries is slightly different, all these programs target the Western Balkans subregion and collectively span the interrelated sectors of multimodal transport, water, energy, and trade and investment. This broader approach is expected to be more effective than shorter-lived efforts to tackle the long-standing challenges in
Page 13 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
economic integration, connectivity, and resilience facing the region that are within the programs’ scope of influence.
14. The investments proposed under SDIP are aligned with (a) the World Bank’s twin goals, (b) the priorities set out by the national/entity governments of the program’s beneficiaries, and (c) the EU’s policy goals for the region. SDIP will unlock economic growth potential in the Sava and Drina River Basins while protecting communities from flood damage and the impact of droughts, which tend to disproportionately affect the poor and other vulnerable communities. SDIP aligns with the development priorities identified in the Country Partnership Frameworks (CPFs) of the riparian countries.12 Common development priorities stated in the CPFs across Sava River Basin riparians include investments in economic infrastructure to enhance growth, enhancement of coping capacity against environmental risks, and protection of natural resources to achieve sustainable growth. These overarching goals are adjusted to reflect country-specific circumstances and priorities in the respective national programs. The EU’s environmental acquis is increasingly considered the unifying regulatory framework for water management across the Sava and Drina basins, although it is recognized that policies and institutional capacities need to be significantly strengthened to allow full implementation of such standards. The World Bank collaborates with EU programs to seek synergies and complement the EU’s strengths.
15. SDIP’s objectives are consistent with GEF’s strategic long-term priorities for international waters. During the GEF 7th replenishment cycle, its international waters focal area prioritized the development of disaster early warning systems, capacity building, institutional support, and the protection of ecosystems. As a result, some analytical studies and physical investments related to environmental management, flood protection, and waterway improvements included in this program may be co-financed with support from GEF. These activities also build on lessons learned from past GEF engagements, such as the GEF-SCCF-funded Drina River Basin Management Project.
D. Multiphase Programmatic Approach
16. Given the need to further build confidence among participating countries and to gradually develop a set of integrated investments, SDIP will use the MPA. As explained in the lessons learned section, transboundary water cooperation13 is a complex endeavor that requires a careful, incremental, and iterative approach. After more than 10 years of engagement at the technical level, a period that coincided with increasingly frequent, and costly, extreme weather events that increased the perceived urgency of climate resilience as a policy goal across the region, countries have signaled their interest to move to a more ambitious level of regional cooperation—including regional investments on floods management and navigation improvements. This stance recognizes that economic coordination and climate change adaptation are critical to the region’s sustainable development, and both require transboundary cooperation on several fronts. At the same time, countries have not yet developed a program of joint, integrated investments. The need to demine the right bank of the Sava River within BiH as a prerequisite to navigation investments in this section of the river represents a further impediment. The MPA’s first phase is intended to finance no-regret, implementation-ready investments (quick wins) to build confidence; it will remove key impediments to further water cooperation (through demining); and
12 CPFs are available for BiH (World Bank Report 99616, December 15, 2015), Croatia (World Bank Report 130706, May 2, 2019), Serbia (World Bank Report 94687, June 23, 2015), and Montenegro (World Bank Report 105039, June 16, 2016). 13 Transboundary water cooperation will be achieved by strengthening institutional capacity across riparian countries and jointly developing mechanisms and tools for coordinated sustainable utilization of the shared water resources for regional economic growth and development.
Page 14 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
it will provide the time, implementation learning insight, and resources to prepare more ambitious, integrated investments, which can then be financed under the program’s second phase.
(i) Rationale for Using MPA
17. The MPA approach is appropriate to achieve SDIP’s goals for the following reasons:
• The MPA allows the achievement of a longer-term vision that has been developed and confirmed through consultations with key stakeholders. It also signals the World Bank’s commitment to this long-term process. There is a long history of insufficient and ad hoc investments in SDIP’s target river corridors. While the FASRB created a common vision among Sava and Drina riparian countries to revive investments, most activities remain at the technical study level. World Bank support over the past decade has also focused on technical assistance and regional studies, which enabled the conceptualization of a long-term, multi- sector, integrated river basin management and development framework. However, the interventions to date remain fragmented or even duplicative due to the multi-sector and multi-stakeholder context, while donor support has proved insufficient. A 10-year programmatic approach with World Bank financing would allow stakeholders to develop and remain engaged in, a long-term plan with greater coherence and a higher level of ambition. • Emphasizing scalable and adaptive design, the MPA can slice high-impact yet complex operations into manageable phases with clear objectives. It also allows the program to start with no-regret, confidence-building activities before gradually moving into larger and more integrated measures. SDIP aims to promote regional economic cooperation within a challenging political environment. The MPA provides the flexibility to accommodate different country-specific readiness and approaches as to timing, funding mobilization, and interventions, thus allowing a horizontal multiphased approach that countries can join when ready. • The MPA provides an opportunity to incorporate lessons learned during implementation and from one phase to another. The MPA will be particularly useful toward taking stock of progress over time, for example, to incorporate lessons learned from Phase I activities into the design and implementation of Phase II activities, and/or adapting to changing conditions on the ground. The Learning Agenda (below) is embedded in the SDIP design. (ii) Program Results Chain
18. SDIP’s Theory of Change ( Figure 2) is based on three pillars: (a) improve flood protection along the Sava and Drina Rivers Corridors; (b) increase navigability of the Sava River; and (c) strengthen transboundary water cooperation, provide institutional strengthening, and strengthen project management.
Page 15 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Figure 2. MPA: Overview of the Program’s Theory of Change
(iii) The proposed investments will result in improved flood and drought protection with enhanced climate adaptation capacity, increased navigability with reduced levels of transport-related emissions of GHGs and local pollutants, and revitalized regional tourism along the Sava and Drina Rivers Corridors and enable transboundary water cooperation based on a strengthened integrated decision support system. The program will also improve the analytical and management capacity of water resources, transport, and related agencies in each beneficiary country, as well as that of ISRBC. Just as important, the program will be a relatively uncontroversial opportunity for the countries in the region to signal their ability and willingness to tackle transboundary issues together, such as the demining of the right bank of the Sava in BiH and the need to rehabilitate infrastructure so that it will be able to withstand the increasingly frequent and intense floods and droughts, and the mutual collaboration necessary for investing in a shared resource among the riparian countries. Program Development Objective
19. The Program Development Objective (PrDO) is to strengthen transboundary water cooperation and improve navigability and flood protection in the Sava and Drina Rivers Corridors.
(iv) Key Program Development Objective Indicators with Baselines and End Targets
20. The progress toward PrDO will be measured by the following outcome indicators throughout the MPA program implementation:
Table 1. Program Outcome Indicators Indicator Name Baseline (2020) End Target (2030)
Page 16 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
1. Area protected by flood risk mitigation measures under the 0 300,000 Program(ha) 2. People protected from 1 in 100-year flood events under the 0 400,000 Program (Number) of which female (Number) (205,000) 3. Duration of access to navigability to 1,000+ DWT vessels in 160 240 the Sava river (days per year) 4. River basin management plan reflecting integrated No Yes measures updated and endorsed by countries (No/Yes)
(v) Program Framework
21. SDIP aims to accelerate regional economic cooperation in the Western Balkans and help strengthen the institutions and procedures through which the Sava and Drina riparian countries collaborate. SDIP will be implemented through two sequential and partially overlapping phases with five participating countries: Serbia, BiH, 14 Montenegro, Croatia, 15 and Slovenia. Slovenia will be a non- borrowing program beneficiary; it will participate in the regional studies, regional dialogue, capacity- building tools, and related activities under program Component 4. The two phases will be implemented over a 10-year planning horizon (2020–30) with three countries—Serbia, BiH, and Montenegro—starting in the first phase (the detailed MPA program framework is presented in annex 4). As a member of ISRBC, Croatia will initially participate in the regional interventions (Component 4) under Phase I. Implementation of Croatia-specific activities, such as civil works to support sustainable and resilient navigation in the Sava River Corridor, may be undertaken during Phase II, for which the World Bank may provide complementary financing to Croatia’s mobilization of EU and/or national budget funds.
22. The estimated program cost is US$332.4 million, including a program-level IBRD financing envelope of US$302.8 million. The first phase (2020–26) includes sub-projects with high implementation readiness and relevance to the program objectives, with detailed designs and tender documents expected to be ready by effectiveness. A second phase (2023–30) will partially overlap with Phase I and is envisaged to implement sub-projects that will be prepared during Phase I, with a stronger emphasis on multipurpose, integrated, and transboundary investments where relevant. The start of Phase II will be subject to approval by the World Bank Board of Executive Directors and will depend upon the implementation readiness of the sub-projects that will comprise the program’s second phase (for example, the completion of feasibility studies, environmental and social impact assessments, and related documents). Detailed engineering designs and bidding documents for civil works will be prepared during Phase I implementation. As a prerequisite to some of the navigation-related interventions expected in Phase II, demining of the right bank of the Sava in BiH is expected to be undertaken during Phase I. Sub- projects will be implemented at the national level, supported by transboundary cooperation, and are expected to have cumulative regional benefits.
14 By appraisal, the Federation of Bosnia and Herzegovina (FBiH) had completed preparation of their respective activities to participate in the project but had not concluded their internal government procedures. Approval for financing for FBiH will be sought from the World Bank’s Board of Executive Directors separately once the Government has completed its procedures. 15 Croatia’s participation in SDIP as a borrowing beneficiary in support of Croatia-specific activities is subject to confirmation during Phase II preparation under the first phase of the MPA.
Page 17 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Table 2. Summary of MPA Program Financing Estimated Estimated Estimated Estimated IBRD IDA Other Estimated Sequential or Phase’s IPF or Environment Phase # Amount Amount Amount Approval Simultaneous Proposed DO/a PforR al and Social (US$ (US$ (US$ Date Risk Rating million) million) million) Improve flood protection and strengthen transboundary August 4, I — water IPF 134.0 0.00 17.5 High cooperation in 2020 the Sava and Drina Rivers Corridors. Strengthen transboundary water cooperation and improve April 30, II Simultaneous IPF 168.8 0.00 12.1 High navigability and 2023 flood protection in the Sava and Drina Rivers Corridors. Total 302.8 0.00 29.6 Estimated for the entire MPA Program US$ 332.4 Note: IPF = Investment Project Financing; PforR = Program-for-Results.
23. The US$302.8 million in IBRD financing could be complemented by US$29.6 million in financing from WBIF,16 GEF, and other potential sources of grant financing over the program period. An investment grant application for the 5th Call for WBIF Investment Grants has been prepared together with the BiH counterparts (Ministry of Transport and Communications), seeking grant financing for the demining of the right bank of the Sava River within BiH. Decision on this grant application will be made by the end of 2020. Grants have also been sought from the GEF international waters focal area to fund regional studies (Component 4). The GEF Council approved the application during its June 2020 Council meeting, and the grant agreement will be finalized by the end of 2020. In the event that the grant funding is not obtained, the project will be restructured in consultation with the countries and adjustments made accordingly.
24. The two SDIP phases will overlap to ensure complementarity and incorporation of lessons learned and experience from Phase I activities into the design of Phase II. Phase I is intended as a trust-building process, to further enhance regional dialogue. Selection of Phase I activities focused on no-regret interventions with high technical readiness and limited complexity. The design of Phase II will consider the capacity of institutions, contributions of other partners, and technical competencies and challenges.
16 WBIF is a joint facility of the EU, financial institutions, bilateral donors, and the governments of the Western Balkans. It supports socioeconomic development and EU accession across the Western Balkans through the provision of finance and technical assistance for strategic investments in the energy, environment, social, transport, and digital infrastructure sectors. The World Bank became a full member of WBIF in June 2019.
Page 18 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
The phasing is also modular; the overlap across phases ensures that essential activities in each phase continue without there being a gap in program rollout while subsequent phases are being prepared. The first phase (this project) is described in detail in this document. Subsequent phases—and specifically Phase II—may change based on experience, country interests, and lessons learned from preceding activities. As mentioned earlier, countries will proceed to Phase II based on the readiness of jointly identified priority interventions prepared during Phase I.
25. Figure 3 illustrates the SDIP scope and implementation plan.
Figure 3. SDIP Program Scope and Implementationa Phase I Phase II
Focus Areas Countries 2020–26 2023–30 BiH, Serbia, and Flood Protection and Montenegro Environmental Management BiH and Serbia Demining of Sava BiH Waterway Improvement River right bank Croatia BiH and Croatia Enhancement of Port Facilities Serbia BiH, Croatia, Montenegro, Regional Dialogue and Studies Serbia, and Slovenia
Note: a. Croatia’s participation in Phase II as a borrowing beneficiary is subject to confirmation during Phase II preparation.
(vi) Learning Agenda
26. A key aspect of the MPA instrument is that it provides an opportunity to integrate learning in the program design. The implementation of multi-sector interventions across borders, in any context, is complex and fraught with risk. Mitigating this risk requires continuous learning, both from own implementation experience and emerging global good practice. In the case of SDIP, the approaches used during Phase I will yield lessons on what works well and what areas need to be strengthened to balance regional cooperation with national interests, contributing directly to building trust among program partners.
27. SDIP builds on a long history of activities and World Bank support in the Sava and Drina River Basins. Previous investments have provided many lessons to help shape SDIP’s scope and design. The program will facilitate learning in several aspects that will help improve its efficiency and effectiveness. SDIP will focus on learning in the following areas:
(a) Flood management systems. This will include identifying and testing the appropriate combination of structural and nonstructural interventions for flood protection and environmental management, including the choice of technologies, during Phase I, to be
Page 19 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
scaled up across the countries during Phase II. For example, embankment rehabilitation, monitoring systems, forecasting tools, and upstream storage using a combination of ‘green’ and ‘grey’ infrastructure to include more nature-based solutions are all areas that are expected to improve gradually over time, and this MPA is an excellent opportunity to test options for scaling up throughout the program.
(b) Use of modern technology. Today, technologies are evolving at an accelerating pace and provide a promise to ‘disrupt’ traditional challenges to development. SDIP will include new technologies such as using new sensors for flood monitoring, earth observation, and geospatial platforms, supported with data analytics, and improved decision support systems for basin planning, investment preparation, and systems management. These technologies and tools will be tested and adapted during the program implementation while strengthening relevant transboundary capacities.
(c) Institutional modernization. There is much room for learning from global good practices to modernize the workflow of the SDIP institutions at national and regional levels. This includes the ways in which modern skills are deployed, capacity is strengthened (including capacity building for climate change mitigation and adaptation through knowledge sharing and training), new management tools are employed, collaboration mechanisms are used, and partnerships (for example, with academia, private sector, knowledge providers, and local communities) are enhanced to provide a shared vision for planning, management, and operational systems. During program implementation, SDIP will develop and conduct a series of periodic assessments to take stock of the quality, efficiency, and timeliness of operations management and use the findings to further improve focused interventions in institutional modernization.
(d) Demining. Demining of the Sava waterway within BiH is an important activity under SDIP and will require learning from other experiences while strengthening capacity. SDIP will bring Croatia’s demining experience from the outset to inform the way demining is implemented in BiH (for example, through collaboration with Croatia’s Mine Action Center). Learning from this experience is also expected to strengthen the implementation of Phase II and improve collaboration between BiH’s state-, entity-, and district-level agencies and governments. Similar levels of collaboration will be critical to the subsequent implementation of Phase II civil works, such as those along the Sava fairway.
(e) Transboundary cooperation. SDIP is designed to strengthen the transboundary cooperation and dialogue in the targeted areas, thereby laying a solid foundation for water resources management and development, as well as climate change adaptation. The first phase will assess and identify key areas of transboundary cooperation which have potential for further strengthening. The assessment will also include other tributaries and the entire basin/watershed and eventually benefit from more regional, EU, and global cooperation.
28. The way in which national and regional institutions build capacity and work effectively with each other on a transboundary collaboration platform will be a key mechanism to help mainstream the learning generated. At the national level, the project will establish mechanisms for exchanging experiences/lessons on implementation among the participating beneficiaries, such as through ad hoc workshops where participating agencies and ministries can present and discuss specific project-related activities. A project-
Page 20 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
specific learning review will also be undertaken, where lessons learned from one beneficiary in implementing a specific activity (including good practices) can provide inspiration to another beneficiary. At the regional level, SDIP’s Regional Task Force and ISRBC will facilitate exchanges and learning among participating countries, as well as from other countries or basins, such as the Danube. Efforts will be made to improve access to global good practice using virtual interactions facilitated by the World Bank. This learning agenda will be financed through the IBRD financing as well as GEF grant.
II. PROJECT DESCRIPTION A. Project Development Objective
PDO Statement
29. The objective of the Project (Phase I of the Program) is to improve flood protection and enhance transboundary water cooperation in the Sava and Drina Rivers Corridors.
PDO Level Indicators
30. The impact of project interventions will be tracked through the following key results indicators:
• People protected from 1 in 100-year flood event in the Sava and Drina River Basin under the project (of which female) (Number)
• Areas protected by flood risk mitigation measures under the project (hectares)
• River basin management plan reflecting integrated measures updated and endorsed by countries (Yes/No)
B. Project Components
31. Phase I activities have been identified based on their readiness and prepared through ongoing World Bank support in the region as well as other initiatives financed by national resources and other financiers. This phase will allow trust-building and learning while financing activities of limited complexity and interdependency. Sub-projects will be implemented at the national level and will have cumulative regional benefits. Phase I will also finance the preparation of additional transformational, multipurpose regional investments to be financed under Phase II. A detailed description of the project components is included in annex 2.
Component 1: Integrated Management and Development of the Sava River Corridor (€94 million, of which IBRD is €86 million and grant financing €8 million17)
32. This component will finance investments in renovation and upgrading of flood protection infrastructures to address the increasing risk of flooding due to climate change. These activities will reduce
17 The program is seeking a WBIF investment grant to cover the costs of demining. An application was presented by the BiH Ministry of Transport and Communications in November 2019 and is expected to be confirmed by year-end calendar 2020, but in the current absence of formal commitment, this amount is registered as a financing gap. The World Bank expects this funding source to fully close the existing financing gap.
Page 21 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
the risk and impact of floods, thereby increasing the resilience of the riparian countries to these climate change-related threats. The component will also finance activities needed to enable improved navigation. The requested GEF funding will support the prioritization and preparation of some activities.
33. Subcomponent 1.1: Flood protection and environmental management. This subcomponent will finance the construction and rehabilitation of embankments at selected priority areas along the Sava River Corridor as well as nature-based solutions to revitalize selected protected areas of ecological significance to the Western Balkans. For example, this subcomponent will finance the reconstruction of Kolubara dykes that will protect Obrenovac City in Serbia, dykes in Novi Beograd that will protect Belgrade City from flood hazards. In BiH, this subcomponent will finance the rehabilitation and upgrade of dykes and riverbanks in RS. These will include rehabilitation of Sava and Una dykes and regulation of the Vrbas River, protecting cities such as Kostajnica, Prijedor, and Banja Luka. Also, this would include forestry management in Vrbanja, Vrbas, and the Sava River Basin, which will mitigate the threat of droughts. Upgraded flood protection capacity (at or above 1 in 100-year event) also enhance climate adaptation capacity of protected areas.
34. Subcomponent 1.2: Waterway improvements. Under this subcomponent, grant financing will be mobilized to support demining activities along the Sava’s right bank within BiH, as a prerequisite to the execution of civil works—planned for Phase II of the program—to increase the navigational capacity of the Sava River. The preparatory documentation for these Phase II works (engineering designs, Environmental and Social Framework [ESF] documents, expected climate change impacts on navigability, and bidding documents) will also be finalized during the project. The project-supported demining efforts are also an operational prerequisite to the planned improvements to Sava River ports under Phase II (such as Gradiska in BiH). Demining activities are proposed as a no-regret investment that will help unlock the river’s economic potential for generations to come.
35. Demining of the right bank of the Sava River in BiH will be conducted following the Standard Operating Procedures (SOPs) for humanitarian demining developed and adopted by the Bosnia and Herzegovina Mine Action Center (BHMAC). These country-specific procedures are based on the principles of the International Mine Action Standards (IMAS) endorsed by the UN Inter-Agency Coordination Group on Mine Action and reflect more than 20 years of demining experience in BiH. They comprise, among others, the actions of general surveying, technical surveying, equipment pre-testing and testing, professional supervision of demining operations, systematic surveying, and integrated planning. The BiH State Ministry of Transport and Communications will be the lead implementing agency for demining, with BHMAC participating as technical lead, jointly with the respective entity-level Ministries of Transport and Interior, and Brčko District Government. The detailed engineering designs for the demining activities and related Environmental and Social Management Plan (ESMP) will be prepared once the grant financing is approved (expected end of 2020) and after the specific demining sites have been identified. The demining civil works will be conducted by one or more experienced contractors to be competitively selected during implementation, in accordance with the World Bank Procurement Framework, with prior World Bank approval of the corresponding bidding documents and supporting ESMP. In addition, expert supervision services will be provided for the duration of the works, to ensure SOP and IMAS compliance. Completion of demining of the right bank of the Sava is consistent with the goals of the BiH Council of Ministers Mine Action Strategy 2018–25, and it will contribute to the attainment of international obligations to which BiH is a signatory, most notably the Mine Ban Convention, which BiH ratified in September 1998.
Page 22 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
36. Subcomponent 1.3: Enhancement of ports facilities, services, and logistics. The project will finance selected infrastructure investments in the port of Sremska Mitrovica. The total cost of port modernization is estimated to be €33 million, out of which activities worth €17 million will be financed through SDIP Phase I while the remaining investments will be financed through counterpart budget and other international financing institutions. These remaining investments are not linked to the project objectives. It is expected that this intervention will improve the connectivity and market access of the immediate hinterland of the port of Sremska Mitrovica: the Srem and Mačva districts primarily, as well as other parts of northwest and central Serbia. It will also contribute to improvements in logistics service delivery in the Sava River Corridor, including the facilitation of container transportation and handling, which are expected to result in greater tonnage capture by the port.
Component 2: Integrated Management and Development of the Drina River Corridor (€21 million all IBRD)
37. This component will support multipurpose investments along the Drina to reduce the risk and potential impact of floods. It may also support preparatory interventions that will protect environmental assets of global value to be implemented in Phase II. This component will facilitate the implementation of actions, management measures, and investments identified by the Drina Strategic Action Plan being prepared under the ongoing Western Balkans GEF-SCCF Drina River Basin Management Project and investments identified through the ESMAP Integrated Water and Hydropower Development Project. The above measures will contribute to increased resilience of the riparian countries to floods and droughts. Requested GEF funding will support the prioritization and preparation of these activities.
38. Subcomponent 2.1: Flood protection and environmental management. This subcomponent will finance infrastructure works (for example, flood protection in Mačva, Serbia; and Bijeljina, along the lower Drina River left bank within RS), studies, surveys, consultations, and the preparation of detailed design of interventions related to the management of environmental assets (the protection of local ecosystems that act as carbon sinks) along the Drina River Corridor. The ongoing GEF-SCCF-financed Drina River Basin Management project as well as the ESMAP technical assistance are conducting studies that will identify the additional actions needed for flood protection, bank stabilization, drainage and river training works, and reservoir management in the Drina River Corridor. Upgraded flood protection capacity (at or above 1 in 100-year event) also enhance climate adaptation capacity of protected areas.
39. Subcomponent 2.2: Integrated development of Drina watershed. This subcomponent will finance improved watershed management in the Lim and Grncar River basins of Montenegro, as well as works related to flood protection, drainage, and irrigation measures within the Lim River Basin (a tributary of the Drina River) to mitigate flood risks and promote sustainable use of natural resources. These measures include riverbank stabilization, river training works, flood protection embankments, and dykes. The detailed designs of these investments are under preparation through the ongoing GEF-SCCF project. This subcomponent will further finance the preparation of selected priority investments in line with the PDO.
Page 23 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Box 2. Integrated Water Investment and Management: The Example of the Viennese Danube As it flows through the city of Vienna, the Danube River is used for multiple purposes, including cargo navigation, recreation, and energy generation. The former floodplain (Donauauen national park) represents a significant environmental asset, though the river also exposes the city to regular flood threats. Over the past 30 years, the institutions engaged in those various activities have developed a unique set of integrated investments to improve navigability while restoring some of the former floodplains, and strengthen flood protection while providing public recreation spaces. The construction of the ‘Donau Island’, a 21 km long island that helps controlling floods, created an enormous green space in the heart of the city, quickly leading to multiple small business and cultural developments and an economic development boost for the left bank of the river. Similarly, the ongoing integrated river reengineering project combines riverbank restoration with side-arm reconnection and targeted river dredging and riverbed corrections to maximize environmental and navigation benefits. The program of measures is the result of an integrative planning process and is based on the findings of an optimized waterway and traffic management as well as the multiyear conception and pilot project phase of the Integrated River Engineering Project. To realize socially and environmentally compatible solutions, the involvement of stakeholders plays an important role alongside the scientific support of the measures. Continuous learning and improvements are core to the success of the project. Source: www.wien.gv.at/umwelt/gewaesser/pdf/donau-hochwasserschutz-2017.pdf and www.viadonau.org/fileadmin/content/viadonau/06Unternehmen/Dokumente/FGP_Masznahmenkatalog_EN_s mall.pdf.
Component 3: Project Preparation and Management (€16 million, all IBRD)
40. This component will support (a) preparation of Phase II regional activities and (b) operational costs, consultancies, non-consultancy services, and goods required for the establishment and operation of the national/entity Project Implementation Units (PIUs).
41. Subcomponent 3.1: Project preparation. This subcomponent will either finance or provide technical support for the preparation of project documentation for Phase II of the program, including environmental and social safeguard assessments. For example, the project will finance the preparation of technical documentation for the Port of Gradiska and improvement of the section Racinovci–Vrsani (RS, BiH). Croatia is financing potential Phase II activity preparations through its own national budget.
42. Subcomponent 3.2: Institutional strengthening and project management. This subcomponent will finance activities to increase institutional capacity and inter-sectoral coordination in the participating countries to ensure more efficient decision-making and program management.
Component 4: Regional Activities (€8 million, all grant financing18)
43. The countries will participate in the regional activities to be implemented by the ISRBC Secretariat. This component will be financed through a GEF grant, and the grant agreement will be finalized by the end of 2020. This component is key to strengthening of strategic regional dialogue and joint planning as
18 The program is seeking grant funding from GEF to cover the costs for the regional activities. An application has been submitted early 2020 and received confirmation from the GEF Council in June 2020, but in the current absence of the grant agreement (expected by the end of 2020), this amount is registered as a financing gap. The World Bank expects this funding source to fully close the existing financing gap.
Page 24 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
well as sustainable management and development of the shared water resources in the Sava and Drina River Basin, including building resilience to climatic shocks.
44. Subcomponent 4.1: Regional dialogue, project management, and coordination. This subcomponent will finance the establishment and operations of the Regional Task Force and Regional Implementation Unit, which will support the ISRBC Secretariat to bring together the national actors to monitor project progress, review and adjust overall regional implementation, and promote knowledge exchange and good practices. This subcomponent will promote joint action and decision-making in river basin management and flood risk management among riparian countries, thus enhancing the climate adaptation capacity of the region. In addition, 1 percent of the GEF financing will go toward IW:LEARN19 which will support an advocacy and communication plan to facilitate partnerships between participating countries to stimulate knowledge sharing and capacity building while implementing activities related to regional dialogue.
45. Subcomponent 4.2: Regional plans, studies, and strategies of basin-wide importance. This subcomponent will support consultations, preparation of basin plans and studies, and investments to strengthen the nexus between water services and development and economic cooperation objectives of the Sava and Drina Rivers Corridors. The subcomponent will also allow for the preparation of key regional studies and plans that will further inform the design of the program.
Table 3. Project (Phase I) Financing (€, millions) Total Components Serbia Montenegro BiH/RS Cost Component 1: Integrated Management and Development of the Sava River Corridora 1.1 Flood protection and environmental management 48.44 20.6 69.04 (consultants, training, equipment, and civil works) 1.2 Waterway improvements (demining) 8.00c 8.00 1.3 Enhancements of ports, services, and logistics 16.96 16.96 (consultants and civil works) Component 2: Integrated Management and Development of the Drina River Corridor 2.1 Flood protection and environmental management 4.04 3.40 7.44 (consultants, training, and civil works) 2.2 Integrated development of Drina watershed (civil 13.90 13.90 works) Component 3: Project Preparation and Management 3.1 Phase II Preparation (consultancy)b 2.20 0.30 3.60 6.10 3.2 Institutional strengthening and project 6.56 0.80 2.40 9.76 management Component 4: Regional Activities 4.1 Regional dialogue, project management, and 0.90d 0.90 coordination 4.2 Regional plans, studies, and strategies of basin- 7.20 7.20 wide importance (consultancy, training, and strategies) Total Cost 139.3 Of which IBRD 78.20 15.00 30.00 123.20 Of which other sources (WBIF, GEF, and so on) 8.00 16.10
19 IW:LEARN is GEF’s International Waters Learning Exchange and Resource Network.
Page 25 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Total Components Serbia Montenegro BiH/RS Cost Legend: indicates IBRD-financed activities. indicates grant-financed activities (WBIF and GEF). Note: a. Only including subcomponents that will be implemented in Phase I. b. Estimated Phase II preparation cost. c. €8 million is included for BiH to cover demining activities to be implemented by the Ministry of Transport and Communications. d. Exact costs will be determined on the basis of a capacity needs assessment to be conducted during the preparation of the grant agreement with ISRBC.
C. Project Beneficiaries
46. Beneficiaries of Phase I include, but are not limited to, residents and businesses located within the flood-prone areas along the Sava and Drina Rivers Corridors and transport service providers. Government/entity agencies across water, transport, energy, emergency response, and environmental sectors will benefit from improved information from regional studies and planning. In addition, aggregated effects from national-level activities could benefit the broader river basins and region in terms of reduced flood risk exposure, new employment and business opportunities, and more cross-sector, cross-national coordination for integrated water resources management and development.
D. Rationale for Bank Involvement and Role of Partners
47. The World Bank has been a long-standing development partner of the Western Balkan countries since the 1990s, playing an important third-party role in their quest for EU accession. The World Bank’s assistance to the region dates back to the transition process from planned to market economies and to emergency recovery efforts after the regional conflict. Increasingly, the World Bank has been emphasizing the benefits of regional cooperation and integration; these include fostering economic growth and job creation, facilitating trade and regional connectivity, and increasing resilience against disasters and climate-related risks (World Bank Western Balkans Poverty Program, 2017; World Bank Water GP Water Strategy for Western Balkans, 2017). Much of the World Bank program has contributed, directly or indirectly, to preparing non-EU member riparian countries to join the EU while continuing to address their specific development challenges. The waterborne trade focus of this program makes it complementary to the TTFP and, together, the two programs align well with the EU’s Western Balkans connectivity agenda and its TEN-T strategy. The World Bank has assisted in the implementation of several successful regional projects, in cooperation with ISRBC, which served as a platform for multilateral dialogue in the region. The latter included the World Bank Water and Climate Adaptation Plan for the Sava River Basin (2015), intended to help make decisions in current and planned water management investment projects that will be affected by changing climate trends.
48. More recently, the World Bank has supported intensive regional dialogue on water resources, irrigation, energy security, and flood protection, in close alignment with the EU environmental acquis; the maritime ports, roads, and railway sectors of several countries of the region, including Croatia, BiH, and Serbia, have also received World Bank support for infrastructure development and sectoral reform. In inland navigation, the World Bank has been involved in past studies for the restoration of the Sava Waterway involving BiH, Serbia, and Croatia, completed in 2013, which in part have informed the preparation of this program. It has also led analytical work to better understand the demand-supply underpinnings and long-term prospects of regional connectivity improvements, including the Regional
Page 26 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Balkans Infrastructure Study Update of 2015. On flood protection and water management, the World Bank assisted the riparian countries in the identification and development of high-priority flood protection works that are being carried out along BiH’s Sava bank (in RS financed by European Investment Bank) and along the Drina (World Bank-financed), in direct support of the EU Water and Floods Management Directives. The World Bank is also supporting the development of the Drina Strategic Action Plan through the ongoing Western Balkans GEF-SCCF Drina River Basin Management Project. There is also an ongoing ESMAP-financed study on identifying management measures and investments through the Integrated Water and Hydropower Development Project.
49. SDIP is consistent with the goals and work of other development partners active in the region, and the World Bank has a history of working closely with these partners. SDIP will contribute directly to European regional priorities agreed on by EU and Western Balkans leaders during the EU/Western Balkans Summit on May 17, 2018, to improve energy and transport infrastructure in the region. The European Bank for Reconstruction and Development is financing the rehabilitation and upgrade of facilities at the Port of Brčko. The European Commission has supported the regional hydropower strategy (a Regional Strategy for Sustainable Hydropower in the Western Balkans) and preparation of the first Sava River Basin Management Plan development. At the same time, the European Commission recognizes the role that the World Bank can play in bringing together actors of the region on a joint river development agenda and has been providing, to that effect, WBIF grant funding to the region through the World Bank. Phase I of the joint flood forecasting and warning system and a Sava Flood Risk Management Plan were developed at ISRBC (with World Bank support and WBIF funding).
50. Through its extensive country-level and regional engagement with the various stakeholders involved in the proposed project, the World Bank has the convening power to bring water-related sectors and Sava/Drina riparian countries to collaborate in a transparent and integrated manner. Water resources serve as the backbone of many economic sectors. Hence, the function of water resources management is in practice scattered across many government agencies within countries. Such an arrangement is especially prevailing among Sava and Drina riparian countries. Integrated water resources management, however, requires close communication and collaboration among agencies in charge of various aspects of water resources. In the case of transboundary waterways, it also means transparency and coordination among nations. Such operations are knowledge- and dialogue-intensive and require long time horizons to identify meritorious investments that are broadly supported and have generated strong economic value. The World Bank has a strong track record of promoting integrated water resources management initiatives globally, such as in Indonesia, China, Argentina, and Mozambique, and in Central and Eastern Europe, with several ongoing river basin management and resource management projects.
51. While the World Bank has played a leading role in bringing together the countries at this stage, eventually, a broader set of development partners are expected to engage in the program. Through its ongoing engagements in the region, the World Bank is well aware of and collaborating closely with many other development partners. As mentioned above, the project’s scope is fully informed by the World Bank’s own activities and those of other partners. Development partners, in particular the EU, were well informed during project preparation. Given the complexity of bringing together five countries and multiple sectors under the same program, the SDIP design is deliberately modest in terms of other donors’ involvement, and limited grant co-financing is being sought from WBIF and the GEF.
Page 27 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
E. Lessons Learned and Reflected in the Project Design
52. SDIP’s design has incorporated lessons acquired from past World Bank water engagements in the Western Balkans region, as well as the World Bank’s experience in engaging in transboundary water cooperation (Box 3).
53. Transboundary water cooperation is a long process where building trust is key to growing ambition. After the breakup of Yugoslavia in the 1990s, the newly established states have been gradually reestablishing the institutional framework for cooperation over the past 15 years. However, at the moment there are no true transboundary investments taking place, and most of the planning still happens at the national level. SDIP builds on 25 years of country-level engagement and more than 5 years of regional engagement. The use of the MPA instrument allows the program to start by financing no-regret, confidence-building ‘quick win’ measures (Phase I) while preparing the ground for a more integrated approach (Phase II). This sequencing leverages the World Bank’s role as a trusted partner of all program beneficiaries, and the MPA signals a long-term commitment on its side to ensure the success of the path forward.
54. To unlock development benefits, countries along a river must complement their country-level investments with corridor-wide planning and cooperation. The restoration and development of the Sava and Drina Rivers Corridors’ economic functions cannot be achieved through investments toward one country or one sector. Previous technical assistance and regional dialogue has highlighted the need for stronger cooperation in particular to improve flood management and navigation. For example, the 2010 and 2014 floods (Box 1) are partly blamed on poor management of the multiple hydropower reservoirs on the Drina River and the inconsistent floods defense standards among countries. Improving navigation along the Sava River will largely depend on each country tackling river and port bottlenecks within their territories, but this will require transboundary cooperation (for example, between Croatia and BiH), and the overall development of the waterway must ultimately be done at the corridor level and with the support of ISRBC, which will implement Component 4—including the development of basin-wide plans— in coordination with the riparian countries.
55. Integrated river development investments can effectively achieve multiple development objectives in a sustainable manner. Addressing inland waterway navigation bottlenecks—by itself an economically attractive investment—may yield further economic and environmental benefits when based on technical solutions that are informed by multiple sectors. In this way, dredging and river training interventions can not only deliver enhanced navigability but also provide ‘room for the river’ for flood protection and community resilience; if done properly, these interventions can also significantly improve the environmental and recreational quality of the river and its floodplain (Box 2). SDIP’s Subcomponent 3.1 will focus on the development of such integrated interventions.
Box 3. Transboundary Water Cooperation: Lessons Learned from the World Bank’s Engagement The World Bank’s engagement in transboundary water management goes as far back as 1952, when it undertook an eight-year effort to advance bilateral negotiations and cooperation between the riparian countries of the Indus basin, resulting in the Indus Treaty. To date, the World Bank’s engagement in transboundary water cooperation has resulted in 35.3 million people provided with access to an improved water source; 6.8 million with access to improved sanitation facilities; 2.9 million farmers assisted; 94 million customers supplied with power, water, and gas; and 3.3 million people provided with access to clean water.
Page 28 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
After decades of involvement in transboundary basins across the globe, the World Bank has gathered the following lessons learned which will continue to guide the World Bank’s involvement in this area: • Effective cooperation takes time and the benefits from this cooperation are still to be realized. • Development partners play an important role in supporting space for dialogue and cooperation. Having an active and coordinated donor group ensures more extensive results. • Cooperation projects have successfully addressed and will continue to address key developmental challenges such as regional economic growth, water security, food security, regional energy security, improved resilience, and poverty alleviation. • Regional cooperation has ensured one common direction, which allows parties to work toward a common goal, using a harmonized approach, and focus on key priorities for the region, without being pushed and pulled in different directions. • It is important to inspire future cooperation and investment. The emerging successes of the investment projects are expected to demonstrate significant shared regional benefits that will inspire further cooperative projects, strengthening the economic impacts for the region of investment. The projects also need to be mainstreamed into the World Bank’s national-level programs. • With a volatile political environment, more flexibility of instruments and support is needed. Overall, cooperation in transboundary waters uncovers hidden opportunities and can incrementally expand the benefits for all parties. For example, in Senegal-OMVS, the implementation of the key approach in the Senegal River underpinned cooperation between riparian countries in the areas of hydropower, navigation, and irrigation. By partially or totally controlling the flows along the river by building two large reservoirs, Mali, Mauritania, and Senegal aimed to develop large areas of land for agriculture, generate hydroelectricity to solve the problem of the low supply and high cost of electricity in the region, and ensure sufficient flow depth in the rivers to make navigation to the Atlantic Ocean possible. Member states contribute to investment and operations and maintenance (O&M) costs proportionally based on the benefits they draw from the infrastructure. Another example is the Bangladesh Regional Waterway Transport Project which supports improved navigation in the Chittagong-Dhaka-Ashuganj inland waterway corridor within Bangladesh, linking the ports of Dhaka and Ashuganj with Bangladesh’s main maritime port of Chittagong, and, via Chittagong, links not only Bangladesh but also landlocked Bhutan with key Indian ports such as Kolkata and global markets elsewhere. This is also expected to promote intra-regional trade between India, Bangladesh, and Bhutan.
56. Transboundary activities where benefits cannot be clearly allocated, or for which there are strong externalities, are particularly challenging to develop and finance. In 2013, the World Bank supported the preparation of a navigation improvement project on the Sava River (Sava Waterway Rehabilitation Project). Ultimately though, the project failed to materialize due to a lack of agreement as to the allocation of costs and benefits from river fairway improvement investments. For SDIP, the World Bank is working with countries to mobilize grant financing for activities that have strong positive non- national externalities, including the demining of key sections of the river (Subcomponent 1.2) and much of the regional planning and investment preparation (Component 4). Being a prerequisite to infrastructure development, demining is particularly well suited to phased approaches, where demining is undertaken first and in a prioritized manner aligned with the sequencing of ensuing civil works.
57. Water cooperation requires clear leadership at the top but must be built from the ground up. A transboundary program such as SDIP will only be successful if governments are willing to engage on a shared agenda. At the same time, political buy-in must be complemented by a strong stakeholder engagement to provide the content of the water cooperation through river basin management plans and other regional instruments. During SDIP preparation, a high-level event was organized in Brčko District with representatives from all financing countries to signal the shared commitment to the program. SDIP’s
Page 29 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
implementation arrangements will enable strong coordination and collaboration at regional and national levels to facilitate multinational and sector dialogue while leaving day-to-day operation in the hands of technical PIUs within the line ministries of each country/entity. In parallel, Phase I envisages a comprehensive stakeholder process to define the scope of Phase II integrated interventions.
58. Integrated water investments have a history of slow development in the region, potentially jeopardizing the confidence-building process. For the respective governments to build trust in the transboundary process, it is important to achieve early successes. Review of past and ongoing World Bank- funded projects in the region, such as the BiH Irrigation Development Project, BiH Drina Flood Protection Project, Poland’s Odra-Vistula Flood Management project, and India Groundwater Management Project, indicate that the level of readiness at effectiveness plays a critical role in the eventual implementation progress. In particular, the land acquisition and construction permit processes can be highly time consuming. Some of the implementing agencies have also shown limited capacity to implement large- scale investments. Therefore, most sub-projects included in Phase I are prepared under ongoing investments and technical assistance projects within the region and have been filtered based on their readiness and absence of complex social or environmental issues. A capacity review of the various implementing agencies has been conducted, and concrete strengthening has been agreed with the respective governments.
III. IMPLEMENTATION ARRANGEMENTS
A. Institutional and Implementation Arrangements
59. SDIP will be implemented by participating countries in a coordinated manner through two levels of coordination at the regional and national levels. At the regional level, a Regional Task Force consisting of a senior official(s) of the ISRBC Secretariat and country senior officials from key sectors such as water, transport, energy, and tourism will be established and facilitate dialogue and cooperation in the region.20 The Regional Task Force will be supported by the ISRBC Secretariat and financed by the grant funding. The detailed implementation arrangements for the Regional Task Force will be further outlined in the respective Project Operations Manuals (POMs). Meetings of the Regional Task Force will be held in principle twice a year and chaired by the Secretary of ISRBC. Meetings will provide a space for exchange of the information on national and regional activities that will be presented by national/entity PIUs and regional PIU, respectively. The Regional Task Force will provide a platform to facilitate knowledge exchange and sharing of implementation experiences, as well as provide strategic oversight and guidance
20 The existing bodies, formed under the framework of or coordinated by ISRBC, will help implement regional activities that are already under ISRBC’s regional coordination mandate (for example, the committee for monitoring and coordination of implementation of the project ‘Rehabilitation and development of transport and navigation on the Sava river waterway’).
Page 30 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
for the implementation of regional activities, ensuring stronger transboundary dialogue, integration, and knowledge sharing. During implementation, other sectors will be engaged as and when the need arises.
Box 4. Key Facts about ISRBC ISRBC was established with the international legal capacity, necessary for exercising its functions, for example, implementation of the FASRB. ISRBC is composed of two representatives of each party (that is, national member), one member and one deputy member, together with one vote in the Sava Commission. The parties to the FASRB include BiH, Croatia, Serbia, and Slovenia, while cooperation with Montenegro on the technical level is based on the Memorandum of Understanding on cooperation between ISRBC and Montenegro signed in 2013. The FASRB is a unique international agreement, which integrated all aspects of water resources management and established ISRBC for the implementation of the FASRB, with legal status of an international organization. ISRBC mandate. To implement the FASRB, the Sava Commission is given capacity for decision-making on its own work and in the field of navigation and providing recommendations on all other issues. In addition, the Sava Commission serves as the focal point in the identification and implementation of projects of regional importance, strengthening the mutual cooperation of the Sava countries in water management. ISRBC Secretariat. The Secretariat is an administrative and executive body of the Sava Commission. It consists of officials and support staff. The officials are the Secretary, deputies, and advisors. They are nationals of the parties, represented on equal basis, and appointed by the Sava Commission. ISRBC chairman. ISRBC has a chairman who represents the commission. The term of the chairman lasts three years and will be rotated following the English alphabetical listing of the parties. Expert groups. ISRBC is entitled to establish permanent and ad hoc expert groups, composed of delegated experts from each party. The expert groups are chaired by the officials of the secretariat. Six permanent expert groups currently exist covering navigation, river basin management, accident prevention and control, flood prevention, hydrological and meteorological issues, and GIS. Financial revenue. ISRBC is financed by annual contributions of the parties and from other sources. The parties contribute to the financing of ISRBC on an equal basis. Its 2018 annual budget was €515,960, equally shared among its parties, that is, BiH, Croatia, Serbia, and Slovenia.
60. A new Regional Implementation Unit will be established and housed within the ISRBC Secretariat to implement regional activities under Component 4. Regional activities will be financed exclusively from grant funds to be mobilized from different sources, including GEF. A grant agreement will be prepared and signed with ISRBC outlining the agreed activities and implementation arrangements, once grant funding is secured. The grant agreement will be implemented following World Bank fiduciary and safeguard guidelines. During the preparation of the grant agreement, a capacity needs assessment of the ISRBC Secretariat will be conducted. ISRBC shall engage appropriate experts, with the skills necessary to carry out regional activities under this program, while ensuring the smooth functioning of the Secretariat in carrying out the regular activities provided for in the FASRB.
Page 31 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Figure 4. Institutional and Implementation Arrangements21
61. At the national level, implementation will be undertaken by PIUs within line ministries of each country. PIUs/Project Management Units (PMUs) comprising the required technical and managerial expertise to support project implementation will be established or strengthened. In BiH, the existing PIU (Agriculture Project Coordination Unit [APCU]) within the RS Ministry of Agriculture, Forestry and Water Management (MoAFW) will implement the project, and technical support will be provided from the Ministry of Transport and Communications; Ministry of Spatial Planning, Construction and Ecology; Public Institution Vode Republike Srpske; and other relevant institutions. In Serbia, two new PMUs will be established within the Directorate for Water Management of the MoAFW and Ministry of Construction, Transport and Infrastructure (MoCTI), respectively. In Montenegro, a new PMU will be established within the Ministry of Agriculture and Rural Development (MoARD).
62. Each PIU/PMU will be responsible for the implementation of the assigned national project activities under Components 1 and 2; carrying out procurement and supervision/monitoring of contracts; maintaining effective internal control procedures; accounting for expenditures in their existing budgetary accounting systems; receiving funds; making payments; and providing the documentation and information related to use of the loan/grant proceeds, statement of expenditures (SOE) documentation of the eligible expenditures, project reporting, and monitoring. The new PMUs in Serbia and Montenegro will have the overall responsibility for implementing the project while the fiduciary responsibilities,
21 By appraisal, the FBiH had completed preparation of their respective activities to participate in the program but had not concluded their internal government procedures. Approval for financing for the FBiH will be sought from the World Bank’s Board of Executive Directors separately once the Government has completed its procedures. At that time, an FBiH PIU will also be included.
Page 32 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
including financial management (FM) and procurement, will be undertaken by the Centralized Fiduciary Unit (CFU) and Technical Service Unit (TSU) in the respective Ministries of Finance.
B. Results Monitoring and Evaluation Arrangements
63. While the national/entity PIUs will be primarily responsible for monitoring and evaluation (M&E) in their respective countries, the Regional Implementation Unit in the ISRBC Secretariat will be responsible for monitoring results under Component 4 and report the progress of the respective project activities and associated project indicators, as presented in the Results Framework in section VII. The M&E reports will be presented as part of the regular progress reports. The regional PIU and national/entity PIUs will collect and present data and reports for semiannual reviews by the Regional Task Force and respective national institutions responsible for project implementation, in conjunction with World Bank missions.
64. A midterm review will be conducted to evaluate implementation progress and identify potential issues in need of attention and resolution, including lessons learned during the implementation of Phase I that will inform the preparation of Phase II.
C. Sustainability
65. Borrower commitment is ensured by the strong alignment between the project’s (and the program’s) investments and national- and regional- level strategies. The project is also supporting the implementation of the FASRB. Sub-projects were identified from participating countries’ national priority investments, including single project pipeline investments for EU candidate countries, which support their EU accession progress.
66. Governments’ actions to finance sub-activity preparation speak of their commitment to achieving the expected results and sustaining project outcomes. The selected sub-projects have been identified, and some have been prepared by the respective government institutions. The same implementing/government institutions have the overall mandate for ensuring sustained O&M for the infrastructure that will be supported through this project. The training, knowledge sharing, and improved monitoring schemes will also ensure strong institutional sustainability.
IV. PROJECT APPRAISAL SUMMARY
A. Technical, Economic and Financial Analysis
Technical Analysis
67. Phase I of SDIP builds on existing cooperation at the country and regional levels and draws on a growing body of studies and analyses. Importantly, the cooperation would specifically aim to strengthen the capabilities and economic development of the riparian countries, by jointly selecting priorities for support in technical assistance, dialogue, institutional strengthening, and investment. The phased approach allows translating technical analysis and joint objectives into operational investment proposals with gliding time frames to accommodate the time scales and complementarity of the different preparatory interventions. Phase I will implement no- or low-regret interventions with high technical readiness and limited complexity. In parallel, detailed engineering designs for Phase II activities will be prepared during project implementation in accordance with the World Bank and EU good practice and
Page 33 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
policy.
68. Proposed activities under this project mainly include construction and rehabilitation of embankments and river training for flood protection and regional studies, taking an integrated approach. The preliminary and detailed designs for these activities are based on reliable and adequate information obtained through detailed geological and hydrological investigations, as well as consultations with the stakeholders of the Sava and Drina Rivers. A few of the sub-activities related to flood protection are being prepared through ongoing World Bank-financed activities including GEF-SCCF Drina River Basin Management project and the recently closed Serbia Flood Emergency Recovery project.
69. SDIP is designed to support multi-sectoral investments, notably in navigability, flood protection, nature development, and tourism. For example, several stretches of the Sava River downstream of Slavonski Brod and Šamac (in BiH but along the border with Croatia) are characterized by extensive meanders restricting both hydraulic flood discharge capacity and navigability. Along the Sava’s left bank (Croatia), large tracts of former floodplains are lying outside of the dykes on that bank. In the stretch upstream and downstream of the mouth of the Drina, on both the left and right banks, large tracts of wetland forests and former wetlands are located along the Bosut tributary (that is, Brezavo polje, Raca, Morovicko-Bosutsko sume [forest], and Usce Drine). During the May 2014 floods, left-bank dykes upstream of the boundary between Serbia and Croatia, on Croatian territory, were overtopped and floodwaters inundated the area, damaging the Bosut dykes at the back. These areas are shared by Serbia and Croatia, and, on the right bank, BiH. This stretch also requires more extensive dredging, channelization, river training, and bank stabilization works to improve navigability. More downstream, on Serbian territory, large wetlands as nature reserves exist such as the Zasavica and Obedska bara reserves, which also lie outside the dykes. In May 2014, these areas and those near Šabac suffered from extensive inundation. Similarly, river basin management interventions have to be planned jointly with the neighboring countries to better identify and negotiate financial, environmental, and social costs and benefits and to prevent any potential conflicts due to transboundary impacts. This approach will create more favorable economies of scale and cost efficiency, identify win-win opportunities, and accelerate the EU accession process.
70. This project will also pave the way for more extensive navigability improvement interventions that will be implemented in Phase II. The SDIP will contribute to the objectives of the FASRB by supporting the implementation of an initial set of works in selected sites where the navigation is impeded because of the lack of sufficient draft; insufficiently protected banks; the presence of debris, sharp bends, and other obstacles in the river fairway; and a lack of modern navigational aids. The removal of these bottlenecks will increase the level of navigability to Class IV standard, expand navigability access from 160 to 240 days a year, and benefit other sectoral purposes, such as flood protection, ecotourism, trade, and industrial development. This phased approach to the upgrading of the fairway is consistent with the financial capacity of the countries and with the parallel development of technical and economic studies and designs of future interventions. The increase of the demand of service and traffic will grow gradually along with the capacity of the shipping companies and the renovation of their fleets. The locations of dredging works and river training works are depicted in Figure 5.
Page 34 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Figure 5. Breakdown of Waterway Improvement Activities in Sava River, by Jurisdiction and Riparian Country
Left Bank Rkm 594.0 to rkm 210.8 (Croatia) Rkm 210.8-Rkm 0.0 (Serbia)
Rkms 0
300
594 228 220
99.0
329.0 315.0 311.9 311.8 301.3 212.7 210.8 109.8 103.5 101.0
Activity
Dredging in Šabac Dredging in
Dredging in Klenak Dredging in
Dredging under bridge in Šamac Dredging in under bridge
Dredging Dredging between Gunja Brčko and
part of the Novi Grad-Jaruge project Grad-Jaruge the of Novi part
Dredging between Račinovci and Dredging Vršani between and Račinovci
Dredging Dredging betweenJaruge and Grad Novi Dredging between Savulje and Slav. Šamac as as Dredging between Šamac Slav. and Savulje
Rkm 594.0 to Rkm 178.0 to Rkm 0.0 Right Bank rkm 515.36 (Serbia)
(Croatia) 346.75
Rkm 515.36 to Rkm Rkm 315.0 to 312.2
Rkm 346.75 to 315.0
BiH (Republika Srpska)BiH (Republika Srpska)BiH (Republika Srpska)BiH (Republika
BiH (Federation of BiH)of BiH (Federation BiH)of BiH (Federation
Rkm 312.2 to Rkm 239.0 Rkm 239.0 to Rkm 212.2 Rkm 212.2 to Rkm 178.0 BiH (Brcko BiHDistrict (Brcko BiH)of
71. Irrespective of the phasing process, detailed designs, including ESF documentation, will be reviewed by the World Bank to ensure compliance with the World Bank’s ESF. In addition, the overall project has been screened for its climate change mitigation and adaptation potential as well as risks.
Economic Analysis
72. A standard cost-benefit analysis was conducted to evaluate the economic viability of SDIP’s proposed flood protection and navigation investments, as well as the proposed expansion and modernization investments at the port of Sremska Mitrovica. Additional river port-related investments elsewhere in the Sava River Corridor (for example, in BiH) may take place during Phase II of the program, and the economics of those investments will be assessed during Phase II preparation.
73. For flood protection, the 2014 Western Balkans flood has been analyzed with respect to the loss of life and the extent of economic damage (see annex 3 for full details). Based on the assessment, an economic analysis has been prepared following standard World Bank procedures. The 2014 Western Balkans flood was a 1-in-100-year event and flooded over 390 km2 of areas in BiH, Croatia, and Serbia (Table 4). The majority of these damages accrued in the areas that are the subject of the proposed project. The magnitude of infrastructural damage and economic losses incurred due to the 2014 flood event is an indicative of the expected high economic pay-offs from flood protection interventions.
Table 4. Summary of Damages and Losses in the Affected Countries Population Population Damage and Losses (€, Country Casualties Affected Evacuated millions) Damage: 860 Serbia 1.6 million 32,000 51 Losses: 662
Page 35 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Population Population Damage and Losses (€, Country Casualties Affected Evacuated millions) Total: 1,532 Damage: 1,274 BiH 1 million 90,000 25 Losses: 763 Total: 2,037 Croatia 38,000 15,000 3 300
Total 2.6 million 137,000 79 2,869
74. A cost-benefit analysis was used to determine the economic viability of the flood protection Component of SDIP’s Phase I. At the benchmark economic discount rate of 6 percent, the present value of the total investment and O&M cost is US$181.1 million, and the present value of benefits is US$1,514.8 million in 2020 prices, representing estimated damages and losses avoided for flood return period of 1- in-100 years.22 The cost-benefit analysis for the base case yields an economic internal rate of return (EIRR) of 46.1 percent and an economic net present value (ENPV) of US$1,333.7 million. Sensitivity analyses are carried out to test the robustness of the analyses. In one case, the investment and maintenance costs were increased by 20 percent, and in another case, the net benefit was decreased by 20 percent. Economic viability was found to be robust to these adverse changes in costs and benefits.
75. The cost-benefit analysis for navigation-related investments indicates that investing in the proposed improvements to navigation along the Sava River is economically viable and therefore justified and desirable (Table 5; full details are presented in annex 3).23 Specifically, the navigation improvement interventions are expected to result in an EIRR of 10.1 percent and an ENPV of €22.4 million in 2019 at the World Bank-recommended benchmark economic discount rate of 6 percent.24 Sensitivity analysis shows that the economic viability of these investments is robust to either increases in costs or reductions in benefits, of at least 25 percent, and to several combinations of simultaneous cost increases and benefit reductions of up to 20–25 percent, relative to base-case assumptions. 76. The cost-benefit analysis for the expansion and modernization of the port of Sremska Mitrovica confirms that these investments are economically viable (Table 6; additional details are presented in annex 3). Specifically, the port investments are expected to result in savings in cargo handling costs and port cargo processing time. When compared with the estimated economic cost of construction of €20.7 million (that is, excluding taxes, price and physical contingencies, and land acquisition costs), these benefits yield an EIRR of 10.8 percent and an ENPV of €15.9 million at the recommended economic discount rate of 6 percent. Sensitivity analysis shows that the economic viability of this sub-project is robust to simultaneous increases in expected costs and decreases in projected benefits of up to 25 percent each.
22 These numbers are based on the damage from Serbia alone, as flood protection in this project largely focuses on Serbia under Phase I. 23 The economic viability of port capacity expansion and modernization investments expected for Phase II of the program will be assessed during the preparation of Phase II. Current estimates of economic viability of navigation-related investments, as presented here, will be updated, as and if necessary, during Phase II preparation. 24 World Bank. 2016. “Discounting Costs and Benefits in Economic Analysis of World Bank Projects.”
Page 36 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Table 5. Economic Evaluation of Navigation-related Investments (2019, €, millions)
Present value of Economic Present value of economic benefits economic costs evaluation Operations Inventory CO PM NO Transport Traffic 2 10 X Capital\1 and carrying costs diversion emissions emissions emissions maintenance costs abatement abatement abatement ENPV EIRR (33.4) (4.6) 33.6 0.6 0.6 3.8 1.5 20.3 22.4 10.1% Source: World Bank analysis and estimates. Note: 1. Including the offsetting infrastructure residual value at the end of the analysis period (2050). Table 6. Economic Evaluation of Expansion and Modernization of the Port of Sremska Mitrovica (2019, €, millions)
Present value of Present value of Economic evaluation Operations Handling Time Capital\1 and cost savings maintenance savings ENPV EIRR (20.7) (2.8) 1.5 38.0 15.9 10.8% Source: World Bank analysis and estimates. Note: 1. Including the offsetting infrastructure residual value at the end of the analysis period (2050).
77. GHG emissions accounting. A GHG emissions accounting and valuation exercise was conducted as part of the economic analysis of navigation-related investments under Subcomponent 1.3 of the project and subsequent investments under this subcomponent during Phase II of the program. Based on World 25 Bank standard guidance, the economic value of a ton of CO2 is assumed to be €35 in 2019, growing gradually in real terms to reach €40 in 2025, €50 in 2035, €62 in 2045, and €69 in 2050. It is estimated that, without the project, by 2024—the first year in which the waterway and river port infrastructure interventions become operational under the with-project scenario—inland waterway transportation along the project’s target corridor will generate 19,035 tons of CO2 (in addition to approximately 12 tons of PM10 and 336 tons of NOx, which are local pollutants that contribute to smog formation and are associated with respiratory diseases in exposed populations). In the absence of the project, this would translate to 34 g of CO2 per ton-km transported. The proposed interventions will facilitate the use of larger vessels, which are both more fuel efficient and able to carry greater tonnage per kilometer transported. It is estimated that the use of 1,250–1,500 DWT vessels along the corridor, which SDIP will in part facilitate, would increase the carbon efficiency of inland waterway transport operations by 32 percent—to 23 g of CO2 per ton-km transported—when the shipping community fully deploys class-consistent barges, a vessel adoption milestone that is assumed to be reached in 2031 under the with-project scenario. By the end of the appraisal period, it is estimated that SDIP will contribute to the avoidance of 213,230 tons of cumulative CO2 emissions over the span of 2024–50, with an estimated present economic value of €3.8 million in 2019.26
25 World Bank. 2017 “Shadow Price of Carbon in Economic Analysis Guidance Note.” To adopt a conservative stance in the assessment of economic viability of the proposed investments, the values used for the social value of carbon refer to the guidance note’s ‘low value’ case, at a US$ per € exchange rate of 1.13. 26 Utilizing the ‘high value’ case for the social value of carbon recommended by the World Bank’s “Shadow Price of Carbon in Economic Analysis Guidance Note” of 2017, the estimated present value of avoided emissions in 2019 would be €10.1 million, or slightly more than 2.5 × the estimated present value of avoided emissions under the ‘low value’ case.
Page 37 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Public Sector Financing and Maximizing Finance for Development 78. Phase I focuses on investments with large externalities, such as flood protection, which are typically unattractive for private financing. SDIP’s first phase consists primarily of investments that are traditionally financed by the public sector given their significant externalities. Flood control infrastructure, demining of rivers, and environmental interventions are typical examples of areas where the rationale for use of public funds is strong. The project’s IBRD lending will however leverage (limited) additional resources in the form of approximately US$18 million in grants to cover regional activities. It will also indirectly leverage significant national resources, in particular in the non-borrowing countries of Croatia and Slovenia. 79. Once Phase I has provided the enabling conditions, it is expected that direct and indirect private investment will significantly increase under Phase II. Phase II’s focus will gradually shift toward more financially attractive sectors, such as navigation and hydropower, and direct or indirect private financing in the respective activities, to be identified during Phase I, will be explored. Furthermore, experience shows that once the conditions have been created for a stronger cooperation alongside the corridor, private initiative will ensure further economic impact. For example, the attractive multipurpose river restoration investments have a strong recreational and touristic appeal, leading to the emergence of small and medium enterprises (SMEs, Box 2). The specific development of a shared tourism master plan for the Sava and Drina Rivers Corridors during Phase I will identify further opportunities to leverage private initiatives.
B. Fiduciary
(i) Financial Management
80. The project will be implemented by the ministries and/or government/entities agencies responsible for water management, transport, environment, energy, and others in the three participating countries. For RS, the existing PIU within the RS MoAFW APCU will be in charge of fiduciary arrangements. GEF funding is being sought to support national entities to participate and engage in regional activities under Component 4 to be implemented by ISRBC, including the establishment and operations of a Regional Task Force and PIU.
81. In Serbia, the main responsibility for the fiduciary arrangements will be within the CFU, under the Ministry of Finance. The unit is already implementing a couple of World Bank-financed projects. The staffing of the CFU will shortly be strengthened by engaging an additional staff member after which the capacity of the CFU will be adequate.
82. In Montenegro, the fiduciary responsibilities will be performed by the Ministry of Finance’s TSU. The TSU is already in charge of all World Bank-financed projects in Montenegro in relation to fiduciary aspects and is proven very effective thus far. The TSU has capacity to manage an additional project without increasing the current capacity.
83. An assessment of the FM capacity of project-related institutions was carried out by the World Bank during a preparation mission in September 2019 and thereafter updated in October 2019. The assessment concluded that (a) the FM arrangements in the APCU, CFU, and TSU are all acceptable to the World Bank, and (b) the overall FM risk is Moderate when applying the proposed mitigation measures.
Page 38 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
84. The APCU, CFU, and TSU will maintain an FM system acceptable to the World Bank. The project’s financial statements including SOE and Designated Account (DA) Statements will be audited by independent auditors on Terms of Reference (ToR) acceptable to the World Bank. The annually audited financial statements and the audit reports will be provided to the World Bank within six months of the end of each fiscal year. The APCU, CFU, and TSU shall prepare and furnish to the World Bank not later than 45 days after the end of each calendar semester interim unaudited financial reports for the project covering the semester, in form and substance satisfactory to the World Bank. However, to improve the existing FM arrangement, an action plan had been agreed with the implementing units:
Table 7. Summary of Actions Action Deadline Responsibility Prepare and get clearance for the FM sections of Two months after the All project implementing units in the POM effectiveness the three countries
(ii) Procurement
85. Procurement under the project will be carried out in accordance with the World Bank Procurement Regulations for IPF Borrowers “Procurement in Investment Project Financing for Goods, Works, Non-consulting Services and Consulting Services” (July 2016, revised November 2017 and August 2018). The project will also be subject to the World Bank’s Anti-Corruption Guidelines, dated July 1, 2016, and further will be governed by the provisions stipulated in the Financing Agreements with the respective country. The implementing agencies in each country will use the Systematic Tracking of Exchanges in Procurement (STEP) system. STEP is a planning and tracking system, which would provide data on procurement activities, establish benchmarks, monitor delays, and measure procurement performance. Based on procurement capacity assessment conducted for the implementing agencies in charge of project implementation in the respective country, it was determined that the procurement risk is rated Moderate.
86. The project will be implemented by the ministries and/or government/entities agencies responsible for water management, transport, environment, energy, and others in the three participating countries. For RS, the existing PIU (APCU) within the RS MoAFW will implement the project, and technical support will be provided from the Ministry of Transport and Communications; Ministry of Spatial Planning, Construction and Ecology; Public Institution Vode Republike Srpske; and other relevant institutions. The APCU will be in charge of fiduciary arrangements.
87. In Serbia, the main responsibility for the fiduciary arrangements will be within the CFU, under the Ministry of Finance. The CFU currently comprises the following staff: Director, Head of Operations, two procurement specialists, and an FM specialist. The CFU has an Operational Manual which was finalized on November 9, 2018.
88. At the moment, the CFU is responsible for five investment projects and one donor-funded project. In addition, there are three projects under different stages of preparation which are planned to be supported by the CFU, as well as one new donor-funded project. The CFU is currently in the final process of hiring an additional procurement specialist who possesses the adequate qualification and experience.
89. In Montenegro, the fiduciary responsibilities will be performed by the Ministry of Finance’s TSU. The TSU is already in charge of fiduciary aspects of all World Bank-financed projects and is proven very effective thus far. The TSU has capacity to manage an additional project without increasing the current
Page 39 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
capacity.
90. The latest procurement capacity assessments of project-related institutions carried out by the World Bank concluded that (a) procurements in the APCU, CFU, and TSU are all acceptable to the World Bank and (b) the procurement risk is moderate when applying the proposed mitigation measures.
91. Project Procurement Strategies for Development (PPSDs) have been prepared by each implementing agency, to outline the selection methods to be followed by the borrowers during project implementation in the procurement of goods, works, and non-consulting and consulting services financed by the World Bank. The country-specific Procurement Plans will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. The identified risks and the mitigation measures are detailed in the PPSDs; annex 1 of the Project Appraisal Document includes a summary of PPSD and details on the procurement arrangements and assessments, for each country.
Table 8. Summary of Actions Action Deadline Responsibility Prepare, finalize, and get clearance for the PPSDs Two months after the All project implementing units in and procurement sections of the POM effectiveness the three countries
.C. Legal Operational Policies . Triggered? Projects on International Waterways OP 7.50 Yes Projects in Disputed Areas OP 7.60 No . OP 7.50 - Projects on International Waterways
92. The policy is triggered since some of the proposed activities encompass international waters including the Sava and Drina Rivers. In accordance with OP 7.50, on October 28, 2019, the International Commission for the Protection of the Danube River notified riparian states on behalf of BiH, Montenegro, and the Republic of Serbia (Phase I countries) and requested comments no later than November 28, 2019. By the stated deadline, no comments nor objections were received from any of the riparian states. The project is not expected to cause appreciable harm to any of the riparian states through water deprivation, pollution, or otherwise. Neither is it anticipated that the implementation of the project activities will adversely change the overall quantity or quality of water flowing to or from any of the riparian states of the concerned international waterways. The Regional Vice President’s approval to proceed with further processing of the project was provided on March 20, 2020.
D. Environmental and Social
93. The project is rated with an overall High risk for both environmental and social. The World Bank ESF and all Environmental and Social Standards (ESS) will be applied.
Environment
Page 40 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
94. Although there are only limited high-risk activities identified for the first phase, considering the geographic and sectoral width of the project, as well as the associated borrower capacity and number of institutions involved across the countries, the environmental risk remains high. The specific activities including civil works related to water training works, dredging, and flood protection may contain significant environmental risks and impacts including impacts to the watercourse; management of excavated and dredged materials and solid waste generated; generation of dust, noise, and air pollution; and possible impacts on the flora and fauna of the waterway and adjacent areas; the planning and strategic documents including River Basin Management Plans need to be coupled with Strategic Environmental and Social Assessments (SESAs) and sectoral Environmental and Social Impact Assessments (ESIAs) to adequately identify all of the underlying environmental and social risks. All the documentation, plans, programs, and studies developed to feed into the future phases will consider all the relevant environmental and social issues not only from impact perspective but from a project design perspective as well.
95. Based on the World Bank’s ESF, the borrower has developed an Environmental and Social Management Framework (ESMF) for each participating country (Serbia, BiH, and Montenegro for the first phase), which will serve to screen every sub-project for potential social and environmental impacts and then develop specific mitigation plans as needed. All the subsequent ESIAs or ESMPs will be developed fully in accordance with the provisions of the World Bank ESF and the ESS. The plans will be site and sub- project specific and will cover the most likely impacts described above. Along with the ESMF, site-specific ESMPs have been prepared, disclosed, and consulted for two locations: riverbank training in Popova Bara and construction of a flood protection warehouse in Surcin (Serbia). Overall, all three ESMFs provide guidance for high-risk activities based on the World Bank ESF, while for activities of substantial and moderate risk, the due diligence is to be prepared following the legislation of the relevant country and expanded to include the requirements of the World Bank ESF. The BiH and Montenegro ESF documents were disclosed on December 30, 2019, while those for Serbia were disclosed on December 19, 2019.
96. The proposed demining activities to be carried out on the Sava River right bank in BiH will be conducted in close alignment with the country’s well-established framework and long experience, as described in section B - Project Components. Under the project’s ESMF, ToR for a specific ESMP covering the demining activities were prepared as part of the due diligence package that includes the World Bank ESF requirements, BHMAC’s SOPs for Humanitarian Demining, and the principles of the UN-endorsed IMAS. The ESMP will be prepared and approved before the commencement of demining activities.
Social
97. Involuntary resettlement. Given that many sub-projects are not fully prepared, Resettlement Policy Frameworks (RPFs) have been developed for each country. Since the World Bank has substantial experience working across these countries on regional programs, the instrument builds on existing frameworks and, where feasible, will continue to be implemented by the agencies that have this experience. Where specific investments have been identified and prepared, Resettlement Action Plans have been developed. The institutional arrangements for approvals and implementation have been laid out in the RPFs, along with identified capacity and policy gaps, entitlement matrix, and M&E arrangements.
98. Out of the sub-projects already identified for Phase I, only two in Serbia will have land acquisition impacts, and for these two, Resettlement Action Plans (RAPs) have been developed. The RAP for the small
Page 41 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
village of Popovo Bara, located on the river, is linked to the rehabilitation of the left bank of the Sava River. This sub-project entails only minor land acquisition, with relocation of structures and loss of perennial or annual crops, but no physical relocation. There are a total of 20 land parcels and project-affected persons (PAPs), all of whom are partially affected.
99. The sub-project ‘Jarak’ is for construction works for the rehabilitation of the left bank of the Sava River to prevent further erosion of the left bank. There are a total of eight land parcels in Jarak (all publicly owned) and four in Hrtkovi (three of which are publicly owned). Only one private land parcel, of 3,099 m2 will be permanently acquired while another of 167 m2 will be temporarily required; both parcels are owned by the same owner and are not used for agriculture. Overall, there will be minor land acquisition impacts and no physical relocation.
100. The demining activities under SDIP will not only follow the requirements of the ESF but will also integrate the BHMAC SOPs for Humanitarian Demining and the principles of the UN-endorsed IMAS. This set of broad standards addresses all issues related to mining, including worker safety, community health and safety (CHS), and occupational health and safety (OHS).
101. Project activities such as rehabilitation of the existing ports, reconstruction of embankments and dykes; river bed dredging, various forms of river training, and so on will affect both direct and contracted workers and in some cases primary supply workers who will be expected to comply with ESS2 requirements. Community flood protection may involve some community labor. Labor Management Procedures have been developed for Serbia, BiH, and Montenegro, which detail how compliance will be done, by whom, and under what laws in each country. They detail the requirements for contractors and others as well as any gaps between ESS2 and national law. While for small-scale works, like small embankments, the locally based and/or community labor may be used, large-scale civil works may involve an influx of labor and construction of labor camps. These will adhere to the standards of the framework: wage, protective gear, working hours, benefits, and so on. These countries also have vulnerable population including refugees who may benefit from job opportunities. OHS/CHS aspects and contractor grievance redress mechanism (GRM) will be included in relevant contracts in all activities. The labor management plans (LMPs) also establish a separate grievance system, including provision for gender- based violence (GBV) mitigation as relevant.
E. Other Corporate Mandates
102. Gender. SDIP’s proposed interventions will not deliver their intended economic and social returns in full unless all members of the target populations and end-user beneficiaries, irrespective of gender, can participate in the decision-making process and access improved facilities and related economic opportunities. Recovery needs assessment studies conducted in BiH and Serbia show that women and men were affected differently in the 2014 flood due to the existing gender gaps and cultural norms, which affect their social behavior and recovery process.27 In particular, most women in the areas were engaged in unpaid household or farm works (64–75 percent) and micro enterprises (50–81 percent), which were
27 Council of Ministries of BiH. 2014. “Bosnia and Herzegovina Floods, 2014: Recovery Needs Assessment.” In Servia Floods 2014, edited by European Union et al. Belgrade.
Page 42 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
severely affected by the floods.28 Their lower participation in formal waged labor29 put them in even more vulnerable situations, as their activities were often not insured and they lacked access to reconstruction assistance or other support that was available for affected people. Moreover, lack of land titling limited women farmers’ access to resources and collateral for loans for recovery.30 A qualitative analysis also showed that women were excluded from decision-making in investment and recovery processes. Another explanation for women experiencing slow recovery and larger drops in income after floods is that they play a larger role in the household in caring for other family members and dealing with the household flood effects, as their work is often less formal and more likely to be cut back. The weight of each of these gaps, and what they are driven by or how they manifest themselves, can vary from one specific locality to the next.
103. The project will conduct a range of studies and develop a number of plans that will influence how the river basin is managed, how floods are responded to, as well as how opportunities for enhanced income and tourism are shaped. More specifically, the project will develop regional tourism master plans for the Sava and Drina Corridor. Under the regional tourism master plan for the Sava and Drina Corridor, the project will support increasing women’s involvement in economic activities and engagement in decision-making. Since tourism-related jobs are often flexible and can be carried out from different locations, this could create opportunities for women who have lost their jobs or means of living through floods to engage in waged jobs. The ToRs of the plan will emphasize the importance of capturing the women-headed SMEs’ specific needs and concerns, as well as exploring potential job opportunities for women, and ways to ensure that women-headed SMEs can benefit from flood recovery resources. Under the plan, a forum of women-headed SMEs will be established to facilitate regular engagement with river basin management authorities and river port authorities and to influence the tourism master plan design to create more resilient and post-flood employment opportunities for women-run SMEs.
104. Furthermore, enterprise surveys have shown that women-headed businesses incur higher logistics costs than male-headed ones. The nature of this gap as it relates to the Sava River Basin will be further explored under Component 4, to better understand the needs and risk exposure of women- headed businesses and to promote interaction between these businesses and the river port authorities of the Sava River Corridor. SDIP-linked feasibility studies for Phase II activities will emphasize assessments of SMEs in the catchment area of the Sava River—as SMEs are more likely to be women-headed businesses—to better understand their logistics and operating needs and incorporate lessons thereof into the design of port and navigation capacity investments.
105. Climate change. The program will address the risks of climate change-exacerbated floods through multiple interventions aimed at both adaptation and mitigation. The program will contribute to climate change adaptation through the provision of flood-prevention infrastructure and the provision of tools to actively monitor and manage flood risk, flood plains, and wetlands in the Sava and Drina River Basin. Design of the construction and upgrading of flood protection infrastructure incorporated climate change
28 The needs assessment report of BiH says that 88 percent of enterprises reported damages and losses were to micro and small enterprises. 29 It ranges from 34 percent (in BiH) to 43 percent (in Serbia), which is 15–30 percent lower than that of men. From World Bank and SDC study on “Promoting Women’s Access to Economic Opportunities in the Western Balkans: Building the Evidence” (2018). PowerPoint Presentation. http://pubdocs.worldbank.org/en/862651521147002998/PPT-Gender-TF-final.pdf. 30 World Bank. 2014. “World Bank FAO Aim to Boost Women's Land Ownership in Central Europe.” https://www.worldbank.org/en/news/feature/2014/09/22/world-bank-group-fao-aim-to-boost-women-land-ownership-in- central-europe.
Page 43 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
impacts on protection standards. In addition, this project will promote data sharing and joint decision making on flood early warning and forecasting, further enhancing riparian countries’ climate change adaptation capacities. By allowing for a significant increase in the daily navigability access of the Sava River, and for the modernization and expansion of selected river ports along the Sava River Corridor, the program will improve the economic resilience of the region by reducing weather- and other climate- related disruptions to this corridor that are caused or exacerbated by climate change. With regard to mitigation, improvements in river fairway navigation capacity will facilitate the use of larger vessels that are more fuel-efficient per ton-km transported than those currently used on the Sava River, resulting in a reduction of GHG emissions related to the transportation of freight along this waterway compared to a without-project, ‘business as usual’ baseline. SDIP’s navigation interventions will also reduce the emission of local pollutants from river transport operations, such as particulate matter and mono-nitrogen oxides, which, while only indirectly linked to climate change, are major contributors in their own right to respiratory diseases and linked to premature deaths in locally exposed populations. Furthermore, these interventions may induce modal shift in the transportation of bulk and containerized freight, from trucks to inland waterway barges, which would further reduce the emission of harmful GHGs and pollutants from the cargo transport activity of participating countries.
106. Citizen engagement. An important component of the learning to be internalized into SDIP’s Phase II from the experience of implementing Phase I activities will be gathered through engagement with end- user populations—the ultimate program beneficiaries. Annual consultations with project beneficiaries will be conducted by country-level PIUs including port users (such as shippers, inland waterway barge operators, truck operators, and other logistics service providers); the communities that host Sava River ports; land owners; and technical national and regional institutions, nongovernmental organizations (NGOs), and local government representatives (all in addition to the site-specific consultations with PAPs). The operational and social needs of these beneficiaries, obtained through participatory planning activities, will be reflected in the design of specific flood protection interventions as well as the regional river basin and tourism plans and will be reported and monitored through quarterly progress reports. Phase I activities have been selected based on prior and ongoing consultations with the target communities. Furthermore, the process of engaging citizens, rural development networks, and NGO representatives through participatory planning and capacity building for flood protection, sustainable watershed management, and the tourism development plan will be detailed after the social assessment screening is completed during the first year of project implementation.
107. On flood protection, the project will ensure a strong focus on establishing effective communications channels and establishing annual participatory decision-making systems with all relevant beneficiaries and their representative organizations, and an online citizens platform will be established where information on river basin activities can be shared, input sought, and feedback provided to government implementing institutions. The project will ensure that representative bodies engaged in flood protection activities have adequate representation of both women and youth, for example, the project will work with and train community groups to make a concerted effort to voice issues specific to women. A screening and consultation process undertaken by country PIUs and their associated social specialists for each activity or investment will help shed light on and raise the concerns as well as potential impacts on women and youth. Where vulnerable groups are identified, targeted group discussions will be undertaken to address their specific needs and ensure they benefit from project activities to mitigate future risks. Flood protection and early warning activities, carried out in areas where communities that may be directly affected live, will include community-based training and support for the development of local organizations to better equip them to deal with early warning and flood management. In this regard,
Page 44 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
special attention will be given to women who are often affected in different ways and could be more vulnerable to floods in the event of pregnancy, female-headed households, and managing children.
V. GRIEVANCE REDRESS SERVICES
108. Grievance redress mechanisms will be established under each national level PIU as well as the regional PIU under ISRBC. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to these established project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/en/projects-operations/products-and-services/grievance- redress-service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org.
VI. KEY RISKS
109. The overall risk to achieve the PDO is considered High because the program aims to address challenges that are multi-sector, multi-country, and transboundary in nature.
110. Political and Governance - Substantial. There is a risk that conflicting and competing demands among the different countries, sectors, and vested interests may delay decision-making and undermine the collaborative process essential for the achievement of the PDO. To mitigate this risk, during preparation, the implementation arrangements, including clear roles and responsibilities of the institutions involved, have been defined. In addition, activities supported under this project are not mutually dependent, thus allowing the opportunity to gradually build political confidence.
111. Macroeconomic - Substantial. While the magnitude of the impact of COVID-19 on Western Balkans countries’ macroeconomic environment will depend on how the outbreak evolves, a worldwide economic downturn could have a substantial impact on Western Balkans countries’ economic growth, balance of payments, and fiscal position. As mitigation, while an economic crisis would constrain the fiscal space for improvements in water-related sectors, project financing will be earmarked to support defined activities within the program. The grant-financed component will also not be affected by the macroeconomic environment changes. Residual risk is, therefore, considered Substantial.
112. Institutional Capacity for Implementation and Sustainability - Substantial. The achievement of the PDO may be jeopardized by the complexity of having three national governments, two entity governments in BiH, a regional organization, and several institutions representing different sectors involved in the implementation of the components. These institutions have various capacities in project implementation and management. The ongoing preparation of Phase I projects is being undertaken in close consultation with the countries, and priority interventions will be identified through this process. These initiatives will mitigate any risks of disagreements among the countries or changes in political
Page 45 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
priorities given the respective plans will be endorsed at the political level as well. The World Bank will support implementation through close engagement with program beneficiaries and by offering technical expertise in the areas within SDIP’s scope. In addition, the World Bank will support the implementing institutions through regular missions, local presence, training on World Bank-related procedures, and knowledge-sharing workshops.
113. Technical Design - Substantial. This multinational, multiphased, integrated water resources management program includes a substantial number of sub-projects. Considering the complexity of the project and program, the number of sectors, and countries involved, the technical design of the project could become too complex. To mitigate this risk, during project preparation, activities were identified in consultation with the countries to verify their technical and financial viability, readiness, and implementation arrangements. Available documentation such as feasibility study and detailed designs, where available, were reviewed to confirm their technical and financial soundness. This pruning process led to the selection of more refined and limited subset of investments for implementation in Phase I.
114. Environmental and Social risk - High. The activities to be supported include a variety of sectors, issues, and stakeholders. Through two phases of the program, there are at least 40 identified locations, mostly at or immediately adjacent to the Sava and Drina, although some of the investments may be located in the wider catchments. The first phase (2020–26) will include activities on flood protection and environmental management, regional dialogue, and studies, along with demining activities of the Sava waterway to enable Phase II activities toward improving the navigability of the Sava River. Considering the geographic and sectoral width of the program (including demining), the need for coordinated stakeholder consultations, and decision-making, as well as the associated limited borrower capacity and number of institutions involved across the countries, the environmental and social risk is High. This risk will be mitigated through targeted trainings for all participating institutions as well as establishment of monitoring tools that will ensure transparent and quality implementation of environmental and social safeguards management. Demining operations have a potential to damage the environment, not only because of the short-term effects caused by demolition activities but also long-term effects that may be caused by contamination of soil and water systems, removal of vegetation, disruption to watercourses, or changes to soil structure. The risk of these effects materializing will be mitigated through the mobilization of experienced demining contractors under the overall technical supervision of BHMAC, through the provision of civil works supervision on the ground at all times and subject to strict observance of BHMAC’s SOPs and IMAS principles. Indeed, removal of mines is expected to open up land to greater and more sustainable uses, which can contribute to more resilient economic outcomes, such as through better protection of the Sava riverbanks.
115. Stakeholders - Substantial. Successful implementation will require strong public sector capacity at the regional, national, and local levels, as well as a coordination body that has adequate political support and authority. Specific risks include (a) government counterparts not seeing the value added of SDIP, and thus unwilling to coordinate and collaborate during the program implementation process; (b) delays caused by disagreements between countries and/or agencies within countries, regarding prioritization, design, timing, funding, and execution approaches of activities that require consensus; and (c) delays or implementation complications arising from shifting political priorities among the countries, such as a result of elections or realignments in policy decision-making. In addition, local stakeholders may object to certain investments. These risks will be mitigated through the proposed implementation arrangements, which have been designed to allow for discussion, feedback, and deliberation at the regional, national, and subnational levels. In addition, all selected sub-projects have been identified and
Page 46 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
agreed upon by the countries, and further prioritization and preparation of regional sub-projects to be implemented during Phase II will be undertaken in a participatory manner with all countries, as part of the Sava River Basin Management Plan.
116. Funding gap - Substantial. Participating countries requested the World Bank to prioritize the credit funds for the implementation of infrastructure and related preparatory studies and requested that the World Bank assist them in mobilization of grant financing in support of demining and regional studies. The current funding gap is about US$18 million. The World Bank has reached out to a number of development partners including the European Commission, WBIF, and GEF. The World Bank worked with countries to submit investment grant funding application for WBIF targeting demining activities initially. The application was submitted in November 2019, and the decision will be made by the end of 2020 by WBIF. The World Bank has also submitted the program concept to GEF for technical review, seeking their grant financing for regional activities. The application received approval from the GEF Council in June 2020, and the grant agreement is expected to be finalized by the end of 2020. Even though the Bank expects these funding sources to close the existing financing gap fully, and the work on securing this additional funding is quite advanced, inability to mobilize full funding for the entire program could potentially jeopardize the achievement of the PDO. This risk is, therefore, rated Substantial until the funding is completely secured. Table 9. Program Risk Ratings Summary Table Risk Category Rating 1. Political and Governance ⚫ Substantial 2. Macroeconomic ⚫ Substantial 3. Sector Strategies and Policies ⚫ Moderate 4. Technical Design of Project or Program ⚫ Substantial 5. Institutional Capacity for Implementation and Sustainability ⚫ Substantial 6. Fiduciary ⚫ Moderate 7. Environment and Social ⚫ High 8. Stakeholders ⚫ Substantial 9. Other/Funding gap ⚫ Substantial . Overall ⚫ High
Page 47 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
VII. RESULTS FRAMEWORK AND MONITORING
Results Framework COUNTRY: Western Balkans Sava and Drina Rivers Corridors Integrated Development Program
Project Development Objective(s) The Objective of the Project (Phase I of the Program) is to improve flood protection and enhance transboundary water cooperation in the Sava and Drina Rivers Corridors.
Project Development Objective Indicators
RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline End Target
Enhance transboundary water cooperation
River basin management plan reflecting integrated measures No Yes updated and endorsed by countries (Yes/No)
Improved flood protection of the Sava and Drina River Corridors
People protected from 1 in 100-year flood event in the Sava and 0.00 200,000.00 Drina River Basins under the project (of which female) (Number)
Of which female (Number) 0.00 110,000.00
Area protected by flood risk mitigation measures under the 0.00 150,000.00 project (Hectare(Ha))
PDO Table SPACE
Page 48 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Intermediate Results Indicators by Components
RESULT_FRAME_TBL_IO Indicator Name PBC Baseline End Target
Improved flood protection in the Sava and Drina River Corridors Length of embankments or dykes constructed or rehabilitated (Kilometers) 0.00 20.00 Flood monitoring and forecasting system upgraded in a participatory manner, publicly disclosed and adjusted based on No Yes citizen engagement (Yes/No) Percentage of grievances responded and resolved within an agreed time frame (Percentage) 0.00 85.00 Strengthened institutions and instruments to enhance transboundary water cooperation Enhanced monitoring/ data sharing protocols and schedules developed (Yes/No) No Yes Priority regional investments prepared (Number) 0.00 5.00 Stakeholders consulted (of which female) and engaged during 0.00 1,000.00 planning and preparation of project interventions (Number) of which female (Number) 0.00 510.00 Waterway improved through demining (Kilometers) 0.00 40.00 Regional tourism master plan for the Sava and Drina Corridor that includes the establishment of a forum for women-headed No Yes SMEs is developed and endorsed.. (Yes/No) Number of annual multi-national stakeholder workshops held 0.00 12.00 (Number) Enhancement of port facilities, services and logistics Freight throughput at the Sava river port of Sremska Mitrovica in 234,465.00 300,000.00 Serbia (Tones/year)
IO Table SPACE
Page 49 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
UL Table SPACE
Monitoring & Evaluation Plan: PDO Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection This indicator measures the progress in updating of the River Basin Management River basin management plan reflecting Administrative Plan to support integrated Yearly Reported by the ISRBC ISRBC integrated measures updated and records water resources endorsed by countries management and subsequently endorsed by the countries. This indicator measures the number of people who face reduced flooding risk and Social People protected from 1 in 100-year flood National/entity PIUs and are protected against 1 in Yearly monitoring Reports by borrowers event in the Sava and Drina River Basins PMUs 100 years flood event due reports under the project (of which female) to improved infrastructure supported under the project. Administrative National/entity PIUs and Yearly Reported by borrowers Of which female records PMUs
This indicator measures the area under reduced risk from adverse flooding (i.e. Administrative Submitted by the National/entity PIUs and Area protected by flood risk mitigation Yearly 1 in 100-year flood event) records borrowers PMUs measures under the project due to improved infrastructure supported under the project.
Page 50 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
ME PDO Table SPACE
Monitoring & Evaluation Plan: Intermediate Results Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection This indicator measures the progress in construction or Administrative Reported by the National/entity PIUs and Length of embankments or dykes rehabilitation of the Yearly records borrowers PMUs constructed or rehabilitated embankments or dykes at
selected priority areas under the project. This indicator measures the progress in upgrading the Flood monitoring and forecasting system in a participatory manner that actively engages stakeholders not only in the formulation but in Flood monitoring and forecasting system providing feedback on the Administrative upgraded in a participatory manner, system, and that will Yearly Reported by ISRBC ISRBC records publicly disclosed and adjusted based on therefore provide timely, citizen engagement accurate and user-friendly flood forecasting. The level and quality of participation will be measured through beneficiary assessments to be undertaken during project implementation at mid-term and again prior
Page 51 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
to project closure.
This indicator measures the efficiency of the GRM management by the PIUs. Administrative National/entity PIUs and Percentage of grievances responded and This is a beneficiary Yearly Reported by borrowers records PMUs resolved within an agreed time frame feedback indicator that
responds to the Bank’s Citizen Engagement commitment. This indicator measures the progress in development of data sharing Administrative Enhanced monitoring/ data sharing Yearly Reported by ISRBC ISRBC protocols/schedules which records protocols and schedules developed are harmonized and agreed among the riparian countries/entities. This indicator measures the number of priority regional Project design National/entity PIUs and Yearly Reported by borrowers Priority regional investments prepared investments prepared for documents PMUs
implementation under Phase II This indicator will measure the level of citizen Stakeholders consulted (of which female) Administrative National/entity PIUs and engagement through Yearly Reported by borrowers and engaged during planning and records PMUs consultation in planning preparation of project interventions and preparation of project interventions of which female This indicator measures the Yearly Administrative Reported by Bosnia and Bosnia and Herzegovina Waterway improved through demining length of waterway records Herzegovina Ministry of Ministry of
Page 52 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
improved through Communications and Communications and demining activities to Transport Transport remove bottlenecks to navigation This indicator monitors the development and endorsement of Master Plans for Nautical tourism Regional tourism master plan for the Sava and Ecotourism, including Administrative and Drina Corridor that includes the Yearly Reported by ISRBC ISRBC the establishment of a records establishment of a forum for women- forum for women-headed headed SMEs is developed and endorsed.. SMEs to ensure their participation in the development of these plans. This indicator measures the progress towards trust building and improved governance among riparian Administrative National/entity PIUs and Number of annual multi-national Yearly Submitted by borrower countries, to highlight records PMUs stakeholder workshops held ongoing achievements of the project and build support for longer-term objectives. Total tonnage throughput, PMU in Ministry of Administrative Freight throughput at the Sava river port inbound and outbound, Annual Submitted by borrower Construction, Transport reports of Sremska Mitrovica in Serbia handled at the port per and Infrastructure
year ME IO Table SPACE
Page 53 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
.
Page 54 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
ANNEX 1: Implementation Arrangements and Support Plan
COUNTRY: Bosnia and Herzegovina, Montenegro, and the Republic Of Serbia Sava and Drina Rivers Corridors Integrated Development Program
Project Procurement Strategy Document
1. PPSDs have been prepared by each country, to outline the selection methods to be followed by the borrowers during project implementation in the procurement of goods, works, and non-consulting and consulting services financed by the World Bank. The underlying Procurement Plan for each country will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. The identified risks and the mitigation measures are detailed in the PPSDs.
2. Procurement under the project will be subject to the World Bank’s Procurement Framework. All procurement will be conducted through the procedures specified in the World Bank’s Procurement Regulations. The project will also be subject to the World Bank’s Anti-Corruption Guidelines, dated July 1, 2016.
3. The implementing agencies in each country will use the STEP system. STEP is a planning and tracking system, which provides data on procurement activities, establish benchmarks, monitor delays, and measure procurement performance. Based on procurement capacity assessment conducted for the implementing agencies in charge of project implementation in the respective country, it was determined that the procurement risk is rated as Moderate
4. The project will be implemented by the ministries and/or government/implementing agencies responsible for water management, transport, environment, energy, and others in the participating countries. Where applicable, the PIUs shall comprise at least the following key staff: a PIU head, an FM specialist, and a procurement specialist and will be complemented by technical staff from the ministries.
5. Where applicable, the PIUs will also ensure coordination with relevant ministries and/or agencies and other beneficiaries of the project’s support. The PIUs will also be responsible for ensuring coordination between all project stakeholders, development of training programs and workshops, regular communication with other donors (if any) ensuring that World Bank procedures are followed according to the World Bank policies and the Project Loan Agreement and Disbursement Letter, and day‐to‐day communication with the World Bank related to fiduciary issues on the project. The project will finance hiring of consultants for the PIUs and will also cover incremental operating costs, including office supplies, reasonable commercial banking charges and fees, vehicle O&M, communication and insurance costs, O&M of office equipment, administration costs, utilities, travel, per diem, and remuneration of locally contracted employees (but excluding the salaries of the borrower’s civil service’s officials), and other related expenditures as may be agreed upon by the World Bank, none of which would have been incurred in the absence of the project.
6. Considering the experience and exposure of the implementing agencies in implementing the World Bank-financed projects, the procurement risk is rated Moderate.
Page 55 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
7. In BiH, for Republika Srpska, the existing PIU (APCU) established within the RS MoAFW will be in charge of fiduciary arrangements for part of the project implemented in Republika Srpska. The APCU possesses more than 10 years of experiences in implementing World Bank-financed projects and are sufficiently staffed with procurement professionals.
8. In Serbia, the main responsibility for the fiduciary arrangements will be within the CFU, under the Ministry of Finance. The CFU currently comprises the following staff: Director, Head of Operations, two procurement specialists, and an FM specialist. The CFU has an Operational Manual which was finalized on November 9, 2018.
9. At the moment, the CFU is responsible for five investment projects and one donor-funded project. In addition, there are three projects under different stages of preparation which are planned to be supported by the CFU, as well as one new donor-funded project. The CFU has hired an additional procurement specialist who possesses adequate qualification and experience.
10. In Montenegro, the fiduciary responsibilities will be performed by the Ministry of Finance’s TSU. The TSU is already in charge of all World Bank-financed projects in Montenegro in relation to fiduciary aspects and is proven very effective thus far. The TSU has capacity to manage an additional project without increasing the current capacity.
Procurement Arrangements
Procurement of Works
11. Works eligible under the project will be procured under open procedure, both national and international, using procedures and methods (Request for Bids [RFBs]) specified in more detail in the Procurement Plan, depending on their estimated cost value. The threshold for prior review and procurement methods are set forth in the PPSDs.
Procurement of Consulting Services
12. Consulting services under the project are of varying size and complexity. Selection of consulting firms will be done using the World Bank standard procurement documents, such as Request for Proposals (RFPs). The employment of an individual expert will be conducted through the Selection of Individual Consultants in accordance with the Procurement Regulations. In case the service is required from a consultancy firm, the Quality- and Cost-Based Selection method will be applied and other methods such as Least-Cost Selection, Selection under a Fixed Budget, or Quality-Based Selection may also be used following provisions of the Procurement Regulations. For contracts below US$300,000 equivalent, the Selection Based on the Consultants’ Qualification (CQS) method may be used.
13. In procuring consulting services not financed in whole or in part from World Bank loans but included in the project scope of the Loan Agreement, the borrowers may adopt other rules and procedures. In such cases, the World Bank shall be satisfied that (a) the obligations to diligently and efficiently implement the project will result in the selection of consultants who have the required qualifications, (b) the selected consultant will carry out the assignment in accordance with the agreed schedule, and (c) the scope of services is consistent with the needs of the project.
Page 56 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Procurement of Goods and Non-Consulting Services
14. Goods may be procured using procedures and methods (RFBs, Request for Quotations, and Direct Selection) specified in more detail in the Procurement Plan. For the procurement of those contracts for goods and non-consulting services not financed in whole or in part from the World Bank loan but included in the project scope of the Loan Agreement, the borrowers may adopt other rules and procedures. In such cases, the World Bank shall be satisfied that the procedures to be used will fulfill the borrower’s obligations to cause the project to be carried out diligently and efficiently and that the goods, works, and non-consulting services procured (a) are of satisfactory quality and are compatible with the balance of the project, (b) will be delivered or completed on time, and (c) are priced so as not to adversely affect the economic and financial viability of the project.
General Procurement Notice
15. The General Procurement Notice will be prepared and submitted to the World Bank before effectiveness. The World Bank will arrange for its publication in the United Nations Development Business online and on the World Bank’s external website. The General Procurement Notice will contain information concerning the borrowers, amount, and purpose of the loan; scope of procurement reflecting the Procurement Plan; the name, telephone (or fax) number, and address(es) of the borrower’s agencies responsible for procurement; and the address of a widely used electronic portal with free national and international access or a website where the subsequent Specific Procurement Notices will be posted. The General Procurement Notice will be published tentatively in the end of 2020 providing information on the scope of major procurements for the project and soliciting expressions of interest from prospective bidders and/or consultants for this project.
Procurement Plan
16. The borrowers have developed their respective initial Procurement Plans for the entire project consistent with the implementation plan, which provide information on the procurement of packages, potential selection processes with methods, and the World Bank review requirements. Because this will cover the entire project completion period, it will be tentative. However, a Procurement Plan per country for 12 months of the project should be prepared in more detail. The Procurement Plan(s) will be updated in agreement with the World Bank project team at least annually or as required to reflect the actual project implementation needs and improvements in the PIU’s institutional capacity. The recommended Procurement Plan(s) for the project is given in table 1.1.
Procurement Supervision
17. Routine procurement reviews and supervision will be conducted by the accredited procurement specialist. In addition, one supervision visit is expected to take place per year when ex post reviews will be conducted. Procurement documents will be kept readily available for the World Bank’s ex post review during supervision missions or at any other point in time. A post review report will be prepared annually and shared with the PIUs.
Page 57 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Table 1.1. Potential Procurement Packages Planned Cost Selection Date Implementing Item Description Country Type Estimate Review Method (Tender Agency (US$) Launch) Component 1: Integrated Management and Development of the Sava River Corridor 1.1 Flood protection and environmental management 1.1.1 Raising right Sava dyke in Šabac City SRB W tbd CFU 1.1.2 Improve and modernize flood protection SRB W tbd CFU infrastructure in urban and recreational areas in the city of Šabac 1.1.3 Rehabilitation of left Sava dyke in Progar-Kupinovo SRB W tbd CFU for flood protection 1.1.4 Rehabilitation of left Sava dyke in Klenak for flood SRB W tbd CFU protection 1.1.5 Raising Sava River dykes at Sremska Mitrovica (left SRB W tbd CFU dyke) and Macvanska Mitrovica (right dyke) for flood protection 1.1.6 Rehabilitation of left Sava riverbank in Jarak SRB W tbd CFU 1.1.7 Embankment stabilization of left Sava River dyke in SRB W tbd CFU Popova Bara 1.1.13 Design and Reconstruction of Kolubara dykes to SRB CS tbd CFU protect Obrenovac City in Serbia 1.1.14 Design and Raising dykes in Novi Beograd to protect SRB CS tbd CFU Belgrade City from flood 1.1.18 Regulation of concrete channel and pipe, Bubnjarica BiH/RS W RFB tbd APCU Creek torrent water 1.1.19 Bubnjarica River torrent canal cleaning BiH/RS W RFB tbd APCU 1.1.20 Drainage control, dyke near the Una River BiH/RS W RFB tbd APCU 1.1.21 Studeni Jadar riverbank works-training BiH/RS W RFB tbd APCU 1.1.22 Examination of status of the Sava dyke and a portion BiH/RS CS RFP tbd APCU of the Una dyke
Page 58 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Planned Cost Selection Date Implementing Item Description Country Type Estimate Review Method (Tender Agency (US$) Launch) 1.1.23 Conceptual design of integrated regulation of water BiH/RS CS RFP tbd APCU regime and multipurpose use of downstream section of Bosna river, with a feasibility study 1.1.24 Regulation of the Vrbas River water regime on the BiH/RS W RFB tbd APCU Section 2 from the Trapisti Bridge upstream to the confluence of the Vrbanja River 1.1.25 Reforestation in torrent creeks basins - the Vrbanja BiH/RS W RFB tbd APCU River tributaries 1.1.26 Establishment of forest plantations in the Sava and BiH/RS W RFB tbd APCU Vrbas River alleys inundation area 1.1.27 Completion of works in seeds and seedlings center - BiH/RS W RFB tbd APCU nursery production - production of adjustable seedlings for the needs of reforestation in the Black Sea Basin 1.1.28 Establishment of arboretum in Banja Luka BiH/RS W RFB tbd APCU 1.3 Enhancement of port facilities, services and logistics 1.3.1 Expansion and modernization of port of Sremnska SRB W RFB tbd PIU Mintrovica
Page 59 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Component 2: Integrated Management and Development of the Drina River Corridor 2.1 Flood protection and environmental management 2.1.1 Flood protection in the upper Lim River SRB W RFB tbd CFU 2.1.5 Flood protection and drainage in Mačva SRB W RFB tbd CFU 2.2 Integrated development of Drina watershed 2.2.1 Integrated development of lower Lim River MNE CS RFP tbd TSU Component 3: Project Preparation and Management 3.1 Project preparation 3.1.1 Project preparation for Phase II Activities CS RFP tbd 3.2 Institutional strengthening and project management 3.2.2 National/entity PIU and project management, Phase I CS 920,000 IC tbd 3.2.4 Implementation and operations cost, Phase I OC 710,000 n.a. tbd Component 4: Regional Activities 4.1. Regional dialogue, project management and coordination 4.1.1 Regional dialogue, project management, and CS RFP tbd coordination 4.2. Regional plans, studies and strategies of basin-wide importance (consultancy, training, systems) 4.2.1 Preparation of the 2nd Sava RBMP CS RFP tbd 4.2.2 Hydrological Study for Sava River Basin CS RFP tbd 4.2.3 Study on sediment, water, and biota in Sava River CS RFP tbd Basin 4.2.4 Climate Change Adaptation Strategy for the Sava CS RFP tbd River Basin 4.2.5 Design of a Master Plan for Sustainable Ecotourism CS RFP tbd Development in Sava River Basin 4.2.6 Advanced flood monitoring, forecasting, and CS RFP tbd management system Note: CS = Consultancy Services; IC = Individual Consultant; MNE = Montenegro; OC = Operating cost; SRB = Serbia; W = Works.
Page 60 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Procurement Arrangements for Deming
18. The estimated cost of demining of the Sava River right bank is €8 million and will take about 10 to 16 months to complete. According to BHMAC, the demining areas could be divided into lots and be implemented by one or more than two dozen contractors currently operating in BiH. In addition to local contractors, the international business community will be involved in this activity. There are experienced firms in Croatia and Serbia, as well as some French, Israeli, Iraqi, and British companies, among others.
19. Procurement of demining companies will be executed by the PIU responsible for these activities including preparation of all relevant documentation (RFBs). However, technical specifications/scope of work, including maps of mine-polluted areas will be prepared by BHMAC, complemented by an international expert. While the estimated amounts would lead to the use of open national bidding, it is advisable to use open international bidding.
20. Knowledge about mine-polluted areas exists within BHMAC, including type of mines, depth of mine burial, demining methods, and so on. This knowledge will be completed by the expertise of an international demining expert (that is, an individual consultant). Former knowledge (bidding documents, technical specifications, scope of work, and so on) obtained through the Sava Waterway Rehabilitation Project (P108000, which was dropped) will be made available, by the client and the World Bank, as inputs to the preparation of demining activities under the current project. In addition to land mines, other types of unexploded objects will also be subject to the demining process.
Financial Management
21. The overall FM risk for the project is Substantial before mitigation measures, and with adequate mitigation measures agreed, the FM residual risk is Moderate. The inherent risk of the project is rated Substantial, while the controls risk is rated Substantial before the mitigation measures. After introduction of mitigation measures such as having prepared the project FM sections of the POM, adequate staffing for FM, and private auditors acceptable to the World Bank audit the project, the risk has been reduced to Moderate.
Budgeting and Counterpart Funding Arrangements
22. Planning and budgeting. The APCU, CFU, and TSU have acceptable planning and budgeting capacity. Budgeting is based on the Procurement Plan and approved by project management in the respective line ministry/agency. Budgets are entered in the accounting system. Variances of actual versus budgeted figures are reported, monitored, and explained.
23. Staffing. The staffing of the APCU, CFU, and TSU is appropriate and there are skilled staff engaged with prior experience in World Bank-funded projects. The ToRs for the FM staff will be appended to the POM.
24. Accounting and maintenance of accounting records. Accounting policies and procedures are appropriate. For project accounting, simple cash accounting method is being applied in all five units. There will be a POM describing, among other things, appropriate FM procedures and policies. It is expected to be prepared and approved by the World Bank two months after effectiveness. The accounting system used for accounting and reporting of all projects is assessed to be reliable. In the APCU, CFU, and TSU, an
Page 61 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
adequate software is installed. It is assessed to provide accurate and reliable accounting information. Accounting data are backed up on a weekly basis on external drives and on servers. Accounting policies and procedures to be applied for project accounting include the following major assumptions and principles: (a) cash accounting is the basis for recording transactions, (b) appropriate analytical accounting records exist by contracts and payments, and (c) reporting should be done in currency of the loan (reporting currency).
25. Internal controls and internal audit. The APCU, CFU, and TSU have adequate internal controls for the project, including regular reconciliation of bank accounts, adequate segregation of duties, proper accounting policies and procedures, and monthly reconciliation of disbursement summaries of the World Bank with project accounting records is performed.
(a) There are regular reconciliations. SOEs are reconciled with the Excel project data for every withdrawal application, DA reconciliation is also performed with treasury records (where applicable), and Client Connection figures are reconciled monthly with the project accounting records. The APCU, CFU, and TSU maintain a list with all the payments made out of the DA, which is used for SOE reconciliation.
(b) The access to the accounting software is password protected; only accounting staff have access to the systems. The journal entries cannot be altered once they are made. Any changes can be done only with reversal of the initial journal and posting the correct one. The software that the APCU, CFU, and TSU have can generate reports that can be used for reporting purposes.
26. Periodic financial reporting. The APCU, CFU, and TSU shall prepare and furnish to the World Bank not later than 45 days after the end of each calendar semester, interim unaudited financial reports for the project covering the semester, in form and substance satisfactory to the World Bank. The APCU, CFU, and TSU that are currently implementing other World Bank-financed projects had been up to date with the submission of the periodic interim unaudited financial reports and such reports were found acceptable.
27. The IFRs will include the following reports stated in the currency of the loan: (a) Statement of Sources and Uses of Funds, (b) Uses of Funds by Project Activity, and (c) Statement of Designated Account.
28. External audit. The APCU, CFU, and TSU will be responsible for the timely compilation of the annual project financial statements for the independent external audit. The project financial statements will be audited by independent auditors acceptable to the World Bank. Each audit of the financial statements shall cover the period of one fiscal year of the borrowers, commencing with the fiscal year in which the first withdrawal was made under the loan. The ToRs for the audit have been agreed with the World Bank and attached to the Minutes of Loan Negotiations. In addition, the auditors are expected to deliver management recommendation letters for the project. Each management recommendation letter will identify internal control deficiencies and accounting issues, if any.
Table 1.2. Audit Report and Due Date Audit Report Due Date Project financial statements Within six months of the end The project financial statements include (a) Project Balance Sheet, (b) Sources of each fiscal year and at the and Uses of Funds, (c) Uses of Funds by Project Activity, (d) SOE Withdrawal closing of the project
Page 62 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Audit Report Due Date Schedule, (e) DA Statement, (f) Notes to the financial statements.
29. The audited project financial statements will be made publicly available on time and in a manner acceptable to the World Bank. The audited project financial statements will be published on a website one month after the World Bank has sent official audit acknowledgement letters to the borrowers.
30. There are no overdue audit reports for projects in BiH, Montenegro, and Serbia.
Flow of Funds and Disbursements
31. One DA for the APCU will be opened in a commercial bank acceptable to the World Bank and such accounts will be opened by the Ministry of Finance and Treasury in BiH. One DA for the CFU will be opened at the National Bank of Serbia and will be administered by the two PIUs. The DA for the project will be opened in a commercial bank acceptable to the World Bank in Montenegro. All DAs will be denominated in euros.
32. Disbursement from the Loan Account will follow the traditional method, either through reimbursement, advances to DAs, or direct payments to suppliers. Withdrawal applications will be approved by authorized persons and thereafter sent to the World Bank directly using the e-disbursement facility by the implementing units.
33. Supporting documents for SOEs will be retained by the implementing units and made available to the World Bank during project supervision. Disbursements for expenditures above the SOE threshold levels will be made against presentation of full documentation relating to the expenditures. The reimbursement of expenditures from the DA may be made on the basis of certified SOEs, based on the SOE thresholds defined in detail in the Disbursement Letters. The ceiling and authorized allocation for the DAs will be defined in the project Disbursement Letters.
34. For the part of the project implemented by Serbia and Montenegro, the loan funds will not be used for funding of value added taxes (VAT) and as a result, the countries will be able to initiate the procedure to exempt the project from paying VAT according to relevant procedures determined in the local laws and regulations of the respective countries. The VAT for BiH can be paid from the proceeds of the loans and such VAT refund will be used for funding relevant project activities in BiH.
Withdrawal of the Proceeds of the Loans
35. Table 1.3 specifies the categories of eligible expenditures that may be financed out of the proceeds of the loans:
Page 63 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
(a) Bosnia and Herzegovina
Table 1.3. Categories of Eligible Expenditure Amount of the Loan Percentage of Expenditures to Category Allocated Be Financed (expressed in Euros) (inclusive of Taxes) (1) Goods, works, non-consulting services, 29,925,000 100 consulting services, Operating Costs and Training for Parts 1.1, 2.1 and 3 of the Project to be carried out by RS (2) Front-end Fee 75,000 Amount payable pursuant to Section 2.03 under Article II of this Agreement in accordance with Section 2.07 (b) of the General Conditions TOTAL AMOUNT 30,000,000
(b) Republic of Serbia
Amount of the Loan Percentage of Expenditures to Category Allocated (expressed in Be Financed EUR) (1) Goods, works, non-consulting services, 78,004,500 100 (inclusive of taxes other consulting services, Operating Costs and than VAT and customs duties for Training for Parts 1.1, 1.3, 2 and 3 of the works, goods, and non- Project consulting services) (2) Front-end Fee 195,500 Amount payable pursuant to Section 2.03 of this Agreement in accordance with Section 2.07 (b) of the General Conditions TOTAL AMOUNT 78,200,000
(c) Montenegro
Amount of the Loan Percentage of Expenditures to Category Allocated (expressed in be Financed EUR) (inclusive of Taxes) (1) Goods, works, non-consulting services, 14,962,500 100 consulting services, Operating Costs and Training for Parts 2.2 and 3 of the Project (2) Front-end Fee 37,500 Amount payable pursuant to Section 2.03 of this agreement in accordance with Section 2.07 (b) of the General Conditions (3) Interest Rate Cap or Interest Rate Collar 0 Amount due pursuant to Section premium 2.08(c) of this agreement
TOTAL AMOUNT 15,000,000
Page 64 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Table 1.4. Financial Management Action Plan Action Deadline Responsibility Prepare and get clearance for the FM sections Two months after the All PIUs in the three countries of the POM. effectiveness
36. Retroactive financing. For Serbia, no withdrawal shall be made for payments made before the loan signature date, except for withdrawals up to an aggregate amount not to exceed €1,000,000 may be made for payments made before the signature date, for eligible expenditures; for BiH, the aggregate amount shall not exceed €6,000,000. Montenegro did not request for retroactive financing.
37. Implementation support and supervision plan. The World Bank will apply a risk-based approach in undertaking project supervision activities that will include reviews of periodic reports and review of audited annual audited financial statements together with auditors’ management recommendation letters, monitoring implementation of agreed remedial actions, and addressing emerging issues in collaboration with implementing units.
38. Contract management. The APCU, CFU, and TSU will maintain technical and financial databases of all project contracts. The technical database shall be updated by procurement staff on a regular basis. This database will have available all information on contracts and any annexes which were concluded as well as any payments made up to date. The FM managers will maintain an overview of all project-related payments and will establish internal controls which will prevent any overpayments of such contracted amounts.
39. Use of country systems. The project will use elements of country systems such as staffing, accounting, treasury, planning, and budgeting, partially internal controls where feasible, depending on each of the country’s capacities.
Environmental and Social Appraisal Summary
Social (including safeguards)
40. The area of stakeholder engagement in the Sava and Drina basins is challenging as it involves a range of institutions that had limited regional engagements. The risk is high because the program is dependent on coordinated and efficient decision-making, and many institutions still have to be set up and procedures for smooth functioning need to be developed and tested. The complexity of the investments could evoke resistance from civil society groups. Consultations will be limited to this full set of riparian countries. The program will directly affect over 8 million people. There are likely to be vulnerable sub- groups like the Roma as well as refugees and women-headed households. The program has hence developed three robust Stakeholder Engagement Plans (SEPs) for Serbia, BiH, and Montenegro to identify key stakeholders and lay out how the project will engage with these groups and institutions, including affected persons, both at the policy level but also more specifically in the context of each sub-project. The key stakeholders are the Ministries of Water and Transport in the beneficiary countries, persons directly affected (such as by land acquisition or loss of access to river resources) and benefitted by each sub- project, communities using the resources from the river and the higher-level task force institutions involved in the river basin planning. Other interested parties include civil society, energy users, transport users, environmental groups, water user groups, local labor, academics, related ministries, and communities in the water catchment and watershed of the river basins. A GRM accessible to all
Page 65 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
stakeholders will be established. The plans outline the institutions responsible for carrying out the stakeholder engagement both at the project and sub-project level. This will continue throughout the life of the project, including identification of impediments for meaningful engagement, and the stakeholder engagement activities will be adapted to mitigate any impediments.
41. The proposed activities are very likely to have land acquisition impacts, including physical relocation due to civil works and restricted access to economic resources for riverine communities due to changes in access and resource use. The project has hence developed three RPFs for Serbia, BiH, and Montenegro, to identify specific gaps pertaining to land acquisition laws and laying out the entitlement matrix. As each sub-project is designed, it will be screened for land acquisition, and an RAP for the specific impacts will be developed and cleared by the World Bank. For the Phase I sub-projects already identified, only two in Serbia have resettlement impacts and two RAPs have been developed for these sites. The program has land acquisition impacts that will result in both physical displacement and relocation as well as land acquisition without relocation. The activities such as port enhancement, dykes, dredging, river training, and increasing river storage are likely to have impacts on involuntary land acquisition. This is particularly risky in more populated urban areas. In addition, building dykes and protection of environmental areas will also restrict access to economic resources for people along the river. There is a risk of temporary/permanent economic displacement of existing activities located close to the waterways and the new ports. The social assessment has screened for all impacts linked to permanent and temporary land acquisition.
42. Given that many sub-projects are not fully prepared, RPFs have been developed for each country. Because the World Bank has substantial experience working across these countries on regional programs, the instrument builds on existing frameworks and, where feasible, will continue to be implemented by the agencies who have this experience. Where specific investments have been identified and prepared, RAPs have been developed. The institutional arrangements for approvals and implementation have been laid out in the frameworks, along with identified capacity and policy gaps, entitlement matrix, and M&E arrangements.
43. Out of the sub-projects already identified for Phase I in Serbia, only two sub-projects with high readiness will have land acquisition impacts. Hence two RAPs have been developed. The RAP for the small village of Popovo Bara, located on the riverbank, is linked to the rehabilitation of the left bank of the Sava River and has only minor land acquisition requirements, with relocation of structures and loss of perennial or annual crops, but no physical relocation. There are total 20 land parcels and PAPs, all of whom are partially affected.
44. The sub-project ‘Jarak’ is for construction works for the rehabilitation of the left bank of the Sava River to prevent further erosion of the left bank. There are a total of eight land parcels in Jarak (all publicly owned) and four in Hrtkovi (three of which are publicly owned). Only one private land parcel of 3,099 m2 will be permanently acquired while another of 167 m2 will be temporarily required; both parcels are owned by the same owner and are not used for agriculture. Overall there will be minor land acquisition impacts and no physical relocation.
45. SDIP’s demining activities will follow not only the requirements of the World Bank’s ESF but also integrate BHMAC’s SOPs for humanitarian demining and the principles of the UN-endorsed IMAS. This set of broad standards addresses all issues related to demining, including worker safety, CHS, and OHS.
Page 66 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
46. Project activities such as rehabilitation of the existing ports, reconstruction of embankments and dykes, river bed and dredging, and various forms of river training works, and so on will have an impact on both direct and contracted workers and in some cases primary supply workers who will be expected to comply with ESS2 requirements. Community flood protection may involve some community labor. Labor Management Procedures have been developed for Serbia, BiH, and Montenegro which detail how compliance will be done, by whom, and under what laws in each country. They detail the requirements for contractors and others as well as any gaps between ESS2 and national law. While for small-scale works, like small embankments, the locally based and/or community labor may be used, large-scale civil works may involve an influx of labor and construction of labor camps. These will adhere to the standards of the framework: wage, protective gear, working hours, benefits, and so on. These countries also have vulnerable population including refugees who may benefit from job opportunities. OHS/ CHS aspects and contractor GRM will be included in relevant contracts in all activities. The LMPs also establish a separate grievance system, including provision for GBV mitigation as relevant.
47. The social assessment screening has identified the relevant social issues and vulnerable groups who may need specific actions and attention during project implementation. These may include women- headed households, Roma households, elderly, or youth organizations. Each sub-project will include specific measures to ensure these groups are included and benefit from the project, as well as mitigate any potential negative impacts on them.
48. It is recommended that flood protection investments be combined with training and emergency preparedness and response plans and information at the community level. Without this element, the infrastructure solutions risk compromising their outcomes. This engagement will focus on community level engagement with households to involve them where relevant in early warning plans, identification of safe shelters, establish communication protocols for evacuation, and so on. It will also be important to regularly solicit, track, and review stakeholder feedback—through the grievance and feedback process that will be set up—on these interventions to assure that they are effective and sustainable. There will be specific attention to vulnerable persons such as the elderly, pregnant women, people with disabilities, children, and women-headed households who may need additional assistance and preparedness against flood impacts.
Environment (including safeguards)
49. The Sava River Basin is one of Europe’s largest transboundary basins that covers over one-third of the Western Balkans in area and population and connects five Western Balkan countries (Slovenia, Croatia, BiH, Serbia, and Montenegro). The Drina is the Sava’s largest tributary, draining over 20,000 km2 area. The economy and jobs in the region depend heavily on these shared water resources, to transport goods, generate energy, grow food and fibers, sustain biodiversity, and provide for leisure and ecotourism activities. The Sava River Basin has considerable untapped potential as an enabler of economic growth, regional connectivity, resilience and social cohesion, and job creation. Similarly, the Drina Corridor has significant potential for food production, power generation, and tourism development. At the same time, the Sava and Drina Rivers caused devastating floods in its catchments, most recently occurring in 2010 and 2014. The 2014 Sava flood—the largest flood in a century—caused 79 casualties and a damage of €1.5 billion in Serbia (4.7 percent of GDP), €2.0 billion in BiH (15 percent of GDP), and €300 million in Croatia (0.5 percent of GDP). In 2010 the Drina was flooded extensively—partly due to spilling hydropower reservoirs—and saw its highest levels in 100 years. The trends and changes in mean values of
Page 67 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
precipitation, evapotranspiration, and discharges in this basin indicate that climate change is expected to cause more intense flood and drought episodes, both in terms of scope and duration.
50. The SDIP, focused on integrated water resources management and development, can facilitate a transition from fragmented, country-specific actions toward joint decisions and concrete investments in infrastructure and complementary measures. The specific objectives and activities under the program are envisaged to include master plans and regional planning tools, multipurpose waterway improvements to improve navigability of the Sava River, flood protection, environmental management, and climate change adaptation along with mitigation of climate change impacts and risks in Drina Corridor. The program will support national and local authorities located throughout the riparian countries and implement potential investments identified at over 40 locations, mostly at or immediately adjacent to the rivers Sava and Drina, although some of investments may be located in the wider catchments.
51. Environmentally related risks and impacts are wide ranging in both scope and nature, as project- related activities include many stakeholders and sectors, the most important being water transport, tourism development, nature protection, floods management, and so on. Additional complexities are brought by involvement of several countries with limited experience of horizontal, vertical, and/or international institutional cooperation. There are no high-risk activities identified for the first phase at this stage but considering the geographic and sectoral width of the program, as well as the associated borrower capacity and number of institutions involved across the countries, the environmental risk remains High. The specific activities including civil works related to water training works, dredging, and port development may contain significant environmental risks and impacts including impacts to the watercourse, management of excavated and dredged materials and solid waste generated, generation of dust, noise and air pollution, and possible impacts on the flora and fauna of the waterway and adjacent areas; the planning and strategic documents including river basin management plans need to be coupled with SESAs and sectoral ESIAs to adequately identify all of the underlying environmental and social risks. All the documentation, plans, programs, and studies developed to feed into the future phases will consider all the relevant environmental and social issues from a project design perspective and not only impact perspective.
52. Based on the World Bank’s ESF, the borrowers have developed an ESMF for each participating country (Serbia, BiH, and Montenegro for Phase I), which will serve to screen every sub-project for potential social and environmental impacts and then develop specific mitigation plans as needed. All of the subsequent ESIAs or ESMPs will be developed fully in accordance with the provisions of the World Bank ESF and all of the ESS. The plans are site and sub-project specific and cover the most likely impacts described earlier. For the demining activities on the right bank of the Sava River, a ToR for the ESMP was prepared as part of the due diligence package that includes both the World Bank ESF requirements and also the BHMAC SOPs for humanitarian demining and the principles of the UN-endorsed IMAS.
53. All assessments (as listed in table 1.5) have been consulted and disclosed by December 31, 2019. These include country-specific Environmental and Social Commitment Plans (ESCPs), SEPs, LMPs, RPFs, ESMFs, and site-specific ESMPs for two locations—riverbank training in Popova Bara and construction of a flood protection warehouse in Surcin (Serbia). The project’s Environmental and Social Review Summary (ESRS) was consulted and disclosed on February 12, 2020. An updated ESRS reflecting the inclusion of the port of Sremska Mitrovica was disclosed on March 30, 2020. Overall, all three ESMFs provide guidance that for high-risk activities the World Bank ESF will be followed, while for activities of substantial and
Page 68 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
moderate risk, the due diligence is to be prepared following the legislation of the relevant country and expanded to include the requirements of the World Bank ESF.
Table 1.5. Summary of ESF Documents Disclosure Country/Project Environment and Social Safeguards Documents Original Disclosure Date BiH ESMF RPF, SEP, LMP, and ESCP December 30, 2019 Montenegro ESMF, RPF, SEP, LMP, and ESCP December 30, 2019 Serbia ESMF, RPF, SEP, LMP, ESCP, 2 ESMPs, and RAPs December 19, 2019 Project level ESRS February 12, 2020
Page 69 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
ANNEX 2: Detailed Project Design
COUNTRY: Bosnia and Herzegovina, Montenegro, and the Republic Of Serbia Sava and Drina Rivers Corridors Integrated Development Program
1. Activity selection criteria. Selection of Phase I activities is based on readiness, relevance, and current country capacities, such as financial, institutional, and resources availability. The World Bank has conducted a needs assessment to identify priority investments that would contribute to the economic integration agenda. Many relevant activities have been pre-identified31 that together make up a coherent cross-boundary program that contributes to the stated objectives. Selected ‘priority’ sub-projects (works, equipment purchase, studies, and services) for Serbia, BiH, and Montenegro are identified, distinguishing the likely financial implications for each country and entity. This list was compiled after more than two years of consultations and field visits with the respective ministries, agencies, academic institutes, and other stakeholders.
2. Project components. The proposed SDIP Phase I will comprise the following components. Detailed project activities are included in Table 2.1 and Table 2.2:
Component 1: Integrated Management and Development of the Sava River Corridor (€94 million, of which IBRD is €86 million and grant financing €8 million32)
3. The component will finance investments in renovation and upgrading of flood protection infrastructure in Phase I. Phase I activities will reduce the risk and impact of floods, thereby increasing the resilience of the riparian countries to these climate change-related threats. The component will also finance activities needed to enable improved navigation. Requested GEF funding will support the prioritization and preparation of some activities, while WBIF funding will support demining of the Sava River right bank in BiH.
4. Subcomponent 1.1: Flood protection and environmental management. This subcomponent will finance the construction and rehabilitation of embankments at selected priority areas along the Sava River Corridor as well as nature-based solutions to revitalize selected protected areas of ecological significance to the Western Balkans.
5. In Serbia, this subcomponent will finance the rehabilitation and upgrade of Sava dyke and riverbank in Šabac, Progar-Kupinovo, Klenak, Sremska Mitrovica, Jarak, and Popova Bara. In addition, the subcomponent will finance design finalization and construction of dykes in Kolubara and Novi-Beograde. In BiH, this sub-Component will finance the rehabilitation and upgrade of dykes and riverbanks in RS. These will include rehabilitation of Sava and Una dykes and regulation of the Vrbas River, protecting cities such as Kostajnica, Prijedor, and Banja Luka.
6. The planned activities will enable flood protection on the left bank of the Sava River against 100-year return period, except for the intervention in the town of Sremska Mitrovica, where the
31 A scoping mission was conducted between February 26 and March 9, 2018, and was followed by a consultation mission conducted between May 29 and June 11, 2018. 32 Seeking WBIF investment grant but in the absence of commitment, this amount is registered as financing gap. The World Bank expects this funding source to fully close the existing financing gap.
Page 70 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
protection level is against a return year of 1,000-year flood of the Sava. The planned flood protection investments on the left bank of the Sava River in Serbia will directly protect an additional population of about 80,000 people and about 46,000 ha of agricultural land.
7. On the right bank of the Sava River, the city of Šabac will be protected from a 100-year flood, directly improving the protection of about 80,000 people in several towns and municipalities, 30,000 ha of agricultural land, key local metal and chemical industries, water supply and wastewater treatment facilities, and regional road and energy infrastructure. The reconstruction of the Kolubara dykes to withstand 100-year floods will protect about 30,000 people and 30,000 ha of agricultural land in the administrative areas of Obrenovac and Ub towns. Raising dykes in Novi Beograd to protect Belgrade City (Serbia) from 200-year floods of the Sava River will increase protection of an area of about 50,000 ha of Novi Beograd and Zemun, with a population estimate of 400,000. A combined flood protection and drainage of Macva region (south of the Sava and east of the Drina) in Serbia will primarily serve agriculture on the area of about 15,000 ha. Flood protection in the upper Lim River in Serbia (Prijepolje) will increase protection of a part of the town with about 5,000 inhabitants against a 100-year flood.
8. Subcomponent 1.2: Waterway Improvements. Under this subcomponent, grant financing from WBIF will be mobilized to finance demining activities along the Sava’s right bank within BiH as a necessary prerequisite to the Phase II waterway improvement and port capacity expansion sub-projects.
9. The right bank of the Sava River, within BiH, remains exposed to the risk of mines—this being a major reason why economic development of this river has been minimal since the end of the regional conflict in the 1990s. Demining is a prerequisite for civil works execution in the key waterway sections to be improved later in the program, including the most pressing navigation bottleneck across the Sava at present. Demining activities are proposed as a no-regret investment that will help unlock the river’s economic potential for generations to come. According to BHMAC, an area of 7.1 million m2 along the Sava riverbank needs to be demined.
10. According to information provided by BHMAC, the land along the entire stretch of the Sava River right bank planned for demining is abandoned land overgrown with vegetation, with downed trees and even solid waste accumulated in some places. However, some agricultural and forest land could be affected (currently mostly unused due to mine concerns) due to the major floods in 2014. There is also a concern that mines could have moved on to the river islands of the Sava River. Therefore, the risk is that the area to be demined will be greater than expected. The terrain conditions (difficulties in access due to overgrown vegetation) may hinder the demining efforts. In addition, more complex operations in the river itself may be needed, such as underwater diving at certain locations, for example, around river islands and bridges. Land ownership is a mix of public and private land—the riverbank is publicly owned, whereas the potentially affected agricultural and forest land into which the mines could have moved is private land—but is estimated at only 2–3 percent or even less of the entire land stretch.
11. Subcomponent 1.3: Enhancement of ports facilities, services, and logistics. The project will finance cargo handling capacity expansion, equipment modernization, and potential connectivity improvements at the port of Sremska Mitrovica, to allow for the handling of up to 1.5 million tons of dry bulk, liquid bulk, and general cargo—including containers. It is expected that this intervention will improve the connectivity and market access of the immediate hinterland of the port of Sremska Mitrovica—the Srem and Mačva districts primarily, as well as other parts of northwest and central Serbia. It will also contribute to improvements in logistics service delivery in the Sava River Corridor, including the
Page 71 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
facilitation of container transportation and handling, which are expected to result in greater tonnage capture by the port.
Component 2: Integrated Management and Development of the Drina River Corridor (€21 million, all IBRD)
12. This component will support multipurpose investments along the Drina River to reduce the risk of flood in Phase I. It may also support preparation of interventions that will protect environmental assets of global value in Phase II. This component will facilitate the implementation of actions, management measures, and investments identified by the Drina Strategic Action Plan being prepared under the ongoing Western Balkans GEF-SCCF Drina River Basin Management Project and investments identified through the ESMAP Integrated Water and Hydropower Development Project. All the above measures will contribute to increased resilience of the riparian countries to floods and droughts. Requested GEF funding will support the prioritization and preparation of these activities.
13. Subcomponent 2.1: Flood protection and environmental management. The subcomponent will finance infrastructure works, studies, surveys, consultations, and the preparation of detailed design of interventions related to the management of environmental assets along the Drina River Corridor. The ongoing GEF-SCCF-financed Drina River Basin Management project as well as the ESMAP technical assistance are conducting studies that will identify the additional actions needed for flood protection, bank stabilization, drainage and river training works, and reservoir management in the Drina River Corridor. This subcomponent will finance the preparation of selected priority investments in line with the PDO including any further studies that may be needed. In Serbia, this subcomponent will finance flood protection and drainage in upper Lim River Basin and Macva. In Republika Srpska, this subcomponent will finance construction of flood protection structures along the left bank of lower Drina River and its tributaries such as Studeni Jadar River which will protect Bijeljina and Milici.
14. Subcomponent 2.2: Integrated development of Drina watershed. This subcomponent will finance improved watershed management in the Lim and Grncar River basins of Montenegro. This activity will finance works related to flood protection, drainage, and irrigation measures. The design of these investments and solutions are under preparation through the ongoing GEF-SCCF project. This subcomponent will finance the preparation of selected priority investments in line with the PDO.
Component 3: Project Preparation and Management (€16 million, all IBRD)
15. This component will support (a) preparation of Phase II regional activities and (b) operational costs, consultancies, non-consultancy services, and goods required for the establishment and operation of the national/entity PIUs.
16. Subcomponent 3.1: Project preparation. This subcomponent will finance preparation of project documentation for Phase II of the program, including environmental and social safeguard assessments. For example, the project will finance the design of a docking facility at the Port of Gradiska and improvement of the section Racinovci–Vrsani in RS, BiH.
17. Subcomponent 3.2: Institutional strengthening and project management. This subcomponent will finance activities to increase institutional capacity and inter-sectoral coordination in the participating countries to ensure more efficient decision-making and program management at the national level.
Page 72 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Component 4: Regional Activities (€8 million, all grant financing33)
18. The countries will participate in the regional activities to be implemented by the ISRBC Secretariat. This component will be financed through a GEF grant, and the grant agreement will be finalized by the end of 2020. This component is key to strengthening of strategic regional dialogue and joint planning as well as sustainable management and development of the shared water resources in the Sava and Drina River Basin, including building resilience to climatic shocks.
19. Subcomponent 4.1: Regional dialogue, project management, and coordination. This subcomponent will finance the establishment and operations of the Regional Task Force and Regional Implementation Unit, which will support the ISRBC Secretariat to bring together the national actors to monitor project progress, review and adjust overall regional implementation, and promote knowledge exchange and good practices. This subcomponent will promote joint action and decision-making in river basin management and flood risk management among riparian countries, thus enhancing the climate adaptation capacity of the region. In addition, 1 percent of the GEF financing will go toward IW:LEARN34 which will support an advocacy and communication plan to facilitate partnerships between participating countries to stimulate knowledge sharing and capacity building while implementing activities related to regional dialogue.
20. Subcomponent 4.2: Regional plans, studies, and strategies of basin-wide importance. This subcomponent will support policy dialogue, consultations, preparation of basin plans and studies, and investments to strengthen the nexus between water services and development and economic cooperation objectives of the Sava and Drina Rivers Corridor. The subcomponent will also allow for the preparation of key regional studies and plans that will further inform the design of the program.
Table 2.1. Project Activities Costs (€, Component and Activity Readiness millions) Component 1: Integrated Management and Development of the Sava River Corridor 1.1 Flood protection and environmental management • Raising right Sava dyke in Šabac City, Serbia Design and ESF documents 5.45 by September 2020 • Rehabilitation of left Sava dyke in Progar-Kupinovo for flood Design and ESF documents 3.54 protection in Serbia by September 2020 • Rehabilitation of left Sava dyke in Klenak, Serbia, for flood Design and ESF documents 0.35 protection by September 2020 • Raising Sava River dykes at Macvanska Mitrovica (right dyke) 1.46 for flood protection in Serbia • Rehabilitation of left Sava riverbank in Jarak, Serbia Design and ESF documents 9.96 ready
33 The program is seeking grant funding from GEF to cover the costs for the regional activities. An application has been submitted early 2020 and received approval from the GEF Council in June 2020, but in the current absence of the grant agreement (expected by the end of 2020), this amount is registered as a financing gap. The World Bank expects this funding source to fully close the existing financing gap. 34 IW:LEARN is GEF’s International Waters Learning Exchange and Resource Network.
Page 73 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Costs (€, Component and Activity Readiness millions) • Embankment stabilization of left Sava River dyke in Popova Design and ESF documents 6.76 Bara, Serbia ready • Design and reconstruction of Kolubara dykes to protect Design and ESF documents 13.96 Obrenovac City in Serbia by March 2021 • Design and raising of dykes in Novi Beograd to protect Design and ESF documents 6.96 Belgrade City (Serbia) from flood by March 2021 • Construction and rehabilitation of embankment and dykes in 17.90 Republika Srpska • Forestry management in Vrbanja, Vrbas, and Sava River 2.20 basin • Protection of ecological environment and biodiversity of Una 0.20 River • Purchase of equipment in Republika Srpska 0.30 1.2 Waterway improvements • Demining right bank of Sava River 8.00 1.3 Enhancement of ports, services, and logistics • Expansion and modernization of port of Sremska Mitrovica 16.96 Component 2: Integrated Management and Development of the Drina River Corridor 2.1 Flood protection and environmental management • Flood protection in the Lim River in Serbia Design and ESF documents 4.04 by September 2020 • Flood protection on Drina River in RS 3.40 2.2 Integrated development of Drina watershed • Integrated development of Lower Lim River in Montenegro Design and ESF documents 13.90 by September 2020 Component 3: Project Preparation and Management 3.1 Phase II Preparation • Project preparation for Phase II activities 6.10 3.2 Institutional strengthening and project management • PIU and project management, Phase I 4.56 • Implementation and operations cost, Phase I 5.20 Component 4: Regional Activities 4.1 Regional dialogue, project management, and coordination • Regional PIU, RTF, and project management 0.9 4.2 Regional plans, studies, and strategies of basin-wide importance (consultancy, training, and systems) • Preparation of the 2nd Sava RBMP 1.0 • Hydrological Study for Sava River Basin 1.5 • Study on sediment, water and biota in Sava River Basin 1.3 • Climate Change Adaptation Strategy for the Sava River Basin 1.0 • Design of a Master Plan for Sustainable Tourism 1.2 Development in Sava River Basin • Advanced flood monitoring, forecasting and management 1.2 system
Page 74 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Table 2.2. Project Activities in Republika Srpska Component 1: Integrated Management and Development of the Sava River Corridor Costs (€, millions) 1.1 Flood protection and environmental management Construction and rehabilitation of embankment and dykes in Republika Srpska 17.9 • Gomjenica riverbed training • Regulation of concrete channel and pipe, Bubnjarica Creek torrent water • Bubnjarica River torrent canal cleaning • Drainage control, dyke near the Una River • Inspection of Sava and Una Dyke in Kozarska Dubica • Regulation of the Vrbas River Forestry management in Vrbanja, Vrbas, and Sava River basin 2.2 • Reforestation in torrent creeks basins - the Vrbanja River tributaries • Establishment of energy plantations and poplar plantations in the Sava and Vrbas River valleys inundation area • Completion of works in Seeds and Seedlings Center • Establishment of arboretum in Banja Luka Protection of ecological environment and biodiversity of Una River 0.2 Purchase of equipment in Republika Srpska 0.3 • Boats procurement for needs of Ministry of Transport and Communications of RS • Equipment for nautical tourism needs (Visegrad, Gradiska, and Brod) Component 2: Integrated Management and Development of the Drina River Corridor 2.1 Flood protection and environmental management • Flood protection on Drina River in Republika Srpska 3.4 Component 3: Project Preparation and Management 3.1 Phase II Preparation Project preparation for Phase II activities 3.6 • Preparation of Gradiska Port design documentation • Preparation of flood protection infrastructure technical documentation • Preparation of dredging on the section Racinovci–Vrsani 3.2 Institutional strengthening and project management • PIU and project management, Phase I 0.4 • Implementation and operations cost, Phase I 2.0
Page 75 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
ANNEX 3: Detailed Economic Analysis
COUNTRY: Bosnia and Herzegovina, Montenegro, and the Republic Of Serbia Sava and Drina Rivers Corridors Integrated Development Program
1. A standard economic cost-benefit analysis was conducted separately for SDIP’s flood protection- and transport-related investments, the results of which are presented in sections 1 and 2 of this annex. In addition, a consolidated analysis was done to determine SDIP’s overall economic viability, considering Phase I activities and currently proposed and known (mostly transport-related) activities expected for Phase II. The consolidated analysis, which is an aggregation of the economic returns to SDIP’s proposed flood protection and inland waterway navigation investments, is summarized in table 3.1.
Table 3.1. Summary of Program-level Economic Cost-Benefit Analysis ENPV (US$, EIRR (%) millions) Flood protection 1,333.7 46.1 Navigation 22.4 10.1 Port modernization and expansion 17.9 10.8 Overall Program 1,374.0 36.7 Source: World Bank analysis and estimates.
2. The cost-benefit analysis indicates that investing in the proposed flood protection and navigation activities in the Sava and Drina River Corridors is economically viable, with an estimated program EIRR of 36.7 percent, well above the benchmark 6 percent economic cost of capital. The sizable benefits from avoidance of flood-related infrastructure and economic losses as a result of relatively small resilience- oriented investments account for the robust program-level ENPV and EIRR obtained.
Section 1: Economic Evaluation of Flood Protection Investments
Background
3. SDIP’s Phase I addresses flood protection investment activities following the worst flooding in the target region in more than 120 years. The flood protection of Phase I is designed to improve, modernize, rehabilitate, reconstruct, stabilize, and raise dykes along the Sava and Drina Rivers Corridors. The investment program intends to strengthen flood protection and landscape management in selected catchment areas of the Sava and Drina Rivers Corridors.
4. Over a century, the Sava River Basin has experienced droughts and floods. In most recent times, the frequency and intensity of flooding is increasing, an outcome attributed to climate change. The latest intense flooding event took place in May 2014, a flooding disaster that affected all countries in the Sava River Basin. The Governments in the Sava River Basin, with the financial and technical support of the EU, the UN, and the World Bank, conducted a post-disaster needs assessment after the floods and landslides that occurred at the end of May 2014—based on an inter-agency agreement subscribed in 2008.35
5. The floods are attributed to a rare combination of events (estimated probability of once per 1,000 years in Croatia and 100-year period in Serbia). The floods had a disastrous impact due to the
35 Serbia Floods 2014, Belgrade.
Page 76 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
simultaneous effect of three key compounding factors: (a) saturated land following previous rains and a mild winter, (b) high river levels, and (c) heavy rainfall. The flooding disaster affected a total of 1.6 million people who were directly or indirectly affected in Serbia alone. The floods and landslides caused 51 fatalities, 23 of which were by drowning. Affected people in need were relocated to temporary shelter camps, organized by the Red Cross and the Government. This fact resulted in doubling the number of internally displaced persons in the country that prevailed before the disaster occurred.
6. More specifically, post-flood assessments in Serbia indicate that the total disaster effects were concentrated mostly in productive activities (€1,070 million and 70 percent of the total), social services (€242 million and 16 percent), and infrastructure (€192 million and 12 percent); thus, the disaster’s impact was highest in terms of production and access to social services, compared with damages to infrastructure. Regarding individual sectors of economic and social activity, the most affected sector was mining/energy (€494 million and 32 percent of the total), followed by housing (€231 million and 15 percent), agriculture (€228 million and 15 percent), trade (€225 million and 15 percent), and transport (€167 million and 11 percent). The estimated value of damages in affected areas was equivalent to 13.8 percent of the value of Serbia’s gross fixed capital formation in 2013. This ratio provides an indication of the size of reconstruction after the disaster. Moreover, compared to Serbia’s total population, the total value of the damages and losses was €210 per person.
7. In BiH, similar post-flooding assessments were undertaken and the impacts from flooding were found to be similar36 to those in Serbia. The size of the damage in BiH was assessed to be US$155.2 million37 in infrastructure assets and US$781,000 in economic losses, with 11,660 affected people.
8. The magnitude of infrastructure damages and economic losses reported above for the 2014 flood event in Serbia and BiH is indicative of the expected high payoffs to flood protection interventions in the region.
Methodology, Data Sources, and Key Assumptions 9. There are generally two quantitative cost-benefit analysis frameworks for flood protection or disaster risk management projects. These are (a) the risk-based forward-looking framework for quantifying risk and benefits of risk reduction and (b) the impacts-based, backward-looking assessment building on impacts in past disaster events. The approach adopted in the current analysis is the latter. Incremental benefits were determined based on ‘with-project’ and ‘without-project’ scenarios. Costs: 10. The costs that are directly relevant or specific to flood protection and drainage interventions are included in the analysis (table 3.2).
Table 3.2. Flood Protection and Drainage Investment Costs Items Costs (US$, millions) Flood protection through rehabilitation, reconstruction, 97.44 stabilization, and raising of dykes Planning, monitoring, design, and supervision 41.8
36 Bosnia and Herzegovina Floods, 2014 Recovery Needs Assessment; available at https://www.gfdrr.org/sites/default/files/BiH- rna-report.pdf. 37 For this analysis, it was assumed that €1= US$1.1.
Page 77 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Items Costs (US$, millions) Implementation 11.82 Total 151.11
Estimation of Benefits
11. Flood damage protection intervention benefits are classified as direct and indirect damages, which can be tangible or intangible. Direct tangible damages may include physical damages to assets such as buildings and infrastructure; while indirect tangible damages may include losses of industrial production, traffic disruption, and emergency costs. Direct intangibles include loss of life, health effects, and loss of ecological goods. The indirect intangibles include inconveniences of post-flood recovery; and increased vulnerability.38 As there are no actual data on these parameters to determine the benefits (damages and losses avoided), a simplified benefit estimation methodology known as ‘Benefit Transfer’ is adopted in this analysis. ‘Benefit Transfer’ is a widely utilized technique to estimate the economic value of environmental benefits when an original valuation study is not available, usually due to budgetary or time constraints.
12. ‘Benefit Transfer’ estimates economic values by transferring available information from studies already completed to another location and or context. In this analysis, the calculated cost-benefit ratios for flood protection projects across a range of studies is used.39 According to these studies, cost-benefit ratios for flood protection projects vary from 0.1 to 60.1, with a mean value of 11.1 and median value of 5.1. For the sake of pragmatism, a cost-benefit ratio of 1.6 is used to estimate the benefits of this project.40
Flood Return Period, Design Standard, and Probabilities of Exceedance Assumptions 13. The flood protection investment design depends on the probability of exceedance of flood, that is, whether the flood is a 1-in-10-year, a 1-in-50-year, a 1-in-100-year, or a 1-in-500-year event. Not only the physical and economic damage of a 1-in-10-year flooding event is smaller than that of a 1-in-100-year flooding, but also, the investment costs for avoidance of damages of a 1-in-10-year flood is likely to be less than the investment cost of a 1-in-100-year flood. Based on the historic data and the most recent 1- in-100-year flooding registered in the basin, the design option selected is one that withstands a 1-in-100- year flooding. That is, over the 100-year period, there is a chance that one or more 1-in-100-year floods can occur and that the structure can withstand most floods less than 1 in 100 years. The economic life of infrastructure built to protect such flooding often varies from 10 to 40 years. In this analysis, an economic life of 40 years is assumed for a 1-in-100-year flood return period.
14. For a 1-in-100-year flood, the probability of damage and losses is equal to 1 for the without- project scenario, while it is 0.331 for the with-project scenario over 40 years of investment life of the project (table 3.3). The probability Pe that one or more floods occurring during any period will exceed a given flood threshold can be expressed, using a binomial distribution function as Pe= 1− [ 1− (1/T)]n, where T is the threshold flood return period (for example, 100-year, 50-year, 25-year period, and so forth), and n is the number of years in the period, here, representing the economic life of the investment. The probability (Pe) that an event (flood level) will be met or exceeded during an interval of n = 40 years
38 Penning-Rowsell et al. 2003; Smith and Ward 1998. 39 Kyla Wethli 2014. 40 http://www.bioecon-network.org/pages/19th_2017/Bos.pdf. Cost-benefit Analysis for Flood Risk Management and Water Governance in the Netherlands; an Overview of one Century.
Page 78 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
(economic life of the physical investment) can be estimated. The return period is defined as 1/T, the annual exceedance probability P equal to 0.01 or 1 percent, implies a return period of 100 years. While the expected value that the number of 100-year floods occurring in any 100-year period is 1.
15. The probability that at least one or more 1-in-100-year flood will occur during the 40-year lifetime of a flood control project is 0.331. On this basis, there is a 33.1 percent chance of occurrence of the 100- year or larger event over the 40-year lifetime of the project. On the other hand, the probability that a 100- year flood or greater will not occur in the 40-year period (1 − p) × 40= 66.9 percent.
Table 3.3. Probability of Exceedance of Floods over the Economic Life of the Project
Probability that Probability of Expected Value of Expected Floods Zero Probability of Exceedance (No. of Will Occur over the Occurrence of Flood Scale Exceedance in Any Floods) over the Life Design Life of the 1 in 10, 1 in One Year (p) of the Project of 40 Project 50, and 1 in Years Fx (n, T, P) 100 1-in -100-year flood 0.01 0.4 (=1) 0.33 0.01 return period
Results of Cost-benefit Analysis: Flood Protection Component
16. The summary results of the cost-benefit analysis are presented in table 3.4. The results suggest that under the adopted set of assumptions, the ENPV is US$1,333.7 million with an EIRR of 46.1 percent. The details are contained in the accompanying Excel model. The main benefits emanate from the avoided damages and economic losses of the flood that the investments are designed to mitigate.
Table 3.4. Results of Cost-benefit Analysis for Flood Protection Estimated Indicators Values Present value of costs (US$, millions) 181.1 Present Value of Benefits (US$, millions) 1,514.8 ENPV (US$, millions) 1,333.7 EIRR (%) 46.1 Source: World Bank analysis and estimates.
17. The sensitivity analysis was performed for key parameters expected to have significant effects on the returns to the project (Table 3.5). The results indicate that the estimated returns to the project are robust under most scenarios.
Table 3.5. Sensitivity Analysis: Flood Protection Component Parameters ENPV (US$, millions) EIRR (%) 20% cost escalation 1,297.5 41 20% cost escalation and 20% reduction in benefit 994.5 36 0.1 Cost-benefit ratio assumption (86.1) −3 5.1 Cost-benefit ratio assumption 4,696.7 80 Source: World Bank analysis and estimates.
Page 79 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Section 2: Economic Evaluation of Transportation Investments
18. A standard economic evaluation was conducted to determine the viability of SDIP’s proposed navigation investments in the Sava River Corridor and port expansion and modernization investments at the port of Sremska Mitrovica. A discounted resource flow analysis of the expected net benefits and costs of these investments over a period of 30 years—through 2050—was used to assess the economic returns of SDIP interventions relative to a without-project, ‘business-as-usual’ baseline. The navigation capacity expansion activities aim to alleviate well-prioritized physical bottlenecks to help restore Class IV navigation to the Sava River Corridor between Sremska Mitrovica and Brod. The proposed navigation interventions comprise dredging, bank protection, installation of modern aids to navigation, removal of obstacles in the river bed, and river training works such as groyne construction and bend correction. To take full advantage of improved navigation conditions, SDIP will finance complementary cargo handling capacity expansion works at the port of Sremska Mitrovica in Serbia. Further port expansion investments along the Sava River Corridor may be financed under the program, and their economic viability will be assessed during preparation of SDIP’s Phase II.
Strategic Rationale for Investment
19. The Sava River is among the most important tributaries of the Danube, yet its navigational standard falls short of agreed-upon aspirations. With a length of 945 km, approximately 63 percent of which is navigable (between Belgrade at the river mouth and Sisak, Croatia), the Sava River connects the countries of Slovenia, Croatia, BiH, and Serbia, and it is both a potential facilitator of efficient, low-carbon regional transport in the Western Balkans and a means to foster economic, social, and environmental integration among the riparian countries. In recognition of this, the 1996 AGN designated the Sava River as an international waterway Class IV. Such a designation mandates the provision of safe navigation conditions for vessels between 1,000 and 1,500 tons in cargo carrying capacity and a draft of 2.5 m, implying a LAD of at least 2.7 m, for a minimum of 240 days per year. At present, however, stemming from years of neglect, lack of capital investments in navigation, and insufficient provision of ongoing maintenance, these conditions are not met. The Sava River meets Class IV standard only through approximately the last 103 km of its fairway—that is, at its most downstream and busiest section, between Šabac and Belgrade, all within Serbia. Beyond Šabac, the Sava River is operationally considered Class III standard, consistent with navigation of vessels up to 700 tons in capacity, and only for approximately 160 days per year at some sections. Yet, as illustrated in figure 3.1, the use of larger- capacity barges results in meaningful reductions in transport costs per ton-km transported, and the bulk of these savings is captured by barges of at least 1,000 tons in capacity—which is the aim of a Class IV waterway and the Sava River-related aspirations of the AGN agreement.
20. The use of larger vessels in a more navigable waterway also results in lower emissions of GHGs and local pollutants per ton-km transported, and in lower logistics costs to cargo shippers. SDIP’s proposed navigation investments target the most pressing bottlenecks to navigation in the Sava River between Sremska Mitrovica and Brod (a distance of 235 river km), including the key bottleneck sections of Jaruge (Croatia)-Novi Grad (FBiH, BiH) between river km 300 and 329, and Racinovci (Croatia)-Vrsani (RS, BiH) between river km 211 and 213. Removal of these bottlenecks will contribute toward restoring Class IV navigation, thus reducing transportation costs and transportation time—which determines the cost of holding inventory in-transit and makes river transport more competitive relative to other modes based on total logistics costs—and transport-related emissions of GHGs and local pollutants. SDIP’s expected support of complementary river port capacity expansion will contribute to providing the
Page 80 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
landside handling capacity needed to connect river barges with the origin-destination cargo generating hinterlands they intend to serve.
Figure 3.1. Index of Transport Unit Costs per ton-km for Self-propelled Dry Cargo Barges in Europe (1,000 DWT barge = 100)
180 160 140 120 100 80 60 40 20 0 500 750 1,000 1,250 1,500 1,750 2,000 2,250 2,500 2,750 3,000 3,250 3,500 Barge cargo carrying capacity (tons) Source: World Bank analysis. 21. The proposed investments are expected to promote modal shift. At present, a portion of the cargo originated in or destined for areas of BiH within the hinterland of the river ports of Brčko and Samac, which would otherwise use these ports as gateways, is instead routed through the Croatian port of Vukovar in the Danube River, and moved to/from Vukovar by rail. This is a circuitous route that increases logistics costs compared to the more direct ‘all water’ route via the Sava River, which SDIP will make more competitive and cost-effective for BiH-based shippers. Truck-to-waterway modal shift is also expected to be facilitated by the proposed investments in both the river fairway and river ports, particularly the container terminals, by virtue of making inland waterway itineraries less costly, more predictable, and more reliably available throughout the year and time of day (as the provision of modern navigational aids is expected to facilitate round-the-clock navigation). As a conservative stance in the calculation of economic returns, however, only rail-to-waterway modal shift is reflected in the ‘diverted traffic’ portion of the estimated benefit streams from upgrading the navigation standard of the Sava waterway, as these flows are the most likely to result in modal shift in the short run.
22. Beyond direct transport and logistics efficiency improvements, SDIP-financed navigation and port expansion investments are expected to generate wider economic benefits. As the Sava River is not only a natural trade corridor but also the border between Croatia and BiH and between BiH and Serbia, SDIP has been conceived from the outset as a regional program. Program interventions have been prepared—and will be implemented—on the basis of transboundary coordination and collaboration across participating countries. The improvements to navigation and port handling championed by SDIP will improve the connectivity of lagging regions in Croatia, BiH, and Serbia, which in turn is likely to facilitate private investment along the Sava River Basin, which can generate employment in the
Page 81 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
manufacturing, agriculture, and services sectors—ecotourism and river cruises being an important navigation-related example of the latter. Such improvements in market connectivity extend not only to the immediate catchment of the Sava River, but also, by the Danube, to the coastal economies of the Black Sea—and international markets beyond.
Freight Transport Demand Along the Sava
23. The Sava River was an important link in the freight transport network of the former Yugoslavia; its current role in facilitating freight transport is different. While in 1990 freight volumes transported in the Sava reached 5.2 million tons, by 2008, volumes were in the order of 500,000 tons, or roughly one- tenth of the 1990 tally. More recently, total throughput handled at Sava River ports totaled nearly 900,000 tons in 2018 (Table 3.6).41 Bulk cargo is the mainstay of the corridor, primarily comprising metal and steel products, crude oil and oil products, gravel, sand, construction materials, and general cargo. Demand has been growing at about 9 percent per year since 2015, although with pronounced volatility from year to year and large variations in throughput growth across ports.
24. It is estimated that most of the freight moved along the Sava River is either destined to or originated from points beyond Belgrade. Table 3.7 presents the estimated origin-destination tonnage matrix for the Sava River Corridor. The origin-destination nature of the movement of freight along the Sava River Corridor is expected to remain largely consistent over the long term, and this is the assumption adopted by this economic evaluation. However, SDIP interventions, and further collaboration and trade and commercial integration among the riparian countries in the future, are likely to result in greater intra- corridor freight volumes going forward.
25. The Sava River freight transport task was 153 million ton-km in 2018,42 evenly divided between inbound freight and outbound freight. The freight task was calculated by combining the origin- destination tonnage matrix of Table 3.7 by the distance, in river km, between ports. The fact that the Sava freight flows are directionally balanced between inbound and outbound flows suggests that logistics costs for the corridor are likely to be competitive relative to other modes and/or relative to similar river corridors elsewhere, as this contributes to reducing the costly incidence of empty backhauls in freight itineraries.
Table 3.6. Cargo Throughput of Sava River Ports, 2015–18 (Thousands of metric tons) Port 2015 2016 2017 2018 2015–18 CAGR (%) Šabac 91 178 259 268 43.2 Sremska Mitrovica 221 261 189 234 2.0 Brčko 71 149 125 119 18.5
41 The total throughput figure for 2018 and the data presented in Table 3.6 exclude the Croatian river port of Sisak, located 251 river km upstream from Brod. Sisak’s throughput for the period 2015–18, in thousands of tons per year, was 54, 90, 60, and 66, respectively, according to ISRBC data. The port of Sisak primarily serves the transportation and transshipment of crude oil, petroleum products, and other inputs to and from the Sisak oil refinery. The operator of this facility (Croatian oil and gas multinational firm INA) has announced that the refinery will be permanently shut down in 2019. On this basis, the port of Sisak is not included in the economic evaluation of SDIP investments. This is a conservative approach, as INA has also announced that it intends to replace the Sisak refinery with an industrial park and logistics center at the same site, which is likely to generate future river cargo traffic that would further benefit from SDIP-financed improvements. However, as details of this industrial development, particularly as to its cargo capture potential, are not available as of the time of writing, the port of Sisak is excluded from this analysis. 42 Excluding flows to and from the port of Sisak—see previous footnote.
Page 82 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Port 2015 2016 2017 2018 2015–18 CAGR (%) Šamac 90 93 96 99 3.4 Slavonski Brod 164 198 117 131 −7.3 Brod 35 20 10 25 −10.6 Total 673 898 796 877 9.2 Source: Port authorities, ISRBC, and World Bank analysis and estimates. Table 3.7. Origin-Destination Port Throughput Matrix for Sava River Ports, 2018 (Thousands of metric tons) Destination Beyond Sremska Slavonski Belgrade- Šabac Brčko Šamac Brod Sisak Mitrovica Brod Dunav Beyond Belgrade-Dunav 168 23 95 94 16 — — Šabac 101 — — — — — —
Sremska Mitrovica 211 — — — — — —
Brčko 24 — — — — — —
Šamac — — — — — — — Origin Slavonski Brod 84 — — — — — 21 Brod 10 — — — — — Total 429 168 23 95 99 26 — Source: Port authorities, ISRBC, and World Bank analysis and estimates.
26. Most Sava River Corridor barge traffic is concentrated downstream. This is due to the origin- destination nature of shipments along the corridor, whereby most shipments are destined to or originated from points beyond Belgrade. As downstream sections of the Sava River capture both traffic to/from themselves and also to/from upstream sections, freight activity (measured in freight ton-km) increases as one moves from upstream to downstream sections, culminating at the river mouth in Belgrade. To incorporate this feature into the economic assessment of SDIP-related benefits, the target corridor— between Belgrade and Brod—was divided into five sections, as shown in Table 3.8.
Table 3.8.. Sava River Corridor Sections for Economic Analysis
Port location Chainage (rKm) Effective class Port (rKm)
Section 1 0 to 103 IV Sabac 103
Section 2 103 to 134 III Sremska Mitrovica 133
Section 3 134 to 223 III Brcko 221
Section 4 223 to 305 III Samac 305 Slavonski Brod/ Section 5 305 to 368 III Bosanski Brod 363/368 Source: World Bank analysis, estimates, and research.
27. Future port throughput and section-level traffic was estimated based on country-specific forecasts for GDP growth and conservative assumptions as to the income elasticity of corridor trade. For the Cost-Benefit Analysis, a without-project scenario was assumed as benchmark, in which no navigational capacity increases take place along the Sava River Corridor beyond what is already either
Page 83 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
being implemented or approved for funding, plus the provision of routine maintenance to maintain current navigation capacity over an analysis period of 31 years, 2019–50. In other words, the reference baseline assumes that the existing navigation class of the Sava River Corridor sections (as shown in Table 3.8) remains unchanged throughout the period of analysis. It was further assumed that SDIP-financed navigation expansion works will be undertaken during 2021–23, including one year of procurement activities and two years of construction, and that operations would commence in 2024. Table 3.9 lays out the economic growth projections used. Income elasticities of freight transport demand are port-specific and are assumed to decrease over time, generally within the range of 1.6 and 0.7. In addition to this underlying traffic growth, the ‘with project’ scenario assumes, as alluded to earlier, that SDIP interventions will generate modal shift in the form of ‘diverted traffic’. Specifically, it is assumed that inland waterway freight currently handled at the Croatian port of Vukovar in the Danube and moving to/from points of origin and destination in BiH via rail will be diverted to the ports of Brčko (primarily) and Samac (secondarily) within BiH in ‘all-water’ direct inland waterway itineraries, as the competitiveness of the Sava fairway increases. The resulting transport task growth projections by river section in the ‘with project’ scenario, inclusive of diverted traffic, are presented in Table 3.10. Table 3.11 shows the underlying projected port-level throughput for selected years, inclusive of diverted traffic.
Economic Benefit-Cost Analysis
28. The calculation of net benefits generated by the with-project scenario compared to the without- project benchmark was conducted via a bespoke spreadsheet model of inland waterway transportation. The model takes into consideration (a) the physical characteristics of the Sava River waterway in each scenario as to navigation class, LAD, and vessel carrying capacity; (b) the operating characteristics of the vessel fleet used in each scenario, as regards cargo carrying capacity, fixed costs of utilization (for example, depreciation, insurance, crew, and maintenance), variable operating costs (chiefly among these, fuel), and speed; (c) in the particular case of SDIP-improved ports, the physical characteristics of the ports used, including waiting times and handling costs; and (d) the emission factors per ton-km transported, by vessel type, for GHGs (CO2 equivalent), which contribute to the risks of climate change, and local pollutants (particulate matter [PM10] and mono-nitrogen oxides [NOX]), which cause smog and are associated with respiratory disease in local populations.
Table 3.9.. Economic Growth Assumptions for the Target Corridor Average Annual Growth Rate in Real GDP by Period '18-'24 '24-'35 '35-'45 '45-'50 Bosnia and Herzegovina 3.3% 2.2% 1.7% 1.4% Croatia 2.3% 1.7% 1.2% 1.0% 3.9% 2.4% 1.8% 1.5% Serbia Source: IMF World Economic Outlook and World Bank analysis and estimates.
Page 84 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Table 3.10.. Sava River Corridor 2018 Freight Task by River Section Transport task CAGR 2018 transport task '18-'24 '24-'35 '35-'45 '45-'50 (millions of ton-km) Section 1 152 3.8% 3.1% 1.6% 1.3% Section 2 125 3.8% 3.1% 1.6% 1.3% Section 3 94 4.0% 3.3% 1.7% 1.4% Section 4 67 3.4% 3.1% 1.7% 1.4% Section 5 39 3.5% 3.4% 1.5% 1.1% Source: World Bank analysis and estimates.
Table 3.11. Projected Sava River Port Throughput, 2018–50 (Thousands of metric tons) Throughput CAGR Port 2018 2025 2030 2040 2050 2018– 2024– 2035– 2045– 24 (%) 35 (%) 45 (%) 50 (%) Šabac 268 344 396 495 569 3.7 2.9 1.6 1.2 Sremska Mitrovica 234 289 325 390 434 3.1 2.4 1.3 0.9 Brčko 119 183 211 267 313 5.3 3.8 1.8 1.4 Šamac 99 127 143 179 220 3.3 2.7 2.2 2.0 Slavonski Brod 131 134 153 203 229 −0.1 3.4 1.5 1.0 Brod 25 32 33 37 63 3.7 1.1 4.8 2.1 Total 877 1,108 1,261 1,570 1,828 3.2 2.9 1.7 1.3 Source: World Bank analysis and estimates. 29. Economic benefits of investments in improvements to navigation. The analysis considered four sources of economic benefits associated with the proposed navigation improvement interventions: (a) reductions in inland waterway transport costs; (b) reductions in in-transit inventory carrying costs; (c) reductions in transport time and cost accruing to diverted traffic; and (d) reductions in the emissions of 43 CO2, PM10, and NOX. Based on World Bank standard guidance, the economic value of a ton of CO2 is assumed to be €35 in 2019, growing gradually in real terms to reach €40 in 2025, €50 in 2035, €62 in 2045, 44 and €69 in 2050. Based on Europe-specific parameters, the economic value of a kilogram of PM10 and a kilogram of NOX in 2019 was assumed to be €20 and €10, respectively, and growing in real terms at the same rate of growth assumed for the unit value of a ton of CO2. The incidence of these benefits is directly driven by (a) the volume of freight transported by river section, expressed in ton-km; (b) the difference in speed, cargo carrying capacity, operating costs, and fuel efficiency of barges triggered by changes in waterway navigation class; and (c) the adoption rate of class-consistent barges by the shipping community. A residual value of 20 percent of the 2019 economic cost of the infrastructure investments was assumed to be ‘recovered’ as a benefit at the end of the appraisal period. An inventory carrying cost factor of 20 percent, representing the cost of capital tied up in inventory in transit and the cost of
43 World Bank. 2017. “Shadow Price of Carbon in Economic Analysis Guidance Note.”. For conservatism in modeling assumptions, the note’s ‘low case’ for the shadow price of carbon was used. 44 CE Delft. 2018. Environmental Prices Handbook EU28 Version: Methods and Numbers for Valuation of Environmental Impacts. For conservatism in modeling assumptions, the report’s ‘lower level’ values of atmospheric emissions were used. These values consider the correlation between pollutant emissions and are based on a combination of characterization models, impact pathway analyses (including dose-response functions), and valuation methods to arrive at the social cost of pollution, or ‘environmental prices’. These prices estimate ‘the loss of economic welfare that occurs when one additional kilogram of the pollutant finds its way into the environment’.
Page 85 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
inventory shrinkage during transportation, was also assumed, based on industry standards. Table 3.12 shows the key parameters used to model the economic benefits of the navigation interventions based on differences in transport costs, emission factors, and cruising speeds by waterway class and mode.45 Table 3.13 shows the assumed rate of adoption of class-consistent barges following SDIP-financed improvements; specifically, it is assumed that it will take eight years from the completion of civil works for the shipping community serving the Sava to fully transition to barges consistent with a Class IV navigation.
30. Economic benefits of port capacity expansion. Investments in port capacity expansion and modernization at the port of Sremska Mitrovica are expected to reduce operating costs for port operators, leading to lower handling fees, as well as in faster vessel turnaround times. Specifically, it was assumed that the proposed terminals will result in a net reduction in port handling fees of 20 percent, and that the time it takes to handle a ton of cargo will be reduced by 0.15 minutes per ton.
31. Economic costs. Implementation costs for navigation expansion activities include the cost of civil works and routine and periodic maintenance. Financial costs were converted to economic costs by removing price and physical contingencies and VAT, and exclude land acquisition, detailed engineering design, and construction supervision costs. The cost of demining the right bank of the Sava River within the territory of BiH—a prerequisite to the start of construction activity—was also excluded, as this is expected to be financed through grant funding. All cost estimates were obtained from the lead implementing agencies responsible for the planning and delivery of the infrastructure. In addition, it was assumed that (a) routine maintenance is to be conducted yearly, with an economic cost equal to 0.5 percent of the economic cost of civil works, and (b) periodic maintenance is conducted every 10 years, with an economic cost equal to 8 percent of the economic cost of civil works.
45 The emissions factors for CO2, PM10, and NOX were taken from Europe-specific estimates, as provided by CE Delft. 2016, STREAM Freight Transport 2016: Emissions of Freight Transport Modes; and by ECTA/CEFIC. 2011. Guidelines for Measuring and Managing CO2 Emission from Freight Transport Operations.
Page 86 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Table 3.12. Selected Transport Parameters Used to Model Economic Benefits Transport costs (2019 EUR per ton-km transported) IWT Class 3 Barge 0.020 IWT Class 4 Barge 0.015 IWT Class 5a Barge 0.013 IWT-Rail combined transport via Vukovar 0.022
Emissions factors (grams per ton-km transported)
CO2 PM10 NOX IWT Class 3 Barge 34 0.021 0.6 IWT Class 4 Barge 23 0.013 0.4 IWT Class 5a Barge 19 0.009 0.3 Rail 23 0.009 0.3
Cruising speed (km/h) IWT Class 3 Barge 8.5 IWT Class 4 Barge 11.5 IWT Class 5a Barge 15.0 Rail 24.0 Source: ISRBC, CE Delft, ECTA/CEFIC, Journal of Commerce, and World Bank analysis and estimates. Table 3.13. Assumed Deployment Rate of Minimum Class IV-consistent Barges 2024 50% 2025 59% 2026 67% 2027 76% 2028 85% 2029 93% 2030 97% 2031 and beyond 100% Source: World Bank estimates.
32. Economic returns. Comparing the economic benefits and costs of the with- and without-project scenarios yields an EIRR of 10.1 percent for the navigation interventions and 10.8 percent for the port of Sremska Mitrovica expansion (Table 3.14), both of which are above the World Bank-recommended economic discount rate of 6 percent.46 At this rate, the ENPV of the navigation investments is estimated to be €22.4 million in 2019, and that of the port expansion investment is estimated at €15.9 million. The proposed navigation improvement and port expansion interventions are therefore found to be economically viable, resulting in net-positive contributions to economic growth in the beneficiary countries.
46 World Bank. 2016. “Discounting Costs and Benefits in Economic Analysis of World Bank Projects.”
Page 87 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Table 3.14. Economic Evaluation of Navigation-related Investments (2019, €, millions)
Present value of Economic Present value of economic benefits economic costs evaluation Operations Inventory CO PM NO Transport Traffic 2 10 X Capital\1 and carrying costs diversion emissions emissions emissions maintenance costs abatement abatement abatement ENPV EIRR (33.4) (4.6) 33.6 0.6 0.6 3.8 1.5 20.3 22.4 10.1%
Present value of Present value of Economic evaluation Operations Handling Time Capital\1 and cost savings maintenance savings ENPV EIRR (20.7) (2.8) 1.5 38.0 15.9 10.8% Source: World Bank analysis and estimates. Note: 1\ Including the offsetting infrastructure residual value at the end of the analysis period (2050). 33. Sensitivity analysis. Sensitivity analysis was conducted to assess the robustness of the economic evaluation results presented in Table 3.14 to changes in the level of projected benefits and costs. The results of this analysis, presented in Table 3.15, show that the economic viability of the navigation investments is robust to a decrease in benefits of 25 percent (or more), an increase in costs of at least the same magnitude, and to numerous combinations of simultaneous increases in costs and reductions in benefits. According to this analysis, this portion of the SDIP interventions would no longer be economically viable if there was a simultaneous increase in costs and a decrease in benefits of 25 percent each, or a simultaneous increase in costs of 20 percent and a decrease in benefits of 25 percent—both are unlikely outcomes. The economic viability of the proposed investments at the port of Sremska Mitrovica is found to be robust to simultaneous increases in economic costs and reductions in economic benefits of up to 25 percent each.
Table 3.15.. Sensitivity Analysis: ENPV at 6 percent Discount Rate Under Lower Levels of Benefits and Higher Levels of Costs Relative to Base Case Assumptions (2019, €, millions) Navigation Investments Benefits Costs Base case -10% -15% -20% -25% Base case 22.4 16.3 13.3 10.3 7.3 +10% 18.6 12.5 9.5 6.5 3.5 +15% 16.7 10.6 7.6 4.6 1.6 +20% 14.8 8.7 5.7 2.7 (0.3) +25% 12.9 6.8 3.8 0.8 (2.2) Port Capacity Expansion Investments Benefits Costs Base case -10% -15% -20% -25% Base case 15.9 12.0 10.0 8.0 6.1 +10% 13.6 9.6 7.6 5.7 3.7 +15% 12.4 8.4 6.5 4.5 2.5 +20% 11.2 7.3 5.3 3.3 1.4 +25% 10.0 6.1 4.1 2.1 0.2 Source: World Bank analysis and estimates.
Page 88 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
ANNEX 4: Detailed MPA Program Framework for the SDIP
PrDO Strengthen transboundary water cooperation and improve navigability and flood protection in the Sava and Drina Rivers Corridors. Total duration 10 years Phase Phase I Phase II BiH, Montenegro and Serbia BiH, Croatia, Montenegro, and Serbia Phased development objective Improve flood protection and Strengthen trans-boundary water enhance transboundary water cooperation and improve cooperation in the Sava and Drina navigability and flood protection in Rivers Corridors. the Sava and Drina Rivers Corridors. Overall Risk H Components Phase I Phase II Component 1: Integrated Works on flood protection and Works on flood protection and Management and Development environmental management will be environmental management, with a of the Sava River Corridor implemented throughout the five growing focus on nature-based years. solutions following various Phase I studies and capacity building activities, will be implemented throughout the five years and be expanded to BiH. Detailed design of the docking Equipment purchase and station for the port of Gradiska will installation and works for the Port be completed. of Brčko will be implemented.
Enhancement for port of Sremska Mitrovica in Serbia will also be implemented during this phase. Demining of the right bank of Sava Subject to completion of demining River in BiH will be implemented of the right bank of Sava waterway, during the first two years subject to additional improvement and availability of WBIF investment maintenance works will be grants. implemented in BiH and Croatia. Component 2: Integrated Flood protection and environmental Scale up flood protection and Management and Development management works will be environmental management works of the Drina River Corridor implemented in the Lim river basin based on priorities identified from of Serbia and Montenegro. the GEF-SCCF Drina project and the ESMAP hydropower project studies. Integrated development of Drina Integrated development of lower watershed in Montenegro. Lim watershed in Montenegro. Building on capacity building activities and lessons learned from Phase I, similar interventions will be scaled up to other watersheds facing similar challenges in the region.
Page 89 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
Component 3: Project Preparation of project Phase II project management preparation and management documentation including detailed activities designs as well as ESF assessments for Phase I activities that will be implemented in year 3-5 and Phase II activities identified during Phase I.
Phase I project management activities Component 4: Regional activities Development of the 2nd Sava River Scale up regional dialogue and Basin Management Plan and conduct studies. hydrological studies for the Sava River. Establishing platforms in support of Operationalize platforms developed Regional Dialogue in Phase I to promote regional cooperation. Design of a Master Plan for sustainable nautical tourism and eco-tourism in Sava and Drina River Basin. Setup of pontoon networks for anchoring touristic vessels.
Page 90 of 91
The World Bank Sava and Drina Rivers Corridors Integrated Development Program (P168862)
ANNEX 5: Project Area Map
Page 91 of 91