Document of The World Bank

FOR OFFICIAL USE ONLY

Public Disclosure Authorized Report No: 32240-AL

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED ADAPTABLE PROGRAM LENDING CREDIT

Public Disclosure Authorized IN THE AMOUNT OF SDR 11.7 MILLION (US$17.5 MILLION EQUIVALENT)

TO

ALBANIA

FOR AN

INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT

IN SUPPORT OF THE FIRST PHASE OF THE

Public Disclosure Authorized INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROGRAM

May 25, 2005

Environmentally and Socially Sustainable Development Sector South East Europe Country Management Unit Public Disclosure Authorized Europe and Central Asia Region

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 March 30, 2005) Currency Unit = Albanian Lek (ALL) ALL 94.75 = US$ 1.0 US$ 1.508 = SDR 1.0 US$ 1.3 = € 1.0

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

APL Adjustable Program Lending MoAF Ministry of Agriculture and Food BNP Butrint National Park MoCYS Ministry of Culture, Youth and CAS Country Assistance Strategy Sports CDD Community-Driven Development MoE Ministry of Environment CVCDP Coastal Village Conservation and MoEP Ministry of Economy and Development Program Privatization CZMP Coastal Zone Management Plan MoF Ministry of Finance EIA Environmental Impact Assessment MoLGD Ministry of Local Government and EU European Union Decentralization ESSF Environmental and Social MoTT Ministry of Transport and Safeguards Framework Telecommunications GDP Gross Domestic Product MoTAT Ministry of Territorial Adjustment GEF Global Environment Facility and Tourism GIS Geographic Information System MSP Medium Sized Project GoA Government of Albania NGO Non-Governmental Organization GRP Gross Regional Product PAO Project Authorizing Official GTZ German Agency for Technical PCU Project Coordination Unit Cooperation PDO Project Development Objective ICZM Integrated Coastal Zone PHRD Policy and Human Resources Management Development ICZMCP Integrated Coastal Zone PPF Project Preparatory Facility Management and Clean-up Project PSC Project Steering Committee IDA International Development SCDP Southern Coast Development Plan Association SEA Strategic Environmental IP Implementation Progress Assessment IT Implementation Team UNECE United Nations Economic MAP Mediterranean Action Plan Commission for Europe METAP Mediterranean Technical UNEP United Nations Environment Assistance Program Program

Vice President: Shigeo Katsu Country Director: Orsalia Kalantzopoulos Sector Manager: Marjory-Anne Bromhead Task Team Leader: Rita E. Cestti

ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

CONTENTS

Page

A. STRATEGIC CONTEXT AND RATIONALE ...... 1 1. Country and sector issues...... 1 2. Rationale for Bank involvement ...... 2 3. Higher level objectives to which the project contributes...... 3

B. PROJECT DESCRIPTION...... 4 1. Lending instrument ...... 4 2. Program objective and phrases ...... 4 3. Project development objective and key indicators...... 5 4. Project components...... 6 5. Lessons learned and reflected in the project design...... 9 6. Alternatives considered and reasons for rejection ...... 10

C. IMPLEMENTATION...... 10 1. Partnership arrangements (if applicable) ...... 10 2. Institutional and implementation arrangements...... 11 3. Monitoring and evaluation of outcomes/results...... 12 4. Sustainability...... 13 5. Critical risks and possible controversial aspects...... 13 6. Credit conditions and covenants ...... 15

D. APPRAISAL SUMMARY...... 16 1. Economic and financial analyses...... 16 2. Technical...... 18 3. Fiduciary ...... 20 4. Social...... 21 5. Environment...... 22 6. Safeguard policies...... 23 7. Policy Exceptions and Readiness...... 24

ANNEXES

Annex 1: Country and Program Background...... 25

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies...... 31

Annex 3: Results Framework and Monitoring...... 33

Annex 4: Detailed Project Description ...... 38

Annex 5: Project Costs...... 49

Annex 6: Implementation Arrangements...... 50

Annex 7: Financial Management and Disbursement Arrangements ...... 53

Annex 8: Procurement Arrangements...... 58

Annex 9: Economic and Financial Analysis...... 64

Annex 10: Safeguard Policy Issues...... 70

Annex 11: Project Preparation and Supervision ...... 71

Annex 12: Letter of Development Policy ...... 73

Annex 13: Documents in the Project File...... 81

Annex 14: Statement of Loans and Credit...... 82

Annex 15: Country at a Glance...... 84

MAPS

IBRD 33577: Integrated Coastal Zone Management and Clean-up Project IBRD 33742: Southern Coastal Zone

ALBANIA

INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

PROJECT APPRAISAL DOCUMENT

EUROPE AND CENTRAL ASIA

ECSSD

Date: May 25, 2005 Team Leader: Rita E. Cestti Country Director: Orsalia Kalantzopoulos Sectors: General water, sanitation and flood Sector Manager/Director: Laura Tuck protection sector (30%); solid waste management (30%); general public administration sector (15%); ports, waterways and shipping (15%); other social services (10%). Themes: Land administration and management (P); pollution management and environmental health (P); other environment and natural resources management (S); municipal governance and institution building (S); environmental policies and institutions (S) Project ID: P086807 Environmental screening category: Financial Intermediary Assessment Lending Instrument: Adaptable Program Leading Safeguard screening category: Requires framework (Credit)

Project Financing Data [ ] Loan [X] Credit [X] Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others: 17.50 Total Bank financing (Sum): 17.50 Proposed terms: Grace period 10 years and Loan Maturity 20 years Financing Plan (US$m) Source Local Foreign Total BORROWER/RECIPIENT 5.03 0.68 5.71 INTERNATIONAL DEVELOPMENT 6.50 11.00 17.50 ASSOCIATION GLOBAL ENVIRONMENT FACILITY 0.54 0.41 0.95 LOCAL COMMUNITIES 0.70 0.56 1.26 EC: EUROPEAN COMMISSION 2.90 2.30 5.20 AUSTRIA, GOV. OF (EXCEPT FOR FED 0.65 1.95 2.60 CHANCELLERY-DG DEV COOP) NETHERLANDS, GOV. OF THE (EXCEPT 0.78 2.33 3.11 FOR MOFA/MIN.OF DEV.COOP.) JAPAN: MINISTRY OF FINANCE - PHRD 1.10 1.13 2.23 GRANTS Total: 18.20 20.36 38.56

Borrower: Albania

Responsible Agency: Ministry of Territorial Adjustment and Tourism Integrated Coastal Zone Management and Clean-Up Project Project Coordination Unit (PCU) Ms. Silva Dracini, PCU Director Address: Blvd. “Deshmoret e Kombit” Tirana, Albania Tel: 00 355 4 273738 E-mail: [email protected]

Estimated disbursements (Bank FY/US$m) FY 2006 2007 2008 2009 2010 Annual 2.68 4.80 5.23 3.53 1.26 Cumulative 2.68 7.48 12.71 16.24 17.50 Project implementation period: Start April 25, 2005 End: September 30, 2009 Expected effectiveness date: October 3, 2005 Expected closing date: March 31, 2010

Does the project depart from the CAS in content or other significant respects? Ref. PAD [ ]Yes [X] No A.3 Does the project require any exceptions from Bank policies? Ref. PAD D.7 [ ]Yes [X] No Have these been approved by Bank management? [ ]Yes [X] No Is approval for any policy exception sought from the Board? [ ]Yes [X] No Does the project include any critical risks rated “substantial” or “high”? [X]Yes [ ] No Ref. PAD C.5 Does the project meet the Regional criteria for readiness for implementation? Ref. PAD [X]Yes [ ] No D.7

Project development objective Ref. PAD B.2, Technical Annex 3 The development objective of the proposed Integrated Coastal Zone Management and Clean-up Project (ICZMCP-APL1) is to set-up and initiate an integrated coastal zone management approach to reduce coastal degradation through: (i) enhancing regulatory policy and governance of the coastal zone, land use and regional planning, and institutional capacity; (ii) initiating targeted municipal and community investments in the southern coast to improve environmental conditions, enhance cultural resources and encourage community support for sustainable coastal zone management; and (iii) reducing soil and groundwater contamination in the former chemical plant at Porto Romano.

Project description [one-sentence summary of each component] Ref. PAD B.3.a, Technical Annex 4 The first component will enhance the capacity of the Albanian authorities to manage the coastal resources of the Adriatic and Ionian Seas.

The second component will assist southern coastal municipalities and local communities to help preserve, protect and enhance Albania’s coastal and cultural resources leading to improvements on the environmental conditions of the coastal area and encouraging community support for sustainable coastal zone management.

The third component will assist to contain soil and groundwater contamination in the former chemical plant at Porto Romano, on the outskirts of Durres, considered as one of the most seriously contaminated locations in the Balkans.

The fourth component will provide support for project management, coordination, monitoring and evaluation.

Which safeguard policies are triggered, if any? Ref. PAD D.6, Technical Annex 10

The project triggers OP/BPs 4.01 (Environmental Assessment), OP 4. 12 (Involuntary Resettlement) and OPN 11.03 (Cultural Property).

Significant, non-standard conditions, if any, for: Ref. PAD C.7 Board presentation: None.

Loan/credit effectiveness: Execution and delivery of all conditions precedent to the effectiveness of the Dutch co-financing Grant Agreement.

Adoption by the Borrower of the Operational Manuals.

Delivery to IDA of a legal opinion satisfactory to the Association to the effect that the DCA has been duly authorized or ratified by the Borrower and is legally binding upon the Borrower in accordance with its terms.

Covenants applicable to project implementation: No later than October 3, 2005, the Government must appoint the Project Steering Committee.

No later than October 3, 2005, the PCU, the CVCDP-IT, and the MoE-IT shall be operational and adequately staffed, and thereafter maintained, under terms of reference acceptable to the Bank.

Take all measures necessary to ensure that the Project is implemented in full compliance with the provisions of the Environmental and Social Safeguards Framework, Project Implementation Plan and Operational Manual for the Coastal Village Conservation and Development Program in a timely manner.

A. STRATEGIC CONTEXT AND RATIONALE 1. Country and sector issues

Context and Sector Issues. With its rich cultural heritage, natural beauty and high biodiversity, Albania’s coastal zone is one of the country’s most valuable assets, recognized as the country’s most important and economically valuable space from both the development and the environmental point of view. Integrated coastal zone management is key to the sustainable development of both tourism and trade, two promising pillars to support the country’s long-term economic growth. In 2002, the tourism board industry generated 12% of total Gross Domestic Product, and 10% of total employment. With population and pollution pressures concentrated largely in the two main coastal cities of Durres and Vlora, and significant coastal areas left underdeveloped or pristine under the former totalitarian regime, Albania has an opportunity that is unique in Europe to sustainably manage its coastline, maximizing both conservation and development objectives. It also has much to learn from the successes and difficulties of its neighbors in this regard, in particular Greece, Croatia, Italy and Bulgaria.

The coastline is broadly divided into three areas: the northern, central, and southern zones. The northern coastal zone, with a coastline of 54 kilometers, and a population of about 150,000, including four river mouths, rich deltas and coastal wetlands, faces the following threats: illegal and dynamite fishing and over-fishing, absence of control and treatment of polluted water, degradation of wetlands and marine ecosystems, and coastal erosion. The central coastal zone, with a coastline of 207 km, a population of 821,000 and broad stretches of sandy beaches, faces environmentally unfriendly and uncontrolled tourism pressures, poorly designed and uncontrolled urban and port development, illegal occupation of coastal areas, uncollected and untreated wastewater and solid waste, hazardous hot spots, degradation of wetlands and coastal biodiversity, and coastal erosion. The southern coastal zone, with a coastline of 168 km, a population of about 70,000, relatively underdeveloped, faces unregulated urbanization, lack of adequate infrastructure, uncollected and untreated wastewater and solid waste, pressures on protected areas and wetlands, and unsustainable use of natural resources.

As in many countries in transition, multiple institutions are responsible for land-use planning and development control in Albania, and there is generally very weak enforcement of zoning regulations. The Ministry of Territorial Adjustment and Tourism (MoTAT) has overall responsibility for urban and regional land-use planning. Responsibility for permitting and development control is with the MoTAT staff in the different municipalities except in the largest cities. Cultivated land (about 24% of land area) and forest and pasture land (51% of total land) are the responsibility of the Ministry of Agriculture and Food (MoAF), as well as the management of protected areas (about 5.8% of Albania’s territory).

There is a law on Priority Tourism Development Zones which creates a “boutique” regime of planning, land use and development administration, carving decisions about the use of specific parcels and projects out of the hierarchy of urban plans and permits. In the absence of regional and local decision-making powers, this easily results in ad-hoc development in pristine areas, without adequate infrastructure.

The illegal construction and settlements, both by the urban poor and also by speculative land developers along the coastline, are a serious problem in Albania. The transition from the centralist state socialism to market economy has profoundly impacted land-use in the whole country. Rapid changes in the economy and freedom of movement have caused rapid changes in the distribution of the population, both of them profoundly influencing the land-use patterns along the coastline.

1 Speculative investments and economic dynamism have been directed towards the western lowland and coastal areas, especially to the areas around the biggest cities such as Tirana, Durres, Vlora, or tourist centers such as Saranda. The population migration reflected this pattern. Consequences for the land-use are such that some parts of the country are left depopulated, and other parts which are commonly recognized for their high economic potential and job opportunity are exposed to both development and demographic pressures.

The unregulated developments, the lack of adequate infrastructure, compounded by the inadequate institutional framework for integrated coastal zone management and weak territorial governance capacity pose a serious threat to the environment and protected areas in the Albanian coastal area, and jeopardize sustainable development of the country’s key asset.

The 1995 Coastal Zone Management Plan. In the early 1990s, Albania embarked on an integrated coastal zone management planning initiative in cooperation with the World Bank, the EU, EIB, UNDP, and UNEP through the Mediterranean Technical Assistance Program (METAP) and the UNEP’s Mediterranean Action Plan Priority Actions Programme. In 1995, this effort produced the first two phases of the Albania Coastal Zone Management Plan (CZMP), providing a framework for implementation of institutional capacity building and investment programs. Implementation of the Albania CZMP during the 1990s was difficult because of government instability and broader crises in the Balkans.

Government Strategy. In 2002 the Albanian authorities began to recognize the need to protect the coastal zone for current and future generations and formally adopted the key principles recommendations of the CZMP. The CZMP provides a useful conservation and development framework that is still pertinent today, and recognizes that: (i) the northern zone has potential mostly for eco-tourism rather than mass-tourism and its priorities should be improved fisheries resources, improved water quality management and ecosystem conservation; (ii) the central zone has greater potential for large-scale tourism and recreation targeted for domestic tourists, as long as the environment is well managed, and its priorities should be improved water supply, wastewater management, solid and hazardous waste management, careful land use planning and zoning, and development control to protect the region’s wetlands and coastal biodiversity; and (iii) the southern zone has potential for qualitative, high-end and carefully managed tourism combined with protection of the unique scenery and natural and cultural heritage of the area, as well as scope for the development of nautical tourism.

The experience from the last ten years and on the ground processes have made the Government of Albania (GoA or the Government) much more aware of the issues and dangers the coastal areas are faced with. In addition, human resources developments that have taken place during the last ten years make all the coastal planning and management interventions and reforms more understandable. Consistent with the recommendations of the CZMP, the Albanian authorities are now beginning to recognize the urgency to strengthen the institutional and regulatory framework for coastal zone management and clean-up, establish a permanent coordinating body to support an integrated approach to coastal zone management issues, and adopt well-informed measures to improve the current situation.

2. Rationale for Bank involvement

The Government has asked the Bank to provide policy and lending support to develop and implement an integrated approach to the interrelated problems of the coastal zone that bridges sectoral

2 operations at central, regional and local levels and builds upon the initial capacity building and land- use planning efforts.

The Bank is assisting in the implementation of several programs in the coastal zone: irrigation, drainage, water resources management, water supply, wastewater management, port development, fisheries, urban land-use planning, and community works. However, a comprehensive umbrella program needs to be put in place that addresses the multi-sectoral planning and management priorities and challenges of the coastal zone. Such a comprehensive approach will contribute to an effective implementation of priority measures, will promote close coordination between line ministries and responsible authorities, and will help avoid overlapping of efforts.

While Albania has other development partners, their ability to help on integrated coastal management is hampered by the weak institutional capacity at the central, regional and local levels to develop and implement a large coastal zone management and clean-up program. The Bank has been asked by the Government to play a catalytic role in harmonizing development assistance activities affecting Albania’s coastal zone and in mobilizing further donor support for the coast.

In sum, the Bank is well-positioned to support the development, adoption and implementation of such integrated programs because of its knowledge, expertise and experience on integrated planning and management. The proposed operation is consistent with and builds on the experience of cross- sectoral operations and the success of community-based operations, which have assisted in establishing the right incentives to change behavior of individuals in areas where coastal resources are under significant pressures, and capacity-building pilot initiatives for sustainable community- focused tourism promotion.

3. Higher level objectives to which the project contributes

The most recent Country Assistance Strategy (CAS) for Albania was prepared in May 2002. An overarching goal of the strategy is the reduction of poverty through support to: (i) improvement of governance and strengthening of institutions; (ii) sustainable private sector growth; and (iii) human development. The proposed Program and Project fit into the above objectives by developing institutional capacity for protection of coastal and marine natural resources, increasing access to basic services associated with improvements of quality of life, and promoting sustainable and regulated tourism sector development in Albania.

By improving land use management capacity at the central and local levels, the proposed Program and Project also contribute to the emerging theme of the new CAS (currently under development): improved governance as a driver of sustainable private sector-led growth. More specifically, the CAS, based on the findings of Growth and Poverty Reduction Strategy, emphasizes that natural resources degradation threatens the country’s development and poverty alleviation. In this context, Albania’s coastal zone is one the country’s most valuable assets.

It is expected that the Global Environment Facility (GEF) will support activities under the first phase of the Program (to be processed under a separate GEF Medium Sized Project (MSP) grant for Butrint National Park and Global Heritage Conservation Project1), which are fully consistent with the GEF’s Operational Strategy No. 2 on the conservation of coastal, marine and freshwater biodiversity.

1 In case the GEF MSP grant does not materialized, the activities financed by the GEF grant to support the Butrint National Park [A.2.(e) and B.3. (b)] will be dropped from the project.

3 Strengthening of protected areas management capacity in Butrint National Park will help restore and conserve natural habitats in a critical ecosystem with global significant biodiversity and will provide lessons learned that can be replicated to other parts of the Albanian coast. Activities to be supported under the Program may also be eligible for financing under the GEF-funded Mediterranean/Adriatic Seas Partnership Investment Fund, currently under preparation.

B. PROJECT DESCRIPTION 1. Lending instrument

The proposed Integrated Coastal Zone Management and Clean-up Program (the Program) is designed as an Adaptable Program Lending (APL) mechanism to be implemented in two phases over 7 years. The total Program is expected to cost around US$66.5 million (Phase 1 US$38.56 million and Phase 2 US$27.94 million). The Phase 1 of the Program (from September 2005 to August 2009) will concentrate on the operational strategies, institutional capacity strengthening for improved land use management, coastal environmental infrastructure and rehabilitation, as well as remediation works in Porto Romano, a hazardous hot-spot in Durres. The Phase 2 of the Program (January 2009 to August 2012) will build upon the initial results of Phase 1 via support to the developed initiatives and further specific investments. The World Bank will finance US$27.5 million of the Program. Phase 1 will be financed by an IDA credit of US$17.5 million, and will be co-financed by the Government of Albania (US$5.71 million), the European Union CARDS Program (US$5.20 million), the Government of the Netherlands (US$3.11 million) for the Porto Romano clean-up activities, the Government of Austria (US$2.6 million) for solid waste management activities, a GEF MSP grant (US$0.95 million), a PHRD co-financing grant (US$2.23 million) and beneficiaries (US$1.26 million). The Phase 2 is expected to be co-financed by Bank financing of US$10.0 million, the Government of Albania, the GEF, and other donors.

2. Program objective and phrases

The overall objective of the proposed APL-supported Program is to protect the coastal natural resources and cultural assets and promote sustainable development and management of the Albanian coast. The Program objective will be achieved through: (i) establishing an integrated coastal zone management (ICZM) institutional and policy framework and strengthening the broader regulatory capacity at the central, regional and local levels for protection of coastal and marine natural resources; (ii) increasing access to basic services associated with improvement of the quality of life and attractiveness of the coastal areas; and (iii) implementing sub-projects aiming at promoting sustainable tourism sector development.

Since Albania is making efforts in developing environmental laws and regulations and in harmonizing them with European Union (EU) directives, the Program will be aligned with strategic directions of the EU with respect to Integrated Coastal Zone Management and other EU environmental directives. Similarly, ICZM institutional framework will, in full harmony with the ongoing decentralization reform be implemented by the Government.

Phase 1. The first phase of the Program consists of the proposed Integrated Coastal Zone Management and Clean-up Project (ICZMCP) and aims at formulating and implementing policies that support integrated coastal zone management and reducing coastal degradation. The first phase will enhance the legal framework, regulatory policy and governance of the coastal zone; promote integrated coastal zone planning; encourage community support for sustainable coastal zone

4 management; and realize basic infrastructure investments to promote sustainable tourism development. Phase 1 will contribute to developing sustainable tourism, improving environmental conditions, enhancing the quality of life, preserving and revitalizing the cultural and architectural heritage of targeted southern coastal communities. This phase will also contribute in reducing the risks to human health in surrounding communities of the Porto-Romano industrial hot-spot.

Phase 2. The second phase of the Program will further develop the institutional, legal and regulatory capacity for ICZM, particularly at regional and local levels, and support sustainable coastal tourism development to serve as an engine for economic growth. Building on the achievements and the performance of Phase 1 and on lessons learned, Phase 2 of the Program will significantly expand support for coastal environmental infrastructure and rehabilitation, protected areas management, conservation and restoration of critical coastal and marine ecosystems, remediation of contaminated sites; and provide additional financing in support of community-driven sustainable tourism development initiatives. In addition, this phase will promote public-private partnerships. Specific areas of support under Phase 2 will be worked out during Phase 1. The second phase is expected to be fully blended with a GEF-funded project under the forthcoming Mediterranean/Adriatic Seas Partnership Investment Fund.

Triggers for Phase 2. The triggers for moving ahead with Phase 2 are the following:

• The institutional, legal and regulatory framework for ICZM is established, implemented and enforced at national, regional and local levels. • The formulation of regional and local land-use plans in the coastal region has followed agreed land-use planning criteria and methodologies, integrated strategic environmental assessment into the planning process, and adopted a participatory planning approach. • The Southern Coast Development Plan (SCDP) and the accompanying Strategic Environmental Assessment and Resettlement Framework have been completed and adopted to guide investments in the southern coast of Albania. • Institutional capacity for enforcement and monitoring of land-use plans, building regulations, and environmental impact assessment legislation has improved on the southern coast; and the results of monitoring and inspections to assess compliance are made available to the public. • The Ministry of Territorial Adjustment and Tourism shows marked understanding on environmental issues and concerns. • Phase 1 clean-up and environmental infrastructure investment activities are completed or demonstrate satisfactory progress (at least 70% commitment and 50% disbursement under the Coastal Environmental Infrastructure and Rehabilitation Component).

3. Project development objective and key indicators

The development objective of the proposed Project is to set-up and initiate an integrated coastal zone management approach to reduce coastal degradation through: (i) strengthening regulatory policy and governance of the coastal zone, land-use and regional planning, and institutional capacity at the central, regional and local levels; (ii) initiating targeted municipal and community investments in the southern coast to improve environmental conditions, enhance cultural resources and encourage

5 community support for sustainable coastal zone management; and (iii) reducing soil and groundwater contamination in the former chemical plant at Porto Romano.

Key indicators for achievement of the Project development objective are the following:

• Completion and approval of the SCDP by the National Council of Territorial Adjustment. • Development of public infrastructure in the southern coastal area in compliance with the SCDP. • Local land-use planning and issuing of construction permits in the southern coast in compliance with the parameters and measures set forth in the SCDP. • New buildings in the southern coastal area do not disturb the existing spatial value and characteristics. • Local, regional and national physical planning efforts and development initiatives aligned with the principles and guidelines of the SCDP. • Stakeholder participation incorporated into coastal zone management decisions. • At least 5,000 tons of household waste and 5,000 tons of construction and demolition waste actually collected and disposed off in proper facilities. • At least 50% of tourist wastewater load in Saranda collected and treated. • At least 50% of public beaches and shellfish areas in the southern coast monitored for water quality against Albanian and EU standards. • Tourism and visitor revenues in the southern coast of Albania increased and benefited wider communities. • Protected areas management plan for Butrint National Park developed with wide stakeholder participation and rules enforced through appropriate by-laws. • Detailed regulatory plans formulated, adopted and enforced by at least 3 coastal municipalities and/or communes. • Zoning and local land-use plans (local strategic plans) formulated and adopted by at least 5 communes located in the southern coast. • Execution of environmental impact assessment (EIA) in accordance with the EIA procedures and in compliance with Albanian law before obtaining environmental permits and starting construction and development activities in the southern coastal area. • Enhanced economic incentives to promote integrated coastal zone management objectives introduced and actively used by regional and local governments. • Reduction of soil contamination in areas adjacent to population centers in Porto Romano guided by the land-use plan formulated and adopted by the Municipal Council of Durres.

4. Project components

The Project or Phase 1 of the Program will consist of the following components and activities:

Component A: Integrated Coastal Zone Management Policy and Institutional Capacity Building (US$3.63 million: US$2.10 million IDA; US$0.92 million PHRD; US$0.36 million GEF; US$0.25 million GoA)

6 The objective of this component is to enhance the capacity of the Albanian authorities to manage the coastal resources of the Adriatic and Ionian Seas through the development of an adequate operational policy, legal and regulatory framework as well as financial/economic instruments for ICZM; strengthening institutional capacity to increase efficiency and effectiveness of regulatory, planning and management functions for ICZM at the central, regional and local levels; strengthening coastal water quality monitoring network; strengthening protected areas management in Butrint National Park; enhancing the knowledge base; and raising public awareness about the coastal issues in Albania. Component A comprises two sub-components: (i) strategic policy support; and (ii) coastal management strengthening. Specifically, the component will support:

• Strengthening capacity at the central, regional and local levels to enforce regulatory responsibilities for land use planning and regulations including compliance with construction permits. • Development and acquisition of adequate management tools such as integrated GIS- based land use applications. • Design and enactment of adequate financial and economic incentives to encourage behavioral changes in human activities in the coastal areas. • Development of the policy and legal framework for ICZM. • Establishment and capacity building of a functional ICZM institutional framework. • Strengthening of the environmental monitoring capacity along the coastal zone. • Development and codification of the SCDP. • Formulation of a selected number of local land-use plans for coastal municipalities and/or communes. • Updating the protected area management plan for the Butrint National Park.

Component B: Coastal Environmental Infrastructure and Rehabilitation (US$28.76 million: US$14.09 million IDA; US$5.20 million EU; US$2.60 million Government of Austria; US$0.58 PHRD; US$0.45 million GEF; US$1.26 million beneficiaries; US$4.58 million GoA)

The objective of this component is to assist southern coastal municipalities and communes to help preserve, protect and enhance coastal natural resources and cultural assets leading to improvements on the environmental conditions of the coastal area and encouraging community support for sustainable coastal zone management. Specific physical investments will be processed on a rolling basis within the framework of the SCDP and local strategic plans. The range of physical investments eligible will be established in advance, and have been grouped in four sub-components: (i) southern coastal solid waste management; (ii) Saranda water supply and sewage improvements; (iii) Saranda gateway; and (iv) coastal village conservation and development program. Specifically, the component will support:

• Improvements in solid waste management in the south coastal zone, including the design and construction of two municipal landfills in Saranda and Himare. • Improvements in water supply and sewage systems in the tourist area of Saranda town. • Transformation of the Port of Saranda into a dedicated ferryboat and passenger terminal to facilitate access of passengers and vehicles to south Albania. • Establishment of a Coastal Village Conservation and Development Program (CVCDP) to offer financial and other form of support to local governments and communes located in the Ionian coast committed to comply with CVCDP requirements (through a “Partnership

7 Agreement”) for the implementation of sub-projects aiming at improving public utility infrastructure for environmental and cultural heritage protection and enhancement, supporting sustainable tourism development, revitalizing traditional architectural heritage; as well as to communes surrounding the Butrint National Park for promoting environmental protection and sustainable economic activities.

Component C: Porto Romano Hot Spot Clean-Up (US$4.45 million: US$0.15 million IDA; US$3.11 Government of the Netherlands; US$0.31 million PHRD; US$0.88 million GoA)

The objective of this component is to contain soil and groundwater contamination in the former chemical plant at Porto Romano, on the outskirts of Durres, considered as one of the most seriously contaminated locations in the Balkans. Component C comprises five sub-components: (i) capacity building and awareness raising on hazardous waste management; (ii) environmental monitoring; (iii) remediation and clean-up works; (iv) land-use planning; and (v) resettlement plan implementation. The Project will build capacity on hot-spot management within the Ministry of Environment, which could be further applied to deal with other critical hot-spots throughout the country2 and will support community awareness raising activities in the Porto Romano site focusing on the reduction of environmental health risks. Specifically, the component will support:

• Capacity building in hot-spot management and community awareness. • Establishment of a long-term environmental monitoring system. • Carrying out critical remediation and clean-up works. • Establishment of a model for dealing with the clean-up of hazardous hot-spots, which if successful, could be replicated in other hot-spots along the coast.

Component D: Project Management and Monitoring (US$1.63 million: US$1.07 million IDA; US$0.15 million GEF; US$0.41 million PHRD)

This component will provide support for project management, coordination, monitoring and evaluation. It will finance technical assistance, office equipment and furniture, training, and incremental operational costs. Component D includes three sub-components: (i) project coordination support; (ii) project implementation support; and (iii) and project monitoring, evaluation and communication support.

Project Preparation Activities (US$0.09 million: US$0.09 million IDA)

The Government has financed key preparatory studies out of the proceeds of the Project Preparation Facility (PPF), which became effective on November 4, 2004.

Initiation of Project Activities. The Government will make use of the proceeds of the PPF to continue with the formulation and codification of the SCDP and initiate key project activities, namely establishment of the Project Coordination Unit and Implementation Teams, provision of technical assistance for solid waste management, and conduction of detailed engineering design of the municipal landfills and civil works in Saranda Port.

2 Other industrial hot-spot sites in the country include: the chlorine alkali and PC factory in Vlore, the Marize oil field in Patos, the oil refinery in Ballsh, the waste disposal site in Sharra, the nitrate fertilizer plant in Fier, the metallurgical complex in El-bassan, the copper factory in Rubik and the phosphate fertilizer factory in Lac.

8 5. Lessons learned and reflected in the project design

Key issues that have been identified as important from the review of ICZM initiatives in other countries as well as Albania’s portfolio to address in the design of this Project include the following:

Capacity building interventions without investments often do not accomplish much. The Bank experience on ICZM shows that support for institutional strengthening, restructuring and policy reform works best in the context of an operation that also demonstrates tangible benefits and catalyzes ownership at the national, regional and community levels.

Stakeholder involvement is a key to success. Promoting a participation process with all the stakeholders at the community, local, regional and central levels from the beginning of the process is a key for integrated coastal zone management. A sustainable and effective ICZM process in Albania will require a greater involvement of those stakeholders involved in land-use planning and land resources management, e.g., local authorities and municipalities. The project shall provide adequate opportunities for the active involvement of stakeholders and civil society through consultations, improved public awareness and access of information. A key lesson from projects implemented in Albania is that projects and programs with a high degree of local participation have greater chances of success.

Institutional framework for ICZM should reflect multi-stakeholder consensus. New institutional arrangements for ICZM should be identified in a transparent and participatory manner, and decisions should be taken when there is consensus among the several agencies and actors operating in the coast about the new rules of the game. Premature institutional reforms may cause more harm than good.

Horizontal and vertical integration should go hand on hand. The ICZM process must ensure that authorities at different levels of administration share power (from the central to the regional level, from the regional to local governments, and from local governments to villages and communities) and coordinate disparate functions such as planning and zoning, issuing construction permits, budgeting, and development.

Partnership with donors is essential. In situations where there is a large number of donor organizations engaged in ICZM-related activities, working in partnership with multilateral and bilateral organizations is not only desirable but indeed necessary for ensuring donor activities which are compatible and not mutually exclusive. A country-led process to coordinate donor activities and commitments to ICZM in line with a common action plan has already been initiated in Albania and is yielding positive results.

Integration with government institutions is required. The sustainability of Bank programs and projects can be ensured by integrating them with Government institutions, structures and budget planning processes. Strengthening of public sector management in Albania is particularly important as the country moves towards greater integration with the European Union.

9

6. Alternatives considered and reasons for rejection

Without corrective interventions, the value of Albania’s coastal zone, the country’s main prospect for sustainable development, will be greatly reduced in an irreversible way due to the ongoing uncontrolled developments. It is of vital importance that proper institutional arrangements for integrated coastal zone management are put in place to guide development and protection of coastal resources and to stem the tide of illegal construction on the coast, to remediate the effects of environmental “hot spots,” and to develop the foundations for sustainable tourism development.

In this context, several alternative options were considered: Option 1: Postpone the project. An alternative option considered was the postponement of the Project because the Government has not yet developed a comprehensive ICZM policy and institutional framework. The proposed Project is the catalyst for formulating and implementing such ICZM policy and institutional framework, and further delay would lead to the irreversible loss of relative pristine parts of the southern coastal zone and lost opportunity for Albania to manage its coastal zone in a sustainable manner. Furthermore, stakeholders are demanding action on the ground and concrete results, rather than additional studies.

Option 2: Stand-alone sector investment project. Another option under consideration was to have a simple stand-alone environmental improvement project aimed at addressing substantive issues related to coastal and marine pollution, critical environmental hot-spots, and inadequate solid waste management. Given the urgency to strengthen central, regional and local capacity and to build the Government’s commitment to implement integrated coastal zone management actions, this approach was not pursued because it would not address the prerequisite of setting effective institutional arrangements for continuous management of the coastal zone and needed incentives to induce necessary changes in behavior. Through continuous policy dialogue, the implementation of the project will bring overall better results.

Option 3: Long-term approach combining investments and reforms. Institutional reforms and capacity building, while essential for promoting integrated coastal zone management, are only a means to the end of achieving tangible improvements in the quality of the coastal zone and in the quality of life of coastal inhabitants. Equally important is to implement concrete actions in the short- term and medium-term to make a real difference on the ground.

In consultation with the Government, it was decided that the APL approach is a preferred option because it allows for institutional reforms, capacity building and phased investments.

C. IMPLEMENTATION 1. Partnership arrangements (if applicable)

The overall Program envisages partnership arrangements with other international financing institutions and donors active in Albania with interest on the Albanian coast in order to maximize effectiveness of donor assistance.

The Government convened a Donors Conference in March 2005, as a first step to coordinate activities and programs, foster the development of an integrated and coherent donors approach to support the sustainable development of Albania’s coastal zone, and to share lessons learned on implementation of ICZM programs in Croatia and other neighboring countries. The Government is

10 committed to developing capacity and strengthening existing mechanisms for donor coordination (e.g., Tourism Donors Working Group). The capacity of the Directorate of Foreign Financed Project Monitoring within the Ministry of Territorial Adjustment and Tourism will be strengthened to plan and coordinate donor- financed projects related to tourism, infrastructure and natural resources along the coastal zone, taking into account progress made on the overall donor coordination at the level of the Council of Ministers.

Phase 1 of the program will be financed by bilateral and multi-lateral grants and concessional funding. The Government of the Netherlands has committed about US$3.11 million to co-finance the Porto Romano clean-up activities, the European Commission has committed to allocate €4.0 million (about US$5.2 million) from the EU CARDS local community program to co-finance the Coastal Village Conservation and Development Program, the Government of Austria has committed to allocate €2.0 million (about US$2.6 million) to co-finance solid waste management activities, and the Japanese Government has approved a PHRD co-financing grant in the amount of US$2.23 million to support capacity building activities. A US$0.95 million grant will be sought from the GEF to support the incremental costs associated with biodiversity and global heritage conservation activities focused on the Butrint National Park. The Government of Netherlands has also committed US$0.55 million to provide technical assistance to the Ministry of Environment for the conduction of a detailed feasibility study and site investigations, and preparation of bidding documents.

2. Institutional and implementation arrangements

Project Steering Committee. A Project Steering Committee (PSC) will be appointed to be responsible for providing overall project oversight, reviewing project progress and assisting in resolving obstacles to project implementation. The PSC will be composed of high-level decision makers (at the level of Deputy Minister) from the Ministry of Territorial Adjustment and Tourism (MoTAT), Ministry of Finance (MoF), Ministry of Economy and Privatization (MoEP), Ministry of Environment (MoE), Ministry of Transport and Telecommunications (MoTT), Ministry of Culture, Youth and Sports (MoCYS), Ministry of Local Government and Decentralization (MoLGD), Ministry of Agriculture and Food (MoAF); as well as representatives from regional and local governments and NGOs. The PSC will be chaired by the MoTAT and will meet twice a year.

Project Coordination Unit. The overall institutional coordination of the Program will be carried out by the MoTAT, as the leading government agency in charge of overall Program coordination. A Project Coordination Unit (PCU) will be set up within the structure of the MoTAT to be responsible for overall project coordination, procurement, financial management, disbursement, monitoring, evaluation and reporting, and will be under the supervision of the Project Authorizing Official.

Project Authorizing Official. The Project Authorizing Official (PAO) will be the assigned Deputy Minister of the MoTAT, who will have overall responsibility for supervising the work of the PCU and signing on procurement activities. The PAO will report to the Government through the PSC on Project implementation progress.

Institutional Arrangements for Project Implementation. The project activities will be implemented by existing entities at the central, regional or local levels. An implementation matrix identifying functions and responsibilities for project implementation is included in Annex 6. A brief description of the implementation responsibilities is provided below. It should be noted that project implementation arrangements will be reviewed around the Mid-Term review in light of the

11 institutional reforms implemented by the Government, including the establishment of a permanent oversight body for integrated coastal zone management.

• Ministry of Territorial Adjustment and Tourism. The MoTAT through the PCU will be responsible for providing oversight and for supporting implementation of activities under the responsibility of the MoTAT, including the Infrastructure Improvements portion of the Coastal Village Conservation and Development Program. The following Directorates of the MoTAT will be involved in the implementation of the Project: Directorate for Urban Planning, Directorate for Tourism Development, Directorate for Solid Waste Management and Directorate for Water Supply and Sanitation.

• Ministry of Environment. The MoE will be responsible for the technical implementation of Component C dealing with Porto Romano hot-spot clean-up and environmental management strengthening activities. A small implementing team will be set up at the MoE to oversee and support all technical aspects of the implementation of all project activities under the responsibility of the MoE. The General Secretary of the MoE will be responsible for providing oversight. The Directorate for Pollution Control and Prevention, the Directorate for Management of Natural Resources and Biodiversity and the Regional Environmental Agency will be involved in Project implementation.

• Ministry of Transport and Telecommunications. The Saranda Port Authority will appoint a Coordinator to be responsible for the technical aspects and facilitate the implementation of the activities associated with the Port of Saranda rehabilitation works. The Ports Department at the MoTT will be responsible for providing oversight.

• Ministry of Culture, Youth and Sports. The MoCYS through the Butrint National Park Administration will be responsible for the technical implementation of the protected areas management activities and for facilitating implementation of activities under Environmental Protection and Sustainable Economic Activities portion of the Coastal Village Conservation and Development Program in Ksamili, Aliko and Xarra communes. The oversight of the activities in Butrint National Park will be carried out by the Butrint National Park Board.

• Municipalities and communes. Southern coastal municipalities, communes and villages (e.g., Himara and Saranda municipalities as well as Lukova and Ksamili, communes) will be responsible for facilitating planning and implementation of the solid waste management activities and the activities under the Infrastructure Improvements portion of the Coastal Village Conservation and Development Program.

3. Monitoring and evaluation of outcomes/results

The monitoring and evaluation function will be carried out by the PCU within the MoTAT. The PCU will be responsible for the preparation of quarterly/annual Project Management Reports, which

12 will be submitted to both the PSC and the Bank. Project Management Reports will integrate financial and procurement information as well as physical outputs. The evaluation of institutional strengthening activities will be done by independent consultants to assess the results of the Project in terms of strengthening of local capacity at mid-term and towards completion of the Project. Similarly, beneficiaries from the municipalities and communes targeted under the CVCDP will be surveyed at the beginning, mid-term and completion of the Project to evaluate the impacts of the CVCDP. The monitoring plan summarized in Annex 3 was agreed during appraisal.

4. Sustainability

The Government’s commitment to the Project development objective, which is a good indicator of its sustainability, is high and is manifested by already carried out activities. A number of planning and strategic documents have been prepared with the aim to protect or develop coastal resources. Some of them are strategic and subject specific, dealing with natural or anthropogenic systems (Biodiversity Strategy and Action Program and Tourism Development Strategy). Others are area specific, dealing with different territorial levels (mostly statutory land-use plans). They provide information on recent planning attempts to regulate and control spatial development within the southern coastal region and at the same time reflect the key development pressures. Also, the tourism development planning program developed by the MoTAT is the first step undertaken in preparation of the new tourism development study for the central part of the Ionian coast.

The commitment to the overall Program is also demonstrated by the fact that the Government signed and launched the PPF, which finances some of the key preparatory activities and critical interventions, including the formulation of the SCDP, the development of the Environmental and Social Safeguards Framework, the drafting of interim coastal regulations and the drafting of a legal, institutional and policy framework for ICZM. The SCDP is funded partially from the proceeds of the PPF and partially by Government funds.

In order to ensure the sustainability of infrastructure investments, attention will be given to affordable technical solutions that respond to the local needs and to the financial capacity of the local governments. Innovative mechanisms to properly maintain and pay for the operation and maintenance costs of the new or rehabilitated infrastructure will be identified and established. Since the infrastructure to be supported under the Project is primarily owned by local administration bodies, the Project will assist in strengthening the ability of local institutions to evaluate their asset base and their conditions and plans for future development. The Project also calls for the involvement of beneficiaries at every stage of the project-cycle (i.e., investment priority setting, planning and monitoring) in order to increase the sustainability of the investments.

5. Critical risks and possible controversial aspects

The following are identified risks associated with the Project and the respective mitigation measures:

• Nurturing and sustaining the strong political commitment from the highest executive level that is necessary to carry out the Project’s policy and capacity-building elements. A critical risk is that the political will demonstrated during the preparation phase at all levels of government to improve governance in the coastal area is not retained through the

13 implementation phase. The Project builds on already well-established dialogue with the Government on the importance of protecting Albania’s coastal assets for the sustainable economic development of the country. The Project has been carefully structured to balance policy and institutional strengthening measures with related priority infrastructure investments, with the infrastructure investments taking place once the policy and planning framework and the local strategic plans are in place. Project preparation activities have been coordinated with both the executive and legislative branches of the Government as a prerequisite of the long-term program viability. The Project will support efforts to increase awareness of the problems of the coastal zone and will further strengthen executive branch buy-in and foster its effective involvement in Project implementation through the establishment of an ICZM Council for which Prime Minister Chairmanship will be sought. Risk Rating: Substantial.

• Multi-sectoral and multi-level nature of the project. Another critical risk is that the involvement and participation of central, regional and local levels of administration and relevant sectoral branches concerned with the coastal area is not sustained through the project cycle. The necessary institutional coordination will be ensured through the establishment of the inter-ministerial PSC. The Project will further strengthen inter-sectoral and multi-level dialogue through the proposed ICZM Council and through related institutional capacity-building interventions at the regional and local levels. Risk Rating: Substantial.

• Local commitment for integrated coastal zone management. Another critical risk is that the commitment of local governments and stakeholders to participate in the overall ICZM process is low. While at present there is a strong commitment at the local level, the Project has made provisions to engage local stakeholders in project implementation. The SCDP and local strategic plans will be prepared following a participatory planning approach and mechanisms will be established for stakeholder consultation and engagement of local communities. Coastal forums will be set up to promote and deliver ICZM at the local level, facilitate exchange of information, and communicate benefits of ICZM to local stakeholders. The Project, through the CVCDP will provide access to financial resources and technical assistance for supporting implementation of local strategic plans and increasing opportunities of local population to benefit financially from eco-tourism. Risk Rating: Modest

• Limited implementation capacity and coordination of national and local institutions. Another risk is that coordination among implementing agencies as well as financial management and procurement practices are not maintained at required standards. The Project will include institutional strengthening and capacity building of the staff of the MoTAT and the other line agencies, and will contract the services of highly qualified consultants with experience in Bank procurement and financial management procedures as well environmental management experts. Risk Rating: Modest.

• Demolitions of illegal buildings. The Government has been implementing an ongoing program to remove unauthorized encroachments from public spaces in many regions of the country, including the coastal zone. The demolition of unauthorized structures started in 2001 and covers areas in Tirana, Durres, Shkodra, Korca as well as Himare and Saranda. The ongoing demolition-drive is aimed at enforcing existing land-use regulations in the

14 country, does not target removing encroachments from specific locations for the purpose of promoting investments, and is a process that is likely to continue regardless of the Bank’s involvement in the Project. The key objectives of this campaign – to vacate public lands that may have been illegally occupied – are consistent with the objectives of the land-use planning activities supported under the Project.

Since the process of identifying and removing unauthorized encroachments in public space following the due process established under the Albanian laws and regulations predates the Bank’s involvement in the Project, and is aimed at promoting improved enforcement of existing land-use regulations in Albania, the removal of such encroachments is not subject to the World Bank’s Policy on Involuntary Resettlement. While some of the affected people would lose their structures and access to land as a result of encroachment removal, this neither “result directly from the Bank-supported Project” nor is such removal tantamount to “taking the land”. Therefore, the likely impacts on a section of the affected population do not meet the criteria necessary to trigger the Bank’s resettlement policy.

As part of the Bank efforts to promote social due diligence, criteria and procedures for assisting affected people who lose their primary residence or main source of livelihood due to encroachment removal will be developed as part of the preparation of the SCDP under the Project.

This issue of demolitions of illegal buildings on the coastal line is certainly distinct from land acquisition required for specific infrastructure investments recommended by the SCDP, which may be financed by the Bank, other donors or the private sector. The Government has adopted a Resettlement Policy Framework included in the Environmental and Social Safeguards Framework that reflects the core principles of the World Bank Policy on Involuntary Resettlement. This framework will be applicable throughout the southern coastal zone.

• Land restitution and registration issues. A related controversy also springs from the incomplete process of surveying, mapping and legal registration of immovable property and the unresolved issues of restitution/compensation of property. The overlaying of historical claims on already privatized agricultural land and the pending compensation claims that have not been satisfied is a contentious issue. A new Restitution and Compensation Law was approved in 2004 but has yet to be properly implemented and may carry adverse implications for the implementation of the SCDP. The Project will assist in setting up mechanisms to ensure public outreach and due process for protecting individual rights that may be adversely impacted by the SCDP.

6. Credit conditions and covenants

(a) Conditions for negotiations: • Submission of the Letter Development Program to the Bank endorsed by the Council of Ministers. • Appointment of key staff at the MoTAT and MoE: (i) MoTAT, financial management specialist and procurement specialist; and (ii) MoE, coordinator and technical expert.

15 • Installation of the financial management system. • Adoption of the Environmental and Social Safeguards Framework acceptable to the Bank. • Adoption of a Project Implementation Plan acceptable to the Bank. • Commitment is made to make the necessary budget allocations to the MoTAT, MoE, and MoCYS for counterpart funds.

(b) Conditions of effectiveness: • Adoption of the Operational Manual for the CVCDP. • Execution and effectiveness of all conditions precedent to the effectiveness of the Netherlands co-financing grant agreement. • Delivery of a legal opinion satisfactory to the Bank to the effect that the Development Credit Agreement has been duly authorized or ratified by the Government and is legally binding.

(c) Other conditions: • No later than October 3, 2005, the Government must appoint the PSC. • No later than October 3, 2005, the PCU, the Implementation Team for the CVCDP and the Implementation Team within the MoE shall be operational and adequately staffed, and thereafter maintained, under terms of reference acceptable to the Bank. • Take all measures necessary to ensure that the Project is implemented in full compliance with the provisions of the Environmental and Social Safeguards Framework, Project Implementation Plan and Operational Manuals for the CVCDP in a timely manner. • A financial management system will be maintained. • The PCU under the MoTAT will maintain a financial management system acceptable to the Bank. The Project financial statements and Special Accounts will be audited by independent auditors acceptable to the Bank and on terms of reference acceptable to the Bank. The annual audited statements and audit report will be provided to the Bank within six months of the end of each fiscal year. • The audits will be conducted in accordance with International Standards on Auditing (ISA) as issued by the IFAC and on terms of reference acceptable to the Bank.

D. APPRAISAL SUMMARY 1. Economic and financial analyses

Economic analysis. The analysis tries to assess in an integrated fashion the socio-economic benefits from an integrated coastal zone management program. The incremental benefits of the orderly and coherent land-use and spatial planning, improved public infrastructure, better landscape management, and control of solid waste along the coast are expected to bring about sustainable tourism development growth in terms of: (i) sustaining and increasing the local tourist base in the coastal area; and (ii) promoting an increasing trend on sustainable high-quality tourism.

Tourism is one of the main sources of income for the municipalities and communes located in the southern coast of Albania. It is estimated that between 30% and 50% of the population from Palase to Ksamil leave their towns for six months to work in Greece or Italy after the tourist season ends. They return to their towns during the tourism season (between mid-May through end-September) when income-generating opportunities are available. The 2004 local Gross Regional Product (GRP) was estimated for the southern coastal region of Albania based on the sectoral income contributions.

16 The calculations reveal that 31% of the local GRP for the coastal municipalities and villages originated from local tourism and 3% from foreign tourism.

Costs. The economic costs include all Program costs plus the cost of rehabilitating the coastal road (which is consistent with the current plans of the Government), and were derived from the financial costs excluding value-added taxes. The costs also include the operation and maintenance costs for the new and rehabilitated infrastructure.

Benefits. In the “without-project” scenario, it can be expected that the current tourist-base income will decrease due to unregulated urban planning and illegal construction, which does not take into account landscape values of the traditional coastal villages, pollution, and low quality of local roads and basic infrastructure facilities. With competitive and attractive beach holiday possibilities in neighboring countries such as Italy, Greece, Turkey and Croatia, it will not be possible to maintain the current base of local tourists from Albania, FYR Macedonia and Kosovo less alone to attract high quality foreign tourists once the income levels have increased. It has been assumed that without substantial improvements in the cultural, natural, landscape and environmental values of the Albania’s coast, starting 5 years from now, local tourists will gradually decrease by 1% per year for Saranda, due to the fact that Saranda is a bigger city and has a unique and close-by attraction in Butrint, and 2.5% per year for smaller coastal communities. It is also assumed that the current (and small) number of foreign tourists will stay constant due to the attractiveness of the Butrint.

In the “with-project” scenario, it is assumed that the impacts on tourism flows will be visible 5 years from now, and will slowly increase at a rate of 3% per year (time horizon is until 2030).

The stream of incremental benefits of the tourism receipts that would result from the Project is expected to be as follows: US$2.2 million by year 2009, and then increases steadily to US$60 million by year 2030.

Economic rate of return. Based on the assumptions of costs and benefits, the overall economic rate of return of the Project is estimated at 16%. This figure excludes other qualitative benefits expected in the project areas such as a coherent spatial planning, an improved decision making process, pollution reduction, biodiversity and habitat improvements and improved basic infrastructure and quality of life.

Financial analysis of the waste component. The present total costs for solid waste management in Saranda Municipality are rather low. This has an impact on the low level of services offered by the waste collection company, which can be viewed from overflowing containers, broken down containers littering the streets and uncontrolled operations at the dumpsites. The total costs for waste collection are not fully covered by the collected fees. One of the key tasks for the municipality is to develop a differentiated tariff system for households based on the value of their house or the square meter of rented housing area. The current tariff for waste management in Saranda is only US$6.5 per household per year and no costs are charged for disposal of waste. The waste management and disposal fees will be gradually increased to cover 100% of operation and maintenance costs and at least 25% of capital costs by year 2010, representing 0.66% and 0.21% of household income3, respectively.

3 Based on average annual household income of ALL450,000.

17 For Himare, the waste management and disposal fees will be set at levels to cover 100% of operation and maintenance costs by year 2010, representing 0.62% and 0.36% of household income, respectively. Tariffs that include partial recovery of capital costs are above reasonable affordability levels.

The tariff system for commercial establishments (shops, restaurants, hotels) should be reviewed in terms of the applicability of the fee compared to the actual amount of waste generated. At the moment, the fee is based on the square meter of the establishment, while the costs of the waste management and disposal are higher than the fees collected.

In terms of the disposal fee, the landfill disposal fee charged should be different for the different types of waste.

Both municipalities would be required to review with the Bank on a semi-annual basis expenditures and revenues of waste management and disposal, including revenues and expenditures for the preceding and following semesters, and annually the projections for the following two years, on the basis of forecasts prepared by it, and to take steps as necessary, including but not limited to tariff increases and improved collections, to ensure the adequacy of the revenues to meet the projected financial requirements.

Financial analysis of the Saranda Port improvements. Based on the recently conducted traffic analysis and traffic forecast, the number of embarkations from passengers and tourists (both Albanians as well as foreigners), small recreational crafts as well as transport connection passengers is expected to increase from the present 44,000 to 140,000 by year 2025. At the same time, freight import is expected to reduce from the present amount of 70,000 tons to 14,000 by 2025 due to increased local cement production (main imported material), upgrading national road network and slowing down of construction sector. Port revenues are expected to increase from the present level of US$370,000 to US$622,000 by 2025, which is enough to cover the forecasted fixed and variable operational expenses that are currently at US$230,000 and are estimated to rise to US$315,000 by 2025. If only revenue from passenger traffic is concerned, the (fixed and passenger) costs would break even with the revenues by year 2010, provided that port tariffs for passengers, cars and trucks will increase to levels prevailing in Greek ports.

2. Technical

Overall project design. The proposed project builds on international good practice and international/regional experience of integrated coastal zone management and land-use planning. The institutional capacity building activities that will be supported by the Project were identified as high priority areas of support by the central and local governments of Albania.

The study conducted by METAP, “Southern Coastal Region: Priority Assessment Study and SEA as a Tool in Coastal Management in Albania,” which established the state of the environment baseline of the southern Albanian coast and identified the changes in the state of the coastline that have occurred since 1995 when the CZMP was formulated, as well as the 2002 UNECE Environmental Performance Review of Albania (which dedicated a whole chapter to the coastal zone management and tourism development), have identified the most important institutional and environmental problems. The urgency to start tackling the problems in the southern coast was confirmed by the Bank.

18 All physical infrastructure investments to be supported by the Project will be prepared and implemented according to Albanian legislation, regulations and standards and are in compliance with operational guidelines of the World Bank. In view of the development objective of Albania to join the EU, related EU environmental directives will be reviewed and applied to the Project to the extent it is practical and feasible.

Coastal Village Conservation and Development Program. It builds on the successful community- based demand driven approach used in Albania and other countries.

Regional infrastructure investments. Two studies for the identification of technical inputs and investment plans for solid waste management in the southern coast and the transformation of the Saranda Port from a cargo facility into a passenger facility, were carried out during the preparatory phase. Regional investment proposals will be re-assessed on the basis of the recommendations of the SCDP. Detailed investments will be reviewed by the Bank and the Government once detailed engineering designs and technical specifications for construction and operation are available. Cost estimates for proposed works have been based on bill of quantities and prevailing unit costs.

• Solid waste management. The solid waste management feasibility study and plan for the southern coast of Albania proposes two regional landfills: one at Bajkaj to serve the Saranda municipality and the Lukove commune and another one at Vuno to serve the Himare municipality. The proposed design takes into account the landfill life-cycle and incorporates pollution prevention measures. In the case of the Bajkaj’s landfill, the study proposes to incorporate a hazardous waste cell. In all urban centers, the waste collection and disposal is sub-contracted to private companies under a 5-year contract. Vlore and Saranda are served by private waste collection companies. In the future, the collection of waste will continue to be sub-contracted. Private companies will be required to dispose the collected waste in the new regional landfills. Municipalities and communes will incorporate the disposal fee for the use of the municipal landfill into the solid waste management fee. In rural areas, waste collection and disposal is handled by the municipalities themselves. In the project area, the city of Himare has a waste collection system at present, while in Lukove commune no waste is officially collected. The Project will assist the Lukove commune to establish a waste management unit.

• Saranda Port upgrades. The design of the future development of the Saranda Port recommends the following sequence of investments in order to cater to the demand of both passenger and cargo traffic: (i) the extension of the existing quay in order to accommodate cruise vessels (length 150-160 meter and draft 6.0-6.5 meter), including land reclamation; (ii) beautification of the passenger terminal; (iii) rehabilitation of the existing quay; and (iv) construction breakwater/berth for alongside berthing of cargo vessels (up to 3,000 death-weight tons, length 100 meter, and draft 7.0 meter). The Project will support activities (i) through (iii). The breakwater would be included in Phase 2 pending results of the bathymetric surveys and updated traffic analysis. The proposed works will be located in the protected port area and will be fully in compliance with international standards and environmental requirements. Geotechnical and soil investigations will be conducted to support the detailed engineering design.

19 • Sewer and water supply extension within the tourist/hotel area of Saranda. Investments have been identified at the level of feasibility by the consultants working on the formulation of the Sewer and Wastewater Master Plan for Saranda. They were identified as urgent activities to be executed as soon as possible, and will be confirmed once the Sewer and Wastewater Master Plan has been approved and adopted.

Porto-Romano remediation works. With regard to Porto Romano hot-spot, the feasibility study commissioned by the Ministry of Environment proposes several measures to reduce risks to human health of the surrounding population. They were endorsed by the Bank as well as the Netherlands Embassy in Tirana. Based on the detailed design, field surveys and site investigations to be financed by a Dutch Trust Fund and to be conducted according to best international practices, bid documents will be prepared for the site remediation works.

3. Fiduciary

The PCU will include two fiduciary management positions: a full-time Procurement Specialist and a full-time Financial Management Specialist. These positions have been filled following competitive selection procedures. The PCU will be responsible for overall management of the Project, including the preparation and timely implementation of work plans, procurement, financial management, disbursement, reporting, monitoring and evaluation.

Procurement

An assessment of the capacity of the MoTAT to implement procurement actions for the Project was carried out in March 2005. The assessment reviewed the organizational structure of the MoTAT for implementing the Project and possible implementation arrangements. The key issues and risks concerning procurement for implementation of the Project have been identified and include the following:

• Albania was ranked as a high-risk country in respect of its public procurement system in the Country Procurement Assessment Review (CPAR) dated January 2001.

• The MoTAT itself (i.e., Ministry’s staff) has no experience in implementation of Bank financed projects. Past and ongoing projects were or are being implemented by PIUs/PMUs staffed by external consultants. While a separate unit will be established under this Project, the MoTAT will assign some staff to work full-time for the project activities. It will also hire a core team of specialists/experts, which are not available in the existing structure of the Ministry.

The corrective measures, which have been agreed between the Bank and the MoTAT, are as follows:

• The procurement file containing up-to-date procurement documents was provided to the PCU at the time of the Appraisal mission. The PCU is recommended to frequently visit the Bank’s web site to ensure using the most updated procurement documents.

20 • The Project Launch Workshop will have a specific session on procurement training for the staff of the PCU and other implementing entities.

• The procurement staff of PCU and the staff of the involved Ministries will attend trainings on Bank’s procurement procedures organized by ILO in Turin and/or regional training programs delivered by ECA RPM’s office. The procurement staff will particularly keep close contact with the Bank’s procurement staff based in the Albania Country Office.

• The procurement staff of PCU will provide training to the municipalities in procurement procedures and provide guidance and advice during procurement processes.

• Bank procurement specialist will be a member of the Project team throughout the project cycle. During project implementation, the Bank procurement specialist should participate in supervision missions.

Financial Management

The financial management arrangements of the project are acceptable to the Bank.

As of the date of this report, the borrower is in compliance with its audit covenants of existing Bank- financed projects. Previous and current project financial statements and auditing arrangements are satisfactory and it has been agreed that these will, by and large, be replicated for the Project. The annual audited project financial statements will be provided to the Bank within six months of the end of each fiscal year and also at the closing of the Project.

The latest Country Financial Accountability Assessment confirms that improvement is required in the management of public expenditures, including cash management in Treasury and better internal control throughout the public sector. Internal audit is currently being developed to improve the government’s internal control environment. The supreme audit institution also needs strengthening. The PCU at the MoTAT has developed policies and procedures that operate in addition to those of the current public expenditure management framework to minimize project financial management.

The banking sector in Albania is relatively weak and the Bank of Albania does not provide normal commercial banking services. However, the PCU will open the special accounts in a commercial Bank acceptable to the Bank.

4. Social

Significant positive social impacts from the project are expected. The Project envisions a highly participatory process in the formulation of the SCDP, in the formulation and implementing of local strategic plans by municipalities and communes, and in the updating of the protected areas management plan (including the forest and pasture management plans) in the support zone of the Butrint National Park. In-depth consultations with stakeholders in the formulation of the SCDP are expected to yield community views and opinions on the impacts of the proposed developments in the southern coast and recommendations on the incentives that can be provided to community members to garner their help in implementing and sustaining the land-use plans. The Project will further assist

21 municipalities and communes in supporting regulated and sustainable tourism development activities through the Coastal Village Conservation and Development Program.

As discussed elsewhere, possible adverse impacts include demolitions of illegal structures along the coastal line aiming to regulate land-use. However, no large-scale relocation of people or communities is envisaged and Albanian laws themselves provide for the possibility of legalization and regularization of settlements. An assistance package will also be designed to ensure that there are no impoverishment risks for the poor. Technical assistance will be provided to the Construction Police in clarifying criteria and assuring transparency during demolition activities. Mechanisms to ensure public outreach and due process for protecting individual rights that may be adversely impacted by the land-use plan will also be put in place.

The issue of demolitions of illegal buildings on the coastal line is certainly distinct from land acquisition required for specific infrastructure investments in the southern coast that follow the SCDP, which may or may no be financed by the Bank. Commitment from the Government has been obtained to adopt a Resettlement Policy Framework that reflects the principles of the World Bank Policy on Involuntary Resettlement to deal with expropriations of land for infrastructure investments. This Resettlement Policy Framework is included in the integrated Environmental and Social Safeguards Framework (ESSF) that was adopted as a condition of negotiations, and the Bank will monitor the adherence to the ESSF as part of its supervision activities.

The relocation of four families in the Porto Romano area to prepare for decontamination works is being carried out by the MoE under the agreed Abbreviated Resettlement Plan, which is also included in the integrated ESSF.

The SCDP and the Protected Areas Management Plan for Butrint National Park may impose some restrictions to land-use and existing traditional livelihood strategies (in particular grazing and/or fishing) as a results of new zoning and increased enforcement of existing laws within the coastal zone and marine and coastal protected areas to ensure sustainable use of natural resources and protection of biodiversity and cultural assets. An initial scoping of social issues carried out through stakeholder consultations in Butrint revealed that the local communities believe that the Project will yield positive impacts relating to the conservation of species and habitats, increasing tourist attraction (national and international) to the site and improving fisheries and mussel production. Issues that need to be addressed during the course of implementation of the Project include private landownership rights and fishing rights. A Process Framework that is included in the integrated ESSF spells the commitment of the Government in ensuring a participatory process by which these issues will be further defined and resolved by determining the criteria for eligibility of affected persons and clarifying measures to assist affected persons and implementing them through the management plan.

5. Environment

The Project is expected to have important and positive environmental impacts on the Albanian coast zone. The ICZM approach proposed under the Project will seek to manage multiple pressures on the Albanian coastline in a way that is environmentally sustainable and socially accepted to local stakeholders and cultures. Furthermore, the Project will improve the environment and health conditions for the people living in Porto Romano.

22 The Project has been proposed as an environmental category financial intermediary (FI) project since specific physical investments apart from the Porto Romano remediation works will be processed on a rolling basis under the framework of the SCDP. However, the range of physical investments eligible will be established in advance, and will likely include: (i) the construction of two municipal landfills in Saranda and Himara; (ii) the transformation of the Saranda Port into a gateway to the south coastal zone; (iii) the extension sewer and water supply system in Saranda town; and (iv) small civil works for the upgrading of water networks, upgrading and expansion of sewage, construction of wastewater ponds, rehabilitation of internal roads, upgrading of waste sites, as well as renovation and upgrading of cultural buildings, information centers, streets and parks, under the CVCDP.

A tailored Environmental and Social Safeguards Framework (ESSF) has been prepared commensurate with the FI environmental category rating to address environmental, land acquisition as well as cultural property issues associated with physical investments and protected areas management planning activities. The ESSF was adopted by the Government as a condition of negotiations and has been disclosed in the INFOSHOP. The ESSF is in compliance with the existing laws, regulations and customs in Albania as well as with the Bank’s Operation Policies on Environmental Assessment, Involuntary Resettlement and Cultural Property. Measures have been incorporated in Project design and implementation to prevent, minimize and mitigate possible environmental and social impacts.

The Albanian environmental regulations require Strategic Environmental Assessment (SEA) for national and regional plans for territorial adjustment. A Strategic Environmental Assessment will be conducted for the SCDP during the course of the Plan’s formulation in order to further examine alternatives and potential impacts of the proposed interventions. The SEA will develop a framework to mitigate any potentially negative consequences of interventions proposed under the SCDP.

With funds from the Bank Netherlands Partnership Program on Environmental Assessment, assistance will be provided to Albanian counterparts to build capacity on SEA4. The scope of the support will be defined during Project implementation and will be closely coordinated with activities conducted by the European Commission.

6. Safeguard policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [x] [ ] Natural Habitats (OP/BP 4.04) [ ] [x] Pest Management (OP 4.09) [ ] [x] Cultural Property (OPN 11.03, being revised as OP 4.11) [x] [ ] Involuntary Resettlement (OP/BP 4.12) [x] [ ] Indigenous Peoples (OD 4.20, being revised as OP 4.10) [ ] [x] Forests (OP/BP 4.36) [ ] [x] Safety of Dams (OP/BP 4.37) [ ] [x] Projects in Disputed Areas (OP/BP/GP 7.60)* [ ] [x] Projects on International Waterways (OP/BP/GP 7.50) [] [x]

4 This is a regional activity targeting Albania and Serbia and Montenegro and aims at capacity building on SEA on coastal development plans. * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas

23 The Project triggers the following safeguards policies: OP/BPs 4.01 on Environmental Assessment, OP/BP 4.12 on Involuntary Resettlement and OPN 11.03 on Cultural Property.

The feasibility study of the Saranda Port has confirmed that the proposed rehabilitation works will not affect the straight of Corfu. The adverse effects of the proposed civil works in the Saranda Port are considered limited and of small scale since the proposed works concern the expansion of an already operating harbor. Therefore, OP 7.50 on Projects on International Waterways is not triggered.

The final Environmental and Social Safeguards Framework (ESSF) dated April 20, 2005, which is available in the INFOSHOP, addresses environmental, land acquisition and well as cultural property issues associated with physical investments in the southern coast and Porto Romano as well as protected areas management planning activities.

7. Policy Exceptions and Readiness

The project does not require any exceptions from Bank policies. The project meets the Regional criteria for readiness for implementation.

24 Annex 1: Country and Program Background ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

Although the coastal regions of Albania have been commonly recognized as the country’s most valuable development asset since the 1990s, they face the following development trends:

Urbanization and Land-Use Planning

Haphazard/unregulated urbanization. Uncontrolled urbanization is presently the single most important development issue faced by the southern Albanian coast. Its consequences include loss of land and nature resources and valuable landscapes, inadequate urbanization including sprawl development, speculative and illegal building, lack of infrastructure and poor sanitation standards.

Illegal building. Illegal building is a widespread phenomenon throughout the Albanian coastal area. Some hot-spots in the southern coastal region include Vlora and Saranda urban areas, Orikumi and Ksamili peninsula. Although legality of the building is still not a guarantee that it will be acceptable and in accordance with the good building/urban and land-use planning practice, the respect for the law and territorial development plans is a necessary pre-condition for orderly development.

Cultural and natural heritage. Traditional ambient of the cities and villages along the Albanian coast are carelessly and irreversibly degraded by the new developments, which ignore the logic of the traditional urban/architectural patterns. Attractive landscapes of the pristine nature are destroyed by introduction of new developments.

Sprawl development. Sprawl development observed at the Albanian coast, as opposed to compact settlement schemes, has resulted in waste on valuable coastal land and resources. Furthermore, it makes provision of infrastructure much more expensive. Phasing and clustering of developments would decrease the area that has to be equipped with the infrastructure, which makes this task cheaper and therefore doable.

Lack of Adequate Infrastructure

Transportation infrastructure. Present road and port infrastructure in the coastal area is completely incompatible with the vision of the high-quality tourism in the region. In the case of road infrastructure, the problem of the poor conditions of the existing roads is further exacerbated by the fact that in many places, illegal or ill-planned buildings are hampering any possibility for road improvements. Nautical tourism infrastructure is still non-existent.

Energy supply. Energy shortages are still common in Albania. Despite the fact that the southern region receives preferential treatment, some energy black-outs still exist. The middle part of the southern coastal region is the most affected.

Water supply. The southern coast has a great potential in fresh water resources. However, inadequate (old and not well maintained) distribution network, in combination with increasing water demand from tourism, could result with water shortage problems in the near future.

25 Environmental and Nature Protection

Communal solid waste management. In general, there is a lack of appropriate waste management system in all of Albania, especially in the bigger towns, where there is not even organized waste collection. Villages are reportedly not covered by any municipal waste management service, and consequently waste is dumped on any available site in the villages or nearby localities. Even in the cities, only 50-70 % of the collected waste is disposed at designated landfills (which are actually simple dumpsites), and the rest is simply dumped elsewhere.

The main road along the Albanian coast is virtually littered with illegal dumps of various scales. Waste management is becoming a major problem that may, besides its environmental consequences, also significantly limit the attractiveness of the southern coast.

Wastewater management. A sewerage network, within the southern coastal region, exists partly only in the Vlora and Saranda. In other parts of the region, wastewater drains directly into the sea. Because of the lack of basic infrastructure, the relatively small population and economic activity in the region is causing a relatively high impact on the environment.

There is no systematic monitoring of the sea quality on the beaches, however, the areas with inadequate underwater outfalls are well known among the local population. Recently, some improvements of the existing network have been made in Saranda (collector), which positively influenced the quality of the sea in the harbor.

Construction waste. Large scale construction works in some areas, the most striking example is Saranda, create additional pressure on the environment coming from the illegal dumping of the construction waste. Waste is even dumped along the shoreline.

Pollution from ships. The Vlora regional administration ranks oil spills from passing ships among the major concerns. This is magnified by the proximity of the ship routes to the shore and by unfavorable current patterns that transport pollution to the shores of the southern region.

Industrial pollution. Industrial pollution has decreased rapidly in Albania after the collapse of the former socialist economy, and the closing of the many polluting industries. However, threats are still present, both from the abandoned former industry sites and from the newly planned plants. The prime example is Porto Romano, with soil and groundwater contamination caused by a former chemical plant. It is considered one of the most contaminated locations in the Balkans. Fortunately, further to the south, there was practically no industry, which nowadays presents comparative advantage in terms of preserved nature and environment.

Pressures to Biodiversity and Nature Protection Areas

Considerable improvement has been achieved regarding the legislation framework for nature conservation and biodiversity protection since the early 1990s. However, capacity to implement what has been declared protected area remains weak, especially when faced with the existing strong development pressures in some areas. The highest present threat to the biodiversity in the Albanian coastal area is connected with the rapid development of housing, infrastructure, tourism facilities in this area, with limited attention to environmental concerns.

26 Unsustainable Use of the Natural Resources

Quarries. Too many new legal (as well as illegal) quarries have been open in the area (especially around Saranda) as a result of the market demand for construction material. At the same time, there has been no attempt to reuse excavated material, which is consequently dumped as construction waste all over the area (even at the shoreline and in the sea) giving additional pressure to the environment and landscape.

Agriculture and forestry. In the past, agriculture has had the strongest adverse impact on biodiversity in Albania. This has changed as agriculture has lost its previous importance. As a result, there are presently huge abandoned and completely neglected areas under the olive trees in the coastal region. Overgrazing remains a problem, as the number of livestock (mainly sheep and goats) have further increased. Rural poverty, especially during the economic collapse in 1997, caused severe forest damage by illegal logging. In combination with the problem of overgrazing, which prevents forest regeneration, deforestation with all its consequences is one of the major environmental problems in Albania today.

Demolition of Illegal Buildings

Since the 1990s, with massive rural-urban migrations and removal of restrictions on population movements, there has been rampant and unregulated construction, nation-wide in Albania. Uncontrolled expansion of existing settlements and large-scale illegal buildings are common features of the Albanian coastal zone. Illegal constructions are carried out in a context of inadequate or ineffective municipal/commune regulatory plans and weak capacity of regional and local-level Construction Police offices, the key organization in charge of demolitions of illegal buildings in Albania.

A consultant was hired to study the demolition process in Albania and to assess the differences in the Albanian laws and Bank policy on removal of squatters/encroachers in the course of land acquisition. The document clarifies the legal and institutional framework that assigns the Construction Police powers to order suspension of civil works, demolition of illegal constructions and issuance of fines.5 The document also provides evidence that demolition of illegal constructions have begun prior to preparation of this project – since 2001, illegal buildings in the Lana River in Tirana city and additions that encroach into public sidewalks and other rights of way have been demolished not just along the coastal line but also in Tirana, Durres, Korca, Shkodra as well as Himare and Saranda. The document further describes three main types of "illegality" with regard to land and buildings in Albania. These include: (i) where a land owner builds on his/her own land but fails to get building permission; (ii) where a person illegally occupies state land and constructs without permission; and (iii) where a person illegally occupies privately owned land and constructs without permission.

While most of the new illegal buildings along the coast line are intended to provide accommodation for tourists, there is also a broad range of socio-economic profiles of the owners of the illegal structures, ranging from the extremely wealthy tourism developers, squatter landlords in public

5 There are three main laws that address the issue of urban and regional planning and set forth the substantive and procedural aspects of demolitions: Law 8405, dated 17.09.1998 On Urban Planning, Law 8408, dated 25.09.1998, On Construction Police, and Law 8402, dated 10.9.1998, On the Control and Disciplining of Construction Works. A fourth law, Law 7665, dated 21.01.1993, On the Development of Priority Areas Concerning Tourism, also influences the development process along the coastline.

27 safety zones deriving rents from illegal areas, to the more legitimate poor and the vulnerable who are squatting on state land. The situation is further confounded by the incomplete process of surveying, mapping and legal registration of immovable property that will allow for a meaningful census and the general weak enforcement capacity of the government as well its ability to register and guarantee legal rights to property.

A related issue surrounds the overlaying of historical claims on already privatized agricultural land and the fact that the resulting compensation claims have not been satisfied. A new Restitution/Compensation Law was approved in 2004 but has yet to be properly implemented.

The issue of ownership over land in the region is critical constraint to any development. Although efforts have been invested in solving this problem, much of the land in the country has its ownership still disputed. Probability of conflicts over the property is especially high in the coastal areas with the highest development potential.

Recent Governance Efforts in Albanian Coastal Areas

The attempts to organize appropriate planning and management of the development in Albanian coastal regions were initiated almost immediately after the establishment of democratic governance in 1990. In 1990, Albania became a party to the Barcelona Convention for the Protection of Mediterranean Sea against Pollution. In 1992, the Albanian Council of Ministers approved the results of the Study of Coastal Protection Belt from Buna river to Stillo cape, which was a first attempt to protect this zone from the expected development pressure, by identifying the most sensitive area for which special development regime should be applied. Although the delineation provided by the study (delineation given on the 1:250,000 maps) is probably based on rather simple criteria, it is still important because of its pioneering role.

These early internal initiatives were followed by a number of international coastal zone management projects, financially assisted by the WB, EBRD, EU, UNEP and UNDP. In the period 1993-1996, the whole Albanian coastal area was covered by the two projects: 1994-95 METAP/World Bank financed preparation of the Coastal Zone Management Plan for the Northern (from the border with Montenegro to Durres) and Southern (from the Karaburuni Peninsula to the border with Greece) Albanian coastal regions; and 1993-96 UNEP/MAP financed Coastal Area Management Programme, which focused on the central coastal region (from Durres to Vlora). The main objective of these projects was institutional strengthening that would allow sustainable integration of the biodiversity protection and the tourism-based development in these regions.

Unfortunately, soon after the CZMP completion, this process was stopped by the 1997 crisis. Several relevant developments from this period should be singled out. 1999, the Albanian Biodiversity Strategy and Action Plan was prepared, with an alarming finding that Albania is the country with the highest biodiversity loss in Europe, and that coastal regions and habitats are among the most endangered. In 1998, the Law on Urban Planning was revised in an attempt to provide the solution for the challenges posed by the illegal and unplanned building, and address the privatization of land as well as public space issues. As on-the-ground realities have clearly demonstrated, the sole revision did not bring improvement. A completely new version of the law has been drafted in 2004, partially also to come in line with the newly adopted (2000) Law on the Organization and Functioning of Local Government. The draft will go through widely participative consultations within next several months.

28 In the year 2000/01, some of the illegal buildings were demolished, and though it temporarily slowed down the process, developers clearly did find a way to legalize their unregulated development by lobbying for the aggressive plans, which maximize their short-term profits.

In 2001/2002, UNECE Environmental Performance Review of Albania dedicated the whole chapter to the topic dealing with the coastal zone management and tourism development in Albania. The report warned about the alarming adverse trends in the coastal areas, and recommended several measures through which these gloomy trends could be reversed, and the development directed into more successful and sustainable future. The recent developments, in principal, have followed these recommendations.

In 2002, the 1995 Coastal Zone Management (CZM) Plan was finally adopted. Although much delayed, this adoption confirmed the existence of the political will to reinitiate governance efforts in the coastal area. Upon the adoption, all relevant governmental institutions agreed that the update of the Plan is needed.

Present legal, institutional and policy framework. Currently, there is no specific law on integrated coastal zone management. According to the paradigm which integrated coastal zone management defines as simple and natural widening of the scope of the land-use planning in a way to include land, sea, and their interface, the next most relevant law would be the Law on Urban (land-use) Planning (1993/98, 2004/05). The other relevant existing laws include: the Law on EIA (2003); the Law on Protected Areas (2002); the Law on Environmental Protection (2002), the Law on the Organization and Functioning of Local Government (2000); the Law on the Development of Tourism Priority Zones (1993), the Law on Fishing and Fish Farming (1995); the Law on Water Resources (1996); the Law on Water Supply and Sanitation Sector Regulation (1996); and the Law on the Construction Police (1998).

The key institutions relevant for the coastal zone management in Albania are the Ministry of Territorial Adjustment and Tourism, the Ministry of Environment and the Ministry of Agriculture and Food.

Presently, there is no institutional capacity established for the systematic environmental monitoring of the coastal area. The consequent lack of data is an obstacle for both sound planning and application of a number of standard management instruments (e.g., economic instruments).

Land-Use Planning and Permitting

The Urban (land-use) Planning Law defines the principal land use planning levels and the relevant responsibilities at the central and local government levels. The Council of Territory Adjustment and Tourism (CTAT) is the highest body responsible for the approval of planning studies. The CTAT approves regional planning studies, master plans for areas larger than 10 hectares or for tourist zones, adjustment plans for cities over 10,000 inhabitants, partial urban studies of city centers for cities with more than 50,000 inhabitants, partial urban planning studies larger than 15 hectares, and building permits for important urban buildings.

The MoTAT through the Directorate of Territorial Planning coordinates the work between the CTAT, the state organs, and the local governments in the field of territorial planning. This Directorate has the right to conduct controls in the local government organs dealing with territorial planning as well as in the drafting and preparation of laws and by-laws.

29 The specializing urban planning units at the local government level are the following: (i) the Council of Territorial Adjustment at the regional, municipal or commune level; and (ii) the urban planning unit (Directorate, Section or Bureau) at the regional, municipality or commune level.

Villages and towns do not have the right to make any decision regarding territorial planning. They can only make request or claims to the commune, municipality or Qark levels where they belong to.

Local level capabilities in land-use planning and permitting in the southern coast can be summarized as follows:

Saranda Municipality. In Saranda Municipality there is an Urban Planning Office, which includes about 12 specialists (e.g., architects, engineers, all with high education). A Directorate of Services is attached to the Urban Planning Office. The Urban Planning Office’s activity is in general considered weak, since it does not have a direct link with any other institute in the country. There is one person in Delvina Commune responsible for issuing ownership permits. On the basis of proposed investments, the municipality has prepared the Master Plan of the City of Saranda, in cooperation with the Institute of Urban Planning in Tirana. The enforcement of construction permits within the Saranda Municipality is the duty of the Construction Police, who is trying to minimize issuing of inadequate construction permits through strengthening preventive capacities and allowing stronger competencies in place. Through the decentralization process, the Construction Police is proposed to be attached to the local authorities.

Lukove Commune. In Lukove commune, there is an Urban Department, staffed with two persons: one engineer responsible for water supply and sanitation matters and one technician/ urban planner responsible for construction and other urban activities. Lukove commune is included in the Regional Vlora-Saranda Master Plan (as part of the National Coastal Plan) endorsed by the Regional Council of Territorial Adjustment.

Himara Municipality. Within Himara Municipality, there is an office responsible for Urban Planning, staffed with 4 persons: one urban planner specialist, one topographic, one construction technician (who prepares documents for construction permits and knows the current construction legislation and the procurement matters) and one engineer (the Head of the Urban Department). This office has also a Department of Service. The Director of Tourism and Environment also participates in urban planning decisions. The Himara Municipality, however, is not able to fight illegal construction (e.g., a 9-level building without a legal permit construction is raising in the middle of Himara town). There are no urban specialists at the village’s level.

30 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

Bank-Financed Projects:

• Municipal Water and Wastewater Project (P041442) [Active; PDO – Satisfactory; IP – Satisfactory]. The project objective is to improve water supply and sanitation services in Durres, Lezhe, Fier and Saranda.

• Forestry Project (P008271) [Closed]. The project had three key objectives: (i) restore degraded State-owned forest and pasture areas and promote their sustainable use; (ii) promote the conservation of natural forest ecosystems; and (ii) support institutional and policy of Albania’s forest and pasture sector.

• Natural Resources Development Project (P089061) [Proposed]. The objective of the proposed project is for participating communities to adopt sustainable natural resource management practices, leading to enhanced productivity and incomes, reduced soil degradation, improved water quality and conservation of critical ecosystems.

• Water Resources Management (P082128) [Active; PDO – Satisfactory; IP – Satisfactory]. The objective of the project is to increase the contribution of water resources to sustainable economic growth through increase in agricultural production.

• Integrated Water and Ecosystems Management Project (P075156). [Active; PDO – Satisfactory; IP – Satisfactory]. The main objective of the GEF-financed project is to assist the Government in improving the management of uncontrolled wastewater discharge, which is threatening the ecosystems along the coastal area, through: (i) reducing sewage pollution loads by urban settlement areas of three coastal cities of Durres, Lezha and Saranda; and (ii) promoting and improving the management of the tidal Kune-Vain marshland near Lezha.

• Durres Port Project (P040818). [Active; PDO – Satisfactory; IP – Satisfactory]. The objective of the project is to overcome infrastructure bottlenecks to economic development through improvement of the efficiency and effective capacity of the Port of Durres.

• Pilot Fishery Development Project (P069479). [Active; PDO – Satisfactory; IP – Satisfactory]. The main objectives of the project are to: (i) improve the operation and management of fishing ports; (ii) introduce an effective institutional framework for community-driven co-management of marine resources; and (iii) restore the country’s capacity in aquaculture.

31 Programs of Other Donors:

• EU, EIB, UNDP and UNEP- financed Mediterranean Technical Assistance Program (METAP). It provided support for the development of the Coastal Zone Management Plan for the Northern (from the border with Montenegro to Durrës) and Southern (from the Karaburuni Peninsula to the border with Greece) Albanian coastal regions [completed in 1995].

• UNEP/MAP financed Coastal Area Management Program. The program focused on the Central coastal region (from Durres to Vlora) [completed in 1996].

• EU. It will support the efforts of the MoE to build management and monitoring capacity [on-going].

• OSCE. It provides support to the State Committee for Restitution and Compensation of Property for implementation of the new Law on Restitution and Compensation of Property [on-going] and plans to provide support to the Immovable Property Registration System by continuing the process of Systematic First Registration [planned].

• Italian Cooperation. It is planning to provide institutional support to the newly established Tourism Agency [planned] and to the MoE for sustainable use and conservation of biodiversity [planned].

• EU-Transport. It is supporting the formulation of the National Transport Plan [ongoing] and the development of several feasibility studies for roads in the southern coast.

• EU-Environment. It is providing technical assistance on environmental legislation and management and the design of a hazardous landfill [ongoing]; and is planning to provide technical assistance to strengthen environmental monitoring [planned].

• SIDA. It is supporting the development of local environmental actions plans [on-going].

32 Annex 3: Results Framework and Monitoring ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

Results Framework

PDO Outcome Indicators Use of Outcome Information To set-up and initiate an integrated Completion and approval of the SCDP First two years to gauge up take and coastal zone management approach to by the National Council of Territorial effectiveness of Project activities and reduce coastal degradation through: (i) Adjustment. components. strengthening regulatory policy and Mid-term to determine whether Project governance of the coastal zone, land- Development of communal infrastructure in the southern coastal needs restructuring or components use and regional planning, and need to be changed. institutional capacity; (ii) initiating area in compliance with the SCDP. targeted municipal and community Years four and five to feed results and Local land-use planning and issuing of investments in the southern coast to lessons learned into Government improve environmental conditions, construction permits in the southern policy and design of Phase 2 and to enhance cultural resources and coast in compliance with the assess whether triggers for Phase 1 encourage community support for parameters and measures set forth in have been met, so Phase 2 can be sustainable coastal zone management; the SCDP. launched. and (iii) reducing soil and groundwater contamination in the former chemical New buildings in the southern coastal plant at Porto Romano. area do not disturb the existing spatial value and characteristics. Global Objective: To assist Albania in meeting its international Local, regional and national planning commitments to protect the Butrint efforts and development initiatives National Park under the Ramsar aligned with the principles and Convention on protection of wetlands. guidelines of the SCDP.

Stakeholder participation incorporated into coastal zone management decisions.

At least 5,000 tons of household waste and 5,000 tons of construction and demolition waste actually collected and disposed off in proper facilities.

At least 50% of the tourist wastewater load in Saranda collected and treated.

At least 50% of public beaches and shellfish areas in the southern coast monitored for water quality against Albania’s and EU standards.

Tourism and visitor revenues in the southern coast increased and benefited wider communities.

Protected areas management plan for Butrint National Park developed with

33 wide stakeholder participation and rules are enforced through appropriate by-laws.

Detailed regulatory plans formulated, adopted and enforced by at least 3 coastal municipalities and/or communes.

Local strategic plans formulated and adopted by at least 5 communes in the southern coast.

Execution of environmental impact assessment (EIA) in accordance with the EIA procedures.

Enhanced economic incentives to promote integrated coastal zone management objectives introduced and actively used.

Reduction of soil contamination in Porto Romano guided by the land-use plan formulated and adopted by the Municipal Council of Durres.

Intermediate Results Results Indicators for Each Use of Results Monitoring One per Component Component Component One: Component One: Component One:

Capacity of the Albanian authorities Interim coastal regulations developed, Yr 1 through Yr 5 to determine enhanced to manage the coastal enacted and operational. improvements in central, regional and resources local capacity for ICZM. Most appropriate structure and functions for ICZM identified, Yr 4 through Yr 5 to assess whether established and functioning according Phase 1 triggers have been met. to objectives and procedures agreed through wide consultation.

Cohesive and harmonized ICZM legal framework developed.

Integrated geographically-referenced land-use information management system is set up.

Environmental monitoring network for gauging quality of coastal waters is upgraded.

Southern Coast Development Plan developed and codified.

Protected areas management plan for Butrint National Park and World

34 Heritage Site developed and site clearly demarcated.

Training to the relevant staff of the central and local administrations provided and new skills applied.

Component Two: Component Two : Component Two:

Targeted communities have improved Municipal landfills for Saranda and Yr 1 and Yr 5 to determine critical municipal and regional Himara are designed, constructed and improvements in public infrastructure infrastructure enabling in operation. and environmental conditions in the environmentally sustainable tourism southern coastal zone. development in the southern coastal A ferryboat and passenger terminal for zone (from the Vlora Bay to the Greek the Port of Saranda is designed and Yr 4 and Yr 5 to assess whether Phase border). constructed. 1 triggers have been met.

Number and value of grants provided to the communities of the Ionian Sea coast and Saranda municipality for improvement of public infrastructure and services, and for preserving local culture and architectural heritage, as part of the Coastal Village Conservation and Development Program.

Component Three: Component Three: Component Three:

Soil and groundwater contamination Improved environmental indicators in Yr 3 to Yr 5 to determine risk from a former chemical plant in Porto the Porto Romano area. reduction of human heath impacts. Romano is contained and the area environmentally rehabilitated. Environmental monitoring system Yr 2 to Yr 5 to determine performance established. of civil works contract.

Volume of polluted soil encapsulated. Yr 5 to assess whether Phase 1 triggers have been met. Component Four: Component Four: Component Four:

Management capacity within Project funds disbursed according to Yr1 through Yr5 to gauge implementing agencies improved. plan, timely accurate project status implementation progress and quality reports, satisfactory financial and of project coordination. procurement records, and timely audits.

Increased public awareness on coastal zone issues and challenges.

35 Arrangements for Results Monitoring Target Values Data Collection and Reporting Outcome Indicators Baseline YR1 YR2 YR3 YR4 YR5 Frequency and Reports Data Collection Responsibility for Data Instruments Collection Southern Coastal Development Plan None 50% 100% Quarterly Progress Reports Project Reports PCU (SCDP) adopted by the National Council of Territorial Adjustment Aide Memoire Bank supervision report Bank supervision mission Local land use planning and issuing of Survey in Yr 1 30% 70% Baseline, Yr 3 and Yr 5 Project Reports PCU construction permits in the southern coast is in compliance with SCDP Local and stakeholder participation Survey in Yr 1 30% 70% Baseline, Yr 3 and Yr 5 Project Reports PCU incorporated into coastal zone management decisions Household waste actually collected and None Survey at 5,000 Baseline at Yr 3 and Yr 5 Project Reports PCU disposed off in proper facilities start of tons waste collection Construction and demolition collected None Survey at 5,000 Baseline at Yr 3 and Yr 5 Project Reports PCU and disposed off in proper facilities start of tons waste collection Public beaches and shellfish areas in the Survey in Yr 1 30% 50% Baseline, Yr 3 and Yr 5 Project Reports PCU southern coast monitored against Albanian and EU’s standards Increase in tourism and visitor Survey during 20% 40% Baseline, Yr 3 and Yr 5 Project Reports PCU expenditures in the southern part Yr 1 Number of ha in Porto Romano with None 50 ha Project Reports Project Reports PCU and IT-MOE reduced environmental health risk Protected areas management plan for None 100% Project Reports Project Reports PCU and BNP Butrint National Park updated Administration Detailed regulatory plans None 1 2 3 Project Reports Project Reports PCU Participatory strategic plans None 3 4 5 Project Reports Project Reports PCU

Results Indicators for Each Component Component One :

Number of km in the coastal zone with None 150 Yr 5 Project Report Project Reports PCU orderly land use planning

Number of ha with protected areas None 2,900 Yr 5 Project Report Project Reports PCU management plans

Number of ha with improved forest and None 250 Yr 5 Project Report Project Reports PCU pasture plans in the southern coast Component Two :

Establishment of sanitary landfill None - - 50% 100% 100% Project Reports Project Reports PCU facilities capacity (75,000 ton in Saranda and 50,000 tons in Himara)

Additional collection capacity Survey during - - 10% 20% 40% Baseline, Yr 3, 4 and 5 Project Project Reports PCU (percentage of house) Yr 1 Reports

36

Reduction in number of open dump sites Sites counted -- - 0% 20% 25% Baseline, Yr 3, 4 and 5 Project Project Reports PCU (visible from roads, housing areas, with pictures Reports beaches and parks)

Waste to landfills (percentage of nominal None - - 0% 50% 75% Yr 3, 4 and 5 Project Reports Project Reports PCU capacity)

Construction of planned activities in None - - 50% 100% 100% Yr 3, 4 and 5 Project Reports Project Reports PCU Porto Saranda (investment budget)

Increase in number of passengers in Survey during - - 0% 5% 10% Baseline, Yr 3, 4 and 5 Project Project Reports PCU and MoTT Saranda Port Yr 1 Reports

Percentage of hotels in tourist area in None - - 20% 50% 70% Yr 3, 4 and 5 Project Reports Project Reports PCU Saranda served with sewer and water supply

Treatment before discharge (exc Saranda) None 60% - - 50,000 150,000 Baseline, Yr 4 and 5 Project Project Reports PCU (m3) Reports

Houses with public water supply 60% - 60% 65% 70% 80% Project Reports Project Reports PCU

Houses connected to sewer 20% - 20% 25% 30% 40% Project Reports Project Reports PCU

Improvements fourth class roads (km) None - - - 5 10 Project Reports Project Reports PCU Component Three:

Implementation of remediation works None 0% 10% 60% 100% 100% Project Reports Project Reports PCU and IT-MOE (investment budget)

Isolation of contamination None 0% 0% 30% 100% 100% Project Reports Project Reports PCU and IT-MoE Component Four:

Project funds disbursed according to plan, 6% (PPF) 11% 40% 70% 90% 100% Quarterly and annual reports Project reports PCU timely and accurate completion of all annual operating, training and procurements plans (%)

Increased public awareness on coastal 0% 30% 50% Public awareness surveys Yr 1, Project reports PCU zone management issues Mid-Term and completion

37 Annex 4: Detailed Project Description ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

The proposed Project aims at setting-up and initiating an integrated coastal zone management approach to reduce coastal degradation through: (i) strengthening regulatory policy and governance of the coastal zone, land use and regional planning, and institutional capacity; (ii) initiating targeted municipal and community investments in the southern coast to improve environmental conditions, enhance cultural resources and encourage community support for sustainable coastal zone management; and (iii) reducing soil and groundwater contamination in a former chemical plant at Porto Romano.

The Project will consist of the following components and activities.

Component A: Integrated Coastal Zone Management Policy and Institutional Capacity Building (US$3.63 million: US$2.10 million IDA; US$0.92 million PHRD; US$0.36 million GEF; US$0.25 million GoA)

Objective. The objective of this component is to enhance the capacity of the Albanian authorities to manage the coastal resources of the Adriatic and Ionian Seas through the development of an adequate operational policy, legal and regulatory framework as well as financial/economic instruments for ICZM; strengthening capacity to increase efficiency and effectiveness of regulatory, planning and management functions for ICZM at the central, regional and local levels; strengthening coastal water quality monitoring network; strengthening protected areas management in Butrint National Park; enhancing the knowledge base; and raising awareness of the coastal issues in Albania.

Background. Actions are needed on an urgent basis to develop appropriate institutional arrangements for ICZM, to guide development and protection of coastal natural resources, to stem the tide of illegal construction on the coast, to remediate the effects of environmental “hot spots,” and to develop and implement a multi-faceted strategy for sustainable tourism development.

Key areas that require improvements are the following: zoning approaches that delimit areas to be protected and areas to be developed; development and enforcement of regulations that require and enforce permitting of coastal developments and structures, monitoring of new construction, the provision of sustainable financing for these management activities, capacity building efforts that provide additional training in ICZM to governments and stakeholders at the national, regional and local levels, and environmental education to the general public.

Component Description. Component A comprises two sub-components: (i) strategic policy support; and (ii) coastal management strengthening.

Sub-component A.1 Strategic Policy Support (US$0.554 million). The Project will provide technical assistance to support the development of the policy and legal framework for integrated coastal zone management and the development of a financial and economic incentive framework for integrated coastal zone policy and management. The specific areas for technical assistance include: review of national policy, legislation, institutional arrangements for coastal management; preparation of interim regulations; identifying appropriate legal and institutional framework for integrated coastal zone

38 management, including assessment of alternative institutional arrangements (e.g., Integrated Coastal Zone Management Council and Coastal Authority); and development of a coastal zone management law (which will codify in legislation the decision-making process set for coastal management, institutional arrangements, management approaches, procedures for environmental review, definition of public and private rights and obligations, monitoring and other relevant provisions). These activities will complement and will be carried out in close coordination with those undertaken by the European Commission (EC), namely the updating of the National Environmental Action Plan and the formulation of an Action Plan for the harmonization of the Albanian legal framework with the EU environmental directives.

In addition, the Project will support the application of modern methodologies and tools for the development of a financial and economic incentive framework to underpin effective implementation of land-use planning, zoning and regulatory measures; promote the use of economic instruments to provide incentives for ICZM, such as provision of environmental services and establishment of voluntary agreements with economic actors; and support coastal municipalities and communes in the implementation of their local strategic plans.

Sub-component A. 2 Coastal Management Strengthening (USS3.073 million). The Project will help strengthen capacity at the central, regional and local levels to increase the efficiency and effectiveness of the regulatory, planning and management functions for integrated coastal zone management. The Project will support the following activities:

a. Regulatory capacity. The Project will support efforts of the MoTAT and communes/villages in enforcing their regulatory responsibility for land-use planning and regulations including compliance with construction permits. The Project will provide equipment (e.g., vehicles, digital cameras, GPSs, computers, etc.), professional development and training for municipal staff and Construction Police (at the central, regional and local levels) and support the development and acquisition of adequate management tools such as the implementation of integrated geographic information system for land use.

b. Capacity building for resolution of disputes. The Project will provide assistance to the Government, including to the Construction Police, and to the judiciary, to build capacity and develop procedures to adequately address disputes arising from the demolition of buildings, including the clarification of criteria and assuring transparency. Support will include: (i) review and develop regulations and clear criteria for classification of illegal buildings as well as transparent and consistent procedures for handling disputes and offering resettlement assistance, reflecting the core principles of the World Bank safeguards on involuntary resettlement; (ii) setting up public outreach and grievance mechanisms at the district level (Vlora/Saranda regions); (iii) capacity building for legal office staff at the central and district levels; (iv) support the development of adequate legalization and regularization procedures; and (iv) design and implement a monitoring plan, with provisions for information gathering and reporting.

The Project will also focus on improving the efficiency and transparency of the restitution and compensation process and will include: (i) GIS and other land information gathered or produced through the Project to the Local Restitution

39 Commission for the project area; (ii) upgrading of equipment and training district office staff of the local restitution commission to use the GIS information; (iii) developing mechanisms to address public outreach and adjudication procedures for restitution claims that are compromised/affected by the SCDP; and (iv) designing and implementing a joint reporting and monitoring mechanism.

c. Integrated coastal zone management capacity. The Project will provide technical assistance to support the establishment and capacity building of the new ICZM institutional arrangements including the Integrated Coastal Zone Management Council and Coastal Authority. Specific areas of support include training and capacity building for members of the ICZM Council at the central and regional levels and the proposed Coastal Authority; capacity building of coastal communities to foster the formation of local forums to promote, develop and deliver ICZM action on the ground; and equipment and capacity building for effective communication and information dissemination.

d. Environmental management strengthening. This activity will be closely coordinated with and will complement the Environmental Monitoring Program supported by the European Commission, which aims at harmonizing the environmental monitoring and reporting capacity of Albania to the requirements of the European Environmental Agency. While the urgent needs to strengthen the coastal quality water monitoring have not been identified yet, the Project is expected to provide financing for rehabilitating and equipping the laboratories and networks used by the MoE. In addition, the Project will support the implementation of an environmental educational program focusing on key coastal issues. e. Protected areas management strengthening. The Project will assist in piloting implementation of sustainable management of Butrint National Park through: (i) supporting the updating of the protected areas management plan for the Butrint National Park, including the formulation of alternative options for the restoration of coastal wetlands and degraded habitat ecosystems as well as the formulation of forest and pasture management plans, using consultation and disclosure processes outlined under the Albania regulations as well as the World Bank Operational Policies; (ii) supporting the establishment of a multi-stakeholder consultative group to oversee the development of the protected areas and site assets management plan; (iii) provision of the necessary equipment and tools for management, resource inventory, biodiversity monitoring and tourism interpretation; and (iv) supporting the demarcation of the protected site and the construction of basic park infrastructure. The experience of Butrint National Park if successful, will be replicated to other coastal protected areas such as Karavasta Lagoon. Support under this activity will be in line with the recommendations of the updated National Environmental Action Plan, under preparation with the support of EC, which will include a wetlands strategy consistent with EU habitats and bird directives. e. Land-use and spatial planning strengthening. The project will focus on strengthening land-use and spatial planning capacity through supporting the formulation and codification of a Southern Coast Development Plan (SCDP) in line with strategic environmental assessment concepts and principles, social safeguard requirements, and within a participatory framework, aiming to establish a framework for sustainable

40 tourism development, which will provide long-term socio-economic and environmental benefits to the coastal population. The southern coastal region (from Orikum to the Greek border) currently suffers from strong development pressures and is therefore in great need of a development framework. The formulation of the SCDP was initiated during the preparatory phase with funds from the PPF. This activity will serve as a capacity building exercise for the urban, cultural and tourism planning institutions at the central, regional and local levels. Participants will be exposed to new methodologies, principles and concept for land-use plans, physical development standards and assessment tools such as Strategic Environmental Assessment (SEA). Funds will be made available to provide participating institutions with basic equipment (e.g., personal computers, printers, cameras, plotters, etc.). This activity will be closely coordinated with other spatial planning efforts along the Albanian coast supported by other development partners. Funds will also be allocated to support additional urban/commune land-use planning efforts in the coastal zone.

Component B: Southern Coastal Environmental Infrastructure and Rehabilitation (US$28.76 million: US$14.09 million IDA; US$5.20 million EU; US$2.6 million Government of Austria; US$0.58 PHRD; US$0.45 million GEF; US$1.26 million beneficiaries; US$4.58 million GoA)

Objective. The objective of this component is to assist southern coastal municipalities and local communities to help preserve, protect and enhance Albania's natural coastal and cultural resources leading to the improvement of the environmental/sanitary conditions in the coastal area and encouraging community support for sustainable coastal zone management. This will be achieved through: (i) improvements in solid waste management; (ii) transformation of the Saranda Port into a dedicated ferryboat and passenger terminal to facilitate access of passengers and vehicles to south Albania; and (iii) the establishment of a Coastal Village Conservation and Development Program.

Background. Tourism is emerging as an important component of Albania’s long-term economic growth. Albania’s rich cultural heritage and natural beauty especially along its southern coastal region provides it with important resources to work towards increased and sustainable economic growth.

Both international and domestic tourism potential in the southern coastal region is significant, where sustainable cultural, nautical and nature-based tourism could be further developed. The pristine coastline with its pebble-stone beaches, the historical ruins of Butrint and the rich biodiversity of Llogara National Park are all fairly untapped resources for tourism-based economic activity. In 2004, 22,000 international tourists visited the Butrint site, for one day or less, visiting the cultural sites of Butrint National Park and spending a day in Saranda before returning to accommodations on the Greek isle of Corfu. Domestic tourism is also an important factor in the area: in 2001 and 2002, visitors to the Butrint site were approximately 60% domestic (30% foreign and 10% undesignated).

Unfavorable environmental impacts on Albania’s attractive coastal line jeopardize the development of coastal tourism industry and boost in economic growth in the coming decade.

Critical threats to the tourism sector and its associated economic growth are: the coastal water pollution which has already resulted in bad smell and formation of foams in critical hot-spots, the inadequacy of water supply and solid waste management systems, the absence of sewerage networks and wastewater management, the poor condition of internal roads and port terminals, among others.

41

Expanding the scope and volume of both domestic and international tourism through longer stays and visits to areas beyond the Butrint world heritage complex, remains subject to meeting basic tourism infrastructure needs. The current situation calls for better regional and local tourism planning and promotion strategies, identification and revitalization of cultural and natural assets and improvement of public infrastructure, in terms of proper wastewater and solid waste management, water supply, and internal roads and port facilities.

Conservation of natural and cultural assets is also imperative for sustaining tourism for the long-term. Assets such as historical ruins, sites and centers, cultural sites and monuments, old-growth forests or biodiversity are relatively unique and non-reproducible. Tourism, especially nature-based or eco- tourism is inextricably linked to the preservation of these assets as it is dependent on their existence. The unique nature of non-reproducible assets is the primary attraction for tourists and therefore, its preservation should be conferred with greater importance. These assets provide Albania with a natural competitive advantage over other countries within the competitive global tourism structure.

Component Description. Component B includes three sub-components: (i) southern coastal solid waste management; (ii) Saranda gateway; and (iii) coastal village conservation and development program.

Sub-component B.1 Southern Coastal Solid Waste Management (US$6.20 million). The Project will finance the construction of two municipal landfills in Saranda and Himare, which will serve the municipalities and the surrounding communes/villages, as well as the equipment needed for operation of the landfills and collection/transport of solid waste to the landfills (e.g., containers, compactors, collection trucks, vehicles and cleaning equipment). It is expected that the Ksamil settlement south of Saranda could make use of the Saranda landfill. Municipalities, villages and communes northern of the Llagora pass will be served by a proposed landfill in the municipality of Vlore, which is financed outside of the proposed project.

The Project will also finance a Construction and Demolition Waste (CDW) pilot project to reduce the amount of scattered debris, through targeted collection and disposal of CDW in the landfills.

Two preliminary sites for the municipal landfills have been identified, with the support of the Municipalities of Saranda and Himare, and preliminary environmental and social impacts and mitigation measures have been assessed. Final selection of the sites will be done in the course of project implementation.

In addition, the Project will finance detailed technical designs (including necessary site investigations and site-specific EIA), construction supervision services, and training to municipal staff on appropriate landfill operation and management. In addition, the project will assist municipalities to improve the quality of control and enforcement system, which is currently deficient.

Sub-component B.2 Saranda Gateway (US$5.98 million). The project will support the transformation of Saranda’s downtown port into a dedicated ferryboat and passenger terminal to facilitate the access of passengers and vehicles to south Albania in line with the general recommendations of the Albania National Transport Plan and the Master Plan for Saranda Port. This component will support: detailed engineering design of the passenger terminal, including a detailed environmental impact assessment and site investigations; physical works, including land reclamation and extension and rehabilitation of the existing quay; and improvement of the Port’s overall

42 management system and administration operations. The design concept is based on an in-depth traffic/cargo forecast and economic analysis as well as on a detailed assessment of the port-urban interface, including in respect to adjacent tourism destinations such as the Butrint National Park. It is expected that, following the conduction of surveys and the preparation of the detailed engineering design and environmental impact assessment, terminal construction works will be initiated during the second year. In consultation with all relevant stakeholders, assistance will be further extended for improving the responsiveness and effectiveness of the port institutional setup and management structure (including but not limited to customs and immigration, defense and municipal interests). In parallel, the MoTT has already initiated the process of expanding the existing cargo pier in the adjacent Bay of Limion to accommodate all general, bulk and brake-bulk cargo operations handled by Saranda’s downtown port terminal. This terminal is expected to become operational by the second year of project implementation.

Sub-component B.3 Sewer and Water Supply in Saranda Tourist Area (US$3.00 million). The Project will support the following works: extension of sewer in the tourist area of Saranda, which accommodates about 70% of the yearly tourist load (about 32,000 tourists), the extension of the water supply system of the same area and roads surface works. It is also expected that the Project will finance additional investment costs associated with changing the point of discharge of the treated effluent from the Saranda constructed wetland to the Ionian Sea via the Cuka canal. In addition, the project will finance the detailed engineering design and construction supervision. This sub- component will be closely coordinated with the ongoing Bank projects FY02 Municipal Water and Wastewater Project (P041442) and the FY03 Integrated Water and Ecosystems Management Project (P075156). Technical implementation will be the responsibility of the Water PIU managing both projects, which is under the oversight of the MoTAT.

Sub-component B.3 Coastal Village Conservation and Development Program (US$13.60 million). The Project will support the establishment of a Coastal Village Conservation and Development Program (CVCDP) that will be targeted to coastal communes/villages located on the Ionian Sea coast and to villages adjacent to the Butrint National Park. Support will be in the form of grants program that will be available to municipal and commune governments on a competitive basis and will require 20% of beneficiary and/or local government contribution. The program consists of three types of activities: (i) infrastructure improvements; (ii) environmental protection and sustainable economic activities; and (iii) capacity building and technical assistance.

(a) Infrastructure improvements (US$11.40 million). Grants will be made available for the following types of infrastructure improvements: (i) public utility infrastructure for environmental protection of traditional and non-traditional villages, inter alia, improvements to sewerage and wastewater treatment, potable water supply and access roads from the main road; (ii) cultural heritage (e.g., churches, forts, castles and caves) protection and enhancement investments (selected on the basis of on-site management plans) include, inter alia, landscaping, interpretation and signage, protection measures, lighting, and improved access (internal paths, stairs and streets) to these sites; (iii) sustainable tourism infrastructure on beach development areas; (iv) revitalization and enhancement of traditional villages; and (v) revitalization of vernacular architectural heritage. Infrastructure investments for sustainable tourism will focus on the non-traditional village areas adjacent to and/or serving beach tourism will include inter alia, street improvements, development and enhancement of public spaces and parks, traffic circulation and control, parking and tourism information centers. Investments for revitalization and enhancement of traditional

43 villages will include inter alia, landscaping, improvement of internal paths and streets, street lighting, traffic circulation and control, and parking. Investments of revitalization of vernacular architectural heritage will include inter alia, façade stabilization and painting, and roof repair, when necessary. All investments will be selected on the basis of local (urban or village) strategic plans.

Eligible communities for infrastructure improvements include the following: the old and new settlements of Dhermiu, Himara, Qeparoi, Vuno and Palase, in Himara Municipality; and Borshi, Lukova and Piqerasi in Lukova Commune. Ksamile Commune will be eligible for type (iii) 2 activities and Orikum Municipality for type (i) activities.

To be eligible for the CVCDP, local governments (at the level of the Mayor/Commune Chairman and the Council) must first sign a Partnership Agreement with the MoTAT committing themselves to program requirements, which include inter alia: enforcement of existing urban zoning and construction regulations; compliance with law on coastal land protection, allocation of funds for operation and maintenance of new or rehabilitated infrastructure; a 20% local contribution to the total cost of the investment (10% in cash); agreement to develop participatory urban (village) strategic plans; and participation on monitoring and evaluation. Communities will be eligible for additional support, once they have successfully completed previous activities and demonstrated compliance with the Partnership Agreement. An Operational Manual has been prepared to regulate all procedures related to this part of the program.

(b) Environmental protection and sustainable economic activities (US$0.86 million). This part of the CVCDP will only be available to the communes surrounding Butrint National Park, which are Ksamili, Xarra (Shen Deli, Vrina, Xarra, and Mursia) and Aliko (Blerimasi, Pllaka and Dritasi). This activity is based on the experiences of a community development grant currently under implementation in these communities that is funded by the Italian Trust Fund for Culture and Sustainable Development and administered by the World Bank’s Development Communications Division. This part of the CVCDP will support three types of activities: participatory forest and pasture management, establishment of agri-environmental demonstration farms, and establishment of a small grant scheme for environmental and sustainable economic activities.

The participatory forest and pasture management activity will be implemented in close coordination with the proposed Albania Natural Resources Management Project. The preparation and implementation of forest and pasture management plans will be coordinated with the development of the BNP protected areas management plan. Grants will be made available to interested communes for small-scale investments for land stabilization, resource rehabilitation and reforestation (e.g., planting of oak, elm and ash trees). This activity will promote sustainable use of natural resources through pasture and forest improvement and conservation of biodiversity through afforestation. Support for mobilization of communes and preparation of forest and pasture management plans will be made available under the Project

44 Two agri-environmental demonstration farms will be established to build effective fertilization systems for the main crops cultivated around Butrint Lake. This activity will reduce soil and water pollution and will provide an optimal, sustainable and qualitative crop production. Support for preparation and implementation of the demonstration farms will be provided under the Project.

The BNP agronomist/forest expert will coordinate the first two activities.

A small competitive grant scheme to support the development of small-scale environmentally-friendly income generating initiatives will be established within the Butrint National Park. The Butrint National Park Small Grants Facility will provide seed money, through targeted small grants to the communes and villages adjacent to the BNP (Xarra and Aliko, and Ksmili communes) in order to support the protection and enhancement of their natural and cultural resources, while utilizing these assets for economic development. The grants coordination at BNP will be responsible for the implementation of the small grant facility. An Operational Manual has been prepared to regulate all procedures related to this grant scheme.

(c) Capacity Building and Technical Assistance (US$1.34 million). The Project will provide technical assistance and training to local governments and other local beneficiaries of the CVCDP for the preparation of participatory urban (village) strategic plans, which will seek protection of landscape and cultural heritage (buildings of architectural and historic merit) and address public services such as water, sewerage, wastewater, solid waste collection and disposal, parks and green areas. The strategic plans will aim at improving the village environment, the quality of coastal village life and will lay the foundation for the development of sustainable tourism activities. Participatory urban (village) strategic plans will be developed in selected coastal communities (e.g., in the Himare Municipality, traditional and new settlements of Dhermiu, Himara, Qeporoi, Vuni and Palase; and in the Lukova Commune, Borshi, Lukova and Piqerasi). Other means of capacity building will include development of guidelines, best practices, knowledge and information dissemination, and study tours. Training courses and material will be developed and delivered in selected communities. National level institutions will also be eligible to obtain support from this sub-component for technical assistance and training to improve their capacity in cultural heritage conservation and sustainable tourism development.

In addition, the Project will finance feasibility studies and engineering design of the infrastructure improvements investments and supervision of construction to ensure compliance with the engineering designs as well as technical assistance for the implementation of the BNP small grant facility.

45 Component C: Porto Romano Hot Spot Clean-Up (US$4.45 million; US$0.15 million IDA; US$3.11 Government of The Netherlands; US$0.88 million GoA; US$0.31 million PHRD)

Objective. The objective of this component is to contain soil and groundwater contamination in a former chemical plant at Porto Romano, on the outskirts of Durres, considered as one of the most seriously contaminated locations in the Balkans.

Background. The former chemical plant in Durres is located 6.5 kilometer north of the city center, extending to an overall surface of about 50 hectares. Until 1990, the chemical plant produced sodium dichromate for leather tanning and pesticides such as Lindane (gamma-HCH) as well as other sulfur-based contaminants. After the closure of the chemical plant, approximately 5,000 people have built houses in the surroundings of the old chemical plant and four families actually live within the former factory premises. East of the lindane/dichromate site, a drainage system leads the drainage water from the Durres plain and the sewage from Durres city through a main channel into the Adriatic sea by means of a pumping station in Porto Romano. Fishing, farming and livestock are important local activities and the Bishti Palles Cape is considered by some as an area for development of a tourist site.

The problems and types of pollution at Porto Romano are multiple: (i) between 450-700 tons of chemical waste, which are still stored on the site, not well packed and are in open air; (ii) contaminated soil within Porto Romano area, mostly with lindane and chromium, with high pollution levels and varying considerably from place to place; (iii) foundation and concrete construction elements from the former industrial plant and buildings, a substantial but unknown amount of these construction elements have been used by the local population for personal usage; (iv) contaminated groundwater and polluted surface water; and (v) people living on the sites or in its direct vicinity, causing major health concerns.

Initiated Actions. With funds from a Japanese PHRD grant, the Government commissioned the preparation of a feasibility study for the environmental remediation of the Porto Romano site. The final report covers the results of the sampling and assessment of the spread of contamination, and presents alternative remediation options and preliminary cost estimates.

The Ministry of Environment (MoE) fully understands the urgency of the situation at Porto Romano and is strongly committed to the rehabilitation of the site. The MoE commissioned additional drilling and soil sampling tests, and established an inter-ministerial working group that studies the problem and its potential technical and financial solutions. The MOE has also commissioned the construction of the bentonite wall around the polluted area.

The Government of the Netherlands has agreed to provide direct support to the Government for the activity of repackaging, transport and safe disposal of the chemical waste presently stored in Bishti Palles storage facility and to assist with the supervision of the local contractor for the construction of the wall.

Component Description. The Project will support the following activities: (i) strengthening of implementation capacity at the MoE and assistance in supervision; (ii) capacity building in soil pollution remediation as well as performance monitoring and raising community awareness to reduce environmental health risks; (iii) remediation and rehabilitation of Porto Romano in an environmentally sound and cost effective manner; and (iv) establishment of a long-term hydrogeological and environmental monitoring program.

46

Sub-component C.1. Strengthening Implementation Capacity (US$0.21 million). Under a separate Dutch trust fund, technical assistance will be provided to further investigate the current soil and groundwater pollution at the Durres site, and to strengthen the capacity within the MoE to launch the clean-up activities. The Project will provide technical assistance on “hot-spot” management and soil pollution remediation to the MOE staff and raising community awareness in terms of reducing health risks.

Sub-Component C.2. Hydrogeological and Environmental Monitoring (US$0.15 million). Under the Dutch trust fund, assistance will be provided to support the establishment of common baseline indicators for groundwater and soil. The Project will support the setup of an after-care hydrogeological and environmental monitoring program to evaluate the effectiveness of the remediation and rehabilitations works for improving groundwater and soil quality. Additionally, long-term monitoring of groundwater and sediment will be conducted to detect long-term changes in background levels on the reference site. Moreover, the results of the monitoring program will be used to estimate the effect of exposure to Lindane and Chromate as part of the risk-evaluation for local population. The monitoring program will assure compliance with guidelines and regulations to protect groundwater from further contaminant infiltration as well exposure of local community.

Sub-component C.3. Remediation and Rehabilitation Works (US$3.90 million). The project will finance remediation works, including the construction of a drainage system to reduce the current and potential risks to local population and ensure effective management of the disposal/encapsulation site where the contaminated soil and other residues, such as debris are to be contained. Routine operation and maintenance of the encapsulation system will be performed. Land-use restrictions will be introduced to: (i) control and eliminate pathways of exposure to chemicals of concern (Lindane, Chromate, and breakdown products); (ii) prevent human ingestion of groundwater and human contact with waste contained in the encapsulation area; and (iii) to effectively prevent residential development.

Sub-component C.4. Resettlement Plan Implementation (US$0.10 million). The Government will finance the implementation of the agreed Resettlement Plan for the four families living in the contaminated area of Porto Romano.

Sub-component C.5. Land Use and Management Plan for Porto Romano (US$0.10 million). The Project will support the development of a participatory land-use and management plan for Porto Romano to assist the Durres municipality and Porto Romano communities to define their medium- and long-term development goals and the means to achieve them after the completion of the clean-up activities, including awareness raising and training activities to build local support for environmentally sustainable development and management and reduce environmental health risks.

During the preparation of the land-use management plan, attention will be given to site storaging sea mines and torpedoes, one kilometer away from the chemical factory in Porto Romano. The storage facility is guarded and items of munitions/ordnance are serviceable and in good condition. However the safety distances are not attained according to standards required. The remediation works in Porto Romano will not affect in any way the risk factor of the mine and torpedoes storage site, but there are health and safety issues for the workers. Since health and safety issues are common in clean-up and remediation of hazardous waste sites, which often includes explosive substances, these issues will not change the normal procedures for contracting of civil works. However, full disclosure of information with regard to the storage site will be provided to the workers.

47

Component D: Project Management and Monitoring (US$1.63 million; US$1.07 million IDA; US$0.15 million GEF; US$0.41 million PHRD)

This component will provide support for project management, coordination, monitoring and evaluation. It will finance technical assistance, office equipment and furniture, training, and incremental operational costs. It would further support the design and implementation of a public awareness and communication strategy and a monitoring and evaluation system.

Sub-component D.1. Project Coordination Support (US$0.63 million). The Project will support the establishment of a PCU (Project Coordination Unit) within the MoTAT to assist the Government in coordinating project implementation. In order to assist the PCU to carry out its responsibilities, the Project will provide funds for salaries and fees of the staff and specialized expertise, fiduciary and professional training, incremental operating expenses, office equipment and furniture, and a vehicle. The PCU will also be responsible for implementation of the Environmental and Social Safeguards Framework.

Sub-component D.2. Project Implementation Support (US$0.65 million). The Project will support small implementation teams within the MoTAT, MoE and BNP by providing funds for salaries and fees of the staff, incremental operating expenses, office equipment, furniture and vehicles.

Sub-component D.3. Monitoring, Evaluation and Communication Support (US$0.35 million). The Project will be guided by bi-annual reviews of results using progress reports prepared by the PCU, based on inputs from the individual implementation teams and other line implementing entities, and in accordance with the Project Implementation Plan, which includes output indicators developed on the basis of Annex 3. The Project will provide funds to engage consultants to carry out annual impact evaluation studies and to develop and implement a public awareness and communication strategy that aims at building support for sustainable tourism, promoting project opportunities and raising awareness on the importance of protecting natural and cultural resources. Some of the products to be used in the implementation of the communication strategy include: consultation and dissemination workshops and public outreach activities, creation of a dedicated web-portal, and production and dissemination of project brochures/newsletters. The Project will finance financial auditing services over the life of the project, will assist in strengthening tourism statistics within INSTAT and the newly created Tourism Agency6 and will facilitate close cooperation with the World Tourism Organization and the World Travel and Tourism Council.

6 The Italian Cooperation will provide technical assistance to the newly established Tourism Agency. The Project will keep dialogue with the Agency on promoting pro-actively the concept of sustainable tourism development at the policy level and supporting specific national and international marketing efforts.

48 Annex 5: Project Costs ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

Local Foreign Total Project Cost By Component and/or Activity US $million US $million US $million A. Integrated Coastal Zone Management Policy and Institutional Capacity Strengthening A.1. Strategic Policy Support 0.24 0.28 0.52 A.2. Coastal Management Strengthening 0.87 1.95 2.82 B. Coastal Environmental Infrastructure and Rehabilitation B.1. Southern Coastal Solid Waste Management 2.07 3.38 5.45 B.2. Saranda Gateway 2.11 3.16 5.27 B.3 Saranda Sewage and Water Supply 0.86 1.70 2.56 B.3. Coastal Village Conservation and 7.03 4.89 11.92 Development Program C. Porto Romano Hot-spot Clean-up 1.62 2.28 3.90 D. Project Management and Monitoring 1.17 0.32 1.49 Project Preparation 0.09 0.09 Total Baseline Cost 16.06 17.96 34.02 Physical Contingencies 1.27 1.49 2.76 Price Contingencies 0.86 0.92 1.78 Total Project Costs1 18.19 20.37 38.56

Total Financing Required 18.19 20.37 38.56

1Identifiable taxes and duties are US$7.60 million, and the total project cost, net of taxes, is US$30.96 million. Therefore, the share of project cost net of taxes is 80%.

49 Annex 6: Implementation Arrangements ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

Project Steering Committee (PSC). During project preparation, the MoTAT coordinated the establishment of a high-level Inter-Ministerial Working Group (IWGP) to provide overall guidance for preparation activities. The IWGP is composed of high-level decision makers (at the level of Deputy Minister) from the following ministries: MoTAT (chair), Ministry of Economy and Privatization (MoEP), Ministry of Environment (MoE), Ministry of Transport and Telecommunications (MoTT), and Ministry of Culture, Youth and Sports (MoCYS). The IWGP will continue operating during project implementation. The Government will re-appoint the IWGP as the Project Steering Committee (PSC), to be responsible for providing overall project oversight, reviewing project progress, and assisting in resolving obstacles to project implementation. The composition will be amended to also include representatives from the Ministry of Local Government and Decentralization, Ministry of Finance, Ministry of Agriculture and Food, as well as representatives from regional and local governments and NGOs. The PSC will meet twice per year.

Project Coordination Unit (PCU). The overall institutional coordination of the Project will be carried out by the MoTAT, as the leading government agency in charge of overall project coordination. A Project Coordination Unit (PCU) would be set up within the structure of the MoTAT to be responsible for overall project coordination, procurement, financial management, disbursement, monitoring, evaluation and reporting, and will be under the supervision of the Project Authorizing Official. The PCU will be staffed with a Project Director, a Technical Expert, a Financial Management Specialist, a Procurement Specialist, an Environmental Expert, and an Administrator/Information Technology Assistant.

Project Authorizing Official (PAO). The PAO will be the assigned Deputy Minister of the MoTAT, who will have the overall responsibility of supervising the work of the PCU and sign- off on procurement activities. The PAO will report to the Government through the PSC on Project implementation progress.

Institutional Arrangements for Project Implementation. The Project activities will be implemented by existing entities at the central, regional or local levels. The attached implementation matrix identifies functions and responsibilities for project implementation.

• Ministry of Territorial Adjustment and Tourism. The MoTAT through the PCU and the Coastal Village Conservation and Development Program Implementation Team (CVCDP-IT) will be responsible for providing oversight and support implementation of activities under the responsibility of the MoTAT. The CVCDP-IT will be staffed with a Program Coordinator, a Technical Infrastructure Specialist, and two Community Mobilization Experts. The CVCDP-IT will be located at the Qark of Vlore. One of the Communication Mobilization Experts will work out of Saranda and be housed in the government (municipality or prefecture) office. At least three additional staff will be appointed, one each, by the MoTAT, MoCYS and MoE, and will be available on a regular basis to provide technical input to the program.

• Ministry of Environment. The MoE will be responsible for implementation of the Porto Romano remediation works and the associated institutional strengthening

50 activities. A small implementing team (MoE-IT) will be set up at the Ministry of Environment to oversee and support all technical aspects of the implementation of all project activities under the responsibility of the MoE. The MoE-IT will be staffed with a Coordinator, a Technical Expert and an Administrator/Information Technology Assistant. The MoE-IT will be under the supervision of the General Secretary of the MoE.

• Ministry of Transport and Telecommunications. The Saranda Port Authority will appoint a Coordinator to be responsible for the technical aspects and for facilitating the implementation of the activities associated with the Port of Saranda rehabilitation works as well as the project’s nautical-tourism development activities. The Ports Department at the Ministry of Transport and Telecommunication will be responsible for providing oversight.

• Ministry of Culture, Youth and Sports. The MoCYS through the Butrint National Park Administration will be responsible for implementing the protected areas management activities and for facilitating implementation of activities under Environmental Protection and Sustainable Economic Activities portion of the CVCDP in Aliko, Xarra and Ksamili communes.

• Municipalities and communes. The Municipalities of Saranda and Himare will be responsible for facilitating planning and implementation of the solid waste management activities. The southern coastal municipalities and communes will be responsible for facilitating the implementation of the activities under Infrastructure Improvement activities portion of the Coastal Village Conservation and Development Program. During the initial phase, fiduciary aspects of the CVCDP will be handled by the PCU. However, it is envisaged that there should be full involvement of local level in order to foster capacity building on procurement and financial management. Once local government capacity assessment reveals that there is capacity in the targeted municipalities/communes, full implementation will be delegated to the local government in line with the decentralization policy adopted by the Government.

Project implementation arrangements will be reviewed around Mid-Term review in light of the institutional reforms implemented by the Government, including the establishment of a permanent oversight body for integrated coastal zone management.

51 Project Implementation Matrix

MoTAT MoE MoTT MoCYS (a) Solid Waste (a) Pollution Control (a) Saranda Port Authority Butrint Municip/ Component/Sub-component/Activity (b) Water Sup & San CVCDP National Park commune/ PCU MoE IT (c) Urban Planning/Tourism IT (b) Nature Protection (b) Ports Department Farmers (d) Construction Police (c) Environmental Monitoring A. ICZM Policy and Institutional Capacity Building A.1 Strategic Policy Support X A.2 Coastal Management Strengthening a. Regulatory capacity F (c) (d) X L b. Integrated coastal zone capacity building F (c) X L c. Environmental management strengthening XF (c)X d. Protected areas management strengthening X X e. Land use and regional planning L (c) X B. Coastal Environmental Insfrastructure and B.1 Southern Coastal Solid Waste Management L (a) X F B.2 Saranga Gateway X X (a) (b) B.3 Saranga Sewer and Water L (b) B.3 Coastal Village Conservation and Development a. Infrastructure improvements XX F b. Environmental protection and sus econ act X XF c. Capacity building and implementation support XX

C. Porto Romano Hot-Spot Clean-Up XF(a)X D. Project Management and Monitoring XXX Legend: F: Fully participates in the review of detailed design and tender documents, approve completed works and take over operation and maintenance of infrastructure X: Involves on day-to-day implementation L: Facilities implementation by participating in the review of detailed design and tender documents, approve completed works or take over operation and maintenance of infrastructure

52 Annex 7: Financial Management and Disbursement Arrangements ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

Country Issues

The latest Country Financial Accountability Assessment (CFAA) confirms that improvement is required in the management of public expenditures, including cash management in Treasury and better internal control throughout the public sector. An internal audit is currently being developed to improve the government’s internal control environment. The supreme audit institution also needs strengthening. The current Project Preparation Unit (PPU) will become the Project Coordination Unit (PCU) once the implementation phase begins. The PCU has developed policies and procedures that operate in addition to those of the current public expenditure management framework to minimize project financial management risks.

Strengths and Weaknesses

The strengths that provide a basis of reliance on the project financial management system include the use of consultants with previous experience in managing Bank-funded projects as well as the MoTAT’s previous involvement in projects in the water sector, although without having the direct project management responsibility.

Implementing Entity

The Project will involve several ministries and implementing agencies. Given the number of counterparts, the Project will rely upon a Project Steering Committee to provide guidance, review the project progress and resolve obstacles to project implementation. The leading Government agency will be MoTAT. The PCU will be responsible for all procurement and financial management aspects of the Project. The relevant implementing agencies will be actively involved in the procurement process by drafting TORs and other related documents, and participating in selection committees as well as monitoring the implementation of the assignments.

Disbursement, financial reporting and management of the special accounts will be carried out by the PCU in MoTAT.

Funds Flow

Project funds will flow from the IDA, GEF MSP, PHRD, EU CARDS, the Dutch Grant and the Austria Grant via six Special Accounts which will be replenished under the Bank’s report-based procedures. Six accounts will be opened in a commercial Bank acceptable to the Association where funding from each respective source will be transferred. Counterpart funding from the Government will be provided through the Treasury system directly to the suppliers/contractors.

53 Staffing

The PCU has hired as the financial management specialist an experienced accountant. The accountant is already trained in World Bank disbursement and financial management procedures and has extensive experience from a previous Bank-funded project. Terms of Reference for the PCU with detailed descriptions of duties and staffing is included in the Financial Management Manual.

Accounting Policies and Procedures

The accounting books and records are maintained on a cash basis with additional information on commitments related to signed contracts. Project financial statements are presented in US dollars. The PCU has instituted a set of appropriate accounting procedures and internal controls including authorization and segregation of duties as far as possible.

The policies and procedures are further elaborated in an overall Financial Management Manual as well as in specific operational manuals of the Coastal Village Conservation and Development Program (under Component B) including a small grants facility according to the CDD approach in Butrint National Park.

Internal Audit

The MoTAT’s internal audit unit will audit the activities as a normal part of their work. However, as the capacity of the unit is still being developed, the Project will not seek to place reliance upon any work that it might undertake.

External Audit

The auditor will be appointed by the Ministry of Finance as part of an overall agreement for the audit of the non-revenue earning Bank-financed portfolio in Albania. Specific terms of reference are used for the projects covered by this agreement. Despite the MoF’s arrangements, the MoTAT is responsible for delivering to the Bank, within six months of the closing of each fiscal year, the audited financial statements. The audit report will cover all sources of funding, but will also include details of the sources and uses of funds for each source of funding. The annual cost of the audits will be covered by the Government as part of the portfolio audit. (Funds have also been allocated for this in case this policy changes in the future). In addition, the country’s supreme audit institution will perform ad-hoc external audits of the Project.

Reporting and Monitoring

The accounting for the Project is cash basis with additional information provided on contractual commitments.

Integration of the project accounting system with the MoTAT main accounting system will be considered during the course of project implementation based on a specific assessment of the system.

Project management-oriented Financial Monitoring Reports (FMRs) will be used for Project monitoring and supervision, and the indicative formats of these are included in the Financial

54 Management Manual. Formats of reporting were agreed during negotiations. The PCU will produce a full set of FMRs every three months throughout the life of the Project.

Information Systems

The PCU has selected an off-the-shelf accounting package, designed for small business users, which has already been installed. This package runs under MS Windows XP, contains adequate user access controls and is capable of generating the FMRs. The same software will be adopted to manage forthcoming Bank-financed projects in Albania. The software is assessed to be acceptable and has been used in other Bank-financed projects in the ECA region. Spreadsheets will be used to keep track of the expenditures for the PPF until the system is fully in place.

The Financial Management Manual sets out the financial management and internal controls policies and procedures and is intended to guide staff and minimize the risk of errors and omissions, as well as delays in recording and reporting. These written standards also clarify responsibilities, including level of authority, clear control over assets, cash, and bank accounts, and ensure timely and accurate financial reporting. An Operational Manual for the Infrastructure Improvements portion of the Coastal Village Conservation and Development Program has been drafted and the proposed financial management procedures are fully acceptable. A similar Operational Manual has been developed for the support of the grant facility to Butrint National Park including acceptable procedures described for the small grants facility in accordance with the Bank’s CDD guidelines.

Disbursement Arrangements

Bank funds will be disbursed under the Bank’s report-based procedures, i.e. the PCU will use the Financial Monitoring Reports to support applications for withdrawal, and the PCU will not provide the Bank with a detailed list of expenditures. Should the Bank determine at any time that the FMRs are not adequate to support the disbursement process, it reserves the right to revert to the traditional disbursement methodology (i.e., SOEs, summary sheets etc.). Supporting documentation for all payments made, including completion reports and certificates will be retained by the Borrower and made available to the Bank during project supervision.

As soon as the Project becomes effective, the PCU will open and manage Special Accounts for the donors funding of this Project in the Bank of Albania to which the donor funds will be transferred. Since the Bank of Albania does not execute commercial transactions with third parties, the PCU will transfer the funds from the Special Accounts to six second-level accounts in US dollars opened by the Project in a commercial bank acceptable to the Bank from which it pays eligible expenses related to the Project. Counterpart funds are transferred through the Treasury system directly to the suppliers/contractors. Withdrawal applications for the replenishments of the SAs will be sent to the Bank every three months attaching the FMR and a calculation of the funds needed for the following six-month period. Upon receipt of each application for withdrawal of an amount of the Credit, the Bank shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account an amount equal to the lesser of: (a) the amount so requested; and (b) the amount which the Bank has determined, based on the Financial Monitoring Reports and is required to be deposited in order to finance Eligible Expenditures during the six-month period following the date of such reports.

55

Allocation of Credit

Allocation of the IDA credit proceeds will be done according to the following schedule:

Category Credit Amount % of expenditures to be (SDR Equivalent) financed Goods 2,000,000 100% Works 3,450,000 80% Grants 2,960,000 80% Engineering Services 1,160,000 100% Consultants’ Services 500,000 100% Training 150,000 100% Incremental Operating Costs 290,000 100% Refunding of the PPF 1,000,000 Unallocated 190,000 TOTAL 11,700,000

Allocation of Other Sources of Financing

Source/Category Grant Amount % of expenditures to be (USD) financed The Netherlands Grant Works 3,110,000 80%

EU CARDS Grant Grants 5,200,000 80%

Austrian Grant Goods 440,000 100% Works 2,160,000 80%

PHRD Grant Consultants’ Services 2,230,000 100%

GEF MSP Grant Goods 90,000 100% Works 136,000 80% Grants 378,000 80% Engineering Services 44,000 100% Consultants’ Services 265,000 100% Incremental Operating Costs 37,000 100%

Supervision Plan

During project implementation, the Bank will supervise the project’s financial management arrangements in two main ways: (i) review the project’s quarterly financial management reports as well as the project’s annual audited financial statements and auditor’s management letter; and (ii)

56 during the Bank’s supervision missions, review the project’s financial management and disbursement arrangements (including a review of FMRs and movements on the Special Accounts) to ensure compliance with the Bank's minimum requirements. As required, a Bank-accredited Financial Management Specialist will assist in the supervision process.

57 Annex 8: Procurement Arrangements ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

A. General

Procurement for the proposed project would be carried out in accordance with the World Bank’s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

Procurement of Works: Works, estimated to cost US$500,000 and more will be procured through International Competitive Bidding (ICB). Works estimated to cost less than US$500,000 and more than US$100,000 will be procured through National Competitive Bidding (NCB). Smaller works estimated to cost less than US$100,000 each will be procured through Shopping procedures.

Procurement of Goods: Goods estimated to cost US$100,000 or more will be procured through ICB. Goods estimated to cost less than US$100,000 will be procured through Shopping on the basis of at least three written quotations obtained from qualified suppliers.

Selection of Consultants: Shortlists of consultants for services estimated to cost less than US$100,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Consultancy services to be provided by consultancy firms estimated to cost US$200,000 or more will be procured through Quality and Cost Based Selection (QCBS) method. Consultancy services to be provided by consultancy firms estimated to cost less than US$100,000 may be procured through Consultants’ Qualifications (CQ) method. The consultancy firm for project audit will be selected through Least Cost Selection (LCS) method. The consultant firm for design and implementation of public awareness campaign will be selected through Fixed Budget Selection (FBS). Individual Consultants will be selected in accordance with Section V of the Consultancy Guidelines.

Operating Costs: The operating costs for the PCU and Implementation Teams covering office supplies, utilities, operating and maintenance expenditures of equipment and vehicles, fuel, communication, utilities, travel expenses, among others, will be disbursec on the basis of annual budgets to be prepared by the PCU and agreed with the Bank.

Community Participation Procurement (CPP): Procurement of goods, works and services for the sub-projects under implementation of the Coastal Village Conservation and Development Program to be implemented by municipalities and communes shall be carried out by community participation procedures method in accordance with paragraph 3.17 of the Procurement Guidelines and in accordance with the Manual for Conducting Very Small Value Procurement under World Bank/IDA Small Grants, Loans, Credits (June 2004). The threshold per contract under the sub-projects for various procurement methods will be as follows:

58

Procurement of goods, works and services for contracts less than US$10,000: Comparison of Prices Procurement of goods, works and services for contracts less than US$10,000: Shopping Procurement of works for contracts up to US$500,000: NCB Procurement of works for contracts more than $500,000: ICB Procurement of goods for contracts more than $100,000: ICB Procurement of services for contracts up to US$200,000: CQ or IC

Commercial Practices (CP): Procurement of goods and services for the sub-projects for the development of alternative income generating activities to be implemented by local associations, individually owned or company owned enterprises shall be carried out through commercial practices established in the country in accordance with paragraph 3.12 of the Procurement Guidelines and in accordance with procurement procedures defined in the Project Operational Manual.

Procurement of goods for contracts less than $100,000: Commercial Practices Procurement of works for contracts less than $500,000: Commercial Practices Procurement of goods for contracts more than $ 100,000: ICB Procurement of works for contracts more than $ 500,000: ICB Procurement of services for contracts less than $100,000: Commercial Practices Procurement of services for contracts more than $100,000: QCBS

The Bank’s Guidelines, Standard Bidding Documents to be used for each procurement method, as well as Consultant Selection documents are provided to the implementing agency at the appraisal mission and the updated documents are available in the Bank’s external website.

B. Assessment of the agency’s capacity to implement procurement

The PCU established under the MoTAT will have overall responsibility for project management and coordination. The PCU will be staffed by qualified experts on planning, monitoring and evaluation, procurement, financial management, environment and technical coordination. The procurement activities will be under the responsibility of PCU. One full-time procurement expert has been recruited on competitive basis as an individual consultant, to work closely with procurement staff assigned by the MoTAT.

Additionally, an Implementation Team will be set up at the MoE to oversee and support all technical aspects associated with Porto Romano clean-up and institutional strengthening activities. The MoE- IT will be staffed with a small number of technical experts. The procurement activities will be under the responsibility of PCU.

The Butrint National Park administration will be responsible for implementing the protected areas management activities. The procurement activities will also be under the responsibility of the PCU.

During the initial phase, procurements under the sub-projects will be done in a centralized manner by the PCU. The procurement process will be carried out in a transparent way with involvement of all related parties. The bids will be opened, evaluated and approved by a committee consisting of representatives of the PCU, Implementation Team, the municipal/commune government and the Village Consultation and Monitoring Groups. It is expected that the involvement of the local level of government in the overall procurement process will foster capacity building on procurement and

59 financial management of the local authorities. Once local government capacity assessment reveals that there is capacity in the targeted municipalities/communes, full implementation including the procurement process will be delegated to the local government in line with the decentralization policy adopted by the Government. Procurement will then follow Community Participation Procurement procedures, and the PCU will continue to provide guidance and advice afterwards.

An assessment of the capacity of the Implementing Agency to implement procurement actions for the Project has been carried out by Ms. Elmas Arisoy, Sr. Procurement Specialist in March 2005. The assessment reviewed the organizational structure of the MoTAT for implementing the Project and possible implementation arrangements.

The key issues and risks concerning procurement for implementation of the Project have been identified and include the following:

• Albania was ranked as a high risk country in respect of its public procurement system in the Country Procurement Assessment Review (CPAR) dated January 2001. The Law on Public Procurement dated January 1, 1996, which has being modified several times (latest being on May 8, 2003), is in line with the internationally accepted public procurement regulations. Significant achievements have been made in putting in place appropriate organizational arrangements to support and oversee public procurement. However, there is still a need for increasing transparency and promoting the consistent application and enforcement of the law by the procuring entities.

• The MoTAT itself has no experience in implementation of Bank-financed projects. Past and ongoing projects were or are being implemented by PIUs/PMUs staffed by external consultants. While a separate unit will be established under this Project, the Ministry will assign staff to work full-time for the Project activities and they will also hire a core team of experts for specific tasks, when expertise is not available in the existing structure of the MoTAT. This arrangement would help capacity building within the agency and will also help mainstreaming with the existing structure of the Government.

The corrective measures which have been agreed are as follows:

• The procurement file containing up-to-date procurement documents (guidelines, manuals, templates of procurement notices, standard bidding documents for procurement of goods and works, standard request for proposal documents for consultants’ services, evaluation report formats, regional and simplified procurement documents etc.) was provided to the PCU at the time of Appraisal. The PCU is recommended to visit the Bank’s web-site frequently to ensure using the most updated procurement documents.

• The Project Launch Workshop will have a specific session on Procurement Training for the PCU staff.

60 • The procurement staff of the PCU and the Ministries will attend procurement trainings on Bank’s procurement procedures given by ILO in Turin and/or by the Bank at the Region at the beginning of the project.

• The procurement staff of PCU will provide training to the municipalities in procurement procedures and provide guidance and advice during procurement processes.

• Bank procurement specialist will be a member of the project team throughout the project cycle. During project implementation, the Bank procurement specialist will be involved in the supervision missions.

The overall project risk for procurement is high risk.

C. Procurement Plan

The Borrower has developed a Procurement Plan for project implementation, which provides the basis for the procurement methods. This plan was agreed between the borrower and the task team during Appraisal. The Procurement Plan will be available in the project’s database and in the Bank’s external website, and will be updated in agreement with the task team annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity.

D. Frequency of Procurement Supervision

In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the implementing agency has recommended that every six months supervision missions visit the field to carry out post-review of procurement actions.

61 E. Details of the Procurement Arrangements Involving International Competition

1. Goods, Works, and Non Consulting Services

(a) List of contract packages to be procured following ICB and direct contracting:

1 2 3 4 5 6 7 8

Ref. Contract Estimated Procurem Domestic Review Expected Comments No. (Description) Cost ent Preference by Bank Bid- Method (yes/no) (Prior / Post) Opening Date 1 Equipment for 500,000 ICB Yes Yes 01/15/07 N/A laboratories 2 Construction of 4,510,000 ICB No Yes 04/15/06 NA Saranda and Himare municipal sanitary landfills 3 Collection 590,000 ICB Yes Yes 01/15/08 N/A equipment (containers and trucks) 4 Equipment for 295,000 ICB Yes Yes 01/15/08 N/A collection and transportation of construction and demolition waste 5 Construction of 4,500,000 ICB No Yes 01/31/06 N/A Saranda terminal 6 Construction of 3,900,000 ICB No Yes 05/15/06 N/A remediation works at Porto Romano 7 Construction of 1,550,000 ICB No Yes 10/15/06 N/A Saranda water supply and sewer 8 Goods for 1,250,000 ICB Yes Yes 09/01/06 N/A Saranda water supply and sewer

(b) All ICB works and goods contracts, NCB works contracts estimated to cost above US$200,000 per contract and all direct contracting will be subject to prior review by the Bank.

62 2. Consulting Services

(a) List of consulting assignments with short-list of international firms.

1 2 3 4 5 6 7

Ref. No. Description of Estimated Selection Review Expected Comments Assignment Cost Method by Bank Proposals (Prior / Submission Post) Date 1 Technical 460,000 QCBS Yes 01/15/06 N/A assistance and training on ICZM 2 Southern coastal 630,000 QCBS Yes During N/A development preparatory plan phase 3. Design and 320,000 QCBS Yes 09/15/05 N/A construction supervision of landfills 4 Training and 380,000 QCBS Yes 07/30/05 N/A capacity building for solid waste management 5 Design and 375,000 QCBS Yes 09/15/05 N/A supervision of Saranda port 6 Technical 540,000 QCBS Yes 07/15/05 N/A support in the implementation of the CVCDP

(b) Consultancy services estimated to cost above US$100,000 per contract and all single source selection of consultants (firms) will be subject to prior review by the Bank.

(c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$100,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

63 Annex 9: Economic and Financial Analysis ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

ECONOMIC ANALYSIS

Context. Since the late 1990’s, Albania experienced a development of beach tourism with tourists from Albania, Kosovo and FYR Macedonia. Initially, this development was expanding at the rate of 15% for the first few years and has now settled to about 10% increase annually. The rate of tourism has significantly increased the income of the local population since most of the tourists stay at bed- breakfast type facilities owned by them.

Investments have been directed towards the western lowland and coastal area, especially to areas around the biggest cities such as Tirana, Durres, Vlora or tourist centers such as Saranda. Population migration has reflected this pattern with an estimate of population increase in the Albanian coastline of 25% between 1990-1997. An overview of the current population is presented in the following table.

Municipality/Commune Population Saranda 15,259 Lukova 3,396 Piqeras 1,096 Borsch 3,500 Qeparo 1,500 Dhermiu 2,000 Himare 3,214 Vuno/Palase 3,500 Orikum 6,358 Total 39,823

Investments and economic dynamisms along the coastline happened in the context of low respect for the government authorities and a weak public sector, resulting in ad-hoc land-use planning, inappropriate landscape management, haphazard/unregulated urbanization, illegal buildings, lack of respect for cultural and natural heritage, lack of public spaces, developments in the beachfront, sprawl development and lack of adequate infrastructure, e.g., roads, electricity supply, drinking water supply, sewerage networks, wastewater treatment, communal solid waste and construction waste management7.

The sustainability of this tourism depends much on the infrastructure in terms of solid waste, sewerage, wastewater, water supply and local road facilities, orderly land use planning and landscape management, as well as the reversal of the other trends as described above. These are needed to attract high-value tourists from Western Europe and other parts of the Mediterranean countries as well to maintain the present family-based tourism of the coastal area. The development of foreign and local tourists will significantly improve the livelihoods of the people in the Southern Coast.

7 METAP, PAP, “Southern Coastal Region: Priority Assessment Study and Sea as a tool in coastal management in Albania, 2004

64 Economic analysis. The analysis tries to assess in an integrated fashion the socio-economic benefits from an integrated coastal zone management program. The incremental benefits of orderly and coherent land-use and spatial planning, improved public infrastructure, better landscape management, and control of solid waste along the coast are expected to bring about sustainable tourism development growth in terms of: (i) sustaining and increasing the local tourist base in the coastal area; and (ii) promoting an increasing trend on sustainable high-quality tourism. The current level of coastal tourism is presented in the following table8:

Municipality/Commune Tourists % local tourists9 % foreign tourists Saranda 48,000 50% 50%10 Lukova 2,000 100% Piqeras 1,370 100% Borsch 4,375 100% Qeparo 1,875 100% Dhermiu 3,000 90% 10% Himare 10,000 95% 5% Vuno/Palase 4,375 100% Orikum 4,000 100% Total 78,995

Tourism is one of the main sources of income for the municipalities and communes located in the southern coast of Albania. It is estimated that between 30% and 50% of the population from Palase to Ksamil leave their towns for six months to work in Greece or Italy after the tourist season ends. They return to their towns during the tourism season (between mid-May through end-September) when income-generating opportunities are available. The 2004 local Gross Regional Product was estimated for the southern coastal region of Albania based on the sectoral income contributions. The calculations reveal that 31% of the local GRP for the coastal municipalities and villages originated from local tourism and 3% from foreign tourism. These estimates only comprise the direct income effect of tourism and not the indirect benefits, and are presented in the following table.

Total GRP (Euro) Direct GRP tourism (Euro) Cities/villages 2004 local Foreign Saranda 65,800,000 20,284,211 1,656,293 Lukova 7,700,000 2,373,684 193,822 Piqeras 4,900,000 1,510,526 123,341 Borsch 10,600,000 3,267,669 266,819 Qeparo 5,600,000 1,726,316 140,961 Dhermiu 7,900,000 2,435,338 198,856 Himare 28,500,000 8,785,714 717,391 Vuno/Palase 11,900,000 3,668,421 299,542 Orikum 14,900,000 4,593,233 375,057 Total 157,800,000 48,645,113 3,972,082

In the “without-project” scenario, limited effort will be undertaken by the Government to implement integrated coastal zone management at the national, regional and local levels and the trends described above will continue. This will result in a declining tourism base with less and less foreign tourists

8 Amongst others, World Tourism Organization, “ Yearbook of Tourism Statistics”, 2003. 9 Under local tourists, Albanian tourists from Kosovo and FYR Macedonia are included. 10 These international tourists are tourists that come for less than one day from Corfu to visit Butrint site

65 visiting Saranda (a trend which is already visible) as well as less local tourists that can increasingly afford to go to other countries (such as Turkey). As a result, the GRP which can be derived from the tourist industry will also decline.

Results of the economic analysis. The economic analysis is executed for the Project as a whole, since it is difficult to distinguish and allocate the impacts of specific activities under integrated coastal zone management. Gross benefits of Integrated Coastal Zone Management are in the areas of habitat protection, local infrastructure and business and tourism. Modeling through an executed assessment of socio-economic costs and benefits of integrated coastal zone management in the European Union suggests that in terms of net benefits generated by ICZM there is a benefit: cost ratio of 13.6: 1 and includes organizational and planning efficiency gains, improved resource use as well as greater economic and environmental sustainability of the coastal communities11. However, the quantification of the socio-economic benefits is focused on the sustainability and the number of tourists visiting the Albanian coastline.

The sustainability of this tourism depends much on orderly land use planning and landscape management as well as infrastructure in terms of solid waste, sewerage, wastewater, water supply and local road facilities, which are needed to attract higher value tourists from Western Europe and the Mediterranean countries taking into account the carrying capacity of the environment when designing tourism plans and infrastructure development. The development of foreign and also local tourists will significantly improve the livelihoods of the people in the southern coast to an extent that people do not have to migrate to Greece to work as migrant laborors. Present facilities of dry pit latrines and unprotected spring water supplies will not attract the more sophisticated tourists.

In the project scenario, it can be expected that the current tourist base will decrease due to unregulated urban planning, illegal buildings not taking into account landscape values of the traditional coastal villages, pollution and low quality of local roads and basic infrastructure facilities. With competitive and attractive holiday and beach holiday possibilities in neighboring countries such as Italy, Greece, Turkey and Croatia, it will not be possible to attract high quality foreign tourists and/or to maintain the current base of local tourists from Albania, Serbia and Montenegro and Kosovo once the income levels rise.

It has been assumed that without substantial improvements in the cultural, natural, landscape and environmental value of Albania’s coast, starting 5 years from now, local tourists will gradually decrease by 1% per year for Saranda, due to the fact that Saranda is a bigger city and has a unique and close-by attraction in Butrint, and 2.5% per year for smaller coastal communities. It is also assumed that the current (and small) number of foreign tourists will stay constant due to the attractiveness of Butrint.

The incremental benefits of the improved infrastructure and better management of the coast and the pollution along the coast are expected to arise in more sustainable high quality tourism and expanded local tourists and for a longer period of time due to better management, reduction of pollution, landscape improvements due to improved and coherent spatial planning as well as better waste management and disposal facilities as well as other beautification village elements. This effect is related to the loss of producer surplus associated with lower number of tourists that will be incurred

11 Firn Crichton Roberts and Graduate school of environmental studies, “An Assessment of the Socio-Economic Costs and Benefits of Integrated Coastal Zone Management”, Final report to the European Commission, November 2000.

66 by the tourism service industry and families receiving income from tourism activities in the coastal area12.

In the “with-project” scenario, it is assumed that the impacts on tourism flows will be visible 5 years from now, and will slowly increase at a rate of 3% per year (time frame is until 2030).

The economic costs include all program costs plus the cost of rehabilitating the coastal road (which is consistent with the current plans of the Government), and were derived from the financial costs excluding value-added taxes. The costs also include the operation and maintenance costs for the new and rehabilitated infrastructure.

The stream of incremental benefits of the tourism receipts that would result from the Project is expected to be as follows: US$2.2 million by year 2009, and then increases steady to US$60 million by year 2030.

Economic rate of return. Based on the assumptions of costs and benefits, the overall economic rate of return of the Project is estimated at 16%. This figure excludes of other qualitative benefits expected in the project areas such as coherent spatial planning, improved decision making process, pollution reduction, biodiversity and habitat improvements and improved basic infrastructure and quality of life.

FINANCIAL ANALYSIS

Financial analysis of the solid waste management activities. The present total costs for solid waste management in Saranda Municipality are rather low, which has an impact on the low level of services offered by the waste collection company. This can be viewed from overflowing containers, broken-down containers, littering the streets and uncontrolled operations at the dumpsites. The total costs for waste collection are not fully covered by the collected fees. One of the key tasks for the municipality is to develop a differentiated tariff system for households based on the value of their house or the square meter of rented housing area. In terms of affordability, the lower level for expenditures for waste management in low income countries could be the following percentage of income: (i) collection, 0.9%-1.7%; (ii) public cleaning, 0.2%-0.3%; and (iii) disposal 0.05%-0.2%. Based on an average annual household income of ALL450,000, the following fees will be applicable for different scenarios of capital costs recovery.

Type of Tariff/Cost Recovery US$ per ton US$ per household As % of per year income Waste management 100% operation and maintenance, 0% capital costs 19.53 27.07 0.60 100% operation and maintenance, 25% capital costs 21.97 30.44 0.66 100% operation and maintenance, 100% capital costs 29.28 40.57 0.90 Disposal 100% operation and maintenance, 0% capital costs 3.70 5.13 0.11 100% operation and maintenance, 25% capital costs 6.97 9.66 0.21 100% operation and maintenance, 100% capital costs 16.97 23.27 0.52

All tariffs are below the total affordability limit of 1.15%-2.2% of waste expenditures compared to household income. However the current tariff for waste management in Saranda is only US$6.5 per

12 World Bank, “Benefit-Cost Analysis for the Black Sea Pollution Reduction Program”.

67 household per year and no costs are charged for disposal of waste. Therefore, the fees will be gradually increased so that at a minimum 100% of operating costs will be recovered by 2010, but aiming at least partial recovery of capital costs. This is the most realistic scenario since current level of collection only reaches 40%-50% of households, and construction of the landfill and improved waste management services will take 2 years.

For Himare, the tariff scenarios are as follows.

Type of Tariff/Cost Recovery US$ per ton US$ per household As % of per year income Waste management 100% operation and maintenance, 0% capital costs 34.46 28.12 0.62 100% operation and maintenance, 25% capital costs 43.27 35.30 0.78 100% operation and maintenance, 100% capital costs 69.68 56.85 1.26 Disposal 100% operation and maintenance, 0% capital costs 19.70 16.07 0.36 100% operation and maintenance, 25% capital costs 28.20 23.01 0.51 100% operation and maintenance, 100% capital costs 53.71 43.81 0.97

Due to the relatively small size of the landfill in Himare, it is expected that tariffs will be set only for recovery of operational costs; the objective will be to reach full recovery of operational costs by the year 2010.

Furthermore, the tariff system for commercial establishments (shops, restaurants, hotels) should be reviewed in terms of the applicability of the fee compared to the actual amount of waste generated. At the moment, the fee is based on the square meter of the establishment, while the costs of the waste management and disposal are higher than the fees collected.

In terms of the disposal fee, the landfill disposal fee charged should be different for the different types of waste.

Both municipalities would be required to review with the Bank on a semi-annual basis expenditures and revenues of waste management and disposal, including revenues and expenditures for the preceding and following semesters, and annually the projections for the following two years, on the basis of forecasts prepared by it, and to take steps as necessary, including but not limited to tariff increases and improved collections, to ensure the adequacy of the revenues to meet the projected financial requirements.

Financial analysis of the Saranda Port improvements. A traffic analysis conducted during the course of project preparation shows that Saranda has been included in the itineraries of cruise packages as early as 2001. At the moment, these are not regular cruises repeated every 7 or 14 days by the same cruise ship, but Saranda serves as a destination for tourists with special interests, mostly in terms of historical monuments and Butrint Park.

Based on the traffic forecast, the number of embarkations from passengers and tourists (both Albanians as well as foreigners), small recreational crafts as well as transport connection passengers is expected to increase from the present 44,000 to 140,000 by year 2025. At the same time, freight import is expected to reduce from the present amount of 70,000 tons to 14,000 by 2025 due to increasing of local cement production (main imported material), upgrading of national road network and slowing down of construction sector. Port revenues are expected to increase from the present

68 level of US$370,000 to US$622,000 by 2025, which is enough to cover the forecasted fixed and variable operational expenses that are currently at US$230,000 and are estimated to rise to US$315,000 by 2025. If only revenue from passenger traffic is concerned, the (fixed and passenger) costs would break even with the revenues by year 2010, provided that port tariffs for passengers, cars and trucks will increase to levels prevailing in Greek ports.

69 Annex 10: Safeguard Policy Issues ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

Environmental Assessment. The Environmental and Social Safeguards Framework (ESSF) was prepared by the MoTAT under terms of reference acceptable to the Bank, and was reviewed by the Bank during the course of Appraisal. The Government has adopted the ESSF. The Bank will monitor the adherence to the ESSF as part of its supervision activities.

Involuntary Resettlement. The above-mentioned Environmental and Social Safeguards Framework addresses: (i) likely adverse social impacts that could result from the implementation of the proposed management plan for the Butrint National Park; (ii) likely issues of land acquisition and resettlement that may result from the investments related to the Saranda and Himare sanitary landfills; (iii) issues of land acquisition for rights-of way for some of the small civil works related to the Coastal Village Conservation and Development Program; and (iv) likely specific investments ensuing from the SCDP. In the case of Porto Romano hot-spot clean-up activities, relocation of four families will be necessary. The MoE has prepared the Abbreviated Resettlement Plan, included in the ESSF, and will be responsible for its implementation.

Cultural Property. Albania’s coastal zone has been witnessing the exchange between man and nature for over three millennia and contains unique cultural and natural landscapes such as the Butrint World Heritage Site. While designed specifically to protect and enhance Albania’s coastal environment and cultural values, some of the Project components would involve physical works that may affect the physical cultural heritage or result in chance finds. In order to protect Albania’s objects of cultural value, the ESSF describes the necessary procedures to eliminate or minimize the potential impacts of project-supported activities on such objects. The Cultural Heritage Assets Mapping Study conducted during Project preparation provides the basis on which the potential for anticipated and unanticipated physical cultural heritage impacts will be assessed.

Institutional Capacity for Safeguard Policies. Practically all of the institutions proposed to be responsible for project implementation have been already involved with the implementation of World Bank Projects and have some institutional capacity to apply the Bank’s Safeguard Policies, including screening and mitigation of possible negative environmental impacts. The Project’s policy and capacity-building component would specifically provide for further strengthening of the environmental control and protection mechanisms for sustainable coastal zone management at both national and regional level, including the provision of assistance to national and local government bodies to develop and acquire adequate management tools. The MoTAT will increase its competence on environmental management by providing customized training on EIA and SEA to its staff.

70 Annex 11: Project Preparation and Supervision ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

Milestone Planned Actual PCN review 03/02/2004 Initial PID to PIC 04/13/2004 Initial ISDS to PIC 04/13/2004 Appraisal 04/12/05 04/12/2005 Negotiations 04/24/05 04/24/05 Board/RVP approval 06/21/2005 Planned date of effectiveness 10/03/2005 Planned date of mid-term review 11/30/2007 Planned closing date 03/31/2010

Key institutions responsible for preparation of the Project are the following: the Ministry of Territory Adjustment and Tourism (MoTAT), the Ministry of Environment (MoE), the Ministry of Transport and Telecommunications (MoTT), the Ministry of Culture, Youth and Sports (MoCYS); and the Ministry of Economy and Privatization (MoEP).

Bank staff and consultants who worked on the Project included:

Name Title Unit Rita Cestti Task Team Leader ECSSD Adriana Damianova Former Task Team Leader SASES Drita Dade Operations Officer ECSSD Katelijn van den Berg Environmental Economist ECSSD Toru Konishi Sr. Economist ECSSD Radhika Srinivasan Sr. Social Scientist ECSSD Frank Van Woerden Sr. Environmental Specialty ECSSD Artan Guxho Operations Officer ECSIE Kirsten Burghardt Propst Lawyer LEGEC Milen Dyoulgerov Coastal and Marine Policy ENV Elmas Arisoy Sr. Procurement Expert ECSPS Olav Christensen Sr. Financial Management Specialist ECSPS Ibrahim Hackaj Operations Officer ECSSD Edward Daoud Sr. Finance Officer LOAG1 Belita Korreshi Procurement Assistant ECCAL Ruxandra Maria Floroiu Environmental Engineer Consultant Marina Djabbarzade Social Development Consultant Katrinka Ebbe Community Development Consultant Jolanta Kryspin-Watson PAD Coordinator Consultant Denisa Bilali Team Assistant ECCAL Sohaila Wali Program Assistant ECSSD

71 Bank funds expended to date on project preparation:

1. Bank resources: US$450,000 2. Trust funds: US$300,000 3. Total: US$750,000 4.

Estimated Approval and Supervision costs:

1. Remaining costs to approval: US$10,000 2. Estimated annual supervision cost: US$100,000

72 Annex 12: Letter of Development Policy ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

73

74 Letter of Development Policy for the Integrated Coastal Zone Management and Clean-up Program

1. Introduction

This letter has been prepared by the Albanian Government in reference to the Integrated Coastal Zone Management and Clean-up Program (hereinafter the Program) in support of sustainable tourism development of Albania’s coastal areas.

The Program has been designed as an Adaptable Program Lending mechanism to be implemented over seven years. Phase I of the Program is planned for the period September 2005 to August 2009 and Phase II for the period January 2009 to August 2012, and will build upon the initial results of Phase 1 via support to the developed initiatives and further specific investments.

The total cost of the Program is expected to be about US$66.5 million.

The Albanian Government is committed to working in partnership with multilateral and bilateral donors in the implementation of the Program and has invited all potential donors operating in Albania and abroad in order to achieve multi-donor financing of the Program.

2. Program Objective

The overall objective of the Program is to protect the coastal natural resources and cultural assets and promote the sustainable development and management of the Albanian coast.

The Program objective will be achieved through:

(i) Establishing an integrated coastal zone management institutional and policy framework and strengthening the broader regulatory capacity at the central, regional and local level for protection of coastal and marine natural resources; (ii) Increasing access to basic services associated with improvement of the quality of life and attractiveness of the coastal areas; and (iii) Implementing sub-projects aiming at promoting sustainable tourism sector development.

3. Phases of the Program

The Program will be sequenced into the following phases:

Phase 1. The first phase of the Program aims to formulate and implement policies that support integrated coastal zone management and reduce coastal degradation. The first phase will enhance the legal framework, regulatory policy and governance of the coastal zone; promote integrated coastal zone planning; encourage community support for sustainable coastal zone management; and realize basic infrastructure investments to promote sustainable tourist development.

Phase 1 will contribute to developing sustainable tourism, improving environmental conditions, enhancing the quality of life, preserving and revitalizing the cultural and architectural heritage of the targeted southern coastal communities.

75 This phase will also contribute in reducing the risks to human health in surrounding communities of the Porto-Romano industrial hot-spot.

Phase 2. The second phase will further develop the institutional, legal and regulatory capacity for integrated coastal zone management and support sustainable coastal tourism development to serve as an engine for economic growth.

Building on the achievements and the performance of Phase 1 and on lessons learnt, Phase 2 of the Program will significantly expand investments in coastal infrastructure, protected areas management, conservation/restoration of critical coastal and marine ecosystems, clean-up of contaminated sites; and will provide additional financing in support of community-driven sustainable tourism development initiatives. In addition, this Phase will promote public-private partnerships. Specific areas of support under Phase 2 will be worked out during Phase 1.

The Phase 2 is expected to be fully blended with a Global Environment Facility funded project under the Mediterranean/Adriatic Seas Partnership Investment Fund.

4. Development Objective of Phase I of the Program

The development objective of Phase 1 is to set-up and initiate an integrated coastal zone management approach to reduce coastal degradation through:

(i) Strengthening regulatory policy and governance of the coastal zone, land use and regional planning and institutional capacity at the central, regional and local levels; (ii) Initiating targeted municipal and community investments in the southern coast to improve environmental conditions, enhance cultural resources and encourage community support for sustainable coastal zone management; and (iii) Reduction of soil and groundwater contamination in the former chemical plant at Porto Romano.

5. Development Policies

The Albanian Government is committed to adhere to the following key principles of integrated coastal zone management: (i) balancing between benefits of economic development and protection, preservation and restoration of coastal zones; and (ii) balancing between public and private access and use of the coastal zone.

The Government has put a temporary freeze on the issuing of construction permits and approval of partial urban planning studies in the southern coast (e.g., residential and tourist development land outside urbanized and serviced areas), until the territorial development study and plan for the Albanian southern coast (hereinafter the Regional Plan) has been formulated and approved by the National Council of Territory Adjustment. Local land-use plans will be prepared in accordance with the parameters and criteria set forth in the Regional Plan.

The Government will follow a participatory approach in the implementation of the Program, involving stakeholders and wider community at the central, regional, municipal and commune levels.

76 6. Progress Indicators for Phase 1 of the Program

Key indicators for achievement of Phase 1 objectives are the following:

• Completion and approval of the Regional Plan by the National Council of Territorial Adjustment; • Development of public infrastructure in the southern coastal area is in compliance with the Regional Study; • Local land-use planning and issuing of construction permits in the southern coast is in compliance with the parameters and measures set forth in the Regional Plan; • New buildings in the southern coastal area do not disturb the existing spatial values and characteristics; • Local, regional and national physical planning efforts and investments are aligned with the principles and guidelines of the Regional Plan; • Stakeholder participation is incorporated into coastal zone management decision-making; • At least 5,000 tons of household waste and 5,000 of construction and demolition waste are actually collected and disposed off in proper facilities; • At least 50 % of public beaches and shellfish areas along the coast are monitored for water quality against Albanian and EU standards; • Tourism and visitor revenues in the southern coast of Albania has increased and benefited wider communities; • Protected areas management plan for Butrint National Park developed with wide stakeholder participation and rules are enforced through appropriate by-laws; • Detailed regulatory plans adopted and enforced by at least 3 coastal municipalities and/or communes; • Zoning and local land-use plans formulated and adopted by at least 5 communes located in the southern coast; • Execution of EIA in accordance with the EIA procedures and are in compliance with Albanian law before obtaining environmental permits and starting construction and development activities in the southern coastal area; and • Reduction of soil contamination in areas adjacent to population centers in Porto Romano.

7. Triggers for Moving to Phase II of the Program

The triggers to proceed to Phase 2 are the following:

• The institutional, legal and regulatory framework for integrated coastal zone management is established, implemented and enforced at national, regional and local levels; • The formulation of regional and local land-use plans in the coastal region has followed agreed land-use planning criteria and methodologies, has integrated strategic environmental assessment into the planning process, and has adopted a participatory planning approach; • The Plan and the accompanying Strategic Environmental Assessment and Resettlement Framework has been completed and adopted to guide investments in the southern coast of Albania; • Institutional capacity for enforcement and monitoring of land-use plans, building regulations and environmental impact assessment regulations has improved on the southern coast. The results of monitoring and inspections to assess compliance are made available to the public;

77 • Ministry of Territorial Adjustment and Tourism shows marked increased in environmental issues and concerns; • Phase I clean-up and environmental infrastructure investment activities are completed or demonstrate satisfactory progress (at least 70% commitment and 50% disbursement of Component B- Coastal Environmental Infrastructure and Rehabilitation); and • Porto Romano land use plan is formulated and adopted by the Municipal Council of Durres.

8. Framework for Addressing Environmental and Social Issues

The Albanian Government is committed to adopting and adhering to an agreed set of procedures, which are needed to systematically incorporate environmental and social issues into the implementation process of the Program. The procedures must include:

(i) Adoption of the Environmental and Social Safeguards Framework (ESSF) to address environment, land acquisition, restriction of access, as well as cultural property issues associated with the infrastructure investments and protected areas management plan for Butrint National Park, as well as for future investments taken pursuant to the Plan in the entire Southern coastal zone, that meets the requirements of Albanian laws and the World Bank’s Environment and Social Safeguard Policies, including the requirements relating to Environmental Assessment, Involuntary Resettlement and Cultural Property.

(ii) Carrying out a Strategic Environmental Assessment of the Study/Plan during the course of the Study/Plan’s formulation in accordance with the existing Albanian environmental regulations and World Bank policies.

(iii) Adoption of adequate procedures and measures, including a resettlement policy framework for the entire Southern coastal zone, to avoid, and where not feasible to avoid, to mitigate risks to individuals and communities if the Plan and associated zoning and regulations and specific investments yield negative impacts relating to loss of land or living. These procedures will meet the requirements of the World Bank Policy on Involuntary Resettlement. If there is a need for the Resettlement Policy to be applied for the areas covered by the Plan, then a Resettlement Action Plan will be developed. Overall, the principle of this Policy is to assist affected persons in their efforts to improve and restore their standards of living to levels prevailing prior to the beginning of project implementation or to pre-displacement levels.

(iv) Carrying out of investment-specific Environmental Impact Assessments that meet the requirements of Albanian laws and the applicable World Bank Operations Policies for each applicable individual investment activity under the Program.

9. Institutional and Implementation Arrangements

Program Steering Committee (PSC). The Government will establish the Program Steering Committee, to be responsible for providing overall Program oversight, reviewing Program progress, and assisting in resolving obstacles to Program implementation. The PSC will be composed of high- level decision makers (at the level of Deputy Minister) from the Ministry of Territorial Adjustment and Tourism (chair), Ministry of Finance, Ministry of Economy, Ministry of Environment, Ministry of Transport and Telecommunications, Ministry of Culture, Youth and Sports, Ministry of Local

78 Government and Decentralization, and Ministry of Agriculture and Food; as well as representatives from the regional and local administration and NGOs.

Program Coordination Unit (PCU). The overall institutional coordination of the Program will be carried out by the Ministry of Territorial Adjustment and Tourism (MoTAT), as the leading government agency in charge of overall project coordination. A Program Coordination Unit (PCU) will be set up within the structure of the MoTAT to be responsible for overall project coordination, procurement, financial management, disbursement, monitoring, evaluation and reporting, and will be under the supervision of the Program Authorizing Official.

Program Authorizing Official (PAO). The PAO will be the assigned Deputy Minister of the Ministry of Territorial Adjustment and Tourism, who will have the overall responsibility for supervising the work of the PCU and signing procurement activities. The PAO will report to the Government through the Program Steering Committee on Program’s implementation progress.

The Program activities will be implemented by existing entities at the central, regional or local levels.

Ministry of Territorial Adjustment and Tourism through the PCU will be responsible for providing oversight of activities and support for the implementation of the activities implemented by the MOTAT. A regional team will be established to support implementation of the Program.

Ministry of Environment will be responsible for implementation of the Porto Romano remediation works and the associated institutional strengthening activities. An Implementation Team will be set up under the MoE to oversee and support all technical aspects of the implementation of the project activities under the responsibility of the MoE.

Ministry of Transport and Telecommunication will appoint a Coordinator in the Saranda Port Authority to be responsible for the technical aspects and facilitating the implementation of the activities associated with the Port of Saranda rehabilitation works. The Ports Department at the Ministry of Transport and Telecommunication will be responsible for providing oversight.

Butrint National Park Administration will be responsible for implementing the protected areas management activities and for facilitating implementation of activities under Environmental Protection and Sustainable Economic Activities portion of the Coastal Village Conservation and Development Program.

Municipalities and coastal communes in the southern coast area of Albania will be responsible for facilitating planning and implementation of the Program.

10. Monitoring and Evaluation

The Program monitoring and evaluation function will be carried out by the PCU within the MoTAT.

The PCU will be responsible for preparation of quarterly/annual management reports, which will be submitted to the Program Steering Committee, the World Bank and Program co-financiers. The evaluation of institutional strengthening activities will be done by independent consultant to assess results of the Program in terms of strengthening of local capacity, at the mid-term and towards completion of the Phase 1. Also, beneficiaries from the municipalities, communes and villages

79 targeted under the Program will be surveyed at the beginning, mid-term and completion of the Program to evaluate program’s impacts.

80 Annex 13: Documents in the Project File ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

Albania Coastal Zone Management Plan (Final Report – Phase One); 1995. Prepared by PAP/RAC & Dobbin Milus International.

Albania Coastal Zone Management Plan (Final Report – Phase Two); 1995. Prepared by PAP/RAC & Dobbin Milus International.

SIDA. Assistance to Land-use Planning Legislation in Albania; 2004. Prepared by SIDA.

Environmental Performance Review of Albania; 2003. Prepared by the United Nations Economic Commission for Europe (UNECE).

Albania: Biodiversity Assessment, 2003. Prepared by USAID.

Southern Coastal Region: Priority Assessment Study and SEA as a Tool in Coastal Management in Albania, January 2005. Prepared by the Priority Actions Programme, METAP.

Environmental, Social and Cultural Assessment of Butrint Ramsar Site, November 2004. Prepared by Taulant Bino, Sokol Celo, Shpresa Vangjeli and Agim Toro.

Heritage Assets Mapping (Final Output 1 Report), March 2005. Prepared by SIM Spa GICO Branch.

Southern Albania Maritime Front Study (Interim Report), March 2005. Prepared by Marnet and SGI- Trademco.

Legal Assessment: Demolitions and Involuntary Resettlement Issues in Albania (Final Report), April 2005. Prepared by Kathrine Kelm.

Institutional Strengthening and Environmental Remediation Project Report (Final Report), March 2005. Prepared by GKW consultants.

Pre-feasibility Study and Solid Waste Management Plan for Southern Albania (Final Report), April 2005. Prepared by Solid Waste Consultancy.

Wastewater Management and Integrated Planning for Albania Coastal Zone Study (Final), April 2005. Prepared by Daniel Gunaratnam.

81 Annex 14: Statement of Loans and Credits

ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

Difference between expected and actual Original Amount in US$ Millions disbursements

Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d P077526 2004 POWER SECTOR GENER & RESTRCT'G 0.00 25.00 0.00 0.00 0.00 24.81 0.85 0.00 P082128 2004 WATER RES MGMT 0.00 15.00 0.00 0.00 0.00 14.93 0.00 0.00 P041442 2003 MUN WATER/WW 0.00 15.00 0.00 0.00 0.00 15.01 1.81 0.00 P077297 2003 COM WRKS 2 0.00 15.00 0.00 0.00 0.00 14.80 0.19 0.00 P069479 2002 FISHERY DEVT 0.00 5.60 0.00 0.00 0.00 4.27 0.75 0.00 P074905 2002 PWR SECT REHAB/RESTRCT'G 0.00 29.90 0.00 0.00 0.00 30.21 14.25 0.00 P066260 2002 ROAD MAINT 0.00 17.00 0.00 0.00 0.00 22.20 -3.14 -0.24 P057818 2002 FSAC 0.00 15.00 0.00 0.00 0.00 8.82 -0.44 0.00 P070078 2001 TRADE & TRANS FACIL IN SE EUR 0.00 8.10 0.00 0.00 0.00 0.97 3.06 0.00 P055383 2001 SOC SERV DEVT 0.00 10.00 0.00 0.00 0.00 10.60 -0.92 0.00 P054736 2001 AG SERVICES 0.00 9.90 0.00 0.00 0.00 6.98 1.70 0.00 P069939 2000 PUB ADM REF 0.00 8.50 0.00 0.00 0.00 6.39 8.67 1.20 P069120 2000 EDUC REF 0.00 12.00 0.00 0.00 0.00 2.24 1.47 0.00 P069079 2000 FIN SEC IBTA 0.00 6.50 0.00 0.00 0.00 1.56 1.33 0.00 P057182 2000 LEG/JUD REF 0.00 9.00 0.00 0.00 0.00 4.96 4.51 4.51 P043178 1999 IRRIG & DRAIN 2 0.00 24.00 0.00 0.00 0.00 0.34 0.79 0.00 P051310 1999 MICROCREDIT 0.00 12.00 0.00 0.00 0.00 0.57 0.19 0.89 P045312 1998 HEALTH RECOVERY 0.00 17.00 0.00 0.00 4.03 7.46 10.57 0.87 P040818 1998 DURRES PORT 0.00 16.99 0.00 0.00 0.00 0.64 0.76 0.83 P040975 1998 LAND DEVT 0.00 10.00 0.00 0.00 0.00 0.73 0.30 0.37 Total: 0.00 281.49 0.00 0.00 4.03 178.49 46.70 8.43

82 ALBANIA STATEMENT OF IFC’s Held and Disbursed Portfolio In Millions of US Dollars

Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 1998 AAP 0.00 14.14 0.00 0.00 0.00 0.00 0.00 0.00 2002 INSIG 0.00 6.23 0.00 0.00 0.00 6.22 0.00 0.00 2000 NCBank 0.00 2.00 0.00 0.00 0.00 2.00 0.00 0.00 1999 SEF Eurotech 0.40 0.00 0.00 0.00 0.40 0.00 0.00 0.00 1999 SEF FEFAD Bank 0.00 0.98 0.00 0.00 0.00 0.98 0.00 0.00 2003 Vodafone Albania 42.36 0.00 0.00 9.08 29.90 0.00 0.00 6.41 Total portfolio: 42.76 23.35 0.00 9.08 30.30 9.20 0.00 6.41

Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. 2005 Fushe Kruje 0.03 0.00 0.00 0.00 1998 Patos Marinza 0.03 0.00 0.00 0.05 2001 Patos Marinza In 0.01 0.00 0.00 0.00 2002 Savings Bank 0.00 0.02 0.00 0.00 Total pending commitment: 0.07 0.02 0.00 0.05

83 Annex 15: Country at a Glance ALBANIA INTEGRATED COASTAL ZONE MANAGEMENT AND CLEAN-UP PROJECT (APL-1)

Europe & Lower- POVERTY and SOCIAL Central middle- Albania Asia income Development diamond* 2003 Population, mid-year (millions) 3.2 473 2,655 Life expectancy GNI per capita (Atlas method, US$) 1,740 2,570 1,480 GNI (Atlas method, US$ billions) 5.5 1,217 3,934

Average annual growth, 1997-03 Population (%) 0.3 0.0 0.9 GNI Labor force (%) 0.8 0.2 1.2 Gross per primary M ost recent estimate (latest year available, 1997-03) capita enrollment Poverty (% of population below national poverty line) 25 .. .. Urban population (% of total population) 44 63 50 Life expectancy at birth (years) 74 69 69 Infant mortality (per 1,000 live births) 22 31 32 Child malnutrition (% of children under 5) 14 . . 11 Access to improved water source Access to an improved water source (% of population) 97 91 81 Illiteracy (% of population age 15+) 1310 Gross primary enrollment (% of school-age population) 10 7 10 3 112 Albania M a l e 10 7 10 4 113 Lower-middle-income group F e m a l e 10 7 10 2 111

KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1983 1993 2002 2003 Economic ratios* GDP (US$ billions) .. 1.2 4.8 6.1 Gross domestic investment/GDP 36.1 13.2 22.7 .. Trade Expo rts o f go o ds and services/GDP 18.2 15.4 18.9 .. Gross domestic savings/GDP 33.5 -33.7 -1.4 .. Gro ss natio nal savings/GDP .. 10.6 14.2 ..

Current account balance/GDP .. 1.2 -8.4 .. Domestic Investment Interest payments/GDP .. 0.2 0.4 0.2 savings Total debt/GDP .. 64.0 27.2 25.4 Total debt service/exports 0.0 1.0 3.4 .. Present value of debt/GDP .. .. 18.0 .. Present value of debt/exports .. .. 51.5 .. Indebtedness 1983-93 1993-03 2002 2003 2003-07 (average annual growth) Albania GDP -3.3 6.1 4.7 6.0 .. GDP per capita -4.8 6.5 4.1 5.4 .. Lower-middle-income group Etfdd i 66 55 STRUCTURE of the ECONOM Y 1983 1993 2002 2003 Growth of investment and GDP (%) (% of GDP) Agriculture 34.1 54.6 25.3 .. 60 Industry 43.3 22.9 18.9 .. 40 M anufacturing ...... 20 Services 22.6 22.5 55.7 .. 0 98 99 00 01 02 03 Private consumption 57.8 119.5 93.0 .. -20 General government consumption 8.8 14.1 8.4 .. Imports of goods and services 20.8 62.3 43.1 .. GDI GDP

1983-93 1993-03 2002 2003 Growth of exports and imports (%) (average annual growth) Agriculture 1.2 2.2 2.3 .. 60 Industry -8.3 9.7 2.2 .. 40 M anufacturing .. 8.7 0.3 .. 20

Services -4.1 7.0 6.6 .. 0 Private consumption .. 4.9 5.5 .. -20 98 99 00 01 02 03 General government consumption .. 5.5 9.7 .. -40 Gross domestic investment 2.0 12.3 6.1 .. Exports Imports Imports of goods and services .. 5.6 9.8 ..

84 Albania

PRICES and GOVERNMENT FINANCE 1983 1993 2002 2003 Inflation (%) Domestic prices (% change) 40 Consumer prices .. 85.0 5.2 .. 30 Implicit GDP deflator 0.0 114.8 6.0 3.9 20 Government finance 10 (% of GDP, includes current grants) 0 Current revenue 50.0 28.5 22.7 .. 98 99 00 01 02 03 Current budget balance 24.7 0.0 -0.1 .. GDP deflator CPI Overall surplus/deficit .. -8.7 -6.3 ..

TRADE 1983 1993 2002 2003 Export and import levels (US$ mill.) (US$ millions)

Total exports (fob) 342 112 330 .. 2,000 A griculture .. 20 40 .. M ineral products .. 18 9 .. 1,500 M anufactures .. 1 206 .. Total imports (cif) 384 602 1,485 .. 1,000 Fo o d .. 120 286 .. 500 Fuel and energy .. 85 206 .. Capital goods .. 193 672 .. 0 97 98 99 00 01 02 03 Export price index (1995=100) ...... Import price index (1995=100) ...... Export s Imports Terms of trade (1995=100) ......

BALANCE of PAYMENTS 1983 1993 2002 2003 Current account balance to GDP (%) (US$ millions) Exports of goods and services 354 189 915 .. 0 Imports of goods and services 405 763 2,076 .. 97 98 99 00 01 02 03 Resource balance -51 -574 -1,160 .. -5 Net income 7 34 128 .. Net current transfers 6 555 625 ..

Current account balance -38 15 -408 .. -10

Financing items (net) -3 34 443 .. Changes in net reserves 41 -49 -36 .. -15 Memo: Reserves including gold (US$ millions) .. .. 866 .. Conversion rate (DEC, local/US$) .. 102.1 140.2 121.9

EXTERNAL DEBT and RESOURCE FLOWS 1983 1993 2002 2003 (US$ millions) Composition of 2003 debt (US$ mill.) Total debt outstanding and disbursed .. 786 1,313 1,555 IB RD .. 0 0 0 G: 31 F: 35 IDA .. 28 476 583

Total debt service .. 8 58 52 IB RD .. 0 0 0 B: 583 IDA .. 0 3 5

Composition of net resource flows E: 657 Official grants .. 183 105 .. Official creditors .. 61 131 120 Private creditors .. 11 1 -3 Foreign direct investment .. 58 135 .. P o rtfo lio equity .. 0 0 .. C: 90 D: 159 World Bank program Commitments .. 70 88 61 A - IBRD E - Bilat eral Disbursements .. 26 79 61 B - IDA D - Ot her mult ilat eral F - Private Principal repayments .. 0 0 1 C - IM F G - Short-term

85 IBRD 33742 BOS.& 19° 20° 21° HERZ. CROATIA SERBIA AND MONTENEGRO

Selenice 40°30'N

Vlorë 42° 42° Shëngjin

Adriatic FYR MACEDONIA Sea Tiranë Shengjini Bay Durrës

K L. i Mavrovë V a jo ALBANIA of s ° r ë s 41° 41 a b Vlorë u Area of Map r u Vlorë n

ITALY 40° 40° Sarandë Orikum GREECE

P r. i Ionian Sea D u k a 19° 21° ti L t . i ° S 40 15'N h u s h ic ë s

Llogarait Pass Palase˘ Dhermi˘

Vuno L .

i Himarë D r i n o Kudhes˘ s Bay of Spilesë

Qeparo L

. Gjirokastër 0 2 4 6 8 10 Kilometers i Borsh K a l a s Bay of Palermos ë 0 2 4 6 8 Miles Piqeras

40°00'N Lukovë ° 19 30'E Ionan

ALBANIA Sea Delvinë Bay of Kakomë INTEGRATED COASTAL cës istri i B ZONE MANAGEMENT L. AND CLEAN-UP PROJECT Sarandë SOUTHERN COASTAL ZONE Bay of PORTS Cukë Sarandë SELECTED CITIES AND TOWNS DISTRICT CAPITALS Butrintit Lagoon RIVERS Ksamil 39°45'N MAIN ROADS SECONDARY ROADS GREECE Bay of Xarrë RAILROADS L Butrintit . i Pa vl INTERNATIONAL BOUNDARIES iës

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 19°45'E 20°00'E

JUNE 2005 IBRD 33577 19°E 20°E21°E

SERBIA AND

Maja Jezercë MONTENEGRO (2693 m) ValbonaValbona MALSI E Al p s h Albanian ALBANIA Nort TROPOJTROPOJËË To MADHE Podgorica Bajram Han i Hoti Curri

Koplik Drin FierzëFierzë HAS To Lake SHKODËRSHKODË R Prizren Scutari KrumëKrumë PUKËPUKË ShkodërShkodër (Scutari) Koman PukPukëë Fush KukKukësës ArrëzArrëz Kalimash ° 42 N 42°N KUKËSKUKË S

Bunë LEZHLEZHËË Zall-Rec ShShëngjinëngjin MIRDITËMIRDITË i Drinit Bay Rubik Z Kurbneshi i

LezhëLezhë n i

r

RrëshenRrëshen D Lake Peshkopi Shkopet Ulzës FushëFushë Kuge LaçLaç UlëzUlëz Rodonit Bay Burrel LAÇLAÇ DIBRA Mamurasi MAMATT KrujëKrujë Lalëzit Adriatic Bay KRUJËKRUJË FYR FushëFushë BulquizëBulquizë DURRDURRËSËS KrujëKrujë BULQIZËBULQIZË MACEDONIA Sea VorëVorë TIRANTIRANËË DurrësDurrës Shijak (TIRANA) Durrësit TIRANËTIRANË Bay IbëIbë Librazhd To KavajëKavajë KrrabëKrrabë Struga LIBRAZHD KAKAVAJËVAJË Elbasan PEQIN Lake VidhësVidhës Perrenjas ° Peqin Ohrid 41 N ELBASAN 41°N Karavastasë LUSHNJLUSHNJËË CërrikCërrik Bay LushnjëLushnjë POGRADEC Lake Kajan Gramsh Pogradec Prespa

KUÇOVËKUÇOVË GRAMSH 010203040 Kilometers FIER KuçovëKuçovë Little Fier Lake Prespa MarinzëMarinzë Berat 0 10 20 30 Miles Patos Maliq DEVOLL BERATBERAT Ballsh KORÇËKORÇË Kafaraj SKRAPARSKRAPAR KorçëKorçë Bilisht 19°E Vjosë MALLA- KASTER ÇorovodëÇorovodë ALBANIA Selenice Bay of VlorëVlorë TEPELENËTEPELENË Vlorë INTEGRATED COASTAL KrahësKrahës ErsekëErsekë MavrovëMavrovë PËRMETP Ë RMET VLORËVLORË KOLONJËKOLONJË ZONE MANAGEMENT TepelenëTepelenë KelcyrëKelcyrë PërmetPërmet AND CLEAN-UP PROJECT Vjosë GREECE PORTS GJIROKASTËRGJIROKASTËR For detail, SELECTED CITIES AND TOWNS see IBRD 33742. GjirokastërGjirokastër ° DISTRICT CAPITALS 40°N Ionian DELVINËDELVINË 40 N NATIONAL CAPITAL DelvinëDelvinë To RIVERS SarandëSarandë Ioánina Bay of Kakavija MAIN ROADS Sea Sarandë SARANDËSARANDË RAILROADS This map was produced by the Map Design Unit of The World Bank. GREECE The boundaries, colors, denominations and any other information DISTRICT BOUNDARIES shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any INTERNATIONAL BOUNDARIES endorsement or acceptance of such boundaries. 20°E21°E

JUNE 2005