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World Bank Document Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 30185 IMPLEMENTATION COMPLETION REPORT (TF-50032) ON A GRANT Public Disclosure Authorized IN THE AMOUNT OF US$ 2.0 MILLION TO CRNOGORSKO PRIMORJE PEW FROM THE TRUST FUND FOR SERBIA AND MONTENEGRO FOR A MONTENEGRO ENVIRONMENTAL INFRASTRUCTURE PROJECT Public Disclosure Authorized MARCH 11, 2005 Infrastructure and Energy Sector Unit South East Europe Country Unit Europe and Central Asia Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective September 30, 2004) Currency Unit = Euro (€) € 1 = US$ 1.23 US$ 1 = € 0.81 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS CAS - Country Assistance Strategy d.o.o. - Limited Liability Company in Serbian EAR - European Agency for Reconstruction EMP - Environmental Management Plan ERTP - Economic Reconstruction and Transition Program FRY - Federal Republic of Yugoslavia GDP - Gross Domestic Product ICR - Implementation Completion Report IDA - International Development Association FRR - Financial Rate of Return KfW - Kreditanstalt fur Wiederaufbau MEIP - Montenegro Environmental Infrastructure Project MESTAP - Montenegro Environmentally Sensitive Tourist Areas Project MJC - Multi-Municipal Joint Solid Waste Disposal Company NGO - Non-government Organization NIMBY- Not-in-my-back-yard syndrome PAD - Project Appraisal Document PEW - Public Enterprise for Water Supply, Wastewater Treatment and Solid Waste Disposal (Crnogorsko Primorje) PMF - Podgorica Municipal Fund PSR - Project Status Report PViK - Javno Preduzece Vodovod i Kanalizacija (Podgorica Water Supply Company) RoM - Republic of Montenegro SaM - Serbia and Montenegro SFRY - Socialist Federal Republic of Yugoslavia WHO - World Health Organization TSS - Transition Support Strategy Vice President: Shigeo Katsu Country Director: Orsalia Kalantzopoulos Sector Manager: Sumter Lee Travers Task Team Leader: Manuel G. Mariño SERBIA AND MONTENEGRO Montenegro Environmental Infrastructure Project CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 1 4. Achievement of Objective and Outputs 5 5. Major Factors Affecting Implementation and Outcome 8 6. Sustainability 9 7. Bank and Borrower Performance 11 8. Lessons Learned 12 9. Partner Comments 13 10. Additional Information 14 Annex 1. Key Performance Indicators/Log Frame Matrix 15 Annex 2. Project Costs and Financing 16 Annex 3. Economic Costs and Benefits 18 Annex 4. Bank Inputs 19 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 20 Annex 6. Ratings of Bank and Borrower Performance 21 Annex 7. List of Supporting Documents 22 Annex 8. FRR calculation 23 Annex 9. Recipient's Contribution 24 Annex 10. ICR Mission Aide-Memoire 32 Project ID: P074618 Project Name: Montenegro Environmental Infrastructure Team Leader: Manuel G. Marino TL Unit: ECSIE ICR Type: Core ICR Report Date: March 11, 2005 1. Project Data Name: Montenegro Environmental Infrastructure L/C/TF Number: TF-50032 Country/Department: SERBIA AND MONTENEGRO Region: Europe and Central Asia Region Sector/subsector: Solid waste management (68%); Water supply (32%) Theme: Water resource management (P); Pollution management and environmental health (P); Other urban development (P); Infrastructure services for private sector development (S) KEY DATES Original Revised/Actual PCD: 07/12/2001 Effective: 03/19/2002 03/19/2002 Appraisal: 07/16/2001 MTR: Approval: 11/28/2001 Closing: 09/30/2004 09/30/2004 Borrower/Implementing Agency: FEDERAL REPUBLIC OF YUGOSLAVIA/CRNOGORSKO PRIMORJE PEW Other Partners: STAFF Current At Appraisal Vice President: Shigeo Katsu Johannes F. Linn Country Director: Orsalia Kalantzopoulos Christiaan J. Poortman Sector Manager: Sumter Lee Travers Motoo Konishi Team Leader at ICR: Manuel G. Marino Manuel G. Marino ICR Primary Author: Michael John Webster 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: Context: Serbia and Montenegro (SaM) – formerly the Federal Republic of Yugoslavia (FRY) – succeeded to the membership of the former Socialist Federal Republic of Yugoslavia (SFRY) in the Bank in May 2001. The Bank’s initial support to SaM was governed by a two-phase Transitional Support Strategy (TSS). In the first (pre-membership) phase a US$30 million trust fund was established by the Bank to finance an emergency economic recovery and transition program in FRY. Five projects were financed out of this trust fund, one in Montenegro (this project, i.e., the Montenegro Environmental Infrastructure Project (US$2 million)) and the other four in Serbia, namely, Private Sector Development Technical Assistance Grant (US$6 million), Financial Sector Development Technical Assistance Grant (US$6 million), Electric Power Emergency Reconstruction Project (US$6 million) and Social Assistance Special Financing (US$10 million). The second phase provided a broader program of support for the Economic Reconstruction and Transition Program (ERTP) financed under a three-year exceptional International Development Association (IDA) allocation of up to US$540 million. The first full Country Assistance Strategy (CAS) for SaM, covering FY05-07, was discussed by the Executive Directors in December 2004. Montenegro is the smaller (0.6 million people) of the two republics comprising the union of Serbia and Montenegro (10.7 million people). The Bank has a long history of support to the water sector in both republics, including the preparation of a water/coastal management project for Montenegro in the early 1990s. In preparing this project -- which was not considered by the Executive Directors because of the change in country circumstances -- the Bank worked closely with Crnogorsko Primorje (Public Enterprise for Water Supply, Wastewater Treatment, and Solid Waste Disposal (PEW)), the government company formed to work on regional water, wastewater and solid waste sector initiatives in Montenegro. The grant for the Montenegro Environmental Infrastructure Project was awarded directly to PEW, and guaranteed jointly by FRY and Montenegro. Objective: The objective of the project was to improve environmental conditions in the coastal region of Montenegro and to improve the quality of water supply in the Zeta Valley (an area near the republic’s capital, Podgorica). This objective was to be achieved through: (a) the rehabilitation of key environmental (solid waste) infrastructure in several coastal municipalities in the region of Kotor Bay, a prime tourist zone; (b) the completion of a water pipeline to replace contaminated water sources in the Zeta Valley; and (c) technical assistance for engineering services and auditing. The project was conceived as a quick operation to address urgent problems, leaving for a second operation more fundamental actions and long-term solutions. Assessment of objective: The objective of the project was clear, simple, realistic and important for the Government of Montenegro (GOM), and a priority for the Bank’s program of support. The project had two distinct objectives in two distinct locations, namely: (i) environmental improvements to the coastal region; and (ii) improved water quality in the Zeta Valley. These two objectives are treated separately. The TSS argues (as stated in the 2001 TSS, and the 2002 and 2004 TSS updates) that by improving the environmental conditions of the coastal areas, the project would contribute to “stimulating near-term growth and creating the basis for a sustainable supply response” through one of the primary growth drivers in Montenegro: tourism. Montenegro’s coastal areas are a prime source of revenue due to the large influx of tourists during the summer season (up to 500,000 per day); however, environmental degradation, due to - 2 - historic under-investment, and poor operation and maintenance of sanitary infrastructure has adversely impacted the tourism sector (the Tourist Master Plan for Montenegro (2001) states that improvements in sanitary infrastructure were a precondition for the development of tourism). While the project was expected to have a positive impact on tourism, it was recognized that the linkage between the project outputs and tourism would be difficult to demonstrate and tourist revenues were therefore not taken as an outcome indicator. During the summer season, all of the six municipalities in the coastal region (Herceg Novi, Kotor, Tivat, Budva, Bar and Ulcinj) experienced water shortages, suffered poor water quality, and did not have adequate facilities for the disposal of wastewater and solid waste. Most solid waste in Montenegro, particularly in the coastal area, was collected and disposed of in wild dumps that were not regarded as sanitary. This posed a threat to public health through the potential contamination of groundwater and the potential build-up of gases. The Bank’s project
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