Document of The World Bank Report No. PAD00000479 Public Disclosure Authorized INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PROJECT APPRAISAL DOCUMENT ON A PROPOSED GEF GRANT Public Disclosure Authorized IN THE AMOUNT OF US$ 6.77 MILLION TO THE REPUBLIC OF CROATIA AND BOSNIA AND HERZEGOVINA FOR THE GEF ADRIATIC SEA ENVIRONMENTAL POLLUTION CONTROL PROJECT (I) CROATIA AND BOSNIA AND HERZEGOVINA Public Disclosure Authorized April 23, 2014 Sustainable Development Department South East Europe Country Unit 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 Public Disclosure Authorized World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective April 23, 2014) Currency Unit = Euro Euro 0.724 = US$1.00 US$ 1.38 = Euro 1.00 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ASEP Adriatic Sea Environmental Program BiH Bosnia and Herzegovina CPS Country Partnership Strategy DA Designated Account EA Environmental Impact Assessment EC European Commission EcAp Ecosystem Approach EMP Environmental Management Plan EPEEF Environmental Protection and Energy Efficiency Fund ESMF Environmental and Social Management Framework EU European Union GDP Gross Domestic Product GEF Global Environment Facility GPA Global Program of Action GTAP Global Trade Analysis Project IBRD International Bank for Reconstruction and Development ICZM Integrated Coastal Zone Management IFI International Financing Institutions IRR Internal Rates of Return MAP Mediterranean Action Plan MoFTER Ministry of Foreign Trade and Economic Relations MSFD Marine Strategy Framework Directive NAP National Action Plans NBSAP National Biodiversity Strategic Action Plans NEAP National Environmental Action Plan NGO Non-Governmental Organization NPV Net Present Value PDO Project Development Objectives PMT Project Management Team PSC Project Steering Committee SAP Strategic Action Plans SAM Social Accounting Matrix SEA Strategic Environmental Assessment SIL Specific Investment Loan SOEs Statements of Expenditures SWMC Solid Waste Management Company TA Technical Assistance TDA Trans-boundary Diagnosis Analysis TORs Terms of Reference WPP Water Partnership Program Regional Vice President: Laura Tuck (ECAVP) Country Director: Ellen Goldstein (ECCU4) and Mamta Murthi (ECCU5) Sector Director: Laszlo Lovei (ECSSD) Sector Manager: Sumila Gulyani (ECSUW) Task Team Leader: Manuel Mariño (ECSUW) GEF ADRIATIC SEA ENVIRONMENTAL POLLUTION CONTROL PROJECT (I) CROATIA AND BOSNIA AND HERZEGOVINA P096213 CONTENTS I. STRATEGIC CONTEXT ....................................................................................................1 II. PROJECT DEVELOPMENT OBJECTIVES (PDO) .......................................................6 III. PROJECT DESCRIPTION ................................................................................................6 IV. IMPLEMENTATION .......................................................................................................11 V. KEY RISKS AND MITIGATION MEASURES ..............................................................13 VI. APPRAISAL SUMMARY .................................................................................................15 Annex 1: Results Framework and Monitoring ............................................................................22 Annex 2: Detailed Project Description .........................................................................................25 Annex 3: Implementation Arrangements.....................................................................................30 Annex 4: Operational Risk Assessment Framework (ORAF) ....................................................40 Annex 5: Implementation Support Plan ......................................................................................44 Annex 6: Economic analisis of the program and Financial analysis of the implementing utilities ...........................................................................................................................................47 Scientific and Technical Advisory Panel .....................................................................................64 STAP Scientific and Technical screening of the Project Identification Form (PIF) ................64 MAPS .............................................................................................................................................67 PAD DATA SHEET GEF Adriatic Sea Environmental Pollution Control Project (I). Croatia and Bosnia & Herzegovina (P143921) PROJECT APPRAISAL DOCUMENT . EUROPE AND CENTRAL ASIA ECSUW Report No.: PAD00000479 . Basic Information Project ID Lending Instrument EA Category Team Leader P143921 Specific Investment Loan B - Partial Manuel G. Mariño (GEF Grant) Assessment Project Implementation Start Date Project Implementation End Date 30-May-2014 15-Sep-2016 Expected Effectiveness Date Expected Closing Date 30-Jun-2014 15-Mar-2017 Joint IFC GEF Focal Area No International waters Country Sector Manager Sector Director Regional Vice President Directors Mamta Murthi Sumila Gulyani Laszlo Lovei and Laura Tuck Ellen Goldstein . Borrower: Croatia, Bosnia and Herzegovina . Project Financing Data(US$ M) [ ] Loan [X] Grant [ ] Other [ ] Credit [ ] Guarantee For Loans/Credits/Others Total Project Cost (US$ M): 29.97 Total Bank Financing (US$ M): 6.77 . Financing Source Amount (US$ M) BORROWER/RECIPIENT 23.20 Global Environment Facility (GEF) 6.77 Municipalities of Borrowing Country 0.00 i Total 29.97 . Expected Disbursements (in US$ Million) Fiscal Year 2014 2015 2016 2017 Annual 0.50 1.00 2.50 2.77 Cumulative 0.50 1.50 4.00 6.77 . Global Environmental Objective(s) Proposed Global Environmental Objective(s) The Project’s development and global environmental objectives are: (a) to reduce the discharge of pollutants with transboundary importance, particularly Nitrogen, in selected hotspots of the eastern Adriatic Sea; and (b) to improve the capacity in the Republic of Croatia and Bosnia and Herzegovina to prepare pollution control projects in selected localities of Dalmatia and Herzegovina and to strengthen the capacity to monitor the sea water quality. Project Beneficiaries The primary Project beneficiaries are the people directly dependent on the Adriatic Sea waters for their livelihood and recreation, such as those involved in the fisheries and the tourism industry. In addition, institutional development and knowledge sharing facilitated through the Project would contribute to strengthening of various institutions and/or agencies responsible for environmental management in Croatia and Bosnia and Herzegovina to implement the required reforms. These institutions include local and central governments (including urban planning departments / institutes and water resources institutions), NGOs, water and sanitation companies/municipal departments, and solid waste management operators. PDO Level Results Indicators Achievement of the PDO would be monitored and measured through the following indicators: • Nutrient load reduction (Nitrogen-N) achieved in the demonstration investments financed under the project (Kg/year) • Number of investments proposals prepared and presented to the EU for funding; and • Number of sea water quality measurements reported annually by the Croatian Ministry of Environment and Natural Resources from the new monitoring system . Components Component Name Cost (US$ Millions) Component 1: Demonstrative Investments to reduce 27.77 Nutrient Discharges and Improve Monitoring Component 2: Technical Assistance 1.98 Component 3: Project Management 0.22 . Compliance Policy ii Does the Project depart from the CAS in content or in other significant Yes [ ] No [ X ] respects? . Does the Project require any waivers of Bank policies? Yes [ ] No [X] Have these been approved by Bank management? Yes [ ] No [ X ] Is approval for any policy waiver sought from the Board? Yes [ ] No [X] Does the Project meet the Regional criteria for readiness for Yes [X] No [ ] implementation? . Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 X Natural Habitats OP/BP 4.04 X Forests OP/BP 4.36 X Pest Management OP 4.09 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.10 X Involuntary Resettlement OP/BP 4.12 X Safety of Dams OP/BP 4.37 X Projects on International Waterways OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X . Legal Covenants Name Recurrent Due Date Frequency Effectiveness No Before N/A Effectiveness Description of Condition (Summary) (a) Adoption of the Project Operations Manual by each the Croatian Environmental Protection and Energy Efficiency Fund (EPEEF) and the Ministry of Foreign Trade and Economic Relations (MoFTER). (b) Execution of the Subsidiary Agreement on behalf of the Republic of Croatia and EPEEF. (c) EPEEF and Cistoca d.o.o. Zadar and the City of Zadar have entered into contractual arrangements, satisfactory to the World Bank, to ensure EPEEF’s access rights at the solid waste leachate collection and treatment plant in Zadar’s landfill for the implementation of the Project. (d) MoFTER and J.P. Deponija d.o.o. Mostar and the City of Mostar have entered into contractual arrangements, satisfactory to the World Bank, to ensure the MoFTER’s access rights to the solid waste leachate collection and treatment plant in Mostar’s landfill for the implementation of the Project. (e) Satisfactory