Document of THE WORLD BANK Report No. 22526-UA Public Disclosure Authorized PROJECT APPRAISAL DOCUMENT ONA PROPOSED GRANT FROM THE GLOBAL ENVIRONMENT FACILITY TRUST FUND Public Disclosure Authorized IN THE AMOUNT OF SDR 5.4 MILLION (US$6.9 MILLION EQUIVALENT) TO UKRAINE FOR THE AZOV BLACK SEA CORRIDOR BIODIVERSITY CONSERVATION PROJECT Public Disclosure Authorized December 14, 2001 Environmentallyand SociallySustainable Development Sector Unit Ukraine and BelarusCountry Unit Europeand CentralAsia Region Public Disclosure Authorized CURRENCY EQUIVALENTS (Exchange Rate Effective January 200 1) Currency Unit = Hryvnia (UAH) UAH 1.00 = US$0.18 US$1.00 = UAH 5.43 FISCAL YEAR January 1 -- December 31 ABBREVIATIONS AND ACRONYMS BSAP Biodiversity Strategy and Action Plan BSEP Black Sea Environmental Program CAS Country Assistance Strategy COP Conference of the Parties CSCEP Crimea State Committee for EnvironmnentalProtection EA Environmental Assessment EU European Union EMP Environmental Management Plan FSU Former Soviet Union GEF Global Environment Facility GIS Geographic Information System GOE Government-owned Enterprises IDF Institutional Development Fund LAC Local Advisory Committee MENR Ministry of Ecology and Natural Resources NGO Nongovernmental Organization PSC Project Steering Committee PAL Programmatic Adjustment Loan PIP Project Implementation Plan PIU Project Implementation Unit PMR Project Management Report RLP Regional Landscape Park SA Special Account SAC Scientific Advisory Committee SOE Statement of Expenditure ULRMC Ukrainian Land and Resource Management Center USAID United States Agency for Intemational Development Vice President: Johannes F. Limn Country Manager/Director: Luca Barbone Sector Manager/Director: Kevin M. Cleaver Task Team Leader/Task Manager: Phillip Brylski UKRAINE AZOV BLACK SEA CORRIDOR BIODIVERSITY CONSERVATION CONTENTS A. Project Development Objective Page 1. Project development objective 2 2. Key performance indicators 2 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 2 2. Main sector issues and Government strategy 5 3. Sector issues to be addressed by the project and strategic choices 7 C. Project Description Summary 1. Project components 8 2. Key policy and institutional reforms supported by the project 11 3. Benefits and target population 11 4. Institutional and implementation arrangements 11 D. Project Rationale 1. Project alternatives considered and reasons for rejection 14 2. Major related projects financed by the Bank and other development agencies 14 3. Lessons learned and reflected in the project design 15 4. Indications of borrower commitment and ownership 17 5. Value added of Bank support in this project 17 E. Summary Project Analysis 1. Econornic 18 2. Financial 18 3. Technical 19 4. Institutional 19 5. Environmental 20 6. Social 22 7. Safeguard Policies 23 F. Sustainability and Risks 1. Sustainability 24 2. Critical risks 24 3. Possiblecontroversial aspects 25 G. Main Conditions 1. EffectivenessCondition 25 2. Other 25 H. Readinessfor Inplementation 26 1. Compliancewith BankPolicies 26 Annexes Anmex1: ProjectDesign Summary 27 Annex 2: DetailedProject Description 33 Annex 3: EstimatedProject Costs 47 Annex 4: IncrementalCosts and GlobalEnvironmental Benefits 48 Annex 5: Financial Summary 55 Annex 6: Procurementand DisbursementArrngements 56 Annex 7: ProjectProcessing Schedule 65 Annex 8: Documentsin the ProjectFile 66 Annex 9: Statementof Loans and Credits 68 Annex 10: Countryat a Glance 70 Annex I1: StakeholderAnalysis and ParticipatoryApproach 72 MAP(S) NA UKRAINE Azov Black Sea Corridor Biodiversity Conservation Project Appraisal Document Europe and Central Asia Region ECSSD Date: December 14, 2001 Team Leader: Phillip Brylski Country Manager/Director: Luca Barbone Sector Manager/Director: Marjory-Anne Bromhead Project ID: P048790 Sector(s): VM - Natural Resources Management Theme(s): Focal Area: B - Biodiversity Poverty Targeted Intervention: N ProgramFinancing Data [ ] Loan [ ] Credit mX]Grant [1 Guarantee [ Other: For Loans/Credits/Others: Amount (US$m): Financing Plan (US$m): Source Local Foreign Total BORROWER/RECIPIENT 1.70 0.00 1.70 DENMARK: DANISH INTL. DEV. ASSISTANCE (DANIDA) 0.15 0.45 0.60 EC: TECH ASSISTANCE FOR CIS - TACIS 0.50 1.50 2.00 GLOBAL ENVIRONMENT - ASSOCIATED IBRD FUND 14.50 1.50 16.00 GLOBAL ENVIRONMENT FACILITY 5.44 1.46 6.90 NETHERLANDS, GOV. OF THE (EXCEPT FOR 0.15 0.35 0.50 MOFA/MIN.OF DEV.COOP.) US, GOV. OF 0.10 0.10 0.20 LOCAL GOVTS. (PROV., DISTRICT, CITY) OF BORROWING 0.40 0.00 0.40 COUNTRY LOCAL SOURCES OF BORROWING COUNTRY 0.30 0.00 0.30 UK: UNITED KINGDOM KNOW HOW FUND 0.10 0.30 0.40 WORLD WILDLIFE FUND 1.50 2.00 3.50 Total: 24.84 7.66 32.50 Borrower/Recipient:UKRAINE Responsibleagency: MINISTRY OF ENVIRONMENT AND NATURAL RESOURCES Address: 5 Khreshchatyk Street, Kyiv, Ukraine Contact Person: Mr. Yaroslav Movchan Estimateddisbursements ( Bank FY/US$m): FY 2002 2003 2004 2005 2006 Annual 0.75 1.60 2.00 1.55 1.00 Cumulative 0.75 2.35 4.35 5.90 6.90 Project implementationperiod: 5 years; Note: Estimated Disbursements are for GEF financing only 0Cb PADF- - aCh 2000 A. ProjectDevelopment Objective 1. Project development objective: (see Annex 1) Projectdevelopment objective: The project objectiveis to conservecoastal biodiversity within the Azov Black Sea coastal corridorby strengtheningthe protectedarea network, mainstreaming biodiversity conservationinto the agriculturallandscapes which connectthem, and by buildingsupport at the national and internationallevels for sustainabledevelopment of the region'sunique biologicallandscape. Globaldevelopment objective: The global objectiveis to supportin situ conservationof biodiversityand threatenedwetland ecosystemsthrough protected area planningand reductionof agriculturalimpacts on Ramsarsites. The Projectwould implementrecommendations of the Black Sea EnvironmentProgram, help removeinstitutional, financial and knowledgebarriers which serveas disincentivesto the adoptionof environmentallysustainable agricultural practices, and developUkraine's leadershipin international agreementssuch as the Bonn Conventionon MigratorySpecies. 2. Key performanceindicators: (see Annex 1) The key indicatorsof project success are: * Ramsarcoastal wetlands and associatedupland steppecommunities on the Azov Black Sea coast under full protection,with managementplans under implementation,increased by 250,000hectares, through establishmentof new protectedareas and improvedmanagement of existingones; * Increasedsupport for biodiversityconservation, marked by increasedparticipation of local communitiesin protectedarea managementand conservationactivities; * Land use plans that integratenew and existingProtected Areas and sites of other high biodiversity value preparedin six coastalrayons; - Farm managementplans to reduce nutrientrunoff underimplementation on 10,000hectares of coastal farmland; * Improvednutrient reduction and erosioncontrol measures under implementationin at leastone raion of each coastaloblast; * 5,000 hectaresof forestbelts under sustainableuse, with defined roles of farms in theirmanagement. B. StrategicContext 1. Sector-relatedCountry AssistanceStrategy (CAS) goal supported by the project: (see Annex 1) Documentnumber: 20723-UA Dateof latestCAS discussion: 08/16/00 The CASseeks to assistGovernment and civil societyin implementinga broad-basedpoverty reduction strategy,with a focus on institutionbuilding and environmentallysustainable development. The CAS statesthat despiteecological problems, Ukraine has conserveda number of typicaland uniqueecosystems which have been lost in othercountries in Europeand elsewhere. The GEF biodiversityproject is included in the CAS,which states that the Bank willhelp Governmentto: (i) improvethe environmentalregulatory framework;(ii) improvethe capacityof the Ministryof Environmentand Natural Resources;and (iii) -2 - prepare and implement investment projects in the protection of biodiversity, and improvement of land, water, and solid waste management. la. Global Operational strategy/Program objective addressed by the project: The Ukrainian coasts of the Black and Azov seas contain large and biologically diverse wetland complexes, some of which are the best or only remaining examples of these wetland types in Europe. 650,000 hectares of the most important of these have been designated Ramsar sites, including 250,000 hectares of the unique saline lagoons and mudflats in the Sivash ecosystem of northern Crimea. These wetlands and the adjoining upland steppe habitats along the northwestern border of the Black Sea function as the Azov Black Sea Ecological Corridor, are critical spawning grounds for numerous fish species, some of which are threatened, and wintering and feeding habitat for millions of geese, ducks and waders that overwinter there or utilize the wetlands for feeding and resting on their annual migration between northern Europe and Siberia and Africa. Fifteen of the 27 European threatened bird species stopover or breed in these wetlands, including the majority of the world's populations of the white pelican and the red-breasted goose and 60% of the world population of the broad billed sandpiper. The Ecological Corridor also contains undisturbed steppe, Ukraine's most endangered habitat. The Ukrainian steppe areas in the project region are the main surviving European representatives of Stipa steppes which range over the Eurasian plains from China to Ukraine. These species-rich communities, dominated by grasses