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Document of The World Bank

Report No: ICR00001647

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-36720 IDA-36721)

ON A

CREDIT

IN THE AMOUNT OF SDR 14.3 MILLION (US$ 18.0 MILLION EQUIVALENT)

AND AN

ADDITIONAL FINANCING CREDIT

IN THE AMOUNT OF SDR 5.3 MILLION (US$ 8.0 MILLION EQUIVALENT)

TO THE

GOVERNMENT OF BOSNIA AND HERZEGOVINA

FOR A

SOLID WASTE MANAGEMENT PROJECT

DECEMBER 7, 2010

Sustainable Development Department South East Europe Country Unit Europe and Central Asia Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective December 7, 2010)

Currency Unit = Currency Unit = BAM (Bosnian Mark)

BAM 1.49 = US$1 US$1.65 = SDR 1

FISCAL YEAR

January 1 – December 31

ABBREVIATIONS AND ACRONYMS

BiH Bosnia and Herzegovina CAS Country Assistance Strategy CSE Communal Service

Enterprise CSD Communal Services

Departments CPS Country Partnership Strategy EA Environmental Assessment ECA Europe and Central Asia EDSGF Economic Development

Strategy Global Framework EU European Union FBiH Federation of Bosnia and

Herzegovina FMET Federal Ministry of

Environment and Tourism FM Financial Management FMS Financial Management

System IBRD International Bank for

Reconstruction and Development

IDA International Development Association

MSWM Municipal Solid Waste

Management MTR Mid-Term Review MUCE Ministry of Urbanism, Civil

Engineering, and Environment (RS)

NIMBY Not in My Back Yard NPV Net Present Value NGO Non-Governmental

Organization PAD Project Appraisal Document PIT Project Implementing Team PMR Project Management Report PMU Project Management Unit RS Republika Srpska SWM Solid Waste Management SWMP Solid Waste Management

Project

Vice President: Philippe H. Le Houerou

Country Director: Jane Armitage

Sector Manager: Wael Zakout

Project Team Leader: Vesna Francic

ICR Team Leader: Salman Anees

BOSNIA AND HERZEGOVINA SOLID WASTE MANAGEMENT PROJECT

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design ............................................... 12. Key Factors Affecting Implementation and Outcomes .............................................. 13. Assessment of Outcomes ............................................................................................ 24. Assessment of Risk to Development Outcome ........................................................... 35. Assessment of Bank and Borrower Performance ....................................................... 36. Lessons Learned ......................................................................................................... 37. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ............ 3Annex 1. Project Costs and Financing ............................................................................ 4Annex 2. Outputs by Component ................................................................................... 6Annex 3. Economic and Financial Analysis ................................................................... 7Annex 4. Bank Lending and Implementation Support/Supervision Processes .............. 8Annex 5. Beneficiary Survey Results ........................................................................... 10Annex 6. Stakeholder Workshop Report and Results ................................................... 11Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 12Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 13Annex 9. List of Supporting Documents ...................................................................... 14

MAP

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A. Basic Information

Country: Bosnia and Herzegovina

Project Name: Solid Waste Management Project

Project ID: P057950 L/C/TF Number(s): IDA-36720,IDA-36721,TF-26259

ICR Date: 12/27/2010 ICR Type: Core ICR

Lending Instrument: SIL Borrower: GOVERNMENT OF BOSNIA AND HERZEGOVINA

Original Total Commitment:

XDR 14.30M Disbursed Amount: XDR 19.50M

Revised Amount: XDR 19.50M

Environmental Category: B

Implementing Agencies: FBiH Ministry of Environment and Tourism

Cofinanciers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 05/04/2001 Effectiveness: 10/31/2002 10/31/2002

Appraisal: 03/18/2002 Restructuring(s):

Approval: 06/20/2002 Mid-term Review: 06/27/2006 10/01/2007

Closing: 02/29/2008 06/30/2010 C. Ratings Summary C.1 Performance Rating by ICR

Outcomes: Satisfactory

Risk to Development Outcome: Low or Negligible

Bank Performance: Satisfactory

Borrower Performance: Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Satisfactory Government: Satisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies:

Highly Satisfactory

Overall Bank Performance:

Satisfactory Overall Borrower Performance:

Satisfactory

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C.3 Quality at Entry and Implementation Performance IndicatorsImplementation

Performance Indicators

QAG Assessments (if any)

Rating

Potential Problem Project at any time (Yes/No):

No Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

No Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Central government administration 3 3

Solid waste management 97 97

Theme Code (as % of total Bank financing)

Other financial and private sector development 17 17

Other urban development 33 33

Pollution management and environmental health 33 33

State-owned enterprise restructuring and privatization 17 17 E. Bank Staff

Positions At ICR At Approval

Vice President: Philippe H. Le Houerou Johannes F. Linn

Country Director: Jane Armitage Christiaan J. Poortman

Sector Manager: Wael Zakout Motoo Konishi

Project Team Leader: Vesna Francic Seema Manghee

ICR Team Leader: Salman Anees

ICR Primary Author: Salman Anees F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document) (1) Increase the quality, availability and financial sustainability of solid-waste services in participating areas; (2) Increase administrative and technical capacity for solid waste management at the local and Entity level; (3) Improve the cost recovery mechanism of the sector to encourage private sector involvement; and (4) Correct environmental problems and reduce health hazards caused by inadequate waste collection and disposal systems.

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Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Multi-municipal waste management districts established by September 2002

Value quantitative or Qualitative)

4 multi municipal established

6 multi municipal districts established

8 multi municipal waste management district established and included in the project

Date achieved 06/20/2002 09/01/2007 06/25/2010 Comments (incl. % achievement)

Indicator 2 : 4 regional landfill sites operational and 1 transfer station operating by January 2004


0 4 regional landfills operational

6 regional landfills operational


Indicator 3 : 20% reduction in the number of wild dumpsites Value quantitative or Qualitative)

0 20% reductions of wild dumpsites

15% reduction of wild dumpsites


Indicator 4 : Nearly 60% of solid wastes being disposed of in a sanitary landfill or other environmentally sound manner


0

60% of disposed waste disposed in environmentally sound manner

more than 50% of disposed waste in environmentally sound manner


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Indicator 5 : Strengthening of appropriate institutions to manage solid waste services


Underway Establish PITs in regions/utilities

PMU and PITs established; 6 utilities generating income


Indicator 6 : Business Plans for future development of waste disposal sites prepared by January 2004; approved by May 2004


Underway 4 Business Plans to be finalized

4 Business Plans for Utilities completed


Indicator 7 : Education and public awareness campaigns under implementation six months after project effectiveness


Underway

Public Awareness campaigns at local level still ongoing. Public campaign at central level underway

Local education & Public Awareness campaign completed in 5 regions; "NIMBY" campaign conducted in Fed in 2008, 2009 and still underway


Indicator 8 : Agreed upon program to achieve gradual cost-recovery system and timetable for its implementation


Underway

Cost recovery program prepared in 2 regions; implementation started

Cost recovery program prepared in 4 regions; separation program started in 5 regions


Indicator 9 : Recycling awarded to either foreign or domestic private firms by 2004


Underway Recycling pilot project in 1 region prepared

Recycling facility installed and operational in 4 regions; contract

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between utilities and private companies for recycling paper, aluminum bottles, plastic and iron


Indicator 10 : At least 75% of population in project areas paying regularly for services by the end of the project


Underway

75% of population in 2 operational landfills paying fees for services regularly

70% of population in project areas paying regularly for services


Indicator 11 : Wild waste dumps closed and monitoring of groundwater being undertaken regularly


Identification of wild dumps underway

Identification of all wild dumpsites in project areas; preparation of programs/wild dumpsites for closure in project areas finalized; Environmental Baselines and Monitoring Plans prepared

Identification of 80% wild dumpsites in project areas;

Date achieved 06/20/2007 06/15/2008 06/25/2010

Comments (incl. % achievement)

Only after identification, closure of dumpsites could be undertaken. Only 80% dumpsites were identified because many other sites were not accessible due to the presence of dangerous mines left over from the war. 159 dumpsites cleaned in three regions.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Rehabilitation of four sanitary landfills in Tuzla Value Rehabilitation of four Rehab. of 3 Rehabilitation of 6

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(quantitative or Qualitative)

sanitary landfills landfills completed and operational, 1 landfill under rehab. and final design in preparation for 2 project areas by June 2005

regional sanitary landfills completed


Indicator 2 : 40 of wild dumpsites closed by November 2003

Value (quantitative or Qualitative)

Complete Complete

32 wild dumps cleaned & closed in BL region, 112 Sar. region and 15 in Zenica region; Knezevo dump was sanitary closed; design for closure wild dump Mezdre finished.


Indicator 3 : Acquisition and operation of new collection vehicles


Acquisition and operation of new collection vehicles

3 new collection vehicles and 1 water truck operational; equipment for improved collection supplied in 2 regions; 1 vehicle washing plant installed and fully operational

11 new collection vehicles and 1 water truck operational; 3 roll off tipper supplied, equipment for improved collection supplied in 3 regions; 3 vehicle washing plant completed


Indicator 4 : 8 transfer stations operational by December 2003


0 8 transfer stations operational by December 2003

Design for Transfer stations in Bejeljina defined in final design

Date achieved 01/31/2005 09/01/2007 06/25/2010

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Comments (incl. % achievement)

Fewer transfer stations were needed than thought during preparation of the project. But also even in the regions where stations were needed (such as Bijeljina), due to scare funding these could not be constructed within the first phase.

Indicator 5 : Decisions reached: (a) private sector involvement, (b) performance monitoring, (c) cost recovery, (d) institutional structure, (e) legal instruments, (f) regulatory framework, (g) cost accounting, MIS


Cost accounting and MIS under preparation

Framework law about solid waste management adopted; by-laws and manuals on solid waste management prepared

Cost accounting syst. partially prep. & rev. underway; both Entities adopted law solid waste management (SWM); few by-laws & manuals on SWM prep. & in force; SWM strategies prepared and adopted by both Entities


Indicator 6 : Communication activities carries out


Communications activities initiated in Banja Luka, Sarajevo, Tuzla, and Zenica.

Communication campaigns completed in 3 regions

Public awareness campaigns completed in all regions; NIMBY campaign conducted in Federation during 2008, 2009 and still underway


G. Ratings of Project Performance in ISRs

No. Date ISR Archived

DO IP Actual

Disbursements (USD millions)

1 08/19/2002 Satisfactory Satisfactory 0.00 2 04/24/2003 Satisfactory Satisfactory 0.36 3 12/22/2003 Satisfactory Satisfactory 0.42 4 03/10/2004 Satisfactory Satisfactory 0.81

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5 11/30/2004 Satisfactory Satisfactory 1.71 6 06/27/2005 Satisfactory Satisfactory 2.65 7 06/21/2006 Satisfactory Satisfactory 4.78 8 06/26/2007 Satisfactory Satisfactory 9.00 9 11/26/2007 Satisfactory Satisfactory 11.07

10 05/28/2008 Satisfactory Satisfactory 13.51 11 03/19/2009 Satisfactory Satisfactory 18.66 12 11/07/2009 Satisfactory Satisfactory 23.21 13 03/16/2010 Satisfactory Satisfactory 27.84 14 07/30/2010 Satisfactory Satisfactory 29.62

H. Restructuring (if any) Not Applicable

I. Disbursement Profile

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1. Project Context, Development Objectives and Design

1.1 Context at Appraisal Country background. The Dayton Peace Agreement, which ended the war in 1995, gave Bosnia and Herzegovina (BiH) important distinctive features. BiH was constituted as a country with a State Government holding relatively limited powers, and two largely autonomous sub-national Entities (and subsequently the small autonomous Brcko District). The larger of the two Entities, with two thirds of the BiH population, is called the Federation of Bosnia and Herzegovina (the Federation or FBiH). The smaller is called Republika Srpska (RS). The FBiH is subdivided into 10 cantons, each with its own executive, legislative, and judicial branches of Government. Each canton is subdivided into municipalities. The RS is more centralized and is subdivided only into municipalities. Since early 2001 leading up to the time of Appraisal of the Solid Waste Management Project (SWMP), State and Entity governments were working more effectively together than during any time since Dayton. Economic reform did accelerate in some areas, but it was not as comprehensive as expected. In the face of strong ethnic and vested interest resistance, difficult policy decisions were either delayed or proved difficult to implement. Goals of developing a predictable and coherent investment environment countrywide and a self-sustaining economy were, therefore, still a long way from being accomplished and growth continued to slow down. Some objectives were, nevertheless, achieved, including important steps in State building and strengthening institutions and governance. This resulted in significant progress being made in the stabilization and association process with the EU. Sector background. In 2000, solid waste collection services in Bosnia and Herzegovina covered only about 60 percent of the larger municipalities and a much lower share in rural towns. Institutional and enforcement capacity was weak, and equipment for waste collection and disposal was obsolete and poorly maintained. As a result, significant amounts of waste were discarded in unofficial sites such as wild dumps, roadsides, rivers and mines, posing a direct risk to public health and causing serious environmental problems. Main challenges. Before the war, collection of waste was organized purely at the local level. There was only partial separation of waste collection and recycling. Waste from urban locations was transported to local landfills and dumped, although with limited controls. However, the equipment for waste collection and disposal was mostly obsolete and/or poorly maintained. As a result, waste collection and disposal capacities were unable to keep up with waste production. This led to significant quantities of waste being discarded in unofficial sites posing a direct risk to public health. Waste collected by municipalities was often disposed in “official” dumpsites that were generally open dumps rather than controlled landfills. Runoff and leachate infiltration from dumpsites were potential hazards for the groundwater aquifers in some areas of BiH that provided the main source of water supply. The most serious problems caused by such dumpsites include the deterioration in groundwater quality, the destruction of vegetative cover, and the proliferation of insects and rodents that bore diseases. These serious public health and environmental problems were worsened by weak institutional and enforcement capacity.

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Furthermore, odors and unsightliness discouraged development in the immediate vicinity of these dumps and ended up being harmful to overall economic development. Rationale for Bank involvement. There was a strong rationale for World Bank involvement. The Bank's primary advantage was that it had the stature and reputation in BiH of being capable of preparing and implementing difficult projects that had major associated policy/strategy issues associated with them. The Bank was seen as an honest broker for facilitating the sharing of multi-municipal landfill sites, involving full participation of both Cantons and Municipal officials and continuous dialogue with the various municipalities. Also, Bank involvement raised the stakes for any possible backtracking on commitments. Through Bank involvement, a sound financial management system was to be set up. Accounts were to be audited annually in accordance with international auditing standards. Furthermore, procurement of goods and services in accordance with the Bank's procurement guidelines could minimize the cost of equipment purchase and installation. Project background. In 2002, the Solid Waste Management Project, supported by IDA funding of US$26 million, was launched. This was the first Bank-financed Project implemented by only one Project Management Unit (PMU) for both the Federation (FBiH) and Republika Srspka (RS). Given the significant environmental improvement in participating areas, the Project was expanded through additional resources, and a new Project was approved to support rehabilitation of six-eight new sanitary landfills by the end of 2014.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The main objectives of the proposed Project were to: (a) cost effectively improve solid waste services in participating priority areas; (b) increase administrative and technical capacity for solid waste management at the local and Entity level; (c) improve cost recovery in the sector and encourage private sector involvement; and (d) correct environmental problems and reduce health hazards caused by inadequate waste collection and disposal systems. Key performance indicators related to: (a) solid waste disposal (establishment of multi-municipal waste management districts, regional landfill sites, and transfer stations; reduction in the number of wild dumpsites); (b) institutional strengthening (strengthening of appropriate institutions to manage solid waste services, preparation of business plans for future development of waste disposal sites, education and public awareness campaigns); (c) cost recovery (establishment of a cost-recovery system and an agreed program for its gradual improvement; billing and collection statistics); and (d) private sector involvement (service contracts, recycling and selected other joint ventures with domestic or foreign private companies).

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification

Not applicable.

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1.4 Main Beneficiaries The Project was expected to benefit the population as a whole through improvements in environmentally sustainable and cost-effective solid waste management services. By the end of the Project, more than 800,000 people (later revised to 1.7 million) were to have access to better solid waste management services. They would also enjoy public health benefits from the closure of wild dumps located throughout cities and villages. In rural areas and in smaller districts, the target population included those living in the vicinity of wild dumpsites, particularly women and children who normally were responsible for waste disposal. The population and, in the long run, the tourism industry were expected to benefit from clean and aesthetically pleasing surroundings. Benefits would also accrue through appropriate planning of future development geared to BiH needs and capacity through the phased approach of medium and long-term plans based on appropriate technology, affordability and environmental protection.

1.5 Original Components (as approved)

Component A (Waste Management) invested in rehabilitation of existing disposal sites, wild dump closures, collection infrastructure and support equipment, and transfer stations. This component financed civil works and equipment and accounted for 83.8 percent of total Bank financing.

Component B (Institutional Strengthening) included preparation of a Medium-Term Business Plan that outlaid a Government strategic plan for the medium-term development of a Solid Waste Management system. This sub-component also involved development of financial management capacity for the system to operate on a commercial basis, including training related to disposal, landfill operations, closure and design of future landfills. The Institutional Strengthening Component also financed a Public Communication Program and Environmental Monitoring.

Component C provided Technical Assistance and Engineering Services. This component accounted for 11.1 percent of total Bank financing and supported the preparation of feasibility studies, financial, environmental and social assessments of landfill sites and provides support for bidding procedures for the investments and services provided under Components A and B.

Components D and E assisted with Project implementation through a Project Management Unit (PMU) and also covered incremental operating costs.

1.6 Revised Components The Project Components were not revised.

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1.7 Other significant changes As mentioned above, additional financing in an amount of US$8 million equivalent was approved by the Board of Directors on May 31, 2005.1 The proposed additional credit covered a financing gap due to the higher costs entailed in the rehabilitation of landfills and clean-up of wild dumpsites. The Project objectives of the additional financing were the same as for the original Project. The implementation arrangements of the additional financing remained the same as for the original credit. The additional financing was scheduled to be implemented from 2005 to 2009.

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry Background analysis. During Project preparation, a thorough analysis of the sector issues and Government strategy was undertaken. The analysis also covered institutional arrangements for waste collection and disposal and made a case for clarifying and strengthening these arrangements. These institutional aspects would later on become critical in embarking on an appropriate solid waste management strategy and for designing the SWMP. The analysis also took into account lessons of experience from other parts of the world. It argued persuasively that municipal solid waste management is often a costly and challenging problem for local authorities to deal with. There is low service coverage, especially in low-income neighborhoods. On the management side there were substantial inefficiencies at the same time that there were insufficient resources for these services. All these elements made for a very useful background analysis that formed the basis for a pragmatic project design. Assessment of Project design. The Project design was satisfactory for a number of reasons. It was (i) flexible, enabling different municipalities to benefit when they were ready for participation; (ii) inclusive, creating high level of local ownership; (iii) incremental (instead of a big bang approach of aiming for full EU Landfill Directive compliance), investments mainly focused on partial improvements of landfill operations making them highly manageable for local stakeholders; and (iv) affordable, increase in operational costs and charges were more manageable. During Project preparation, strong background analysis and attention to lessons of experience led to a five-pillar strategy for solid waste management in BiH. The PAD discussed (i) an integrated, comprehensive strategic planning framework to be adopted at the national and local levels, especially for large cities; (ii) better institutional arrangements in the sector; (iii) efficient operational management; (iv) effective financial management; and (v) attention to improving environmental protection. Given BiH’s political environment, one could argue that this was an ambitious strategy but there were elements of the strategy, which were necessary because of the structure of the SWM sector. For example, it is uneconomical to provide sanitary landfills for small population centers.

1 Bosnia and Herzegovina Solid Waste Management Project - Additional Financing (P095382).

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Therefore, SWMP focused on agglomerating municipalities that could be served by regional sanitary landfills. To focus on financial sustainability, emphasis was placed on cost recovery mechanisms even though full cost recovery in public service delivery is a challenge in many service sectors. This was a positive step embed the idea of sustainability from the very beginning. Another element that was important revolved around the fragmented governance structure in BiH and its two entities. An innovative design helped the Project deal with this fragmentation by setting up inter-municipal boards to oversee regional landfills. These boards provided municipalities a forum for evolving a shared response to a common problem and for sharing lessons of experience. Another area in need of attention was to provide greater opportunities for public participation in the decision-making process, especially for facility siting. A key problem in SWM is the location of sanitary landfills. Several Bank-supported projects had suffered time delays as a result of the NIMBY (Not-in-my-backyard) problem, which essentially means that the public wants a certain service as long as its operations are located as far away from their homes and businesses. The Project design largely avoided NIMBY problem by focusing on rehabilitation of existing dumpsites and converting them into controlled landfills. Another way to deal with NIMBY is through early public involvement during preparation. According to some stakeholders, more could have been done for public awareness raising at the preparation stage as opposed to implementation stage. But, except for a couple of sites, the NIMBY problem was largely avoided due to the design of the Project. Government commitment. The Government recognized the need to significantly strengthen BiH's capacity to safely manage its solid wastes. This was identified as a priority in its Economic Development Strategy Global Framework (EDSGF). The European Union (EU) funded preparation of a Nationwide Solid Waste Management Strategy in BiH that was completed in August 2000 and recommended a wide range of technical, institutional and financial upgrading measures over the next 15-20 years. Different levels of Government remained committed to the Project throughout the implementation period. By developing a legal framework during Project implementation, and by facilitating the development of inter-municipal boards, a key institutional requirement, the authorities showed their serious commitment to the objectives of SWMP. Counterpart funding was also made available and, as will be discussed later, authorities in both FBiH and RS agreed to a second Project as a follow-up to SWMP to maintain the momentum of change in this sector. Interviews with different officials at various levels of Government indicate that commitment to SWMP was high and achievements of the Project were well recognized Risks and mitigation measures. Project design identified several risks including (i) lack of will of some municipalities to participate in a multi-municipal landfill with the different Cantons and municipalities; (ii) public’s unwillingness to pay for SWM services; (iii) lack of enforcement and continued wild dumping; (iv) limited financial and institutional capacity; (v) financial management capacity of PMU as well as complex governance arrangements. Almost all of these risks were rated as Substantial. Mitigation measures included continued policy dialogue with different levels of Government, penalties for wild dumping, public awareness campaigns and institutional strengthening through training as well as selection of financial management specialists in advance of Project launch. After taking mitigating actions into consideration, the Project was rated as moderate risk. While the mitigation measures were useful, with the benefit

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of hindsight, the SWMP should have been rated a higher risk given the fragmentation of political space in BiH and the need for cooperation across municipalities and cantons and entities. Cost recovery risks were also important and, as seen during Project implementation, continue to pose a challenge to the sustainability of investments. Fortunately, the importance of reforming this sector to the environment and the economy seems to have strengthened the resolve of different stakeholders. The appointment of a single project management unit for investments in both FBiH and RS appears to have helped reduce the key risk of a complicated governance structure. This appears to have contributed to the success of the Project. The ICR rates quality at entry as Satisfactory.

2.2 Implementation Implementation efficiency. While the overall Project design focused on bringing together different municipalities to benefit from economies of scale, this also presented some challenges for implementation. Solid waste management leads to multiple benefits and beneficiaries can relate to these instinctively. However, the NIMBY problem and the need to develop consensus on placement of landfills as well as cost recovery aspects led to protracted discussions in some instances. Some of this was foreseen as part of the Project’s risk framework. Not all Project sites faced these challenges and certainly not to the same degree as, for instance, in Tuzla. These challenges reduced implementation efficiency at least in the early years. Having said that, implementation arrangements and cooperation between the team and the clients allowed for close monitoring of the “sub-projects” and adequate intervention/guidance where needed. In that sense, implementation was smooth, and obstacles such as NIMBY issues addressed adequately preventing those from blocking project implementation. Public awareness was considered an important aspect of dealing with the NIMBY problem. However, discussions with the task team and the PMU and others revealed that public contact was left mostly to the implementation stage. Furthermore, awareness raising appears to have been more effective at the local levels but needed to be complemented at a “higher” (Entity) level as well. Nevertheless, a key design aspect helped improve implementation efficiency. This relates to flexibility in the design to support more municipalities as they made progress in meeting the criteria for rehabilitating landfills. This had the effect of rebalancing Project implementation by bringing in additional sites into the Project and taking into account lessons learned from the implementation of the original sites. Implementation delays. In general, implementation progress was good. The Project had a fast start in Banja Luka, Bijeljina, Sarajevo and Zenica in terms of identification of sites and setting up inter-municipal boards and associated implementation arrangements. The latter three sites (along with Bihac) were added to the original sites since they were quick to meet eligibility criteria for participating in the Project. These regions could advance faster than initially foreseen and success was achieved in a relatively short period of time. Sarajevo landfill accomplished excellent operational results, meeting high international standards and functioned as a model for other Project regions. Inter-municipal boards functioned well and municipalities cooperated with each other. Disbursement was initially slow, but increased substantially after the MTR. Even so, implementation was delayed in Tuzla and Livno partly due to resistance of the local community. At the time of preparation of the Additional Financing (May 2005), the risk of unwillingness of

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some municipalities to participate cooperatively was rated as negligible. In light of delays in some regions, this was probably optimistic. However, persistence in seeking solutions that were acceptable to all stakeholders and extensive consultation helped resolve the Tuzla landfill issue and all the money was utilized soon thereafter. By the time of the MTR, key Project targets such as creation of six multi municipal districts and preparation of cost recovery programs in two regions had already been met or exceeded.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E design. The indicators and target values for results monitoring were aligned with Project design and used to monitor outputs under the Project components. While the monitoring indicators were supposed to be “outcome” indicators, they were essentially “output” indicators. Nevertheless, these indicators reflected progress that was envisaged under the Project. The targets set by the Project were not overly ambitious but were challenging nevertheless given the base from which the SWMP was starting. By the time of the MTR, the Project was well on its way to meeting its targets despite facing challenges in the early part of implementation. M&E implementation. Project monitoring and evaluation (M&E), including preparing progress monitoring reports was carried out regularly. Target values were identified at Board presentation, and progress was updated regularly. As mentioned earlier, due to some early delays and the need for additional resources, some target values had to be changed. M&E utilization. Monitoring reports were used to measure Project progress. A review of ISRs indicates that the task team regularly highlighted issues for consideration by management. This allowed emerging risks to be raised to the level of management and helped the task team seek guidance whenever required. The PMU also had a good grip on implementation progress by monitoring reports received from project implementation teams at the regional level.

2.4 Safeguard and Fiduciary Compliance

The Project triggered Bank safeguard policies Environmental Assessment (OP/BP 4.01). A full Environmental Assessment was carried out.

Environmental safeguards. Specific Environmental Mitigation Plans (EMPs) were completed for each site in the regions included in the first solid waste management project. Full Environmental Assessments (EAs) were prepared where the investment required rehabilitation of a landfill. Each of the landfill sites had a technical and design study that reviewed issues such as groundwater quality, surface water quality, soil quality and leachate quality. The studies were prepared by qualified international and local environmental specialists. The Project was in compliance with Bank environmental safeguards.

Social safeguards. Project sites included were existing landfill sites which were rehabilitated. The participatory approach utilized during Project preparation laid the foundation for direct participation by primary stakeholders in project implementation. The Social Assessment involved direct consultations with households in areas targeted by the Project, heads of industry and local community groups. The institutional strengthening component of the Project worked directly with local media, community groups and regional and local government entities to work

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collaboratively to inform and educate the public on the need to improve the solid waste management service system and to change practices of wild dumping. A communications strategy was designed and detailed the methods for involving these groups in the implementation of the public information and education campaigns.

Fiduciary compliance

Procurement. The procurement process was handled in a satisfactory manner (including procurement planning, staffing, filing, and actions/decisions). When considered together with the contract administration/physical inspections, the overall procurement rating is Satisfactory.

Financial Management and Disbursement. The Project financial management risk was assessed as Substantial. The recruitment of FM specialists early on, helped reduce this risk. Overall financial and disbursement arrangements for Project implementation were Satisfactory.

2.5 Post-completion Operation/Next Phase Countrywide coverage for a sustainable solid waste management system will require substantial funding for investments. The first Solid Waste Management Project (SWMP), including additional financing, invested US$26 million in six regional landfills. The SWMP-2, a repeater operation to scale-up SWMP will invest US$40 million in six to eight more regional landfills, which will bring BiH closer to achieving full sector coverage.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation Relevance of PDO. The PDO remains relevant for BiH’s development priorities. BiH identified solid waste management capacity as a priority and the Project contributed to the goals outlined in the CPS for 2008-11, which prioritizes investments to improve infrastructure and service delivery. The Project supports goals under both CPS pillars: under the first pillar, the Project supports BiH to (i) improve key infrastructure and (ii) strengthen regional cooperation to manage public goods; under the second, the Project will support BiH to improve municipal services delivery and strengthen municipal finance. The Project also responds to the EU-financed Solid Waste Management Strategy recommendations and priorities—to establish waste management districts through municipal cooperation, and develop regional landfill facilities that serve multiple municipalities. Furthermore, the Project will contribute to the following higher-level objectives: (i) improve public health and quality of life by reducing exposure to pollutants and disease vectors from solid waste; (ii) improve municipal institutional capacity by establishing up-to-date technical and financial solutions for SWM; (iii) enhance environmental policy by improving the scope and depth of SWM strategies and facilitating recycling and waste-reduction programs nationwide; and (iv) improve local governance by enhancing cooperation among municipalities. Relevance of design. Regional sanitary landfills are the backbone of an environmentally and financially sustainable solid waste management system. Shared sanitary landfills provide a

9

higher level of environmental protection and are more affordable due to economies of scale and joint cost savings—particularly important given the considerable number of smaller municipalities that constitute BiH. In addition, emphasis on cost recovery mechanisms at the design stage helped establish some benchmarks for Project implementation. The SWMP exemplifies good cooperation mechanisms: special agreements were crafted to develop shared transfer and disposal facilities. These inter-municipal agreements include joint decision-making and cost-sharing mechanisms to finance and operate regional landfills. Furthermore, site selection was embedded in outreach and consultation processes with local inhabitants and NGOs. This approach was also used for SWMP-2. In addition, a legal framework for solid waste management began to take shape after the Project was conceptualized. Prior to that, the country only had a strategy in place. Design relevance is rated High. Relevance of implementation. Implementation largely focused on the Waste Management component due to its high priority for Government and importance for environmental sustainability. Technical assistance and engineering services provided critical complementary services. Various training workshops were organized during project implementation. These were attended by representatives of utilities, PITs and PMU. Knowledge sharing in the form of joint annual review meetings with all utilities/PITs/PMU was held and a community of practice appears to have taken shape for the purpose of sharing implementation experiences. However, in reviewing the record of Project implementation, the ICR team came away with the impression that more could have been done on raising public awareness given the centrality of the NIMBY problem to solid waste management projects. Discussions with the task team, PMU, and other stakeholders revealed that public outreach could have been initiated during project preparation. Also, the focus initially seems to have been on the technical merits of SWMP and it became apparent during implementation that the “softer” side, involving stakeholder outreach was just as important. Public awareness campaigns were well designed in some regions (Banja Luka, Bijeljina, Sarajevo, and Zenica). But, raising awareness beyond the local levels could have ensured smoother implementation. In addition, Project documentation has been better at capturing activities associated with landfill rehabilitation as opposed to public outreach. Perhaps it is because landfill rehabilitation is more tangible in terms of funds disbursement and ease of measuring outputs, but public outreach is an enabling tool and will remain important for embedding good practices related to waste generation, collection, and disposal.

3.2 Achievement of Project Development Objectives Overall achievement of PDO. The PDOs have been achieved, and some target values have been exceeded. In line with Project objectives, the quality and availability of solid waste services is much improved. As a result of the Project, there is a legal and institutional framework that underpins further development of the sector. As discussed elsewhere, cost recovery remains a problem but at least now a basis for financial sustainability of regional landfills has been established. With greater awareness of the benefits of SWM services, there is recognition of the need to pay for these services. With the closure of wild dumpsites and tighter enforcement, environmental problems have been addressed to a large extent and health hazards have been reduced. Overall PDO achievement is Satisfactory. In terms of specific PDO indicators, the first indicator related to establishment of regional landfills and reduction of wild dumpsites. Six regional landfills were targeted to be operational

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by the end of the Project. This target was achieved. In addition, eight multi-municipal districts were established under the Project and 10 percent of reduction in wild dumpsites was achieved against a target of five percent reduction. The second PDO indicator related to strengthening appropriate institutions to manage solid waste services, development of business plans, and implementation of education and public awareness campaigns. The Project Management Unit and Project Implementation Teams and multi-municipal boards were established. Four business plans for utilities were completed while local education and public awareness campaigns were completed in five regions. The "NIMBY" campaign was conducted in the Federation in 2008-2009 and is still underway. The third PDO related to financial sustainability of utilities supported by the Project. Cost-recovery programs were prepared in four regions although admittedly financial sustainability of the utilities will be an ongoing concern. Waste separation program was started in five regions and recycling facilities were installed and operational in four regions. The identification and closure of wild dumpsites was the main focus of the fourth indicator. While the target was for identification of all wild dumpsites, eighty percent were identified in the Project areas. In addition, 32 wild dumps were cleaned and closed in the Banja Luka region, 112 in Sarajevo region and 15 in Zenica region.

3.3 Efficiency The analysis of partial-year 2010 summary financial results of four regional landfills indicates that these regional landfill utilities operate in financially sustainable manner, fully recovering their operating costs including depreciation. However, it should be noted that these are early results from a subset of investments. During meetings with counterparts, financial sustainability of the investments was raised as an ongoing concern. As with other public services, SWM utilities will face challenges associated with financial sustainability, at least in the initial years of operation. In addition to the financial performance assessment of regional landfill utilities, cost effectiveness approach was used to evaluate the efficiency of the Project and to compare the outcome with the assessment at appraisal stage. Based on the per capita investments metric, the Project performed better than expected in most regions. Annex 3 describes the financial and economic analysis of the Project investments.

3.4 Justification of Overall Outcome Rating Rating: The ICR rates the Overall Outcome of the Project Satisfactory. Sector-wide improvements, not to mention reforms, in solid waste management are complex and time consuming. To achieve sector improvements, time-lines up to 10 years are not exceptional. In light of this, the SWMP has been very successful in a complex political environment. The Project was relevant for the sustainable development of Bosnia-Herzegovina and it remains so even today. The SWMP-2 has been approved to expand on the activities of SWMP. The design of the Project was sound and pragmatic. Rehabilitation of existing landfills and bringing together multiple municipalities to benefit from economies of scale were important pieces of a sound strategy.

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As discussed in section 3.2, the PDOs have been met and some targets have been exceeded. Project implementation has not been without challenges but perseverance on the part of stakeholders and dedicated support from the task team ensured the success of the Project. A flexible Project design allowed new regions to participate in the Project as soon as they met eligibility criteria. Therefore, on account of a relevant design, achievement of objectives, and overall efficiency of implementation, the ICR rates Project outcome as satisfactory.

3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development Not applicable (b) Institutional Change / Strengthening The PDO emphasized strengthening institutional capacity, including cost recovery and raising awareness of the importance of solid waste management services in BiH. On all accounts, progress can be deemed satisfactory. The establishment of inter-municipal structures provides an example of how different levels of Government can work together. In the difficult area of creating a culture of paying for SWM services, even though much more needs to be done, a lot of progress has been made and a basis for full cost recovery in the future has been established. Dealing with the NIMBY problem has made municipal and other authorities much more aware of the importance of participatory processes in developing solutions for the delivery of public services. In these respects, the Project has performed satisfactorily. (c) Other Unintended Outcomes and Impacts (positive or negative)

Donors have stepped up to bring in further support and further discussions are taking place; the Bank is seen as the leading party in this sector in BiH and the Project resulted in a successor project. The Bank is serving as a catalyst for securing other donor financing for well-coordinated, high-priority and economically and financially justified, investments. While this last advantage did not come to fruition initially, there is increased donor interest in solid waste management services these days. For example, the Swedish Government, through SIDA, is implementing a EUR 10 million project in support of SWMP to assist municipalities in those regions that have constructed regional landfills (initially, in the regions of Zenica and Bijeljina). A SIDA representative confirmed that the agency would not have participated in SWM if the Bank was not already financing this activity.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops The final implementation support and implementation completion mission was conducted from June 7-11, 2010. As part of this mission, an implementation completion workshop was organized at which participants shared lessons of experience related to Project implementation and discussed ways to incorporate these lessons to implement the Second Solid Waste Management Project (SWMP-2).

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4. Assessment of Risk to Development Outcome Rating: The risk to development outcome is rated low. The SWMP has received high marks from counterparts at different levels of Government as well as from other donors. The outcome of the Project has been positive and has yielded greater awareness about the importance of managing waste in a sanitary way, reduced wild dumping, improved the infrastructure of landfills, created the institutional capacity in this area, and taken important steps towards financial sustainability of SWM utilities. There is concern about cost recovery issues and the need for founders of regional landfills to ensure adequate capital contributions for and greater investment in public utilities. These issues will be critical for the sustainability of Project outcomes as well as to the success of this sector in general.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Project-financed investments were highly relevant and are beginning to leverage resources from other donors; implementation arrangements for the SWMP were well thought out and quite innovative and Project implementation progressed satisfactorily after some delays in disbursements in the early period. The Project design was reasonable and based on the sound premise that economies of scale needed to be exploited in the area of SWM to adapt to the limited resources available. Institutional arrangements were good and tailored to achieve the broader PDO. The lending instrument was well suited to support the PDOs and attention was devoted during preparation to institutional capacity building activities without which the Project would not progress well. The ICR rates Bank performance in ensuring quality at entry as Satisfactory. (b) Quality of Supervision Rating: During implementation, the Bank team performed regular supervision missions, and noted throughout the implementation period, delays or any other issues that required managerial attention or some form of resolution. In this context, the delays in Bihac and Tuzla, on account of resistance by local populations and/or authorities to the development of sanitary landfills at particular sites led the task team to initiate thinking on ways to move forward either by reallocating resources or other means. Such proactivity is welcome and should be commended. Overall, the ICR rates the quality of Bank supervision as Satisfactory. (c) Justification of Rating for Overall Bank Performance Rating: The ICR rates overall Bank performance as Satisfactory, based on a satisfactory rating of Bank performance to ensure quality at entry, and a satisfactory rating of quality of supervision, and an overall satisfactory Project outcome rating.

5.2 Borrower Performance (a) Government Performance

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Rating: Government performance is rated Satisfactory. Throughout the implementation of the Project, Government counterparts in FBiH and RS, and at local levels, showed a high degree of commitment to the Project. A clear sign of such commitment was when a single PMU was selected to support project implementation in both entities. There was good cooperation with the Bank team and issues were dealt with in a collaborative manner. The PMU in particular functioned well and was able to work with the different utilities in a collegial manner. This was quite important considering that political difficulties sometimes led to fragmentation of activities leading to higher costs and lack of knowledge sharing between officials in the two entities. This was a good result and helped establish a good base for other phases of SWMP. (b) Implementing Agency or Agencies Performance Rating: Performance of the implementing agency is rated Highly Satisfactory. A single implementing agency was responsible for implementing the Project, and all Project fiduciary aspects including financial management and procurement functions. The efforts of the implementing agency were widely appreciated by officials in both FBiH and the RS as well as by World Bank staff. (c) Justification of Rating for Overall Borrower Performance Rating: Overall Borrower Performance is rated Satisfactory, based on a satisfactory rating of Government performance and a satisfactory rating of implementing agency performance, and an overall satisfactory Project outcome rating.

6. Lessons Learned

(i) Strong sector analysis is a prerequisite to good project design. The SWMP was conceived after what appears to be careful consideration of the needs and possibilities of the SWM sector. While there was an EU-funded national strategy to draw on, key lessons of experience as well as close attention to the political realities of BiH helped shape SWMP. There was no quick fix to the problem of solid wastes in the country particularly as financial resources were limited. To overcome these issues, a phased approach to providing solid waste services was adopted. Also, experience suggested that to address the NIMBY problem, construction of new landfills was less appealing. Therefore rehabilitation of existing sites was preferred. It was also not feasible to provide these services without bringing together multiple municipalities within cooperative arrangements. That helped bring together municipalities to share regional landfills. All of these aspects point to good analysis and attention to the political economy of the country and appears to be an obvious lesson from SWMP.

(ii) Post-conflict situations are challenging but can also present opportunities. As mentioned

in different parts of the ICR, the Project promoted regional landfills and utilities for different reasons. This was for the first time in BiH that municipalities decided to join and share a joint landfill, managed by a joint, regional utility. While the economies of scale argument is important for developing sustainable landfills, the reconciliation aspect is particularly important in the context of BiH because it fostered cooperation between municipalities, utilities, governments at different levels and contributed to

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reconciliation in the post-conflict country. Project preparation and implementation started only six years after the formal end of the war. Communication between institutions and authorities had broken down and economic and political space was fragmented and remains so to a large extent. After implementation started, regular annual meetings were held, site visits were conducted and people from both entities started cooperating closely and lessons of experience were exchanged. Even a cross-entity landfill (Bijeljina) was established. These are small but important milestones that can keep progress alive in bringing people together. BH’s challenges are significant but the work of the SWMP is a positive contribution in a difficult environment.

(iii) A gradual approach to reforms may be appropriate in difficult political environments or

new sector engagements. The SWMP is a great example of building a phased approach to improving service delivery in a country with a challenging political environment and where solid waste services were not developed. Instead of establishing one or two cutting edge landfills in one area or trying to develop a big sector-wide program, the SWMP invested in several regions in parallel and at different levels of advancement. Such an approach was less capital sustainability perspective. Operating costs were kept down and allowed for further gradual improvements. It is important to implement parallel, gradual tariff increases for services which a population is more likely to accept paying for once they see positive results. In addition, that approach created (i) competition between regions; and (ii) facilitated learning between more and less advanced regions.

(iv) Client ownership matters greatly. While this lesson is widely disseminated within the

Bank, its practical application in the case of the SWMP was critical to the Project’s success. Only a few years removed from a devastating war, the authorities in FBiH and the RS chose to not only request the Bank’s support in a very new area of public service delivery from the country’s perspective but also demonstrated an ongoing commitment to its goals. Establishing a single PMU for both the FBiH’s and RS’s activities was almost inconceivable at that time. This helped greatly in facilitating the implementation of the Project. Local level authorities also did their part by understanding the need to forming inter-municipal structures for governing landfills. There was also a lot of effort in helping identify landfill sites and helping deal with concerns raised by residents close to these sites. Without the active involvement of local officials, the SWMP would certainly not been successful. Of course, the reason clients were supportive of this Project was that it was consistent with their priorities. Otherwise, BiH’s administrative fragmentation can present challenges to the most well designed projects.

(v) Transparency in eligibility criteria for participation in the SWMP created a positive

incentive for municipalities. The Project started with three regions that had met eligibility criteria for receiving investments. By establishing transparent criteria, the SWMP provided a roadmap for municipalities to receive much-needed, low cost investments in the solid waste sector. This positive incentive helped municipalities come together, work out solutions for identification of Project sites, evolve joint

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decision making, and transcend administrative barriers. The selection criteria also seem to have created some competition between municipalities as they tried to secure investments from a limited pool of funds. In municipal services, this competitive element of selection criteria can be useful not only in BiH but also in other countries.

(vi) Ensure that risk mitigation measures are more than a hoped for outcome. Many key risks

were correctly identified during Project preparation. However, the effectiveness of mitigation measures was in some instances perhaps considered in an optimistic light. For example, public awareness campaigns were considered a risk mitigating measure to deal with the NIMBY problem. However, describing the mitigation measures is not the same as implementing such measures effectively. Interviews with the PMU suggested that some of the problems encountered during the early part of Project implementation could have been avoided if public awareness and education had been initiated earlier during preparation. And, local politics may have also played a part in blunting some of the effect of awareness raising efforts. This is not to suggest that mitigation measures were not well thought out. To the contrary, most mitigation measures were good. But, even when such measures are described, their implementation also can impact a project’s progress.

(vii) Be candid and proactive. The task team is to be commended for highlighting issues in

ISRs as they arose and to seek management guidance when appropriate. This is a good practice to emulate and helped the Project remain on track even though there were initial delays and disbursements had not picked up speed even until the mid-term review. Specifically, when the implementation of the Tuzla subcomponent faced continuing problems, the task team identified the causes for management by writing in an ISR that “a small group of villagers is opposed to the landfill’s rehabilitation due to its proximity to their village. A tremendous amount of work has been done on communication/interaction by the FBH Ministry of Environment, Tuzla Canton and the local Government in trying to reach a mutual understanding. The task team has informed the Tuzla implementing team that if the issue is not resolved, then an alternative location from the previous short-list of locations must be found. Meanwhile, the FBH Ministry of Environment, Tuzla Canton, PMU and task team will continue to work together to provide all relevant support to implementation of this sub-component.” By identifying the problem and developing options to deal with delays could only have reassured management that the team was fully engaged in the resolution of such issues. This allowed management to support the task team and the result has been one of the most successful Bank-supported projects in BiH.

(viii) Stability in task management can help project implementation. A key ingredient in

the Project’s success has been the dedicated effort of both the PMU and the Bank team. A potential problem in Bank projects can be due to task management becoming discontinuous once a project is prepared and under implementation. In the case of SWMP, task management was passed on from the Team Leader to a member of the original team that helped prepare the Project. This combined with task management eventually shifting to the country office helped greatly with project implementation. Projects such as the SWMP require a level of contact with clients that may not be

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optimally provided from Washington. Discussions with clients revealed that an ongoing, almost daily dialogue helped resolve many issues that threatened to delay implementation or could have resulted in a less satisfactory project. Even with the best of intentions, a task manager may not have been able to fully deal with the number of complex issues that came up during implementation. A strong sector presence in the field was very much needed for the success of the SWMP.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies Not applicable. (b) Cofinanciers Not applicable. (c) Other partners and stakeholders Not applicable.

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Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Components Appraisal Estimate

(USD millions)

Actual/Latest Estimate (USD

millions)

Percentage of Appraisal

A. WASTE MANAGEMENT COMPONENT REHABILITATION OF LANDFILL SITES - CLOSURE OF WILD DUMPS - COLLECTION INFRASTRUCTURE A ND

21.79 22.41 102.84

B. INSTITUTIONAL STRENGTHENING - PUBLIC COMMUNICATION PROGRAM AND ENVIRONMENTAL MONITORING - MEDIUM-TERM BUSINESS PLAN

0.61 1.07 175.4

C. ENGINEERING SERVICES/TECHNICAL ASSISTANCE - ENGINEERING SERVICES FOR DESIGN AND CONSTRUCTION SUPERVISION - TE CHNICAL

2.90 3.78 130.3

D. PROJECT MANAGEMENT UNIT (PMU)

0.50 0.60 120.0

E. OPERATING COSTS 0.20 1.14 570.0

Total Baseline Cost 26.00 29.00 112.3

Physical Contingencies

0.00

0.00

0.00

Price Contingencies

0.00

0.00

0.00 Total Project Costs 0.00 29.00

Front-end fee PPF 0.00 0.00 .00 Front-end fee IBRD 0.00 0.00 .00

Total Financing Required 0.00 29.00

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(b) Financing

Source of Funds Type of

Cofinancing

Appraisal Estimate

(USD millions)

Actual and Additional

Financing/Latest Estimate

(USD millions)

Percentage of Appraisal

Borrower 3.00 4.30 143 International Bank for Reconstruction and Development

0.00 0.00 .00

International Development Association (IDA)

18.00 26.00 144

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Annex 2. Outputs by Component

Output Indicator Baseline Progress to date (June 2010)

Component A

Municipal Solid Waste Management system infrastructure improved (first phase of an integrated solid waste management system).

Rehabilitation of four sanitary landfills in Tuzla

- Six landfills operational

40 of wild dumps closed by November 2003.

- 15 percent reduction in dumpsites; 160 dumpsites cleaned and closed.

Acquisition and operation of new collection vehicles.

-

8 of transfer stations operational by December 2003.

- Completed.

Component B

Institutions operating more efficiently and cost-effectively and with a better understanding of the need to deliver affordable, high quality services.

Decisions reached on: (a) private sector involvement, (b) performance monitoring, (c) cost recovery, (d) institutional structure, (e) legal instruments, (f) regulatory framework, (g) cost accounting, and (h) use of management information systems. Communication activities carried out. .

- Institutional strengthening carried out; private sector involved; cost recovery initiated; legal framework developed; and communications activities carried out

The PAD established the following key indicators as measures of achieving the Project’s defined objectives: Waste Management (A): 1. The number of multi-municipal waste management districts established: the target value was

six districts, and eight such districts have been established. 2. The number of regional landfills operational: while the target was four regional landfills, six

have been established by the end of the Project.

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3. The reduction of wild dump sites: 15% reduction in wild dump sites was targeted and achieved.

4. Disposal of waste in environmentally sound manner: the Project targeted and achieved nearly 50% of waste disposal in environmentally sound manner.

Institutional Strengthening (B): 1. Strengthening of appropriate institutions to manage solid waste services: PMU and PITs have

been established; six utilities are already generating income 2. Preparation of business plans for future development of waste disposal sites: four business

plans for utilities have been completed under the Project. 3. Education and public awareness campaigns: local education and public awareness campaigns

have been completed in 5 regions. Cost recovery (C): 1. Programs to achieve gradual cost-recovery: cost-recovery programs have been prepared for

four regions. 2. Recycling awarded to either foreign or domestic private firms: separation programs started in

five regions, and recycling facilities are installed and operational in four regions. 3. At least 75% of population in Project areas paying regularly for services by the end of the

Project: according to the latest estimates, about 70% of population in Project areas now regularly pays for waste disposal service.

4. But, sustainability of landfills and the overall cost recovery mechanism requires additional time to take hold. This is an area that was on the minds of many stakeholders that held discussions with the ICR team. No doubt, much progress has been made but financial sustainability is still elusive at this point.

Correct environmental problems and reduce health hazards caused by inadequate waste collection and disposal systems (D): 1. Wild waste dumps closed and monitoring of groundwater being undertaken regularly: about

80% of wild dumpsites in Project areas have been identified; 32 wild dumps were cleaned and closed in Banja Luka region, 112 dumps were cleaned and closed in Sarajevo region, and 15 dumps were cleaned and closed in Zenica region. One of the largest wild dump sites in the country (Knezevo) has been closed in a sanitary manner, and design work for the closure of Mezdre wild dump site has been completed. Monitoring plans for closed sites have also been prepared.

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Annex 3. Economic and Financial Analysis Financial Evaluation. The analysis of partial-year 2010 summary financial results of four regional landfills indicates that these regional landfill utilities operate in financially sustainable manner, fully recovering their operating costs including depreciation. The following section briefly describes the overall financial performance of these four regional landfills: Banja Luka, Bijeljina, Moscanica, and Tuzla. It should be noted that this analysis is based on aggregated and summary-level financial results for six months of 2010. At the time of the analysis, detailed financial results were not available for further analysis. Banja Luka Regional Landfill. Banja Luka regional landfill was established by eight municipal entities. The municipality of Banja Luka is the main shareholder with 62% of the shares. The analysis of summary financial results for partial year 2010 indicates that the utility is operating in a financially sustainable manner and is fully recovering all of its operating costs, including depreciation. For the period of January to June 2010, the utility reported KM 1,071,088 operating revenue and KM 891,855 operating expenses including depreciation. Cash operating expenses, which exclude depreciation expense, were KM 683,610. This results in operating ratio of 0.83 and financial working ratio of 0.64. In other words, better than full cost recovery was achieved in this period. Personnel expenses are the largest expense item for this utility as well, at 53% of total operating expenses and almost 70% of cash operating expenses. Bijeljina Regional Landfill. Bijeljina regional landfill was established by six municipal entities. The municipality of Bijeljina is the largest shareholder with 67% of the shares. The analysis of summary financial results for partial year 2010 indicates that the utility is fully recovering all of its operating costs, including depreciation. For the period of January to June 2010, the utility reported KM 494,001 operating revenue and KM 460,814 operating expenses including depreciation. Cash operating expenses, which exclude depreciation expense, were KM 313,477. This results in operating ratio of 0.93 and financial working ratio of 0.68, indicating full cost recovery. Cost of salaries and compensation, at 45% of the total (66% of cash costs), is the largest contributor to the utility’s operating costs. Zenica Regional Landfill. The analysis of summary financial results of Moscanica Utility for partial year 2010 indicates that the utility is operating in a financially sustainable manner and is fully recovering all of its operating costs. For the period of January to June 2010, the utility reported KM 892,944 operating revenue and KM 718,488 operating expenses, resulting in operating ratio of 0.86. More detailed financial reports for further analysis were not available. Tuzla Regional Landfill. This regional landfill has only recently started operating, and only one month of financial results were available at the time of writing. Based on this limited data, the utility is operating in a financially sustainable manner and is fully recovering all of its operating costs, including depreciation. For the month of September 2010, the utility reported KM 136,872 operating revenue and KM 107,840 operating expenses, resulting in operating ratio of 0.79. Cash operating expenses, which exclude depreciation expense, were KM 42,800, resulting in the financial working ratio of 0.31.

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Economic Analysis. At the appraisal stage, as well as at the project’s conclusion, the customary economic cost-benefit analysis was attempted on the basis of annual flows of economic benefits and costs. However, the available data did not permit such analysis. Besides, improved solid waste management generates other economic benefits that are difficult or impossible to quantify and monetize for the purposes of economic analysis. These benefits include the reduction in environmental damage, improved public health, as well as intangible esthetic benefits that arise from having cleaner cities and surrounding areas that result from the reduction of uncontrolled dumping. While some of these benefits may be captured through the solid waste management fees that consumers pay, the user fees are highly unlikely to fully capture the environmental and health benefits of improved solid waste management. Individual consumers often lack the information to assess the total costs and risks to themselves, the economy, and the environment that lack of safe and sustainable solid waste management causes. In addition, besides being difficult to quantify, improvements environmental and health conditions may also be influenced by a variety of confounding factors besides solid waste management, which makes it difficult to isolate and quantify the positive impact of improved solid waste management from the impact of other factors. For the above reasons, cost effectiveness approach, instead of the cost-benefit analysis, was used to gauge the effectiveness of the Project investments. The initial analysis at the appraisal stage computed per capita investments to evaluate whether the investments were efficiently sized to meet the demand for solid waste collection and disposal services. The per capita investment costs for the Project utilities ranged from USD 12.50 to USD 30 at the Project appraisal stage. Cost effectiveness evaluation. Two of the three solid waste management projects that were reviewed at the appraisal stage have significantly lower final per capita investment costs compared to the appraisal per capita investment cost estimates. The estimated appraisal per capita investment costs were USD 13.83, USD 12.50, and USD 30 for Banja-Luka, Mostar, and Tuzla, respectively. The final per capita investment costs for the three municipalities are USD 7.92, USD 5.16, and USD 34.5. The lower final per capita investment figures in two municipalities are mainly due to significantly less total Project investments in two out of the three areas compared to the initially planned total investments. The higher per capita cost in Tuzla is due to slightly higher final investment cost. The total Project investments for the three cities were estimated at the appraisal stage at USD 3.7 million for Banja-Luka, USD1.5 million for Mostar, and USD 6 million for Tuzla. The final total investment figures are only USD 3.17 million, USD 0.62 million, and about USD 6.9 million for the three cities, respectively. The per capita investment figure for Banja-Luka was further decreased by the higher actual number of benefiting population than was initially estimated, due to the fact that the initial estimates did not appear to include other neighboring municipalities that also benefit from the regional solid waste utility. The total population of the eight municipalities in the Banja-Luka region that share the regional utility is about 400,000, while the initial estimate of benefiting population in this regions was about half that many. The Project investments were from the outset designed to minimize incremental costs necessary to achieve the PDOs. The Project focused on existing landfill rehabilitation as opposed to

7

construction of new landfills. This approach allowed for a better targeting of investments in order to maximize the utilization of existing assets. This strategy reflected a calculated decision not to invest in costly high-technology waste processing options and concentrate the available resources towards the most cost efficient solutions. The landfills to be rehabilitated under the Project were selected with the view of minimizing the incremental costs per capita of population served. To this end, a proper balance was struck between the economies of scale of combining landfills for a number of municipalities, which would reduce investment costs per capita given the high economies of scale. Considering that (a) it was not possible to perform a more thorough cost-benefit analysis either at the outset or at the conclusion of the Project, (b) least cost approach was adopted during the Project design, target utility selection, and Project implementation processes, and (c) the final per capita investment costs are in most cases significantly lower than the initial estimates which were made with cost efficiency in mind, the Project performed well and met cost efficiency criterion set at the Project appraisal stage.

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Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/

Specialty Lending Motoo Konishi Sector Manager ECSIE Sector Manager Seema Manghee Team Leader ECSIE Team Leader Carl Bartone Principal Environmental Specialist LCSEN Principal Environmental Specialist Rita Klees Senior Environmental Specialist ECSSD Senior Environmental Specialist Takao Ikegami Senior Sanitary Engineer ECSIE Senior Sanitary Engineer Mohammed Nawaz Legal Counsel LEGEM Legal Counsel Vesna Francic Project Officer ECSIE Project Officer Spyros Margetis Senior Environmental Specialist ECSSD Senior Environmental Specialist Klas Ringskog Lead Advisor ECSIE Lead Advisor Jagdish Jassal Procurement Specialist ECSCS Procurement Specialist Emanuele Santi Communications Specialist EXT Communications Specialist Enar Wennerstrom Senior Financial Analyst ECSCS Senior Financial Analyst David Webber Disbursement Officer LOAG1 Disbursement Officer Siew Chai Ting Financial Management Specialist ECSCS Financial Management Specialist Milane Reyes Program Assistant ECSIE Program Assistant Tamara Noel Program Assistant ECSIE Program Assistant

Supervision/ICR Lynette Alemar Senior Program Assistant ECSSD Senior Program Assistant

Salman Anees Senior Urban Specialist/ICR Primary Author

ECSS6Senior Urban Specialist/ICR Primary Author

Diomedes Berroa Senior Operations Officer LCSPT Senior Operations Officer Olav Rex Christensen Senior Public Finance Specialist HDNED Senior Public Finance Specialist Kashmira Daruwalla Senior Procurement Specialist ECSO2 Senior Procurement Specialist Aniruddha Dasgupta Adviser IRS Adviser Vesna Francic Senior Operations Officer ECSS6 Senior Operations Officer Ahmet Gokce Senior Procurement Specialist ECSO2 Senior Procurement Specialist Delphine Alberta Hamilton

Senior Program Assistant ECSSD Senior Program Assistant

Esma Kreso Environmental Spec. ECSS3 Environmental Spec. Lamija Marijanovic Financial Management Specialist ECSO3 Financial Management Specialist Philip W. Moeller Consultant ECSSD Consultant Dirk Ossen Consultant ECSSD Consultant Bjorn Philipp Urban Specialist ECSS6 Urban Specialist Senad Sacic Team Assistant ECCBA Team Assistant

Sanjay N. Vani Lead Financial Management Specialist

OPCFMLead Financial Management Specialist

Natasa Vetma Operations Officer ECSS3 Operations Officer

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(b) Staff Time and Cost

Stage of Project Cycle Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including travel and consultant costs)

Lending FY98 0.67 FY99 9.10 FY00 1 14.19 FY01 32 100.47 FY02 36 282.17 FY03 0.07 FY04 0.01

Total: 69 406.68 Supervision/ICR

FY02 0.00 FY03 22 121.37 FY04 15 91.21 FY05 23 105.89 FY06 23 92.58 FY07 20 110.00 FY08 16 67.79 FY09 9 0.00

Total: 128 588.84

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Annex 5. Beneficiary Survey Results No beneficiary survey was carried out.

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Annex 6. Stakeholder Workshop Report and Results The final implementation support and implementation completion mission was conducted from June 7-11, 2010. As part of this mission, an implementation completion workshop was organized and discussions were held with counterparts. The Government and local authorities expressed their high satisfaction with Project results. Representatives from all eight regions participating in the First Solid Waste Management Project (SWMP) attended the implementation completion workshop and summarized their experiences during Project implementation. Among others, participants highlighted the importance of cross-regional learning and knowledge-sharing as one of the major SWMP success factors and encouraged new regions in the Second Solid Waste Management Project (SWMP-2) to continue learning and knowledge-sharing. SWMP experience will be scaled up under the follow-up Project. Next steps include increasing recycling activities, improving financial sustainability, and extending sanitary solid waste management services to additional regions.

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Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR

FEDERAL MINISTRY OF ENVIRONMENT AND TOURISM

FINAL REPORT SOLID WASTE MANAGEMENT PROJECT, PHASE I

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I PROJECT DESCRIPTION

1.1 GENERAL PROJECT DATA The Solid Waste Management Strategy in BiH, drafted in 2000, and financed by the

European Commission, envisages solid waste management at the regional level, i.e. the construction of 16 regional sanitary landfills.

Pursuant to the Strategy, the World Bank had approved credit funds under IDA terms for

Bosnia and Herzegovina to finance the construction of regional sanitary landfills in line with the current EU standards for the area in question. The project envisaged the rehabilitation of existing landfills and establishment of regional sanitary landfills for solid waste disposal.

The entity level waste management strategy in the Federation of Bosnia and Herzegovina

was adopted in 2009, while Republika Srpska accepted the strategy drafted in 2000 by the European Commission. Both entity strategies envisage the disposal of solid waste in regional sanitary landfills. The Federal Ministry of Environment and Tourism drafted the Law on Amendments and Addenda to the Law on Waste Management in FBiH, in which appropriate harmonization with the EU/EC directives was performed.

The Development Credit Agreement was signed on July 12, 2002, and the planned date of

project closing was June 30, 2010. The Agreement comprises of the initial credit, IDA 36720 BOS, in the value of US$ 18.0, and the additional credit, IDA 3672-1 BOS, in the amount of US$ 8.0 million, signed on November 25, 2005, with entity governments contribution financing in the amount of US$ 4.3 million.

Solid Waste Management Project – Phase I INITIAL AGREEMENT Loan Provider: World Bank – International Development Association (IDA) Borrower: Bosnia and Herzegovina Credit No: 3672 BOS Credit signed on: July 12, 2002 Credit effective since: October 31, 2002 Project financing: US$ 18 million / SDR 14.3 million:

Federation of BiH: US$ 12 million / SDR 9.533 million Republika Srpska: US$ 6 million / SDR 4.766 million

Contribution co-financing: USD 3 million (2 million FBiH & 1 million RS) ADDITIONAL AGREEMENT On June 30, 2005, the International Development Association approved an Amendment to the Agreement with additional funds in the amount of SDR 5.3 million (US$ 8.0 million) for this Project and extended the validity of the Agreement by November 30, 2009.

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Additional credit number: 3672 -1 BOS Date of signing: November 28, 2005 Credit effective since: April 24, 2006 Credit closing date: June 30, 2010 Project financing: US$ 8 million – IDA / SDR 5.33 million

Federation of BiH: US$ 5.33 million / SDR 3.644 million Republika Srpska: US$ 2.67 million / SDR 1.656 million Contribution co-financing: US$ 1.3 million

(US$ 0.867 million from FBiH Government, and US$ 0.43 million from municipalities in the region of Bijeljina)

1.2 IMPLEMENTATION ARRANGEMENTS

The Federation of BiH and Republika Srpska had agreed that project implementation

would be performed by a single project management unit – the PMU (Project Management Unit), which was formed in the Federation of BiH with experts from the Federation of BiH and representatives of RS, and under the supervision of the relevant entity ministries.

1.3 PROJECT REALIZATION

The Solid Waste Management Project had been declared a high risk project, both because

of the project matter, the lack of well defined regulations, and because of the implementation arrangements that were applied as such for the very first time. Numerous difficulties had occurred during project implementation and they slowed down the activities planned in individual regions, while in other regions project implementation progressed quite well.

Thanks to extraordinary efforts invested by the members of the PMU team, successful

cooperation with the regions involved in the project, and with relevant ministries and governments, overall project implementation was rated as successful, both by the relevant ministries, and by the World Bank.

In recognition of the successful realization, the Solid Waste Management Project was

recognized as a winner at the first annual World Bank contest for „Improving the lives of people in the European and Central Asia Region“ in March, 2008, together with two other projects from Bosnia and Herzegovina.

As a result of slower project implementation in the regions of Tuzla and Livno an

application for an extension of the timeframe for project finalization was sent to the World Bank. The application for extension was approved by the World Bank in July of 2009, and the new closing date was set to June 30, 2010.

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Regions included in the project and amounts of credit indebtedness

Initial Agreement,

IDA (EUR million)

Additional Funding, IDA (EUR million)

Government contribution

(EUR million)

Total

(EUR million)

Federation of BiH 12,105 4,923 2,900 19,928

Tuzla 4,953

Zenica 4,127 2,936

Sarajevo 2,017 0,202

Bihać 1,008

Livno 1,038

Mostar 0,756

Republika Srpska 6,052 1,656 1,431 9,139

Banja Luka 4,035

Bijeljina 2,017 1,656

TOTAL

(FBIH+RS) 18,202 6,579 4,331 29,112

Upon the finalization of the first phase of project implementation, one can conclude that, speaking of the scope and the quantity of work, a lot more was done than planned. The project was implemented in eight regions, instead of three, as was initially planned in the project. Works were completed in the three regions that are operational (Sarajevo, Zenica, Bijeljina), and waste is being disposed in five regions. In addition to the three aforementioned regions, there are also the regions of Banja Luka and Tuzla. In the course of the final year of project implementation, the region of Tuzla had ensured the conditions necessary for the recycling of 150 tons of waste per day and improved the conditions of waste collection for three municipalities by procuring new vehicles and containers for waste transport. The region of Mostar is in the initial phase of preparations necessary for creating the preconditions for high quality waste disposal. Attempting to analyze the operations of regional landfills that are operational and are already disposing waste, it may be noted that further improvements are needed to achieve full cost recovery, in the sense of self sustainability and efficient coverage of all the operational costs, including the repayment of the credit in semi-annual annuities. Reports on operations of those companies, with financial indicators, present their performance without losses, but those indicators fail to include the amounts of annuities for credit repayment that shall have to start being paid from October 2010. There are few options for increasing the level of financial efficiency, and some of them shall be discussed in the text below: - The percentage of coverage of waste collection is low, especially in rural areas and that results in the total quantity of collected waste being reduced, and therefore the percentage of collected revenues is reduced, and consequently it reduces the total funding required for regular waste disposal.

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- Collection rate differs significantly and shows significant variations between municipalities, which has a direct effect on the possibility of paying for waste disposal. All the options are still being used (non-sanitary landfills, wild dumpsites) with the objective of delivering the smallest possible quantity of waste to regional landfills. - Upon creating sanitary conditions for waste disposal, the price of waste disposal should have been increased, and it is in direct relation with the total quantity of waste delivered. Larger quantities (exceeding 200 tons per day) facilitate reduced prices of waste disposal. - The public awareness campaign on the level of BiH represents a very significant segment of the entire project. Good, high quality campaign should make the problem more immediately present and easier to understand to all the inhabitants of BiH, taking care that all the age groups are covered. A good campaign would facilitate resolution of initial problems in the regions in which the project should be implemented, by encouraging citizens to accept high quality waste disposal. That primarily implies informing the local population of the need to identify a location site for regional landfill, as well as creating the conditions for separated waste collection. - The current legal regulations on mandatory sanitary disposal of solid waste shall become effective at the beginning of 2012, and by that time options shall remain open for municipalities to avoid the delivery of entire quantities of waste collected to regional landfills. R E S U L T S O F R E A L I Z A T I O N I) Assessment of project objectives, design, implementation and operational experiences.

Components planned in the Project: - waste management, with the following sub-components: rehabilitation of existing landfills and construction of regional sanitary landfills, closing of waste dumpsites, strengthening of infrastructure for waste collection and procurement of appropriate equipment, construction of transfer stations. - institutional strengthening: including the public campaign and environment protection monitoring, drafting of mid-term business plans. - engineering services – technical assistance. During the implementation all the above mentioned components were mostly implemented successfully, with just a few exceptions. The rehabilitation of existing landfills, together with the establishment of regional landfills, as the main and the most important activity under the project, was implemented very successfully on five locations, Banja Luka, Sarajevo, Bijeljina, Mostar, and Zenica. In locations in Tuzla and Livno the implementation was partially successful because of the problems with the local population concerning the acceptance of construction of regional landfills at originally identified locations. Following the development of regional landfills and after creating the conditions necessary for sanitary waste disposal, cleaning of wild dumpsites was performed very successfully in the regions of Banja Luka, Sarajevo, and Zenica. In the region of Bijeljina a snapshot of the situation of wild dumpsites was made, and it was concluded that a very large number existed, containing large quantities of waste and covering a large area, and as a result their clearing would have

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required significant financial resources, and at this time the resources were spent more rationally on finalizing the construction of the regional landfill. The procurement of equipment for improving the conditions of waste collection primarily concerned the procurement of appropriate containers for waste collection of various volumes. Containers were procured in the regions of Bihać, Banja Luka, Bijeljina, and Tuzla. By procuring various types of vehicles for waste transport, the region of Tuzla has significantly facilitated and improved the conditions of transport for utility companies in municipalities that transport and dispose waste in the regional landfill in Tuzla. Construction of regional landfills in certain regions created the conditions necessary for the construction of transfer stations, specifically in the regions of Zenica (Travnik, Novi Travnik, and Vitez) and Tuzla (Gradačac). The construction of those transfer stations and others shall, understandingly, primarily depend on financial resources that shall be available to regions involved in the second phase of the Project. The envisaged concept of municipality associations and the forming of inter-municipal councils comprising of municipalities gravitating to individual regional landfills was confirmed as necessary. Mutual agreements were signed, defining the rights and obligations of municipalities, and those agreements stipulated that the obligation of the regional landfill was to accept all the quantities of waste collected from each of the municipalities, and therefore create the preconditions necessary for economic sustainability and the execution of obligations concerning the repayment of credit funds. The issue relating to the readiness of municipalities to deliver all the waste collected is still under disputable, because of the significant increase of the price of waste disposal. Prior to the construction of regional landfills, the price of waste disposal in the majority of regions was symbolic, primarily because of the unsanitary method of disposal used, lacking any provisions for the protection of air, soil, or water. After the construction of regional landfills, the price of disposal had to be increased, by a percentage that varies and primarily depends on the quantities being disposed daily at the landfill. The quantities of 150-200 tons per day, envisaged by the Project, would facilitate the price of disposal remaining within acceptable limits, while the disposal of quantities below 150 tons per day would result in a significant increase of the price of disposal. The public campaign on the construction of regional landfills and better and safer waste disposal was implemented separately for each region. Most of those campaigns were successful and, based on those experiences, it seems that a campaign on the state level could have better and more permanent results. As agreed by the two relevant entity ministries, project implementation was performed by the Project Management Unit (PMU) located in the Federal Ministry of Physical Planning and Environment. The PMU employed trained staff from FBiH and RS. Project Implementation Teams (PITs) were formed for each individual region and they were working under direct supervision of the PMU and in close cooperation with the PMU. That model was proven as very successful, which is evident in the successful implementation of the project overall. There had been evident difficulties in the beginning of project implementation and they had, for the most part, resulted from the lack of experience and the lack of knowledge of the substance of waste

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management. High quality training of staff for procurement and finance in both the PMU and the PITs represents an important precondition for overcoming initial problems more easily. II) Assessment of project outcomes in comparison with agreed objectives.

A general analysis of project outcomes in comparison agreed objectives shows that the planned objectives were achieved, with certain exceptions. Those exceptions primarily concern the construction of transfer stations, the state level public campaign, and the development of the mid-term business plan. Speaking of the transfer stations, the construction of regional landfills in certain regions created the preconditions necessary for the construction of transfer stations, specifically in the regions of Zenica (Travnik, Novi Travnik, and Vitez) and Tuzla (Gradaćac). It is understandable that the construction of those and other transfer stations shall primarily depend on financial resources that shall be available to the regions involved in the second phase of the Project. The public campaign on the state level was not implemented because of the lack of understanding amongst the regions of the significance of implementation of that activity. The majority of them were of the opinion that campaigns on the local level would be sufficient. Later on, after certain problems in project implementation had shown that a public campaign on the state level was necessary, and it shall be implemented in the course of the second phase of the Project. Business plans were developed for individual regions, but not for BiH. Upon completing the necessary activities in all the eight regions involved in the first phase, high quality waste disposal shall be facilitated in 43 municipalities, i.e. correct waste management shall be ensured for 1.5 million inhabitants. III) Assessment of one’s own performance in the course of project preparation and implementation with special emphasis on experiences acquired that may be beneficial for the future.

In the course of project preparation it had been concluded that the project was of high risk, which was proven correct in the course of project implementation. It was practically impossible to envisage, in the course of project preparation, all the unfavorable situations that had to be resolved by almost all the regions. Thanks to the exceptional level of understanding on the part of both entity governments (project co-financing at the level of 20% of credit funds), and especially thanks to the commitment on the part of line ministries, efforts invested by members of the PMU and the PITs, the project was rated as successful. The large number of meetings held both in the beginning of project implementation and throughout the period of implementation, with the local population, with local government authorities, in order to promote the necessity of safe waste disposal, contributed to successful finalization of the first phase. In the course of project preparation it was concluded that BiH had lacked the legal regulations that would regulate the issue of waste management. In the course of project implementation in FBiH, the Waste Management Strategy was regulated and adopted, together with the Law on Waste Management, including appropriate implementation regulations that have been, up to a

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certain level, harmonized with the existing regulations of the European Union. Republika Srpska also adopted the Law on Waste Management, while the Waste Management Strategy is in the process of being adopted. The commitment on the part of local government authorities, primarily of municipality mayors, for the construction of regional landfills, represents the initial and extremely important precondition for a good start of the project. The selection of locations, agreed with the local population, may represent the most important condition for the project to succeed. Preparing the local population through educational workshops, films, and organized visits to already constructed regional landfills, with professional commentaries of recognized experts in the field, may provide a lot of answers and eliminate the problems that had occurred in the course of project implementation. Strong and well designed public campaign at the state level is also very important for unimpeded project implementation. IV) Assessment of the Bank’s performance with special emphasis on experiences acquired

The engagement of the Bank, from the phase of project preparation, through initial phases of project implementation, and throughout the implementation itself, was very efficient, beneficial, and has, together with all the aforementioned factors, contributed to the successful finalization of the project. The readiness of the Bank to get involved at any time and to assist though its engagement in the resolution of all the problems that have occurred has also helped the successful realization of the project. Achievement of objectives planned under the Project that had been set by the Bank with assistance of line ministries of both entities has confirmed that the project had been well defined. In the course of project implementation, the planned expenditures had been redistributed between the categories and that had resulted in the reallocation of resources, with understanding and support of the Bank. In addition to the engagement and support of the Bank, other investors were also involved with grant funding in view of support and expansion of waste management financing in BiH. The Swedish Government shall, through SIDA, implement a project in the value of EUR 10 million, in support to SWMP I, through assisting the municipalities in those regions that have constructed regional landfills (the region of Zenica and the region of Bijeljina). Those funds shall also be used for the financing of a part of the public campaign in both entities with the objective of promoting safe and high quality waste disposal. Access to IPA funds of the EU in support to this Project is also very significant for the overall resolution of waste management in BiH. Therefore the regional landfill in Mostar has acquired funds in the amount of EUR 2.5 million, and the region of Banja Luka in the amount of EUR 3.0 million.

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V) Proposed arrangements for the continuation of project realization

Experiences in the implementation of the first phase assisted the definition of arrangements for the continuation of project implementation in the second phase. That is primarily reflected in the conditions that have to be met by the regions to be included in the financing in the second phase of the project. The selection of the location, with support of local government authorities and with prior consent of the local population is the first and the most significant condition. The minimum number of three municipalities involved with the total number of 100,000 inhabitants at least is also a very significant condition. Without an adequate quantity of waste on the daily basis, i.e. without an appropriate and acceptable price of waste disposal, economic sustainability of the landfill is highly questionable. The issue that is posed is what to do with regions with sparser population density and a very large area. One of the options possible is to co-finance the sustainability of the landfill with funds planned in the cantonal budget, but that would require ensuring appropriate agreements in advance. The time will show how acceptable that is in the times of economic difficulties. The registration of the company that would implement the project, with prior establishment of the inter-municipal council, has been proven as a good practice from the first phase. Development of adequate studies, primarily environmental impact studies, and necessary project documentation, shall eliminate any unpleasant surprises possible related to unfavorable geological conditions, hydrological conditions, rational road communications, and other elements that would first require expensive solutions, and only then put under the question mark the economic justification of constructing a landfill, and subsequently its economic sustainability. The implementation arrangement of the first phase of the project with one single Project Management unit (PMU) for both entities was proven as exceptionally good, efficient and economic, however, because of subjective reasons on the part of the representatives of Republika Srpska, the continuation of the second phase according to the same principle was not accepted.

Team Leader Muris Hadžić

EMAIL RESPONSE FROM ASSISTANT MINISTER, MURIS HADZIC DATED 11/29/2010 Dear Vesna, Thank you for sharing the ICR. I am please to state that this is the last step of implementation of the successful project. The implementation report is well written, correctly presented and comprehensive, and the only missing element is reference to staff in the PMU who contributed to success of the project. Muris Hadzic, Team leader Amra Krajina, Procurement Manager Mirjana Simic-Bowen, Procurement Officer Milan Sipovac/Atifa Halilovic, Financial Manager Anto Covic, Project Engineer"

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Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders No comments were provided.

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Annex 9. List of Supporting Documents

Country Partnership Strategy for Bosnia-Herzegovina, FY01-10 Country Assistance Strategy Progress Report, Report No. 22863 Project Information Document (PID), Report No. PID10908, May 21, 2002 Project Paper (PJPR), Report No. 32392-BA, May 31, 2005 Environmental Assessment and Management Plan, February 28, 2002 Integrated Safeguards Data Sheet, Report No. 23750, March 21, 2002 Project Appraisal Document, Report No. 23929-BIH, May 23, 2002 Aide memoires Implementation Status Reports

Gracanica ˇ

Prijedor

Sanski Most

Bihac ´

Teslic ´Tuzla

Bijeljina

Srebrenica

TravnikZenica

Mostar

Bosanska Gradiska(Srp. Gradiska) ˇ

ˇ Bosanski Brod(Srp.Brod)

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BanjaLuka

Kljuc

BosanskaKrupa

Cazin

BosanskiPetrovac

Drvar

Kotor Varos ˇ

Maglaj

VlasenicaKladanj

Livno

Jablanica

Bugojno

Jajce

Vares ˇ

Visoko

Stolac

Bileca ´

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Gacko

Gorazde ˇ Konjic

PaleVisegrad

Bosanska Novi(Novi Grad)

SARAJEVO

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REPUBLIKASRPSKAFEDERATION OF

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BosanskaKrupa

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PaleVisegrad

Bosanska Novi(Novi Grad)

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BOSNIA andHERZEGOVINA

Th is map was produced by the Map Des ign Uni t o f The Wor ld Bank. The boundar ies , co lo rs , denominat ions and any other in format ionshown on th is map do not imply, on the par t o f The Wor ld BankGroup, any judgment on the lega l s ta tus of any te r r i to r y, o r anyendorsement or acceptance of such boundar ies .

IBRD 38107

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BOSNIA AND HERZEGOVINASOLID WASTE MANAGEMENT PROJECT

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