Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 34745

IMPLEMENTATION COMPLETION REPORT(IDA-31070 TF-25582 TF-26521)

ON A

CREDIT

IN THE AMOUNT OF US$20 MILLION EQUIVALENT

TO THE

REPUBLIC OF AZERBAIJAN

FOR AN

URGENT ENVIRONMENTAL INVESTMENT PROJECT

December 29, 2005

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective )

Currency Unit = Manat 1 Manat = US$ 0.000217

US$ 1 = Manat 4,600

FISCAL YEARJanuary 1 - December 31

ABBREVIATIONS AND ACRONYMS

CEP Caspian Environment ProgramCIU Component Implementation UnitEIA Environment Impact AssessmentEMP Environment Management PlanGEF Global Environment FacilityHWM Hazardous Waste ManagementIBRD International Bank for Reconstruction and DevelopmentMENR Ministry of Environment and Natural ResourcesNEAP National Environmental Action PlanPAD Project Appraisal DocumentPHRD Policy & Human Resources Development Fund (Japan)PIU Project Implementation UnitPRSC II Second Poverty Reduction Support CreditPSA Production Sharing AgreementsSCE State Committee on EcologySOCAR State Oil CompanyTPH Total Petroleum HydrocarbonsUEIP Urgent Environmental Investment Project

Vice President: Shigeo KatsuCountry Director: Donna M. Dowsett-Coirolo

Sector Director: Laura Tuck Task Team Leader: Agi Kiss

REPUBLIC OF AZERBAIJANUrgent Environmental Investment Project

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 105. Major Factors Affecting Implementation and Outcome 156. Sustainability 167. Bank and Borrower Performance 198. Lessons Learned 249. Partner Comments 2510. Additional Information 30Annex 1. Key Performance Indicators/Log Frame Matrix 31Annex 2. Project Costs and Financing 33Annex 3. Economic Costs and Benefits 35Annex 4. Bank Inputs 40Annex 5. Ratings for Achievement of Objectives/Outputs of Components 43Annex 6. Ratings of Bank and Borrower Performance 44Annex 7. List of Supporting Documents 45

Project ID: P055155 Project Name: Urgent Environmental Investment Project

Team Leader: Agi Kiss TL Unit: ECSSDICR Type: Core ICR Report Date: December 29, 2005

1. Project DataName: Urgent Environmental Investment Project L/C/TF Number: IDA-31070; TF-25582;

TF-26521Country/Department: AZERBAIJAN Region: Europe and Central Asia

Region

Sector/subsector: General water, sanitation and flood protection sector (38%); Animal production (37%); Central government administration (12%); Oil and gas (7%); Roads and highways (6%)

Theme: Environmental policies and institutions (P); Pollution management and environmental health (P); Other rural development (P); Administrative and civil service reform (P); Law reform (S)

KEY DATES Original Revised/ActualPCD: 01/20/1998 Effective: 02/02/1999 02/02/1999

Appraisal: 05/13/1998 MTR: 06/15/2003 06/15/2003Approval: 06/30/1998 Closing: 12/31/2003 06/30/2005

Borrower/Implementing Agency: GOVERNMENT OF AZERBAIJAN/COMMITTEE OF ECOLOGYOther Partners:

STAFF Current At AppraisalVice President: Shigeo Katsu Johannes F. LinnCountry Director: D-M Dowsett-Coirolo Ishrat HusainSector Manager: Laura Tuck Kevin CleaverTeam Leader at ICR: Agi Kiss Roger BatstoneICR Primary Author: Karen Gustin; Agi Kiss

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: M

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: U

Project at Risk at Any Time:

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:There was no single development objective of the UEIP. Rather, the DO was stated in terms of the objectives of each of the fourth main components: a) restore the capacity of Azerbaijan to produce sturgeon fingerlings by building a new hatchery; b) demonstrate mercury cleanup technologies and procedures by cleaning up one area heavily polluted by mercury; c) test and demonstrate onshore oil field cleanup methodologies by cleaning up one oil field in the Absheron Peninsula; and d) improve the institutional and regulatory capacity of the Azeri environmental management system. These objectives targeted specific priorities identified in the National Environmental Action Plan (NEAP), The UEIP also fell under the umbrella of the regional Caspian Environment Program (CEP) which involves the five countries surrounding the Caspian Sea working in collaboration with international partners to on pollution control, biodiversity protection and clean water management. The project mainly involved building facilities and demonstrating technologies, and on building capacity to manage, implement and regulate them. There was a clear expectation of continuation and scaling up in the future, but the institutional and financial mechanisms for this were not fully defined. This was addressed to some extent during implementation, as additional measures were incorporated aimed at enhancing the sustainability of the project outcomes.

3.2 Revised Objective:The development objectives were not revised.

3.3 Original Components:The four project components were:

Component A: Construct, Operate and Maintain Sturgeon Fish Hatchery ( US $9.0 million)

Sturgeon eggs (caviar) and meat are very important commercial products for Azerbaijan and other countries on the Caspian sea. The governments of the Caspian littoral countries are therefore very concerned over the dramatic decline (96%) in the sturgeon population over the last two decades. This component involved constructing a new sturgeon fish hatchery for the production of fingerlings at a new location, replacing the obsolete and deteriorating old hatchery. The new hatchery was also to be built 20 km up the Kura River, to protect it from the effects of the rising waters of the Caspian. The objective of the hatchery is to raise 15 million sturgeon fingerlings per year, hatched from eggs collected from wild-caught adult "mother fish." The fingerlings are then release into the Caspian Sea to mature, where they can be caught by any private or commercial fishermen, who may be Azeri or other nationals. Upon reaching sexual maturity, the sturgeon would normally migrate back into their home river to spawn. However, hydroelectric dams and other development, as well as siltation of river mouths, have largely blocked off their access to natural spawning grounds, thus creating the need for hatcheries. The three subcomponents of this component were: 1) constructing the hatchery; 2) procurement of equipment, supervision and training of staff; and 3) operation and maintenance of the hatchery.

Component B: Mercury Cleanup ( US $8.0 million)

For the last 50 years, chlorine gas and caustic soda have been produced in the city of Sumgayit near Baku, using a mercury amalgam process. A plant that operated from 1958-1981 used large amounts of mercury, some of which was lost in the sludge byproduct. After 1981, this plant was replaced by a new plant in an adjacent area, which used the same technology. This plant is still operating today, and it continues to generate considerable quantities of hazardous waste materials. Some recovery of mercury is carried, out

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using hazardous manual extraction methods which create high exposure risk for workers. This component targeted the problem of safe disposal of 65,000 tons of inadequately stored mercury-rich waste sludge and 40,000 tons of mercury-contaminated soil and building debris from the old plant. The component aimed to demonstrate modern, safer remediation techniques for mercury recovery and disposal of hazardous waste, and also to carry out an assessment of the extent of mercury accumulation in the environment and of human exposure in the Sumgayit area. The five subcomponents of this component were: 1) sludge basin cleanup; 2) old factory site cleanup; 3) construction of a secure landfill (and transferring the waste material to it); 4) improve and maintain roads to the landfill; and 5) implement environmental monitoring and controls, and provide management and technical support. In addition, there was to be a demonstration of the mechanical extraction of metallic n mercury for commercial re-sale.

Component C: Onshore Oil Field Cleanup ( US $5.1 million)

The Absheron Peninsula is the oldest and one of the largest centers for oil extraction/production in the world. About 6,880 hectares of land on the Peninsula are contaminated by oil, posing an environmental hazard and health hazard and making the land unsuitable for other use or development. In addition to oil-related contamination, these areas suffer from other chemical pollution of ground and surface water and sediments, radiation, improper solid waste disposal, human encroachment, poor air quality and improper disposal of solid waste.

The state oil company (SOCAR), is responsible for managing the oil fields on behalf of the Government, including signing "Production Sharing Agreements" (PSA) with international oil companies. While the PSA's include provisions for environmental management, SOCAR has no legal responsibility for cleaning up "legacy" pollution resulting from operations prior to 1993. Both SOCAR and Government are interested in finding ways to develop partnerships with the private sector to rehabilitate the oil fields.

This component aimed to test and demonstrate cleanup options to determine the most cost effective way to treat contaminated substrates. The three subcomponents of this component were: 1) pilot testing and evaluation of several cleanup technologies (Phase 1); 2) applying the most cost-effective technologies to cleanup and restoration of a small demonstration site (Phase 2); and 3) support for the Component Implementation Unit in SOCAR.

Component D: Environmental Management and Institutional Capacity Building (US $1.4 million)

Azerbaijan inherited a relatively well developed set of environmental regulations from the Soviet era; however, enforcement capacity is weak. The NEAP indicated the need for fundamental restructuring of the sector to address this problem. This component aimed to assist the government in implementing structural changes at both the national and local levels, and to strengthen enforcement of environmental laws and regulations by improving the capacity for sustainable environmental management. The component initially included two subcomponents: 1) strengthening environmental management capacity, and 2) hazardous waste management (development of a cradle-to-grave management system for hazardous waste).

3.4 Revised Components:Component B – Initially the hazardous waste (HW) landfill to be constructed was planned only to contain the hazardous waste generated by the cleanup of the old chlorine plant site, supported by the project. Before construction of the landfill began, however, the Government of Azerbaijan and the World Bank agreed that it would be opportune to increase the size of the landfill, allowing it to remain open and to be operated commercially on an ongoing basis. Azerbaijan has a great need for such a facility, particularly with the revival of oil extraction on the Peninsula. Thus, the landfill capacity was increased from 18,000

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m3 to 250,000 m3, and the objective changed to include establishing an ongoing commercial landfill operation. This change added a new dimension to the objectives and target outcomes of this component, to include developing mechanisms to ensure long-term financial and institutional sustainability. Another change was the recognition of a need for a leachate treatment sytem to prevent groundwater contamination. The site had been selected in part because of low rainfall, based on historical records. The designers believed that leachate from the landfill could be managed solely by recirculation and evaporation with the cell. However, based on the decision to enlarge the landfill and operate it commercially, and also on the evidence that rainfall was sometimes higher than the available historical records had suggested, , it was later determined that this approach was no longer adequate and a leachate treatment system would be needed, in which the excess water that has accumulated in the cell would be pumped and trickled through the geotextile to increase the evaporation surface area.

Component C – Phase 1 of this component was intended to support trials of several different oil cleanup technologies (mechanical, chemical and biological), after which the most cost-effective would be used to carry out a demonstration cleanup of a pilot site. A detailed evaluation of the different technologies was to be an important output of the component. However, when the tender was issued for Phase 1 activities, SOCAR only received responsive bids for one technology – bioremediation. Implementation of the component had already been significantly delayed, so it was decided not to re-tender, but rather to proceed with Phase 2 using bioremediation as the main methodology. However, the successful bidder was invited to also test other methods on small areas within the pilot site, and the results of these tests would be evaluated (effectively, Phase 1 was merged into Phase 2). At the same time, it was agreed that SOCAR would also prepare an Oil Cleanup Strategy based on experience gained, and that this strategy (along with the remediation of the pilot site) would become a main output of the component. This was another example of a revision aimed at enhancing sustainability of the project’s outcomes.

Component D – The “Environmental Management’ sub-component (D-1) initially aimed to support structural changes within the environment sector. Based on a template developed under the project, in May, 2001 the President of Azerbaijan dissolved the State Committee of Ecology and several other national institutions and established the Ministry of Environment and Natural Resources (MENR). Following the creation of an entirely new line Ministry with complex responsibilities, the institutional capacity building focus of this component shifted towards assisting the Government to implement the reorganization that created the MENR. (This became known as Component D-3; D-2 being hazardous waste management). In June 2002, the World Bank also supported the Government’s request for a second PHRD Grant for implementation assistance for Component D-3, in the amount of US $350,000. Specifically, the grant was to support:

1) technical assistance provided by international and local experts on environmental policy, law and institutional change to support and monitor implementation of the new organization;2) training the government staff on tools to support an improved environmental management capacity;3) support public consultations and intergovernmental policy dialogue.

3.5 Quality at Entry:The project was designed as a collection of more or less unrelated components. In this it was similar to a considerable number of projects prepared within ECA and other Regions in response to newly adopted National Environmental Action Plans. These NEAPs identified priority actions in a number of sectors, usually with little linkage among them. In some cases the result was an unmanageable "Christmas tree" project, with a large number of components and sub-components, broad but vague capacity building objectives, and multiple (poorly coordinated) implementing agencies. The UEIP was more focused and manageable, with just three well defined "operational" investment components, one rather narrowly

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targeted institutional development component, and two implementing agencies (MENR (initially the State Committee on Ecology) and SOCAR). Therefore, its basic structure is not regarded as a problem. Given the absence of a single umbrella objective, there was no need for a cohesive design to draw all parts of the project together. Therefore, the rating for quality at entry (QAE) of the project reflects the QAE of its separate components.

Component A: Construct, operate and maintain Sturgeon Fish Hatchery

The two objectives of this component were: (1) build a sturgeon fish hatchery with the capacity to release 15 million fingerlings/ year; and (2) create a sustainable institution and financial basis for future hatchery operations. The first objective was well addressed in the PAD, which provided a considerable amount of technical detail on hatchery design and operations.

The project design was less fully developed for the second objective. Initially it was expected that a joint stock company (JSC) would be established to operate the hatchery. However, after approval of the project, it was discovered that the World Bank could not finance such a company. At the time of project appraisal, the sturgeon/caviar industry in Azerbaijan was entirely state-owned. Therefore, it seemed appropriate to create a public sector entity to support the industry through augmenting the sturgeon population. A Public Fund (PF) was created with an inter-Ministerial board under the chairmanship of the Minister of MENR. This was an appropriate institutional structure during the life of the project, as it facilitated needed cross-sectoral coordination, and the operating funds were provided by Government directly to the PF through the Project Account managed by PIU. It may not be an appropriate structure for long term operation (see Section 6).

The PAD gives little attention to the question of financial sustainability of the hatchery. Because the released sturgeon fingerlings become a common pool resource shared by several countries, the hatchery cannot operate as a for-profit enterprise as long as this is its sole product. The implicit assumption in the PAD seems to be that future funding will come from Azerbaijan's annual state budget allocations, and the economic analysis is based on the assumption that a portion of the released hatchlings will return to Azerbaijani waters upon maturity, presumably increasing the supply available to the Azeri sturgeon/caviar industry. During project implementation there were discussions regarding possible alternative sources of funding, and a study on sustainability of fisheries (including financial sustainability of the hatchery) was added under Component D-3. It suggested options such as obtaining revenue through license fees, taxes and duties on the sturgeon catching and processing industry, but did not discuss whether the regulatory framework needed to support this existed or would be put in place. The PAD also did not mention the existence of an inter-country Bioresource Commission representing the five Caspian states, which sets an annual quota for the allowable sturgeon catch each year among the member countries (Iran is a member of the commission but does not participate in this quota system) The Commission allocates that quota among the four countries, based on a number of factors including the number of hatchery-produced fingerlings each released into the Caspian Sea in previous years. The other factors used in calculating the quota are relatively static or difficult to control (total area of natural sturgeon spawning and feeding grounds within the country’s borders, output of fresh water from its rivers into the Caspian, etc.). Therefore, increasing hatchery production was a relatively practical and direct measure for Azerbaijan to increase its share of the annual quota. This does not automatically translate into a mechanism to capture revenues from the industry to help fund the hatchery’s operations, but it does provide a concrete economic rationale for government investment. The PAD also failed to identify and address some issues relating to technical sustainability. The first is the need to ensure an adequate supply of fertilized eggs for the hatchery operations. The original plan

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apparently was to purchase fertilized roe or adult fish (for extraction of eggs and sperm, followed by release of the adults back to the wild) from the private sector. This would have represented a substantial annual expense. During implementation, the Bank encouraged MENR to explore more sustainable options. MENR responded with a “sustainability plan,” to place eight nets at the entrance to the Kura River to capture adult fish directly from the wild. The second issue relates to how great an impact the artificial raising and releasing of an additional 15 million sturgeon fingerlings per year into the Caspian will have on the wild population of adult fish which represents the supply stock for the sturgeon industry. Natural spawning of Caspian sturgeon now occurs only in the Ural River, as spawning sites in all other rivers have become largely inaccessible to the migrating fish. All the Caspian states operate hatcheries, with Russia producing the largest quantity of fingerlings (about 50 million/year). The new hatchery, when fully operational, is expected to substantially increase Azerbaijan's annual production of fingerlings. As noted above, this should in principle trigger an increase in Azerbaijan’s share of the annual sturgeon quota. However, this would involve a proportionate decrease in other states’ quotas, which is likely to be resisted. The current estimate is that, under good conditions, approximately 0.3% of released fingerlings are likely to reach maturity. There are no good estimates of the total size of the wild populations, so it is not clear what impact an additional 45,000 fish each year will have. Finally, there is the issue of the extent to which an increase in the wild adult sturgeon population will benefit the legitimate fishing industry (and particularly the Azeri part of it), versus simply providing more material and incentive for poaching.

While aspects relating to physical design of facilities were well addressed, overall quality at entry for Component A is rated as unsatisfactory, due to a lack of clarity regarding an appropriate institutional structure for the hatchery, a failure to adequately address financial and technical sustainability, and incomplete financial and economic analysis, and lack of uncertainties regarding institutional. Some of these shortcomings were rectified during project implementation, while some remain to be resolved (see Sections 4 and 6). Improved protection of wild sturgeon populations was beyond the scope of this project, as it requires international cooperation, for example through the CEP. However, the PAD could have provided an analysis of the likely impact of the fingerling production and release on the wild adult populations, and consideration could have been given to including in the project some support for strengthening the national capacity to control sturgeon poaching.

Component B: Mercury Cleanup

The objectives of this component were to:

1) Clean up mercury contaminated soil and sludge at the old chlorine plant on a demonstration basis.2) Provide safe and sustainable disposal of the mercury amalgam process’ waste sludge, disposal of the mercury contaminated soil and building debris from the old plant.3) Perform an overview of the extent of mercury accumulation in the environment and human exposure in the Sumgayit area.

The PAD indicated that about 65,000 tons of waste sludge and 40,000 tons of contaminated soil and building debris would be excavated and disposed of in the newly constructed landfill, and that in the process some of the metallic mercury from the sludge would be recovered for re-use or sale. The PAD indicated that this was to be a demonstration rather than a full site remediation, but did not specify what proportion of the total mercury-contaminated soil and sludge at the site would be removed, or whether there were any other significant hazardous waste problem at the site. The economic analysis was based on an assumption that neonatal mortality rate and various other health impacts in the Sumgyait area would be reduced by 50%. This seems unrealistic for a demonstration project, and in fact only about 20% of the contaminated sludge, soil and debris were removed and 20% of the site was cleaned. This suggests that the

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economic analysis was based on the assumption that the demonstration would catalyze a much larger scale cleanup in the relatively near future.

The PAD stated that the project was a demonstration but did not clearly identify the precise objectives of the demonstration or the nature of the expected follow-up. The main target was presumably the management of the chlorine plant, given the apparent assumption that they would provide the resources to continue the activities in the future. However, it is not clear whether the plant management would be primarily interested in cleaning up a hazardous but already abandoned site (for which they might not have any legal liability) or in a better method for recovering mercury to replace the manual process which was ongoing despite the high risk of toxic exposure for plant workers. Plans for follow-up were limited to transferring the facilities and equipment from the demonstration project to the chlorine plant for future use.

The HW landfill, in addition to providing a site for safe disposal of the mercury-contaminated wastes from the cleanup demonstration, was also intended to demonstrate best practice and provide a model to be followed in future. As noted in Section 3.4, this objective was changed to establishing an ongoing facility that could accept additional wastes in future and eventually operate on a commercial basis. A major reason for this change was the realization that, given the high design standards, construction of such a small facility for a one-time use was not cost-effective. This could have been anticipated during project preparation, saving the time and expense of revising the landfill design and redoing the EIA. It would also have made it possible to carry out a detailed evaluation of various institutional options for long-term operation and include appropriate provisions for institutional development under the project. This might have reduced the difficulties that the government is currently experiencing in developing a workable model for partnership with the private sector (see Section 6). Little information was provided in the PAD regarding the third subcomponent (overview of mercury accumulation and human exposure), and this activity was also not reflected in the outcome indicators and targets. An initial, limited survey was carried out during project preparation, and it may be assumed that the objective was to expand the scope during preparation. It seems likely that the underlying objective was to raise awareness and create commitment for continuing cleanup, and perhaps to create political pressure for reducing mercury emissions from ongoing operations. However, the PAD did not discuss how the results would be used or by whom.

The component focused on cleanup of "legacy" waste from the chlorine plant, and did not address the issue of continued mercury contamination from ongoing operations. The new plant uses the same mercury amalgam technology as its predecessor, so it would not be realistic to expect mercury waste production to stop entirely as long as the plant is operating. However, there may have been a missed opportunity to support technical improvements in the production system to reduce the amount of the waste produced, or to develop better waste disposal practices. There is no indication that this was considered. This may be because initially there was an expectation that the chlorine plant would cease operations, and this was even initially proposed as a condition of disbursement for Component B. However, it proved to be unfeasible given the demand for the product and for the jobs, particularly given that most of the workers are refugees with few other employment opportunities. Therefore, the condition of disbursement was amended in May 2000 to say only that the plant must cease emissions of chlorine gas during the clean-up operation itself, in order to help protect the clean-up crew from exposure.

Quality at entry for this component is rated unsatisfactory due to the lack of clarity of the objectives and inadequate provisions to support follow-up for the mercury cleanup demonstration and the survey of mercury exposure levels, as well as the failure to consider the relative cost-effectiveness of a small versus

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large HW landfill. The implications of these shortcomings are discussed in Sections 4 and 6. The impact of the component could also have been enhanced by including some provisions for improving the regulatory framework and technical processes to reduce future toxic emissions and wastes generated by the chlorine industry.

Component C: Onshore Oil Field Cleanup

The objectives of this component were to test and evaluate cleanup technologies (Phase 1) and then to use apply the best of these technologies to mitigate existing pollution on one pilot onshore oil field. (Phase 2). SOCAR (The State Oil Company of Azerbaijan) was the implementing agency. Some of the proposed methodologies (e.g. excavation and mechanical washing of soil) could be expected to yield results quickly, while others (e.g. in-situ bioremediation through landfarming) might take several years to demonstrate clear benefits. Therefore, it may not have been realistic to expect to be able to implement and evaluate the results of Phase 1, and then carry out Phase 2, within the life of the project. In fact, during implementation the two phases were combined, with testing and evaluation of different technologies being done as part of the pilot site remediation. In retrospect, it may have been better to design the project in this way from the beginning. The total area to be remediated and the quantities of contaminated substrate to be cleaned were not specified in the PAD because the pilot site had not yet been selected.

The cleanup and testing activities were to be implemented by a contractor, which was also responsible for providing on-the-job training for SOCAR staff . There was no explicit discussion of follow-up in the PAD, aside from an indication of the very large geographic scale of the oil pollution problem and the fact that much of the contaminated land would have a high development value if it were cleaned up. This was somewhat rectified during implementation, when it was agreed that SOCAR would prepare an oilfield cleanup strategy and create a Cleanup Unit to which the facilities, equipment and trained personnel from the pilot were transferred at the end of the project.

The project design did not discuss the expected use of the pilot site after the completion of the project, except insofar as the economic analysis indicated that it would become attractive for residential development and thus a valuable source of tax revenue. The implications of this became clear at the end of the project, as there is now some conflict and tension between SOCAR on the one hand and the Executive Authority and local population on the other, as to who has the authority and the obligation to control development on the now remediated site. Meanwhile, there is a flood of informal housing construction. This could have been predicted, given that the pilot site was chosen in part because of its proximity to Baku and therefore the potentially high value of the land. In retrospect it would have been advisable to update the cadastre and clarify ownership prior to proceeding with the cleanup. The importance of clarifying land rights and establishing land use planning and regulations before (or at least in parallel with) investing in cleanup is one of the most important lessons learned from this component.

Oil contamination is only one of the serious environmental and health issues that plague the Apsheron Penninsula. There are also problems of pollution of ground and surface water and sediments from industrial and domestic effluents, radiation, improper solid waste disposal, poor air quality and unplanned/unregulated building, often on contaminated sites. The original project design did not address these issues, but the contractor did in fact clean up large quantities of solid waste at the pilot site and constructed a modern landfill to contain it. Without this additional effort, the desired end result of the pilot site remediation (Phase 2) would not have been achieved.

Like Component B, this component focused only on "legacy" pollution, and did not address the regulatory framework and capacity for managing ongoing pollution from oil field production. However, in this case

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there is an existing regulatory mechanism in the form of environmental provisions in the Production Sharing Agreement signed between SOCAR and its international partners. While not always fully or speedily enforced, the environmental provisions in the PSAs are specific and legally binding. The quality at entry for this component is rated as satisfactory, as its main objective was to test and demonstrate different clean-up methods, and it was well designed to achieve this. Again, the lack of explicit provisions and plans for sustainability and follow-up may be seen as a shortcoming at the design stage, although an effort was made to correct this during implementation. Unlike the case for Component B, there was also an explicit expectation of a follow-on project, to be financed by the Bank among others, to take the cleanup effort to a much larger scale.

Component D: Environmental Management and Institutional Capacity Building

The objective of this component was to assist the government of Azerbaijan to develop and implement measures to strengthen the overall environmental management system (Component D-1) and develop and implement a modern system of environmental regulations and enforcement with an emphasis on management of hazardous waste (D-2). The PAD noted that Azerbaijan inherited a relatively well developed set of laws and regulations from the Soviet era, but that enforcement capacity was weak. Therefore, the component focused on institutional restructuring and strengthening to improve enforcement of existing laws. This was consistent with the NEAP priorities. Given that the existing regulatory framework is in some cases out of date and not well suited to contemporary conditions (e.g. increasing emphasis on private sector development and public/private partnerships), consideration could have been given to supporting regulatory reform as well. However, it is likely that this was regarded as a longer term undertaking and not consistent with the thrust of an “Urgent Investment” project. The review of the institutional system and structures for environmental management covered a broad, multi-sectoral range, but capacity building activities focused narrowly on the principle environmental agency (initially State Committee on Ecology, later MENR). Consideration could have been given to broadening the coverage of training activities beyond MENR. The objectives encompass local as well as national level capacity but this could have been more clearly reflected in the activities.

The subcomponent on developing a hazardous waste management strategy addressed an urgent need and had direct relevance for Components 2 and 3 (for example, development of standards and for HW clean-up and disposal).

The other institutional and capacity issues addressed under this component were initially rather general in scope and could have included more specific provisions for identifying and addressing specific regulatory and capacity gaps, particularly those associated with implementation and sustainability of the other components. However, this shortcoming was alleviated considerably by the PHRD grant which was approved during the course of project implementation, after the new MENR was established. For example, the PHRD grant supported analyses of legislation, regulations and institutional arrangements relating to EIA, natural resource management, environmental management (pollution control), environmental policy and public finance, and environmental data management. The quality at entry of this component is rated as satisfactory, as it was timely and targeted some urgent needs. However, it could have been better linked to the other project components and could have approached institutional capacity building for environmental management from a broader, multi-sectoral perspective.

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Overall QAE

Overall quality at entry for the project is rated as unsatisfactory. It is recognized that the project was primarily designed to support a number of urgent , on-the-ground activities, and therefore long-term sustainability was not the main focus. Nevertheless, project design would have benefited from more attention to identifying and making provisions for expected follow-up, including the institutional and regulatory framework needed to sustain both activities and benefits. It is likely that pressure to complete preparation in a short time (6 months) in order to retain the IDA allocation contributed to these problems. A number of positive changes that were introduced during implementation could have been better anticipated and addressed during preparation had there been more time. The ERR for the project was probably overstated at appraisal, as the estimates seemed to reflect expected benefits of large scale follow up activities rather than the limited scale pilots and demonstrations financed by the project. In the case of the hatchery, FRR should have taken into account the lack of mechanisms for the hatchery to capture revenues from the international public goods it produces.

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:There was no single, umbrella development objective for the project. The DO was a compendium of the objectives of the separate components.

Overall, the component outputs identified in the PAD were achieved satisfactorily. The construction of the hatchery and the hazardous waste landfill can perhaps be regarded as highly satisfactory, given the quality of the completed facilities. The objectives of the components were relatively narrowly defined in the PAD, with an emphasis on construction of facilities and remediation of specific elements of pollution within quite limited areas, by way of a demonstration or pilot. These short term objectives were for the most part satisfactorily achieved. Some longer term objectives relating to financial and institutional sustainability, that were introduced or made more explicit during project implementation, have not yet been fully achieved although steps have been taken towards this. This is understandable given the short time frame of the project and the challenges of institutional reform.

4.2 Outputs by components:Component 1: Construct, Operate and Maintain Sturgeon Fish Hatchery

The objective of constructing a modern sturgeon hatchery upriver from the Caspian Sea was fully achieved. The hatchery has been in operation since October, 2003. During its first season it produced and released 6 million fingerlings, and 9 million are anticipated in 2005. When fully operational, it is expected that the hatchery will achieve the target of 15 million fingerlings annually.

With respect to operation and maintenance of the hatchery, an entirely local and fully capable management and staff are in place. Reliable funding is now the key to ensuring that this hatchery continues to operate at a high standard. The efficiency and effectiveness of the hatchery may be somewhat hampered by the fact that the tugboat, which is used to collect mother fish and release fingerlings, was not procured under the project as planned, in part because it was incorrectly believed that a ready-made boat could be modified to accommodate the somewhat particular service requirements and local navigational conditions. , The contract was ultimately not awarded as the delivery date would have gone beyond the closing date. The hatchery is currently dependent upon use of existing, not entirely appropriate boats, provided by MENR on an ad hoc basis.

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The Public Fund which was established to own and operate the hatchery worked well during project implementation and is still in place, although it might take another form in the future. While the PAD envisaged the hatchery becoming financially self-sufficient through direct contributions from the sturgeon industry, this is not realistic under current circumstances. For the foreseeable future, financially sustainability of the hatchery is expected to depend on allocations from the state budget, and it is likely that Government will fulfill its commitment to provide them.

Component 2: Mercury Cleanup

The physical targets for excavation, cleaning and disposal of mercury-contaminated sludge and soil were largely met, resulting in reducing the extent of the contamination at the site by about 20 percent (extraction and disposal of about 39,000 m

3

out of a total of 200,000 m3

of sludge; cleanup of about 1,000 m2

out of a total 5,000 m

2

of contaminated oil and building debris at the old plant site). In addition, about 1825 m3

of soil was cleaned through extraction of 702 kg of metallic mercury, which was returned to the factory.

The expanded landfill was completed in accordance with the revised objective (250,000 m3

capacity), and meets EU standards for design and construction (including the road and access system). The mercury-contaminated waste has been safely deposited in it, and the portion of the landfill occupied by this material has been capped with soil under the supervision of an international consultant who confirmed that the procedure and result were consistent with safety requirements.

A State-owned company (Hazardous Waste Ltd. Co., hereafter called the Landfill Co.) has been established by Government (MENR) to operate the facility and take over the assets. Project savings were used to provide an initial $350,000 capital for the Landfill Co., and the personnel received training under the project

Because the PAD did not clearly specify the objectives of the cleanup demonstration, it is more difficult to evaluate the success of that aspect. Based on discussions with the PIU, it appears that the objectives at the time were to raise awareness of the dangers of current practices (workers recovering mercury through hazardous manual methods), catalyze a change in these practices (adoption of safer mechanical methods and use of protective gear by trained workers), and stimulate the chlorine plant management to continue cleaning up the site in the future, using the equipment and skills transferred from the project and its own resources. The cleanup equipment provided by the project has been transferred to the chlorine plant but is not currently being used. The Director of the chlorine plant has indicated he wishes to continue with clean-up activities, but this will require some further investment, such as purchase of an excavator and truck as well as ongoing operational funding. It is not clear whether the potential value of the additional mercury that could be recovered will be sufficient to lead the company to make this investment. Meanwhile, the final supervision mission reported that the cleaned area is becoming contaminated again with waste that continues to be generated by the chlorine plant operations. This suggests that the benefits of the cleanup effort may be transitory.

The mercury exposure survey that was to be done under the project was not carried out, and no provisions appear to have been made for monitoring of chlorine emissions from the plant site as called for by the Environmental Management Plan. . Component 3: Onshore Oil Field Cleanup

As noted above, Phases 1 and 2 were combined so that trials of different cleanup technologies were carried

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out in parallel with the pilot site remediation. The selected pilot site on Binagadi oil field covered 154 ha, of which about 75% was contaminated or polluted to some extent. This included 22.5 hectares (121,500 tons) of soil with shallow oil contamination (<0.3m), and 4.7 ha (59,200 tons) with deeper contamination (0.3-1.2m). Oil concentrations in the contaminated soils generally ranged from 4% - 8%, but values up to 20% occured, especially in shallow soils near fresh releases. Because of the age of much of the contamination, the oil was mostly highly weathered, with little volatile content (volatiles having evaporated over time) and often hardened into a bitumen-like layer. This is typical of much of the Absheron Peninsula.

Altogether, remediation activities were carried out over a period of about one year, on about 17 hectares of oil-contaminated land involving approximately 200,000 tonnes of soil. Specific activities were: • Landfarming (in-situ bioremediation) on 8.5 hectares of contaminated soils.• Excavation and ex-situ bioremediation on 30,000 m

3

of soil. • Phytoremediation on 3.26 hectares. Excavation and mechanical washing of approximately 7,029 m

3

of contaminated soil. Contaminated soil excavation and clean soil replacement of 41,000 m

3

. A number of other activities were also completed under this contract, as part of overall remediation of oil pollution and other waste problems at the pilot site.• Construction of a landfill to accommodate approximately 23,463 m3 of contaminated soil used in construction works.• Removal of municipal/domestic trash from the site, and disposing of it in the landfill.• Clean up ofapproximately 8,800 m2 of contaminated land along the Balajary to Binagadi road through soil excavation and replacement with clean burrough.• Installation of water management system focused on water management and water treatment for produced water and waste water from soil washing.• Construction of two lagoons and a drainage system.• Construction of offices and compound.• Trial of use of asphaltic concrete (made by blending virgin asphalt and aggregate with soil containing high concentration of heavy-oil-fraction contamination) and use of this material to construct an onsite road.

The results of the different soil cleaning trials were evaluated, against the target of reducicng contamination to less than 1% Total Petroleum Hydrocarbons (TPH). All methods were found to be effective although some will require a longer period of time to achieve their full impact, and/or are only suitable for certain kinds of contamination. Detailed evaluation reports are available as a reference for future initiatives. In summary:

(i) Landfarming (ploughing and fertilizing land to enhance in situ bacterial decomposition of petroleum compounds) reduced the total petroleum hydrocarbons (TPH) concentration from initial concentrations of well over 5%, to around 2% in less than one full warm season. A gradual decline in TPH concentration to 1% could occur in 2 or 3 warm seasons.

(ii) With ex-situ bioremediation, the level of contamination was reduced to about 65% of the initial average concentration. At the end of the project, the average concentration was 4%, which is substantially above the project target of 1% TPH. Results indicate that it could take several years to reach the goal of 1% TPH using ex-situ bioremediation, particularly where there are high initial concentrations of heavy oil fractions which do not degrade readily through bacteriological action.

(iii) Phytoremediation consisted of planting trees, grasses and herbs on moderately contaminated

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land. Phytoremediation is a long term process, so the benefits will be realized in future years, however, the work was executed well.

(iv) Use of mechanical soil washing equipment succeeded in reducing oil concentrations in soil from an initial 5-10%, to less than 0.5%.

(v) In trials of using heavy fractions of oil contamination from a heavily contaminated area to produce asphalt cemen, the asphalt was produced with the addition of approximately 18% highly contaminated soil. The asphalt concrete was placed on access roads and parking lots within the pilot site.

In accordance with the revised Component objectives, SOCAR has prepared a draft Oil Cleanup Strategy, which now needs to receive comments from the MENR and other key stakeholders and be submitted to the Cabinet of Ministers for approval. Government approval of the cleanup strategy is conditionality for the PRSC2 SOCAR Management has also established a Cleanup Unit for the first time. The Unit has inherited some equipment and facilities from the project, and SOCAR management has provided some funds to cover the general operating costs and salaries of the staff, estimated at $90,000 per year. The cost of actual cleanup activities, and the source of funding for them, have not yet been identified.

Component D: Environmental Management and Institutional Capacity Building

The main outputs of both sub-components of this component were successfully achieved. Under the first subcomponent (institutional restructuring and rationalization) project activities yielded a template for reorganization of the State Committee on Ecology and other related committees. In accordance with this template, in 2001 the State Committee of Azerbaijan Republic on Ecology and Nature Utilization Control, the State Committee of Azerbaijan Republic on Geology and Mineral Resources, State Committee of Azerbaijan Republic on Hydrometeorology and Industrial Enterprise, State Fishery Concern and State Forestry Committee were all dissolved to form the Ministry of Ecology and Natural Resources (MENR). In June 2002, the World Bank assisted the Government to obtain a second PHRD grant to provide technical assistance needed to implement the 2001 reorganization and build the capacity of the new MENR. Specific activities of the PHRD grant included analysis of legislative gaps and institutional structure, a study on sustainable financing of the fisheries sector (including the sturgeon hatchery), public consultations and policy dialogue, and training of over 70 MENR staff in their new functions and environmental management tools (e.g.: EIA and monitoring, environmental audit, compliance and enforcement, environmental legislation and policy, economic evaluation, management of environmental data and MIS, etc.). A website has also been developed. In October 2004, a multi-stakeholder workshop was held which produced a report on integrated strategic planning for environmental management, in the context of Azerbaijan’s Partnership Agreement with the EU and the EU Environmental Acquis. The report provided an in-depth analysis of the environmental legislative framework, implementation capacity, institutional structures and included recommendations regarding establishing priorities and identification of specific programs and projects to implement the key programs. This report, which has been approved by MENR but not formally adopted by Government, provides a basis for updating the NEAP.

Under the second sub-component a Hazardous Waste Management Strategy was prepared, which has been approved by Government. In addition to the HWM Strategy, the consultant provided recommendations relating to inventory, classification and certification of hazardous waste, regulations for licensing and monitoring of hazardous waste transportation and for location, construction and operation of hazardous waste facilities. Some relating to storage, transportation, inventory and classification system, have already been adopted by Government. In addition, a policy-focused Hazardous Waste Management sector unit has

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been established within MENR (monitoring compliance with HW regulations is the responsibility of an already existing Inspectorate Department).

4.3 Net Present Value/Economic rate of return:At appraisal, the economic and financial analysis (Annex 4 of the PAD) provided the following NPV and ERR for the four components of the project:

NPV ERR(US$ Million)

Sturgeon Fish Hatchery 36.39 24.6%Oil Cleanup 0.19 17.7%Mercury Recovery 3.92 15.8%Total Project 40.51 22.0%

This analysis was not revisited for the ICR because the data and assumptions on which it was based could not be expected to change substantially during the project period and no new information has become available to justify revisiting the original assumption (see Annex 3 for details).

The sturgeon hatchery, which accounts for the great majority of the project NPV, was successfully completed and is fully operational. However, the economic benefit of the hatchery output is mainly at a regional and global level and could prove difficult for the Azerbaijan government to capture in any direct way.

In general, the Appraisal estimates were based on what appear to be very ambitious assumptions, particularly with respect to the health benefits of the mercury cleanup operation and the commercial value of recovered oil. Land restored to productive use on the Absheron Peninsula, particularly in the vicinity of Baku, is potentially very valuable as there is a very high demand for land for residential and other development. However, at the pilot site remediated under the project, that value is currently being captured mainly by individuals who are being informally permitted to build private residences on the remediated land. It will take an updated improved cadastre, political will and new land allocation and planning processes to change this situation and ensure that this land is put to its highest value use and contributes to broader public welfare. This will also be essential if the government wishes to attract private sector partners to invest in oil clean-up in exchange for land use or development rights.

4.4 Financial rate of return:See Annex 3

4.5 Institutional development impact:The project had a significant impact by providing the basis for the reorganization of the environment sector (creation of MENR), and by building the capacity of the MENR through training and technical assistance. Through the October 2004 workshop and follow-up report on integrated strategic planning for environmental management, the project laid the groundwork for a future update of the NEAP. The project also supported capacity building for management and operation of the hatchery, the hazardous waste landfill and the mercury waste and oil cleanup activities. Given the highly technical nature of these activities and the need to come quickly up to international standards, there was a large emphasis on long term international TA during the life of the project, but also on training to transfer those skills to allow for local operation after the end of the project. This was largely successful although (particularly in the case of the landfill) the long term benefit of the training was somewhat undermined by high level staff turnover.

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SOCAR's establishment of a Cleanup Unit is a positive institutional development, both because it can support continued cleanup activities and because it reflects a recognition on the part of SOCAR management of the importance of improved environmental management. The hatchery sets a new standard in the Caspian region for modern and efficient operation, which can be expected to have a broader impact within the sector both nationally and regionally as other hatcheries adopt some of its methods and benefit from exposure to its trained staff.

Development of the Hazardous Waste Management (HWM) Strategy and Oil Cleanup Strategy were also significant institutional achievements because they will provide the framework for Government action and investment in these important areas in the future. The HWM Strategy was approved by Government and has already led to the adoption of some new rules and regulations. The Oil Cleanup Strategy has not yet been approved by SOCAR management or submitted to Government, but this is expected to be done in the near future given the fact that this is a conditionality for the PRSC II.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:Experts designing the HW landfill determined that it did not need a leachate treatment system, based on the available data regarding precipitation patterns. Either these data were inaccurate or conditions have changed, as rainfall in the past few years has exceeded expectations. A leachate treatment system is one of the investments that will now be required for the landfill to operate on a commercial basis in the future. both on the proposed limited size and purpose of the facility and on the site conditions.

5.2 Factors generally subject to government control:Government recognized the highly technical nature of the project activities and the lack of local capacity, and agreed to an unusually high level of international TA under the project. This TA was generally quite effective both in supporting implementation and in building local capacity.

When the Ministry of Ecology and Natural Resources was created, the signing of a few important pending contracts (e.g. for construction of the hatchery) was held up for several months as the new Minister wished to carry out a detailed review of the bidding and evaluation processes before signing them. In one case, a substantial amendment of the proposed contract was required. There were also a number of other cases in which procurement and other activities were substantially delayed because of the length of time required to obtain Government approval of consultant selections, signature of contracts, and other decisions and actions. For example, the second PHRD grant was approved in November 2001 but only countersigned by Government in June 2002. (see Section 7 on Borrower Performance for further discussion).

The project closing date was extended twice at Government request (first for one year, then for additional 6 months). Government chose not to request a third extension of the project. An extension would have made it possible to proceed with purchase of the tugboat for the hatchery, construction of the leachate treatment system for the landfill, and additional equipment and TA to facilitate continuation of cleanup/recovery activities at the chlorine plant. These will now have to be financed from other sources to ensure sustainability.

5.3 Factors generally subject to implementing agency control:The implementing agency for Components A,B, and D was the PIU, originally created under the State Committee of Ecology and later transferred to the new Ministry of Ecology and Natural Resources. Aside from its overall satisfactory performance (see Section 7), it is notable that the PIU staff continued to function and keep activities on track during the period when the transfer to MENR

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resulted in a non-payment of their salaries and non-payment of contractors for several months.

The implementing agency for Component C was SOCAR, which established a Component Implementation Unit for the purpose. SOCAR management’s agreement to develop an oil cleanup strategy and to establish an internal Cleanup Unit were positive consequences of the project, and reflected a new degree of importance being attached to environmental management. However, because the Unit was not established and staffed until after the project closed, it was not possible to provide on-the-job training for the staff as had been intended.

5.4 Costs and financing:The initial total project cost was $24.50 million, of which $20 million (SDR 14.90) was from IDA, $3.1 million from GoA, $0.8 million from PHRD, and $0.6 million from the UK Know-How Fund. An additional PHRD grant for $0.35 million was approved in 2002.

The project closed with $ 3.06 million (SDR 2.15) undisbursed. Most of the savings would have been used for procurement of the tugboat, leachate treatment system, and equipment and TA to continue chlorine plant cleanup activities, had the project been extended for an additional year.

There was substantial reallocation of funds during project implementation as a result of initial underestimation of costs, the need to extend international TA contracts due to delays in the activities they were assisting and supervising, and dropping or addition of activities. For example, about $ 4 million was allocated in the DCA for construction and equipping of the hatchery, but all bids received for this turnkey contract were much higher. The final negotiated contract price was 5.75 million, even after the scope of work was reduced and the purchase of the tugboat was taken out to be handled separately. Overruns were covered from the Unallocated category and from savings on activities that were reduced or dropped (e.g. Phase 1 testing of alternative oil cleanup methods was dropped when no responsive bids were received for methods other than bioremediation; mercury emissions monitoring was not carried out).

6. Sustainability

6.1 Rationale for sustainability rating:As noted in Section 3, the initial project design focused primarily on urgent, on-the-ground interventions activities. Some of the project activities were clearly meant to continue beyond the close of the project (e.g. production of sturgeon fingerlings at the hatchery), while others were pilots and demonstrations intended to catalyze future activities (e.g. mercury and oil clean up). Sustainability is considered to be highly likely in the case of the hatchery, likely for the hazardous waste landfill, unlikely for the mercury cleanup demonstration, highly likely for the oil cleanup demonstration and likely for the institutional strengthening elements. While commercialization and/or cost recovery for any of these operations is likely to take some time, the Government’s greatly improving overall fiscal situation means it should be able to meet the costs in the interim, while other financial strategies are being developed.

The hatchery was built to very high, modern standards and is fully equipped and operational (with the exception of a dedicated tugboat, which is regarded as important in the long term, but not immediately essential). The Public Fund was an appropriate institutional structure during the project but it is not clear whether it will or should continue in this form in the future. The original concept was that the hatchery should become a financially self-sustaining entity, and possibly privatized (e.g. as a Joint Stock Co. or Limited Co.). However, this would require that its main

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function – production of sturgeon fingerlings – become a marketable commodity. This in turn would depend on policy changes to create a market, such as introducing a legal requirement that private fishing companies must release a certain number of fingerlings each year in order to qualify for a license to harvest sturgeon and caviar. In October 2005, the Prime Minister issued a resolution calling on the Ministries of Ecology and Natural Resources, Finance and Economic Planning to develop a proposal for the hatchery’s future legal structure and staffing/salary plan, but this proposal has not yet been submitted. .

Unless and until it should become privatized and operate commercially, the financial sustainability of the hatchery will depend on annual Government budgetary allocations. The Government provided US$ 180,000 (equivalent) for salaries and operating costs through December 2005, and has reportedly earmarked $400,000 for 2006, to be allocated to the hatchery once its future legal structure has been determined. There is good reason to believe that Government will continue to provide funding for the hatchery operations, in view of a national policy that emphasizes development of the non-oil economic sectors. However, the level of funding (including salary scales) may be less than under the project (more in line with other national hatcheries), which could have negative impacts on the operation. The longer term objective of developing mechanisms to capture some financial contribution from the sturgeon/caviar industry to supplement the government funding will require policy action, such as establishing fees or taxes on the sturgeon industry or linking commercial fishing licenses to release of fingerlings (thus creating a direct market for the hatcheries' services). It will also require sectoral reforms including control of poaching, in collaboration with other Caspian Sea states. This is being addressed in other contexts, such as the Caspian Environment Program.

The Hazardous Waste landfill and surrounding site (National Hazardous Waste Management Facility) has the potential to become a viable commercial enterprise in the future, as intended, but a number of issues need to be resolved. First, some investments in facilities, equipment and capacity building are needed to bring the operation of the site up to international standards. Second, the institutional structure for management of the facility remains to be decided. Government is exploring options for privatizing the facility itself or for having the Landfill Co. enter into various types of partnerships with private sector waste management service companies, but no model has yet been selected. The Landfill Co. has entered into a contract with BP for construction and use of a small non-hazardous waste landfill at the site, but has not yet finalized any contracts dealing with hazardous waste. Actions will be needed at the policy and regulatory leve to create an incentive for private companies to pay the high costs of proper disposal of the HW they generate. The management of the chlorine plant has indicated an interest in continuing the cleanup and mercury recovery activities initiated under the project, and MENR has transferred the equipment and facilities to the plant. However, these have not been used in the six months since project closing, due to the lack of an excavator and truck to transport contaminated materials and lack of operating funds. MENR has sent a proposal to the Cabinet of Ministers that the chlorine plant should either adopt the improved methods for handling waste materials or should be closed.

The pilot cleanup of oil-contaminated land provided very useful information and experience. Sustainability now depends on Government commitment to a concrete strategy and plan of action for cleaning up additional oil-contaminated lands, and to provide financial resources to implement it. However, this will be an enormous undertaking, likely involving hundreds of millions of dollars

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to remediate up to 100 km2 of affected land on the Apsheron Peninsula. Approval of the Oil Cleanup Strategy prepared by SOCAR under Component C will be an important first step, and it has been given extra leverage and urgency as a conditionality for approval of PRSC2. Once approved by the Cabinet, this strategy should provide a good basis for developing a specific plan of action and mobilizing funds from various sources (including the proposed IBRD/GEF-financed Apsheron Peninsula Environmental Cleanup Project). As indicated in Sections 4 and 8, a key element of this plan of action must be to put in place cadastral and other systems needed to manage the ownership and use of the remediated lands. Among other things, this will be essential for attracting private investors to help meet cleanup costs.

SOCAR has created a new Cleanup Unit and is committed to meeting its basic salary and operating costs (ca. $90,000 per year). The future role of this Unit still needs to be determined, for example whether it will oversee or compete with private cleanup companies. Some Presidential resolutions and decrees calling for further cleanup of oil contaminated lands have been issued or are under preparation, and a commission has been established to coordinate action by different players (MENR, SOCAR, Local Executive Authorities).

The main results of Component D were the institutional restructuring which created the MENR, training provided primarily to MENR staff, and the preparation and adoption of a Hazardous Waste Strategy, all of which are entirely sustainable in principle, although their effectiveness will depend the level of financial and political support they receive. The published proceedings of a 2004 a workshop on priority directions and actions for environmental protection in Azerbaijan is likely to serve as the basis for an update of the NEAP.

6.2 Transition arrangement to regular operations:The Prime Minister has called for the relevant Ministries to develop a proposal for the future legal structure and staffing/salary requirements for the hatchery. One issue to be addressed is whether the staff of this facility will continue to receive substantially higher salaries than their counterparts working in other hatcheries. In the longer term, GoA expects to replace the Public Fund with a different, more commercially-based entity and possibly to privatize the facility.

The Landfill Co., which was established under the project, is the legal owner of the landfill. It is presently a fully state-owned and financed company but the intention is to privatize it in the future, when appropriate and interested investors can be identified. It was originally proposed that the company be by a branch of Government other than MENR, to avoid conflict of interest with MENR’s regulatory responsibilities; however this recommendation appears to have been set aside. Privatization is probably some time away, as it is likely to require some policy and regulatory reforms in order to create a reliable market for commercial HW disposal services. Over the past year, MENR and the Landfill Co. have been involved in negotiations with some prospective clients and partners (British Petroleum; the Israeli Green Technology Services of Israel, etc.) in an effort to establish a viable commercial arrangement. In the meantime, the facility is being maintained by a small crew.

After completion of the mercury cleanup and oil cleanup demonstration projects, equipment and facilities used during the project were transferred to the chlorine plant and to the newly established SOCAR Cleanup Unit, respectively. In both cases, the project also provided

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on-the-job training to local management and staff. Future use of these assets will depend on management commitment to continue the activities. In the case of the SOCAR Cleanup Unit, SOCAR management has committed to covering basic salary and maintenance costs, but its engagement in future oil cleanup activities will depend on whether the government provides direct funding and/or puts in place regulations and incentives to stimulate private sector funding.

The PIU which was established by government decree at the beginning of the project was created with the mandate to manage internationally financed projects in the environment sector. It is expected to continue to exist and serve in this capacity. For example, it will be the PIU for the recently approved Azerbaijan Rural Environment Project, and is likely to lead preparation of the proposed Absheron Environmental Cleanup project.

7. Bank and Borrower Performance

Bank7.1 Lending:The Bank responded quickly in helping Government to develop and launch a project to support the priorities identified in the NEAP. Preparation was completed in approximately 6 months. To some extent this was a reflection of Borrower and Bank commitment, but there was also considerable pressure to bring the project to the Board in FY 99 as there was a risk of losing the IDA allocation. In addition, continuing uncertainty as to the amount of IDA allocation available added to the difficulty of designing the project (which components could be included, and at how much total cost). These issues likely contributed to certain weaknesses in project design, such as underestimation of some costs, a relatively complex procurement plan (which was later simplified with the assistance of the Project Management Consultant), inadequate thinking through of the feasibility of implementation arrangements and limited attention to mechanisms for institutional and financial sustainability. Implementation mechanisms (e.g. registration of a Joint Stock Company (JSC) for the hatchery; Subsidiary Implementation Agreement among SCE, SOCAR and MOF for Component C) were agreed upon in principle during preparation, but were made into conditions of disbursement rather than being put in place prior to effectiveness. The Subsidiary Implementation Agreement signed between SCE, SOCAR and Ministry of Finance proved insufficient to avoid complications later on over the issue of whether MENR or SOCAR should have fiduciary responsibility for procurement and expenditures under Component C. In addition, implementation responsibility was not clearly assigned for some important activities, such as the monitoring of mercury emissions.

The design of the project (4 relatively unrelated components with no single overarching Development Objective) might be questioned today, but was not unusual for a project supporting implementation of a NEAP. The complexity was maintained at an acceptable level by limiting the number of activities and implementing agencies.

The development objectives, project outputs and indicators (as listed in Annex 1 of the PAD) were concrete and specific for physical outcomes such as construction of the hatchery, amount of oil recovered/removed from sediments, actual area cleaned and restored, analysis of extent of mercury contamination in the area, etc. They were less clear in relation to the expected longer term results of demonstration and pilot activities. Annex 1 also had some notable gaps. For example, Component D was not included within the Development Objectives, and Indicators and Outputs for Component D were vague and general, making it somewhat difficult to evaluate the outcomes. While this is a common issue with components for institutional capacity building, in most cases an effort is made to establish some concrete targets for training, establishment of new institutional structures, adoption of legislation and regulatory reforms, etc.

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In this case, the capacity building aspects of Component D could have been more clearly linked to specific institutional needs to achieve the objectives of Components A-D (this appeared only in relation to strengthening the regulatory framework for Hazardous Waste Management). The LogFrame also largely lacked concrete indicators relating to measures needed to ensure follow-up and sustainability of project activities and investments (several measures to promote sustainability were incorporated during project implementation).

7.2 Supervision:The project was supervised regularly, with mission teams that often included relevant technical specialists, who made important contributions. For example, during the first supervision mission, a team member noted that the preliminary proposal for the HW landfill was over-designed, given the favorable (naturally protective) conditions of the proposed site. He recommended a less costly alternative involving excavation of cells rather than above-ground mounds. This made it possible to construct a much larger facility. During implementation the task team worked flexibly with the client to address the shortcomings in design, particularly with regard to sustainability issues.

The Aide Memoires were informative and well organized, with a clear summary of essential issues, agreed actions and next steps, with detailed technical annexes. There was good follow-up on issues and agreed actions from one mission to the next, and regular attention to review of financial management and procurement aspects. There was good collaboration between the Bank and the implementing agencies, and both the Bank and the client showed flexibility in supporting the adjustment of project objectives, activities and budgets, based on new information and situations that arose during implementation.

There was a relatively high level of turnover in Task Team Management, with one TTL serving during implementation, a second for the first four years, a third starting with Midterm Review, and two new ones during the final year of the project. The impact of these disruptions on the client was reduced thanks to the very active involvement of team members based at the Country Office, who not only provided technical and operational support but provided much-needed continuity in client relations and served as an essential source of “institutional memory.”

COMPLIANCE WITH SAFEGUARD POLICIES: The project was rated Category A for Environmental Assessment because of Component B (mercury contaminated waste clean-up and disposal). The EIA therefore focused on Component B, while Environmental Reviews were carried out for Components A and C (no further review was required for Component D). . No separate monitoring plan was prepared for the project as a whole, but the EMP contained provisions for monitoring of each of the 3 components.

Supervision of implementation of the EMP was less than fully satisfactory, because::

• The change in the objectives and design of the HW landfill required updating of the EIA. The PIU indicates that this was done, and the revised version was approved by the responsible unit within MENR. However, there is no indication that the revised EIA was ever reviewed and approved by the Bank, or that the need for this was raised.

• The Bank carried out only one independent assessment of implementation of the EMP and project compliance with WB safeguard policies (an Environmental Audit carried out by an ECSSD senior environmental specialist in June, 2001). At that time compliance was found to be satisfactory, but this was at a relatively early stage of project implementation. The environmental audit noted the need for preparation of the monitoring program for mercury emissions, and indicated that this was included in the

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project work plan. Later supervision missions did address specific environmental issues, such as the need to close off the mercury waste cell in the landfill, but did not provide a systematic update of the EMP as a whole.

• Monitoring of mercury emissions and human and environmental exposure to mercury in the context of the Component B clean-up activities, was not implemented, despite being an important element of the EMP. Supervision Aides Memoires noted the reallocation of the funds, but gave no explanation as to whether it had been agreed that this aspect of the EMP could be dropped, and if so, why.

When no suitable local consultant could be found, the task of monitoring implementation of the EMP was given to the Project Management Consultant (PMC), an international firm which was also supporting PIU in the implementation and oversight of Components B and C. While the PMC performed admirably, this arrangement should probably not have been approved, given issues of overall workload and potential conflict of interest.

The PMC’s final report (June 2005) on EMP implementation concluded that all requirements of the EMP were met for Components A and C, but not for Component B (the highest risk component). In particular, it noted the failure to complete the planned surveys of mercury exposure among local residents and chlorine plant workers, and to implement a monitoring program for mercury emissions. It even made the worrying observation that exposure testing of the cleanup workers was not carried out because the management of the plant did not allow it. The PMC’s final report also noted the failure to close and seal the HW landfill cell containing the waste from Component B, but this was later carried out under his supervision.

While the Bank’s supervision reports do not reflect fully adequate supervision of environmental aspects, these were addressed to some extent in the PMC’s interim and final reports and in the project progress reports submitted by PIU. For example, the PIU reported that the Protocol on Cessation of Chlorine Emissions (aimed at reducing the danger of mercury exposure for the cleanup crews under Component B) was being implemented by the chlorine plant management as agreed.

7.3 Overall Bank performance:Overall, the Bank's performance is rated as satisfactory, while noting some areas where project design and supervision could have been improved. The focus of design and supervision on short-term, on-the-ground outcomes is understandable given the nature of this "Urgent Investment" project. Support relating to technical aspects was more effective than on institutional aspects. Both the Bank and the Borrower demonstrated flexibility and sought to strengthen the sustainability aspects during the course of project implementation, by introducing new elements such as preparation of the oil cleanup strategy, the study on sustainability of fisheries, and the establishment of the Landfill Company. The effectiveness of these interventions was however limited by the fact that they were initiated relatively late in the project, and were developed in a relatively ad hoc manner without clear criteria, indicators or targets. (See Section 4 on Achievement of Objectives and Outputs).

The project benefited from strong support from Bank management, such as approval of project extensions. On one occasion, effective intervention on the part of the Country Director (a timely letter to the Prime Minister’s office) helped to resolve a long-standing issue that was delaying implementation of Component C (payment to the main contractor was being held up by a lack of agreement within Government as to whether SOCAR or MENR should sign withdrawal applications for these expenditures). In addition, Government adoption of the Oil Cleanup Strategy has been included in the conditionality for PRSC II.

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Borrower7.4 Preparation:Given the length of time since preparation and the degree of turnover of Bank task team management and membership, there is little information on which to base an assessment of Borrower performance during preparation. The short preparation period and relatively quick approval of the Credit Agreement reflects strong commitment on the part of the Government. The Borrower shares with the Bank some responsibility for failing to identify and resolve some institutional problems prior to project approval and effectiveness (e.g., the issue of whether MENR or SOCAR should be accountable for expenditures under Component C).

7.5 Government implementation performance:This section refers to both Government as a whole (Cabinet of Ministers) and the Ministry of Ecology and Natural Resources (MENR), while the following section refers to the PIU (of MENR) and to SOCAR as the implementing agencies.

The Government supported the project implementation by making available suitable facilities for the PIU, and providing counterpart funding as required and without significant delays. Other concrete support included the establishment of a Hazardous Waste Sector (division) within the MENR, and appointing a member of that Sector to participate in a Quality Assurance Group for the HW landfill, and approval of the HW management strategy. The Apsheron Executive Authority also made an important contribution by allocated a 50 ha site for the HW landfill.

Government contributed to some delays in project implementation. For example, startup of mercury cleanup operations was delayed for about four months after the completion of the landfill, because of the need to wait for approval by a Government commission. The transition associated with the transfer of responsibility for project implementation from SCE to the newly created MENR was somewhat problematic, resulting in a period of several months when payments to contractors and PIU staff were suspended and procurement packages that had already received approval by Government and No Objection from the Bank were put on hold for further review. Internal procedures for review and approval of procurement packages, strategies, etc. were often slow and cumbersome, requiring several rounds of review for successive drafts, and in many cases long response periods. The long delay in obtaining approval for the second PHRD grant is one example. Coordination and communication between MENR and SOCAR were sometimes problematic, for example in relation to managing the Special Account and reviewing the oil cleanup strategy.

7.6 Implementing Agency:The Implementing Agencies for the project were the PIU, which was established by Government under MENR to implement projects in the environment sector, and SOCAR , which established a Component Implementation Unit (CIU) to implement Component C. The PIU was financed under the project, but SOCAR’s CIU was not. Some other agencies and authorities were involved in various activities and/or key decisions. For example, MENR was responsible for signing contracts for Components A, B and D and for providing counterpart funds allocated by the Ministry of Finance. The Sumgayit Municipality and the management of the chlorine plant played a role, for example in developing the Protocol for Cessation of Mercury Emissions which was a condition of disbursement for Component B.

The performances of PIU and CIU were satisfactory, although there were some delays in the first few years of the project. Procurement delays were a problem throughout the project, but in many cases there were mitigating factors. The PIU staff were only recruited after project effectiveness, and therefore lacked the benefit of the 1-2 years of experience with Bank requirements that are often gained during project

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preparation. Many of the activities were highly technical in nature, and it was not considered appropriate to increase the size of the PIU by adding additional full-time technical staff positions. Instead, international consultants were engaged to assist the PIU with preparing tender documents, evaluating bids, supervising on-site activities, etc. These TA contracts which themselves took considerable time to procure, so that they did not begin work until early 2000.

In addition, the procurement was “lumpy,” with a few very large and complex contracts covering most of the activities and costs. The most notable example was the $5.75 million turnkey contract for construction and equipping of the sturgeon hatchery. Procurement of this contract was initiated early in 1999 and startup was not until October, 2001. In the interim, the contract had to be retendered when no bidders met the original pre-qualification criteria, got caught up in the transition from SCE to MENR, and had to be amended and resigned because of a problem related to documentation of the joint venture status of the selected firm. Contracts for landfill construction and site remediation under Component B were only signed in October 2002 and January 2003. Reasons included the fact that the PMC was only appointed in March 2000, at which time he recommended a major revision of the procurement plan to combine numerous separate packages into only two. In addition, activities such as a topographical survey, soil assessment and archaeological survey had to be completed before the tenders could be finalized.

PIU and CIU had capable Director and Component Managers, and also engaged consultants to assist with the more technical aspects such as supervision and evaluation of oil clean-up pilots, supervision of construction of landfill and of hatchery, etc. In most cases these consultants performed satisfactorily. However, there were a few cases in which PIU disagreed with contractors' performance or consultants' recommendations and took a long time to resolve the issues (e.g. payment for supplementary works on hatchery; preparation and evaluation of tender documents for tugboat).

While some procurement processes were delayed (and on a few occasions had to be repeated due to procedural problems) there were no misprocurements. Financial management was fully satisfactory, with all audits unqualified and most received on time (with the exception of the final audit report, which was delayed by several months due to poor performance on the part of the audit firm).

7.7 Overall Borrower performance:Overall Borrower performance is rated as satisfactory. Despite the initial delays, some of which were due to factors within the control of the Borrower, most of the planned activities were completed by the original closing date of December 2003, and nearly all were satisfactorily completed by the revised closing date of June 2005.

Both the Borrower and the Bank recognized the importance of enhancing the financial and institutional sustainability of the project’s achievements, and sought to incorporate additional elements for this purpose. Other examples include the decision to prepare a sustainability plan for the hatchery and an oil cleanup strategy, and to seek mechanisms for partnership with the private sector to put the landfill operations on a commercial track (starting with the proposed contract with British Petroleum). However, there have been problems with following up on some of these measures, such as continuation of mercury cleanup operations, developing commercial contracts for HW disposal at the landfill facility, and approval of the oil cleanup strategy (See Sections 4 and 6).

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8. Lessons Learned

Even if a project design has some shortcomings, a diligent and flexible approach during implementation can help to address these shortcomings and reorient the project so that its development objectives can be achieved.

Institutional structures that will be required for sustainability of project activities should be put in place as early as possible during project implementation. Provisions should be made to phase in the independence of these entities during the last 1-2 years of the project, rather than suddenly cutting them off from financial and technical support when the project closes.

Where project activities are meant to be demonstrations or pilots, the desired outcomes of those demonstrations/pilots should be clearly identified (i.e., whose activities or approaches are expected to change as a result of the knowledge and/or capacity gained, and in what way), and the project should include provisions to facilitate this follow-up.

With respect to clean-up/remediation of contaminated land, institutional aspects such as land ownership and land use planning should be identified and addressed up-front. Where land is in high demand for residential and other development, it may be expected that any remediated land will be in great demand and occupied illegally unless appropriate provisions are made in advance.

The experience of co-implementation by MENR and SOCAR indicated the importance of agreeing in advance on concrete mechanisms for coordination, particularly clarity regarding fiduciary responsibilities when an agency other than the parent Ministry is responsible for implementation of one component.

It is important to abe realistic regarding how quickly it is possible to transform activities and institutions that were historically state-operated to a model based on a commercial, market-based approach, particularly in formerly socialist countries. State-owned companies can provide a bridging mechanism, but it may be some time before they can evolve into institutions that can operate in a truly commercial mode and work effectively with the private sector. Even after the project closes, these entities are likely to require financial support from government for some years before they can become completely self-sufficient, and government should recognize and make a commitment to this.

Capacity building needs to address development of professional management capability, not just technical aspectsl. This is particularly true for entities such as the hatchery and the HW landfill, which will be functioning in a competitive commercial environment and will need to be able to deliver results in an efficient and business-like way.

In order to be effective, Technical Assistance needs to be regarded by government and implementing agencies as a useful tool for achieving highly desired outcomes, otherwise it will be wasted. In this project, the government and the Bank recognized the highly technical nature of the work to be done and the limited local capacity, and therefore included relatively high levels of international TA in the project design. This TA was effective in supporting implementation, and also in building local capacity through on-the-job training.

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9. Partner Comments

(a) Borrower/implementing agency:Overall Project Performance

Performance of Procurement

Component A Construction of a Sturgeon Hatchery The following contracts have been successfully implemented under the Component:

UEIP/A3/ICB/CWThe Sturgeon Hatchery was successfully constructed in 2003 and approved and commissioned by the State Reception Committee established by the Cabinet of Ministers of the Azerbaijan Republic.

UEIP/A1/QCBS/CS- Technical Assistance Contract for Supervision of the Construction of the Sturgeon Hatchery.

Component B Mercury Clean-up All contracts have been successfully completed and the equipment is installed and commissioned. The contracts are:

UEIP/B1.2/ICB/CW- Remediation ContractorUEIP/B3.4/ICB/CW- Construction of a new landfill and improvement of access roadsUEIP/B5.1/IS/G- Personal Protection EquipmentUEIP/B5.2/IS/G- Environmental and health monitoring equipmentUEIP/B5.3/IS/G/CW- Development of the training facilityUEIP/B5.4/IS/CW- Construction of Relocated Training CenterUEIP/B6.1/QCBS/CS- Thorough environmental, health and safety review of the project designUEIP/B7.1/CQ/CS- Topographic surveying/Archeological SurveyUEIP/B7.2/NCB/CW- Site Investigation drilling, sampling, geotechnical testingUEIP/B7.3/CQ/CS- Laboratory chemical analysesUEIP/B8/QCBS/CS- Project Management ConsultantsUEIP/B10/Minorworks/CW- Additional infrastructure for the new Landfill

Component C Onshore Oil field-cleanup

This component was implemented by CIU SOCAR and the contracts under this component are successfully completed.

UEIP/C1/ICB/CW- Pilot Testing of Clean-Up MethodologyUEIP/C2.1/ICB/CW- Cleaning and Restoring of SiteUEIP/C2.2./NS/CW- Drilling Sampling and Lab AnalysesUEIP/C3.1/Ind/CS- Consultancy support during bidding process for pilot testsUEIP/C3.2/Ind/CS- Consultancy services for supervision of site cleaning and restoration

Upon mutual agreement between the Ministry of Ecology and SOCAR, and after endorsement by the Ministry of Finance and Cabinet of Ministers, the authority to sign withdrawal application for direct payment under contract UEIP/C2.1/ICB/CW- Cleaning and Restoring of Site was delegated to SOCAR

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officials.

Component D Environmental Management All contracts have been completed.

UEIP/D1/FB/CS- Consultant Services Technical Assistance for Development HW Management SystemsUEIP/D2/NS/G- Procurement of equipment

PHRD Grant No. TF 026521 for Implementation of Institutional Reforms under AzUEIP.

PHRD-1/CS/FB/A- Technical Assistance Consultant for Institutional StrengtheningPHRD-2/CS/FB/B- TA Consultant for the Training on New Functions and ToolsPHRD-3/CS/SS/C- National Institutional and Public Consultations ExpertPHRD-4/CS/FB/C- TA Consultant for the Public Consultations and Policy Dialogue

The Bank issued no-objection to addition of the 2 new packages in to the Procurement Plan: UEIP/A5/ICB/G- procurement of TugboatUEIP/B11/NCB/CW- construction of a Leachate treatment facility

The process of preparation of Bidding Documents caused some delays in tender announcement. Both tenders were announced and respective bids were received by the bidders. However, due to long time required to deliver the tugboat to Azerbaijan the Government decided not to extend the project (closing date being June 30, 2005), and, therefore, both tenders were cancelled.

Project Progress

Component A “Construction of a Sturgeon Hatchery”

Overall the construction has been completed in a satisfactory manner: turn-key contract signed in October 17, 2001 with the companies “Azerenerjitikintiqurashdirma/ Ferrostall”, the Nere Hatchery Fund established to operate the hatchery is fully staffed; during the period November –December 2003, the Hatchery underwent operational test for which protocols have been prepared by the supervising consultant from SOFRECO; training of hatchery staff is completed.

As a result of the project Azerbaijan has got a modern sturgeon hatchery with the potential to supply 15 million fingerlings annually for release in the Caspian Sea. By year 5 starting 2004, the hatchery will reach its full production capacity. The budget has been agreed by 2006. According to decree, #322 of October 27, 2005, of the Cabinet of Ministers, the Ministry of Finance was instructed to transfer 900 million AZM to the account of the Public Fund by the end of 2005. This decree also instructs the Ministry of Ecology and Natural Resources, Ministry of Economic Development and Ministry of Finance to present to Cabinet of Ministers a joint proposal regarding sustainability and future operation of the Hatchery.

Now the hatchery is fully operational, having produced 6 million fingerlings in 2004 and 8.1 million fingerlings this year. Feeding regimes and staff skills have been improved, including training in caesarian operations to increase survival rates of the mother fish.

Component B “Mercury Cleanup”

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Hazardous Waste Landfill.

A landfill for hazardous waste meeting relevant international requirements was constructed under the Component in the allocated area of 50,0 hectares located close to Pirekushkul village of Absheron district. An asphalt road of 6,0 km length was fixed from Baku-Guba roundabout way to the landfill, and a new bridge was built over Samur-Absheron water canal passing along the same way. The Landfill cell has a volume of 250,000 m

3

.

Cleanup of Mercury Wastes

Special cleanup equipment was installed to clean mercury wastes at the site of the “Synthetic Surfactants Plant” (SSP) of Sumgait city. Cleanup works have been carried out in the total area of 1.000,0 m² in order to clean this area from mercury wastes. 39.300,0 m³ of hazardous wastes were transported and disposed in the hazardous waste landfill mentioned above. Upon completion of the project the cleanup equipment and facilities were handed over to the SSP, so that it is able to continue cleanup of the plant site in the future, using its own resources. It should be noted out that the production of the chlorine by mercury method was used in the plant area from 1958 to 1981 and a huge quantity of mercury wastes was disposed on the surroundings. As a result of this, an area of chlorine production of 5,0 ths m² was polluted by mercury wastes at a depth of 6 meters. Although operation life of chlorine production by mercury method launched in 1981 has been already over, it still operates up to now. During last time, more than 50,0 tons of mercury was disposed in the area and over 200,0 tons of sludge consisting of mercury wastes was collected and remained in the plant area.

Chlorine production by mercury method must be stopped in the area of “SSP” and chlorine production by Membrane or Diaphragm methods must be applied. Both old and new areas of chlorine production located within the Plant must be cleaned from mercury wastes and sludge containing mercury must be transported from the Plant and buried in the HW Landfill. The Ministry of Ecology and Natural Resources reported to the Cabinet of Ministers that additional investments are needed and measures should be taken to allocate required financial means. Component C “Onshore Oil Field Clean up”

The originally planned objective of Component C was to test and demonstrate onshore oil field clean-up methodologies by cleaning up an oil field site on the Absheron peninsula. Two phases were anticipated in the original plan: Phase 1, a series of pilot projects to determine the most cost-effective method for the treatment of oil-contaminated soils; and 2, clean up and restoration of the pilot test site. The results of the pilot tests were required to be evaluated to identify the most effective cleanup technology to obtain experience and cost documentation for large-scale cleanup activities.

While the original objectives of the project remained essentially the same, the scope of work was modified slightly during the implementation. The most modifications have been made as a result of experience gained whilst executing the project, in order to best achieve the planned outcome, and to provide opportunities for future remediation activities. The results produced in excess of the original goals, together with an overall saving of more than $1,000,000 from the original budget, show that such changes in the course of implementation were justified.

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The successful outcome of Component C is that it has provided a comprehensive demonstration of applicable site clean up technologies. The project has included a detailed characterization of a large contaminated site, which will be valuable in assessing remediation requirements on other sites. The project has primarily provided an opportunity to test technical approaches and provide a basis for cost estimations. The technical issues probably do not need further detailed evaluation, and can be applied directly on future projects.

In addition to the information from the Component, which was the original goal, the opportunities to continue the remediation of onshore oil fields are enhanced by the fact that the budget has also been used to make significant investment in clean up equipment and infrastructure, which were remained in SOCAR’s ownership at the end of the project. These facilities and equipment formed a core of technical resourses of remediation unit “Azerneftekologiyaservis”, newly established under the auspices of SOCAR.

Component C has also resulted in the preparation of a proposed clean up strategy, which SOCAR/Government can develop further to suit its needs. This recommended development and expansion of “Azerneftekologiyaservis” to treat the remaining contaminated land in Binagad, as well as possibly establishment of remediation centers in each oil field to clean up land within the oil field.

The challenge now is to identify possible sources of funding to support the activity of the established unit. Potentially, the services of “Azerneftekologiyaservis” could be utilized within a new Apsheron clean up project that is currently under consideration of the World Bank, thereby providing financing for continuation of practical remediation works on the field and development of this unit coming into being.

Component D “Environmental Management” Institutional Strengthening sub-component:

The Institutional Strengthening sub-component provided a template based on which the Ministry of Ecology and Natural Resources was established in May 2001. Capacity building of the newly created Ministry was supported by the following TA packages:

PHRD/1/CS-FB/A “Institutional Support”, 158,260 USD, March 2004 – October 2004, SMEC company (Australia)Submitted reports contain comparative analysis of the legislation in the field of ecological management and environment sectors in comparison with the legislation of European Union, adaptation of the legislation of abovementioned fields, and proposals for strengthening of ecological management and institutional support. Reports have also provided proposals in the field of short-term and long-terms reforms envisioned for institutional strengthening support and project proposals for ecology management support.

PHRD/1/CS-FB/A “Public Consultations and Dialogues”, 90,000 UDS, March 2004 – October 2004, Currie and Brown company (UK)This facilitated the dialogue among different organization and mass media, provided the assessment of ecology situation in Azerbaijan and dissemination of information at the seminars and discussions held in Baku, Guba and Khachmaz. Proposals on facilitation and conducting dialogue between MENR and ecological NGO and non-ecology government organizations. A pilot edition of “Azerbaijan Nature” magazine and improvement of the Ministry and PIU Websites were completed, and Internet website of “Hazardous Wastes Centre” (Land fill) was created.

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PHRD/3/CS-FB/B“New functions and methods training” project, 74,900 USD, March 2004 – October 2004, SMEC company (Avstralia)Training needs required for the Ministry have been determined, training topics have been agreed with the Ministry, trainings on the topics agreed with MENR have been held on 19-31 March, and training programs for MENR and Specialization and Professional skills improvement Institute of MENR have been prepared.

Waste Management sub-component

The sub-component was completed in December 2002. Hazardous Waste Management (HWM) Agency was established under MENR. A number of normative legal regulations related to Hazardous Waste Management have been prepared. On the 31st March, 2003, the Cabinet of Ministers approved legal document N41 on “Rules of certification of hazardous wastes”. On June 14, 2003, the Ministry of Justice has registered in State Register (Certificate N2986) “Guidelines on classification system and rules of inventory of wastes produced in the fields of production process and services”. The State strategy on hazardous waste management in Azerbaijan was prepared based on project documents and approved by the Decree of the Cabinet of Ministers on August 21, 2004.

Technical assistance for the creation of hazardous waste management system (0.8 mln USD, Japanese Government Grant, July 2000-December 2002, GIBB Company (UK)

The Consultant prepared the following reports under the sub-component: - Strategic assessment of current situation of hazardous waste management in Azerbaijan,- Preparation of the strategy for hazardous waste management in Azerbaijan, - Conformity with International Conventions, - Classification of wastes, - Regulation of hazardous waste management and economic interest, - Regulation for facilities (landfills, equipment etc) of hazardous waste management and strengthening local capacity

Practical implementation of project recommendations has been launched.

Implementation of this component contributed to the improvement of ecological management in Azerbaijan by providing a modality for more efficient body – Ministry of Ecology, and further supporting the institutional capacity of the Ministry.

Overall project impact

The project has greatly contributed to the improvement of ecological situation in Azerbaijan through providing modern and high quality facilities for increasing sturgeon stock in the Caspian Sea, hazardous waste management, institutional strengthening and obtaining a lot of data, experience and knowledge on clean up operations, which can be a good basis for developing such operations in the future.

(b) Cofinanciers:

(c) Other partners (NGOs/private sector):

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10. Additional Information

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

Producing 15 million sturgeon fingerlings per year; increase number of sturgeon that returns to spawn in the Kura river.

Hacthery fully operational; release of fingerlings reached at least a rate of 12 million a year; monitoring conducted for strugeon returning to spawn in Kura delta.

Hatchery is fully operational, with the exception of absence of dedicated tugboat for hatchling releases. 6 m fingerlings released in first year, 9 m in second year. Monitoring of returning fish will begin in [ xxxx ]

Mercury clean-up and safe disposal demonstrated.

Cost effective clean up demonstrated; knowledge base established; capacity built in the Chlorine Plant to continue the clean up; partnership with oil companies established for sustainable utilization and operation of the Hazardous Waste Landfil.

Cleanup completed, no basis provided for calculating cost-effectiveness; Chlorine Plant has somewhat improved clean up capacity but follow-up remains to be seen; partnership for utilization/operation of HW landfill is still pending (first contract is still under negotiation)

Oil clean up methodologies tested and risk based oil clean up demonstrated.

A comprehensive risk-based clean up demonstrated; limited slots of land immediately made available for residential or commercial use; overall clean-up strategy completed, based on the outcomes of the clean up; knowledge base and capacity established.

5 different clean-up methods tested/demonstrated and results evaluated; cleaned land has not been officially made available for other use (and due to lack of approved standards it is not clear whether they are suitable for residential or commercial use). However, informal and uncontrolled residential occupation is taking place.

Institutional and regulatory capacity of the Azeri environmental management system improved.

The institutional capacity of the new Ministry of Environment strengthenned in few areas under on-going support from the Project; the Hazardous Waste management regulations are piloted under the Mercury Clean up Component of the Project.

MENR institutional capacity improved through training but still relatively weak due to insufficient personnel and funding. Hazardous Waste Management Strategy developed towards end of the project.

Output Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

Improve financial sustainability and effectiveness of the Hatchery.

Operational funding is provided by the Government as committed for the duration of the Project; strategy for sustainable financing of the hatchery developed and adopted by the Government.

Operational funding provided by project during life of project; Government committed to continuing funding after project. A proposed strategy for sustainable financing prepared but regarded as inadequate.

Improve hatchery technology and operational efficiency of the Hatchery.

The modern capacity of the Hatchery is fully utilized. On-site research conducted with participation of university scientists and international experts.

Completed

Design of cost effective mercury clean up methodology and removal of the source of mercury pollution.

Clean up carried out as designed; hazardous waste landfill that is fully operational; significant part of the source of pollution is removed and the capacity and commitment to continue clean up per established procedures is established in the Plant.

Cleanup completed. Landfill well constructed but not fully operational (operation not meeting EU standards for HW disposal, therefore presently not able to attract commercial clients).

Analyses of extend of mercury contamination in the area.

Completion of the study with post clean-up data.

Not completed - funds allocated to other purposes.

Knowledge base for appropriate and cost effective oil clean up technologies developed.

The remediation carried out, based on which the overall clean-up strategy for SOCAR completed and reliable cost data generated. Knowledge base and capacity for cost effective clean-up established in SOCAR.

Remediation trials completed and results evaluated; oil clean-up strategy prepared by consultant pending approval by SOCAR management and submission to Government

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Reduced health risks to population living adjacent to the cleaned oil field area.

Limited data on improvements in health conditions generated during the preparation period.

No data collected during implementation

More capable and efficient environmental monitoring and regulatory capacity.

Regulations for hazardous waste treatment and safe disposal tested under Mercury Component; Training provided to the staff of the Ministry on few functions (EA, Design of Standards, MIS, etc.); further TA provided for institutional strengthening.

Trainig and TA provided as indicated. Some new HW management regulations adopted based on recommendations from project.

1 End of project

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)AppraisalEstimate

Actual/Latest Estimate

Percentage of Appraisal

Component US$ million US$ millionSturgeon hatchery 7.00 7.36 105Mercury cleanup 6.67 6.78 102Onshore oil cleanup 4.13 3.36 81Environmental management 1.23 1.24 101Project management and implementation 0.76 0.89 117

Total Baseline Cost 19.79 19.63 Physical Contingencies 1.82 Price Contingencies 2.89

Total Project Costs 24.50 19.63Total Financing Required 24.50 19.63

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

01

Other2 N.B.F. Total Cost

1. Works 12.52 0.95 0.00 0.00 13.47(12.52) (0.95) (0.00) (0.00) (13.47)

2. Goods 0.95 0.43 0.20 0.00 1.58(0.95) (0.43) (0.20) (0.00) (1.58)

3. Services 0.00 0.00 4.76 1.55 6.31(0.00) (0.00) (4.76) (0.00) (4.76)

4. Miscellaneous 0.00 0.00 0.04 3.16 3.20(0.00) (0.00) (0.04) (0.00) (0.04)

5. Miscellaneous 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

6. Miscellaneous 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

Total 13.47 1.38 5.00 4.71 24.56(13.47) (1.38) (5.00) (0.00) (19.85)

Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 12.96 0.08 0.17 0.00 13.21(12.96) (0.08) (0.17) (0.00) (13.21)

2. Goods 0.00 0.00 0.26 0.04 0.30(0.00) (0.00) (0.26) (0.00) (0.26)

3. Services 0.00 0.00 4.04 1.11 5.15(0.00) (0.00) (4.04) (0.00) (4.04)

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4. Miscellaneous 0.00 0.00 0.31 0.76 1.07(0.00) (0.00) (0.28) (0.00) (0.28)

5. Miscellaneous 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

6. Miscellaneous 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

Total 12.96 0.08 4.78 1.91 19.73(12.96) (0.08) (4.75) (0.00) (17.79)

1/ Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies.2/ Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff

of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.

Project Financing by Component (in US$ million equivalent)

Component Appraisal Estimate Actual/Latest EstimatePercentage of Appraisal

Bank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF.Sturgeon Hatchery 6.86 2.90 6.67 0.77 97.2 26.6Mercury Cleanup 6.67 6.78 101.6Onshore Oil Cleanup 4.13 0.10 3.36 81.4 0.0Environmental Mgt 1.23 1.24 100.8Proj Mgt/Implementation 0.76 0.10 0.79 0.10 103.9 100.0

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Annex 3. Economic Costs and Benefits

The following tables summarize the results of the economic and financial analysis carried out at appraisal.

Cost Benefit Assessment: Economic Analysis Component

NPV-US$ millions (Appraisal)

EER (Appraisal)

Net Fiscal Impacts (Appraisal)

Sturgeon Hatchery

36.39 24.6% 9.02

Oil Cleanup

.19 17.7% -.59

Mercury Recovery

3.92 15.8% -5.97

Total Project

40.51 22.0% 2.46

Cost-Benefit Assessment: Financial AnalysisComponent NPV-US$

millions (Appraisal)

EER (Appraisal)

Surgeon Hatchery

9.25 14.9%

Oil Cleanup

-.97 NA

Mercury Recovery

-6.23 NA

Total Project

2.05 10.8%

The above results were based on the following assumptions and calculations:

Sturgeon Hatchery component:

• 1/2 of those adult hatchery fish will return to the Kura river.• Average weight of a mature fish is 25 kg and its average weight in caviar and meat are 7.5% and 92.5%, respectively.• Caviar exports will reach 100 tons after year 2027.• Export parity price for caviar and sturgeon meat will remain constant over the life of the project at $170 and $2 per kg, respectively.• Production costs of caviar and meat will remain constant at $25 and $.5 per kg, respectively.

Analysis of the Sturgeon Hatchery Component

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Category Economic Analysis-US$ million (Appraisal)

Financial Analysis: Fishery Sector Point of View-US$ million (Appraisal)

Benefits 47.07 21.16Costs (10.68) 11.91

Net Benefits 36.39 9.25IRR 24.6 14.9Positive externalitiesLabor Force 3.09Domestic consumers

3.12

Government 20.93Sub total 27.14Net fiscal impactsExport taxes 15.81VAT sales 1.25Foreign exchange premium

3.87

Capital subsidy (7.86)Recurrent subsidy

(4.05)

Sub-total 9.02

Mercury clean-up component:

• 275 tons of mercury will be recovered and sold at a market price $1200 per ton.• Neonatal mortality rate (18.5/1000 pregnant women) of the population of Sumgait living close to the waste site will be reduced by 50%• Defects on development rate (60/1000 births) of the population of Sumgait living close to the waste site will be reduced by 50%• Slow development rate (estimated at 25/1000 births) of Baku’s children consuming 100gr or more of fish per day will be reduced by 50% as result of the educational campaign• 15% of the population in Baku was assumed to consumed more than 100 gr. of fish per day• Premature child death was valued at US$18000• Cost of avoiding major negative impacts on development at the time of birth was valued at US$ 9200 per case.

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• Cost of avoiding slow development on children exposed to contaminated fish was valued at US$1800 per case• 2% of caviar exports will be rejected

Category Economic Analysis-US$ million (Appraisal)

Financial Analysis: Fishery Sector Point of View-US$ million (Appraisal)

Benefits 10.07Costs (6.16)

Net Benefits 3.92IRR 15.8%Positive externalitiesLabor Force .77Society 7.77Fishery sector 1.36Government .26Sub total 10.15Net fiscal impactsForeign exchange premium

(.24)

VAT sales .50Mercury recovery sales

.25

Capital subsidy (6.00)Recurrent subsidy

(.48)

Sub-total (5.97)

Oil Clean-up component:

• 500,000 cubic meters of oil-polluted soil with a mean recoverable oil content of 20% will be cleaned• 100,000 tons of oil will be recovered and sold at a market price of $35 per ton• 11 hectares of land will be made attractive for residential purposes• Average value of land is estimated at US$10,000 per hectare, and expected to increase at a rate of 7% per year• Property tax is expected to remain constant at 1.5% per year

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Category Economic Analysis-US$ million (Appraisal)

Financial Analysis: Fishery Sector Point of View-US$ million (Appraisal)

Benefits 3.58Costs (3.38)

Net Benefits .19IRR 17.7%Positive externalitiesLabor Force .55Domestic consumers

.23

Government .38Sub total 1.16Net fiscal impactsForeign exchange premium

(0.20)

VAT sales .55Property taxes .03Oil recovery sales

2.76

Capital subsidy (3.73Sub-total (.59)

The analysis carried out during Appraisal was not revisited for the ICR because the data and assumptions on which it was based could not be expected to change substantially during the project period and no new information has become available to justify revisiting the original assumptions.

For Component A, the calculations were based on estimates of the number of hatchery-bred fingerlings that would survive to adulthood (returning to the Kura River to spawn), the weight and average caviar production per adult fish and international prices for sturgeon meat and caviar. However, the maturation period for all four sturgeon species is seven years or more, and production of fingerlings only began in 2003. It remains to be seen whether Azerbaijan’s share of the annual approved sturgeon will be adjusted upwards starting in 2010, based on this increased production and release of fingerlings, and if so what the economic implications of this are. The most direct economic impact of increasing Azerbaijan's capacity to produce and release wild sturgeon fingerlings may be related to an increase in Azerbaijan's share of the annual sturgeon/caviar catch quota for the Caspian Sea, set and monitored by a Commission of the riparian countries. The quota takes into account the number of fingerlings each country released to the wild seven years prior to the year of the quota, based on the maturation period of the fish. However, the number of fingerlings released is only one of a number of factors used in calculating both the total annual quota and

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each country's share of the quota. Therefore, no concrete estimates can be made of the size or value of the increased quota share that Azerbaijan may receive from 2010 onwards. Furthermore, it is generally believed that the legal catch, which is governed by the quota, is substantially less than the illegal catch.

For Component B, the benefits were estimated based on the economic impacts of improved health among residents of Sumgayit and Baku as a result of decreased exposure to mercury. The calculation made very ambitious assumptions regarding project impact (50% reduction in neonatal mortality rate, 50% reduction in developmental defects, etc.). However the very limited scale of the cleanup operation, the presence of many other pollution hazards, and the long term nature of the health impacts of mercury exposure make it highly unlikely that any significant health impacts would be visible as a result of this project. In addition to these theoretical issues, the planned systematic survey and monitoring of mercury emissions and exposure were not carried out, so there are no data against which to test the assumptions.

For Component C, the economic benefits were mainly expected to arise from sale of recovered oil (in the short term) and from increased land values and associated property taxes on remediated land, which could be used for residential purposes. However, no commercially relevant quantities of oil were recovered in the small pilot demonstration. This was due in part to the relatively small area cleaned and to the nature of the oil contamination present -- i.e., consisting mainly of "heavy end" compounds with little commercial value. Furthermore, although land in the area of the pilot cleanup is clearly in high demand for residential development and becoming very valuable due to its proximity to Baku (estimated $100,000 per hectare), no mechanisms were put into place under the project to calculate or capture the increased value of the land following remediation.

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Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle Performance Rating No. of Persons and Specialty

(e.g. 2 Economists, 1 FMS, etc.)Month/Year Count Specialty

ImplementationProgress

DevelopmentObjective

Identification/Preparation

12/9/1997 12 PROJECT TEAM LEADER (1); TEAM LEADER (2); PR. ENV. SPECIALIST (1); SR. FISHERIES ECON. (1); PR. ENERGY SPECIALIST (1); PROCUREMENT SPECIALIST (1); FINANCIAL MANAGEMENT (1); INSTITUTIONAL SPEC. (1); OPERATIONS OFFICER (1); PROJECTS ASSISTANT (1); HATCHERY SPECIALIST (1)

S S

Appraisal/Negotiation

3/24/1998 13 PROJECT TEAM LEADER (1); TEAM LEADER (2); PR. ENV. SPECIALIST (1); SR. FISHERIES ECON. (1); PR. ENERGY SPECIALIST (1); ENVIRONMENTAL SPECIALIST (1); PROCUREMENT SPECIALIST (1); FINANCIAL MANAGEMENT (1); INSTITUTIONAL SPEC. (1); OPERATIONS OFFICER (1); PROJECTS ASSISTANT (1); HATCHERY SPECIALIST (1)

S S

Supervision

11/28/1998 10 TEAM LEADER (1); PR. ENV. SPECIALIST (1); SR. FISHERIES ECON. (1); PR. ENERGY SPECIALIST (1); PROCUREMENT SPECIALIST (1); FINANCIAL MANAGEMENT (1); INSTITUTIONAL SPEC. (1); OPERATIONS OFFICER (1); PROJECTS ASSISTANT (1); HATCHERY SPECIALIST (1)

S S

05/10/1999 7 TEAM LEADER (1); HAZARDOUS WASTE (1);

S S

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PROJECT OFFICER (1); OPERATIONS ANALYST (1); HATCHERY SPECIALIST (1); MERCURY/HAZARDOUS (1); OIL MITIGATION (1)

11/12/1999 6 TEAM LEADER (1); OPERATIONS ANALYST (1); INSTITUTIONAL SPEC. (1); HATCHERY SPECIALIST (1); OIL-SPIL SPECIALIST (1); HAZARDOUS WASTE SPEC. (1)

S S

07/13/2000 4 TEAM LEADER (1); ENVIRONMENTAL ENGINEER (1); HAZARDOUS WASTE SPEC (1); OPERATIONAL ANALYST (1)

S S

06/01/2001 5 TEAM LEADER (1); ENERGY SPECIALIST (1); OPERATIONS (1); PROJECT COORDINATOR (1); ENVIRONMENTAL AUDIT (1)

S S

12/14/2001 5 TEAM LEADER (1); OIL COMPONENT MANAGER (1); MERCURY COMPONENT MNGR (1); PROJECT IMPLEMENTATION (1); PROJECT OFFICER RM (1)

S S

05/07/2002 3 TEAM LEADER (1); PROJECT OFFICER RM (1); FISH. SECILAIST (CONS) (1)

S S

08/19/2002 2 TEAM LEADER (1); PROJECT OFFICER RM (1)

S S

04/25/2003 3 OPERATIONS ANALYST (1); COMPONENT C (1); PROJECT OFFICER (1)

S S

02/17/2004 5 MISSION LEADER (1); CONSULTANT (2); FMS (1); PROJECT OFFICER (1)

S S

11/23/2004 8 TEAM LEADER (1); OPERATIONS ANALYST (1); INST. SPECIALIST (1); ENEGY SPECIALIST (C) (1); FMS (1); CONSULTANT, COMP B / C (1); OPERATIONS OFFICER (1); FUTURE TTL (1)

S S

4/25/2005 TEAM LEADER (1); ENVIRONMENTAL ENGINEER (1); ENVIRONMENTAL OFFICER (1); CONSULTANT (1)

S S

ICR

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12/1/2005 3 TEAM LEADER (1); ENVIRONMENTAL OFFICER (1); CONSULTANT (1)

S S

(b) Staff:

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ ('000)

Identification/Preparation 402Appraisal/NegotiationSupervision 970ICRTotal

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingMacro policies H SU M N NASector Policies H SU M N NAPhysical H SU M N NAFinancial H SU M N NAInstitutional Development H SU M N NAEnvironmental H SU M N NA

SocialPoverty Reduction H SU M N NAGender H SU M N NAOther (Please specify) H SU M N NA

Private sector development H SU M N NAPublic sector management H SU M N NAOther (Please specify) H SU M N NA

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

Lending HS S U HUSupervision HS S U HUOverall HS S U HU

6.2 Borrower performance Rating

Preparation HS S U HUGovernment implementation performance HS S U HUImplementation agency performance HS S U HUOverall HS S U HU

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Annex 7. List of Supporting Documents

Containment Quality Associates, Ltd, July 2004. AzUEIP Component C: Oil Field Clean-up Pilot Tests, Task 8 Report, Strategy for Cleanup of Oil Contaminated Sites - Draft

Containment Quality Associates, Ltd, December 2004. Mercury Clean-up Project, Sumgayit, Project Management Consultants' Final Report

Containment Quality Associates, Ltd, June 2005. AzUEIP Coponent C: Oil Field Clean-up Pilot Tests, Task 7 Final Report on Progress of Phase 2 Works, Assessment of Contract Implementation and Results

Containment Quality Associates, Ltd, June 2005. AzUEIP Final Report on Compliance with Environmental Mitigation Plan

EnSafe Inc., 2005. Final Report for Oil Clean-up Component of the Urgent Environmental Investment Project

Hassanov, T., 2005. Environmental Protection: Priority Directions and Actions (based on October 2004 workshop, prepared by National Expert on Institutional Strengthening, under Component D)

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