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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 65984-BA
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT
IN THE AMOUNT OF SDR 25.8 MILLION
(US$40.00 MILLION EQUIVALENT)
TO
BOSNIA AND HERZEGOVINA
FOR AN
IRRIGATION DEVELOPMENT PROJECT
March 26, 2012
Sustainable Development Department
South East Europe Country Unit
Europe and Central Asia Region
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. Its contents may not otherwise be disclosed without World
Bank authorization.
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CURRENCY EQUIVALENTS (Exchange Rate Effective January 25, 2012)
Currency Unit = Bosnian BAM 1 BAM = US$0.669388
US$1 = BAM 1.49390
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AAA Analytical and Advisory Activities
APCU Agricultural Projects Coordination
Unit (of RS)
IFAD International Fund for Agriculture Development
ARDP Agricultural and Rural
Development Project
IFRs Interim Unaudited Financial Reports
BiH Bosnia and Herzegovina MAFWM Ministry of Agriculture, Forestry, and Water Management
CAP Common Agricultural Policy M&E Monitoring and Evaluation
CGF Gross Capital Formation MIS Management Information System
DA Designated Account MOAWMF Ministry of Agriculture, Water Management and Forestry
DAFWM Department for Agriculture,
Forestry and Water Management
MOFT Ministry of Finance and Treasury (state level)
DB District Brcko MOFTER Ministry of Foreign Trade and Economic Relations
DoF Department of Finance MOU Memorandum of Understanding
ECA Europe and Central Asia MTR Mid-term Review
EMP Environmental Management Plan NGO Non Governmental Organization
ESMF Environmental and Social
Management Framework
O&M Operations and Maintenance
EU European Union ORAF Operational Risk Assessment Framework
FBiH Federation of Bosnia-Herzegovina PDO Project Development Objective
FM Financial Management POM Project Operational Manual
FMS Financial Management Specialist PIM Participatory Irrigation Management
GDP Gross Domestic Product PIU Project Implementation Unit
HACCP Hazard Analysis and Critical
Control Point
RS Republika Srpska
IAS Irrigation Advisory Service SOE Statement of Expenditure
ICB International Competitive Bidding
SP Subproject
ICR Implementation Completion
Report
SSCAD Small Scale Commercial Agriculture Development
IDA International Development
Association
TA Technical Assistance
I&D Irrigation and Drainage WUA Water User Association
Vice President: Philippe Le Houerou
Country Director: Jane Armitage
Sector Director: Laszlo Lovei
Country Manager Anabela Abreu
Sector Manager: Dina Umali-Deininger
Task Team Leader: Guy J. Alaerts
Table of Contents
I. Strategic Context ............................................................................................................ 1
A. Country and sector issues ............................................................................................... 1
B. Sectoral and Institutional Context .................................................................................. 2
C. Higher level objectives to which the project contributes ............................................... 4
D. Ongoing/Complementary Activities by the Bank and Other Partners ........................... 5
II. Project Development Objectives .................................................................................... 6
Project Beneficiaries ................................................................................................................ 6
III. Project Description ......................................................................................................... 8
A. Project components ......................................................................................................... 8
B. Project Financing ............................................................................................................ 9
C. Lessons Learned and Reflected in the Project Design .................................................. 10
IV. Implementation ............................................................................................................. 11
A. Institutional and Implementation Arrangements .......................................................... 11
B. Results Monitoring and Evaluation .............................................................................. 13
C. Sustainability................................................................................................................. 13
V. Key Risks and Mitigation Measures ............................................................................ 14
VI. Appraisal Summary ...................................................................................................... 15
A. Economic and Financial Analysis ................................................................................. 15
B. Technical ....................................................................................................................... 16
C. Financial Management .................................................................................................. 16
D. Procurement .................................................................................................................. 17
E. Social Sustainability, Gender and Social Safeguards ................................................... 17
F. Environment (including safeguards) ............................................................................. 18
Annex 1: Results Framework and Monitoring ...................................................................... 20
Annex 2: Detailed Project Description ................................................................................. 21
Annex 3: Implementation Arrangements ............................................................................. 29
Annex 4: Operational Risk Assessment Framework ............................................................. 46
Annex 5: Implementation Support Plan ................................................................................ 50
Annex 6: Team Composition ................................................................................................ 53
Annex 7: Economic and Financial Analysis ........................................................................ 54
Annex 8: Social Development and Sustainability ................................................................. 64
Annex 9: Project Map No. IBRD 39024 ............................................................................... 66
PAD DATA SHEET
Bosnia and Herzegovina
Irrigation Development Project (P115954)
PROJECT APPRAISAL DOCUMENT .
EUROPE AND CENTRAL ASIA
ECSS1
.
Basic Information
Date: 24-Mar-2012 Sectors: Irrigation and drainage (80%), Flood protection
(10%), General agriculture, fishing and forestry
sector (10%)
Country Director: Jane Armitage Themes: Water resource management (67%), Rural
services and infrastructure (33%) Sector
Manager/Director: Dina Umali-
Deininger/Laszlo
Lovei
Project ID: P115954 EA
Category: B - Partial Assessment
Lending
Instrument: Specific Investment
Loan
Team Leader(s): Guy J. Alaerts
Joint IFC: No .
Borrower: Ministry of Finance and Treasury, Bosnia and Herzegovina
Responsible Agency: RS Ministry of Agriculture, Forestry, and Water Management
Contact: H.E. Miroslav Milovanovic Title: Minister
Telephone No.: +387 051 338 415 Email: [email protected],
Responsible Agency: FBiH Ministry of Agriculture, Water Management and Forestry
Contact: H.E. Jerko Ivanko
Ivanković-Lijanović Title: Minister
Telephone No.: +387 033 443 338 Email: [email protected],
Project Implementation Period: Start Date: 30-Sep-2012 End Date: 31-Dec-2017
Expected Effectiveness Date: 30-Sep-2012
Expected Closing Date: 31-Dec-2017 .
Project Financing Data(US$M)
[ ] Loan [ ] Grant [ ] Other
[ X ] Credit [ ] Guarantee
Proposed term: the credit has a final maturity of 25 years including a grace period of 5 years
For Loans/Credits/Others
Total Project Cost (US$M): 47.00
Total Bank Financing (US$M): 40.00 .
Financing Source Amount(US$M)
BORROWER/RECIPIENT 7.00
International Development Association (IDA) 40.00
Total 47.00 .
Expected Disbursements (in USD Million)
Fiscal Year 2013 2014 2015 2016 2017 2018 0000 0000 0000
Annual 3.46 12.55 15.96 6.71 1.32 0.00 0.00 0.00 0.00
Cumulative 3.46 16.01 31.97 38.68 40.00 40.00 40.00 40.00 40.00 .
Project Development Objective(s)
The Project Development Objective (PDO) is to improve the performance of the irrigation systems and
the irrigation institutions to support agricultural producers in the project areas. .
Components
Component Name Cost (USD Millions)
Component 1: Infrastructure Investment (works,
goods/equipment, consulting services): irrigation and drainage
infrastructure and equipment in around 12 subprojects
38.80
Component 2: Irrigation Modernization (goods/equipment,
consulting services, training): agency level and farm level 5.80
Component 3: Project Implementation Support
(consulting/non-consulting services, goods, training, and
incremental operating costs): PIUs, M&E, ESMF, audits,
procurement and FM training
2.40
.
Compliance
Policy
Does the project depart from the CAS in content or in other significant
respects? Yes [ ] No [ X ]
.
Does the project require any exceptions from Bank policies? Yes [ ] No [ X ]
Have these been approved by Bank management? Yes [ ] No [ ]
Is approval for any policy exception sought from the Board? Yes [ ] No [ X ]
Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] .
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment OP/BP 4.01 X
Natural Habitats OP/BP 4.04 X
Forests OP/BP 4.36 X
Pest Management OP 4.09 X
Physical Cultural Resources OP/BP 4.11 X
Indigenous Peoples OP/BP 4.10 X
Involuntary Resettlement OP/BP 4.12 X
Safety of Dams OP/BP 4.37 X
Projects on International Waterways OP/BP 7.50 X
Projects in Disputed Areas OP/BP 7.60 X .
Legal Covenants
Name Recurrent Due Date Frequency
Description of Covenant .
Team Composition
Bank Staff
Name Title Specialization Unit
Guy J. Alaerts Lead Water Resources
Specialist Team Lead ECSS1
Ahmed Shawky M.
Abdel Ghany Sr Water Resources
Spec. Co-TTL and Sr Water
Resources Spec. ECSS1
Daniel P. Gerber Rural Development
Specialist Rural Development
Specialist ECSS1
Samra Bajramovic Program Assistant Program Assistant ECCBM
Mirjana Karahasanovic Operations Officer Operations Officer ECSS3
Naima A Hasci Sr Social Scientist Sr Social Scientist ECSOQ
Nikola Kerleta Procurement Specialist Procurement Specialist ECSO2
Jose C. Janeiro Senior Finance Officer Senior Finance Officer CTRLA
Jasna Mestnik Finance Analyst Finance Analyst CTRLA
Lamija Marijanovic Financial Management
Specialist Financial Management
Specialist ECSO3
Anneliese Viorela
Voinea Financial Management
Specialist Financial Management
Specialist ECSO3
Iwona Warzecha Senior Financial
Management Specialist Senior Financial
Management Specialist ECSO3
Bekim Imeri Social Scientist Social Scientist ECSS4
Esma Kreso Environmental Specialist Environmental Specialist ECSS3
Adam Shayne Lead Counsel Legal LEGEM
Coral Daphne M. Bird Temporary Temporary ECSS5
Non Bank Staff
Name Title Office Phone City
Kunduz Masylkanova Economist (FAO)
Juan Morreli Economist (FAO)
Luis Samoilov Irrigation Designer
(FAO)
.
Locations
Country First
Administrative
Division
Location Planned Actual Comments
.
1
I. Strategic Context
A. Country and sector issues
1. Bosnia and Herzegovina (BiH) has a land area of 51,000 square kilometers (km2) and an
estimated population of 3.9 million. About 50% of the country is covered by forests and 25% by
pastures. It is mostly hilly and mountainous, with only 5% of its territory classified as plains,
24% as hills, 29% as Karst and 42% as mountains. The plain areas have rich, light soils that are
suitable for cultivation of a variety of crops. However they have a tendency to flood during the
rainy periods in fall and spring, while the dry summers make the planting of high value crops
very risky. The slopes and the pre-alpine areas, in turn, have large areas of pasture land suited
for a variety of livestock production and modest cultivation of primarily grains and potatoes.
The climate varies from a mild Mediterranean in the Southwest to a more continental in the
North and Northeast. These agro-climatic conditions allow for a variety of agricultural activities
ranging from intensive irrigated horticulture in the plains and lower plateaus, to extensive
livestock husbandry in the pre-alpine and mountainous regions of the country. The comparative
advantages of BiH‘s agriculture sector lie in its closeness to the European Union (EU), a
moderate continental climate, clean and abundant natural water resources, and relatively low
factor prices. The weak institutional capacity e.g. for extension services, the low investment
rates, and the lack or inoperability of agricultural and rural infrastructure such as reliable
irrigation, however, remain serious constraints to increase the sector‘s productivity.
2. The agriculture sector is and will remain economically important for BiH and is an
integral part of the rural economy, providing important sources of employment for rural
inhabitants and having significant backward and forward linkages to the rest of the economy.
According to official statistics, the primary agriculture sectors still accounts for approximately
9% of Gross Domestic Product (GDP) and employs more than one fifth of the total labor force.
3. Crop yields, and potential options for growing high-value crops and double-cropping, are
restricted without irrigation primarily due to prolonged dry spells during the summer season.
Typical yield losses are estimated to be in the order of 30-40% in the Southwest, while in the
northern areas along the Sava river plain typical yield losses amount to 20-30%, with less in the
central and mountain areas. In addition, in many of the plains and valleys, productivity also
regularly suffers from water logging and inundation. Thus, drainage is as important as irrigation.
4. The BiH Strategic Plan for Harmonization of Agriculture, Food and Rural Development,
the Republika Srpska Strategies for Rural Development and Agriculture, and the Federation of
Bosnia-Herzegovina Strategy for Agriculture, outline their development priorities as follows: (i)
macroeconomic stability; (ii) competitiveness; (iii) sustainable development; (iv) employment
generation; (v) EU integration and (vi) social inclusion. For the agriculture sector, the Strategies
call for investments in technology to improve the efficiency of primary production and to move
towards increased secondary production and processing, to boost employment and added value
in the sector. They also look beyond farming to improve living conditions and diversify the rural
economy and job opportunities. They highlight the priority to be given to environmental
protection, particularly with respect to the management of natural resources such as water, land
and forests.
2
5. The Dayton Peace Agreement, signed in 1995, established a complex governance
structure governing the two constituent territories as Entities, namely Republika Srpska (RS) and
Federation of Bosnia-Herzegovina (FBiH) with a third independent area, namely District Brcko
(DB) (henceforth, the term ―Entities‖ is used to designate the FBiH and RS). The Entities are in
the process of developing, or have completed Rural Development Strategies. These strategies
focus on a set of six broad objectives including: (i) increasing the scope and adjusting the
structure of agricultural and industrial production; (ii) optimal utilization of agrarian resources;
(iii) balanced integrated rural and agrarian development; (iv) supporting a stable market for
agricultural and food related products, with the aim of reducing the share of food related costs in
the structure of family budgets; (v) increasing the level of exports; and (vi) improving the
institutional, material, staff related, technical and technological capacities of agriculture.
6. BiH is working towards candidate status to the EU. The State Council of Ministers and
the Entities as well as DB are in the process of aligning their policies and development programs
with the EU agricultural and environmental acquis including in the water sector, in part with
technical and financial support from the EU, the World Bank and other donors. Climate change
is also likely to lead to higher temperatures in BiH, along with more variable precipitation. Thus
improving water resource management and the performance of the irrigation and drainage (I&D)
systems would be crucial to enable farmers to successfully adapt to the new challenges that the
changing weather and its increased variability would bring. With dryer summers and wetter
springs and falls, in order for BiH to increase or maintain its high value agricultural production
levels, it will need to rely increasingly on supplemental irrigation and better functioning
irrigation systems, while adequately functioning drainage and storage facilities will be needed to
prevent flooding in spring.
B. Sectoral and Institutional Context
7. Harmonized water laws for the FBiH and the RS, developed with the assistance of the
EU, passed into law in September 2006. This legislation provides a broad framework for the
abstraction, use and disposal of water resources. The laws adopted basic aspects of the EU Water
Framework Directive and direct water resource development and management towards more
integrated approaches. In line with the EU acquis, both RS and FBiH have two operational
river-basin based Water Agencies for the Sava basin and for the Adriatic basin, respectively. For
the largest river basins, integrated river basin management plans are being prepared in
accordance with the EU guidelines (those for the Neretva, Trebisnjica and Vrbas with Bank
support). With EU assistance, the preparation of the supporting regulations and establishing a
framework of responsibilities for the various state institutions, agencies and private user groups
for the water sector is on-going. These laws also regulate in broad terms the key aspects of
irrigation.
8. Substantial investment in irrigation was made during the days of former Yugoslavia as
part of the development of vertically integrated Agro Kombinats. However, destruction from the
1992 war, reforms which led to privatization, including the fracturing of the trade links, have left
many irrigation systems under used and dilapidated. Moreover, the country‘s complex
institutional structure, and administrative legacy has left it at the onset with unclear
responsibilities between central, regional, and local government and users in terms of roles and
3
responsibilities towards the irrigation sector. In the mean time, each Entity has gradually
developed its own institutional and organizational structures that are sufficiently compatible and
complementary1. Also, the new EU funded project ―Support for Water Policies in Bosnia
Herzegovina‖ is assisting to improve the coordination of water policies in order to be able to
prepare State level documents. Notably, many of the components of the Entities‘ strategies and
frameworks are already compatible with EU Directives and guidelines.
9. The RS has formulated a vision and strategy for irrigation development and of
government support in the form of subsidies (40% of costs) for irrigation equipment. The
Ministry of Agriculture, Forestry and Water Management (MAFWM) has produced a
comprehensive plan outlining the irrigation potential in the entity together with a further
publication outlining development potential. The Law on Waters of the RS was recently
amended to accommodate the strategy and the participation of water users in the management of
irrigation systems. Some 115,000 ha of land in RS have good potential for irrigated agriculture
development. By far the largest proportion (at least 95%) of this area is in the plains along
tributaries to the Sava, and along the Sava itself. Previously, irrigation schemes irrigated a total
of about 7,260 ha, of which about 3,440 ha was in the northern inland plain (Sava river basin)
and about 3,820 ha in the southern coastal area (primarily the Neretva and Trebisnjica river
basin). Many irrigation systems have deteriorated, such that currently, functioning schemes
service only about 1,700 ha (23% of the previously existing irrigation areas): 1,470 ha in the
Sava basin area (43% of the previously developed area) and 230 ha in the Mediterranean basin
(6% of the previously developed area).
10. The FBiH formulated a concept note in 2009 on the Programme for Irrigation and
Drainage in the Federation of BiH 2
and a strategy for water management for the period 2010-
2022. Prior to the war, irrigation covered about 20,000 ha. Of this area, about 13,000 ha were in
the northern inland plain (Sava river basin) and about 7,000 ha were in the southern area
(primarily the Neretva and Trebisnjica river basins). The present post-war situation in FBiH is
still being assessed; but it is estimated that around 3,000 ha (15% of the previously developed
area) are currently serviced by irrigation. By contrast, a total of approximately 280,000 ha are
reported to have potential for development of irrigated agriculture, of which about 170,000 ha
could be considered as having more favorable conditions and higher priority.
11. Both Entities have an enabling environment for irrigation development and established
Focal Teams on Irrigation in their respective Ministries to prepare the Irrigation Development
Project (IDP). Procedures are in place for establishing water availability in each catchment area,
and for licensing abstraction and disposal of drainage and wastewater. This would provide
improved security for farmers who wish to develop irrigation systems as well as for other exiting
water users.
1 The experience with both the recently closed SSCADP and the on-going Neretva and Trebisnjica Management
Project suggests that despite the institutional complexity and scope for diverging strategies, both Entities are
remarkably consistent and cooperative at the technical and operational level. 2 Program for irrigation and drainage in the Federation of BiH. Undated (2009). Federal Ministry of Agriculture,
Water Management and Forestry, Federation of Bosnia Herzegovina.
4
12. Because of the varied terrain comprising mountainous areas as well as wide river plains,
the irrigation systems in BiH are relatively small in area, are rarely interconnected, and have
relatively small carrying capacities. The conveyance systems are in form of concrete canals and
pipes with sprinkler systems and drip irrigation. Where drainage is important as well, earthen
canals with the dual function of drainage in fall and winter and water supply in the summer are
also typically found. Consequently, each irrigation scheme would need to be carefully tailored to
the local water resources and hydrological conditions as well as the demands of the local
community of users and institutional stakeholders in the water sector of that area. In some
locations, the water would need to be drawn from shallow groundwater and in others from
surface waters, or applied through conjunctive water use. The surface water can be drawn in
some locations from small local creeks that may have a highly variable water discharge, whilst in
others it needs to be pumped or abstracted from larger rivers, or reservoirs or tanks.
C. Higher level objectives to which the project contributes
13. The contribution of I&D to the economy remains below its potential. The area equipped
is very small (27,000 ha) and in 2008 only about 5,000 ha were actually irrigated/drained.
Nonetheless, agriculture is economically important (9 % of GDP in 2009) and employs more
than one fifth of the labor force. Over 200,000 ha have good potential for irrigation
development, including land that needs to be drained or protected from floods. Rates of return
on I&D can thus be high. At IDP appraisal, about12 subprojects (SPs) were identified (including
few SPs with drainage problems) as they met a number of socioeconomic, environmental and
cost-sharing criteria, where the lack of knowledge/investment in (supplemental) irrigation has
been the binding constraint. Thereby the Project provides a replicable showcase for any other
country area where I&D is critically lacking (see Annex 2).
14. As BiH agencies and producers learn how to duly utilize I&D, they will help to improve
crop yield, quality, type, by-products, hence enabling them to increase their access to domestic
and EU markets. The World Bank “ECA I&D Strategy Note” (currently in draft) concluded
that: (i) the I&D priority in BiH is to contribute to modernizing agriculture in preparation for EU
entry; (ii) irrigation plays a role in higher value agriculture, but the institutional structure needs
to be clarified, and investment is required into the long term to build capacity at all levels,
including for Water User Associations (WUAs); and (iii) efficient cost sharing arrangements
need to be worked out. The IDP thus builds on these conclusions, and also contributes to the
objectives of the Country Partnership Strategy (CPS, FY2012-2015) which defined irrigation
development as a priority, and deemed competitive agriculture as conducive to growth and
employment:
(i) Improved growth through competitiveness in agriculture: Crop yields/values are
currently low and the challenge is a transition from low capital/technology agriculture
toward a modern sector aligned with those in the EU. High value horticultural crops,
and also industrial field crops such as potato, sugar beets, soya beans and a variety of
oil seeds, can only be profitably achieved if adequate watering is assured. In
combination with proper field preparation, certified inputs of seeds and fertilizers and
proper pest management, adequate irrigation is essential for double cropping and
increasing productivity of commercial farms. With climate change, the longer dry
5
summers and heavier rain in fall and winter entail reforming the irrigation-water
services and management, to ensure profitable farming, especially with field crops;
(ii) Poverty reduction and job creation: Small farms are currently run as subsistence
operations whose households earn substantial off farm income from either pension or
off farm employment. These farms, given constraints in marketing and supply chain,
often operate low input/output investments and accept minimal returns. With EU
Instrument for Pre-Accession Assistance for Rural Development (IPARD) this picture
may change: However, local government, the Entities and donors will facilitate
growing higher value crops and support slow consolidation of land in the hands of
commercial farms. Irrigation in the dry summer is a key input in this transition.
Improved I&D will help small farms to introduce higher-value horticulture under
greenhouses or orchards, thus intensifying production per hectare, which reduces
poverty and adds on-farm labor; and
(iii) Finally, establishing proper water-management roles and responsibilities between
state, entity, cantonal, municipal, and user level will help manage the frequent
droughts and floods, and reduce competition between hydropower and irrigation on
reservoir releases.
D. Ongoing/Complementary Activities by the Bank and Other Partners
15. The Project does not involve formal partnership arrangements, but there is cooperation
between the Bank and the EU in developing the related regulatory framework, to ensure
compliance with the water directives of the EU Aquis Communautaire, including good river
basin management. The country is also participating in the Stabilization and Association Process
(SAP) and is committed to undertaking the necessary reforms that may lead to future accession.
The European Partnership (EP), revised every two years, is an instrument of the SAP which lays
down the principles and medium and short-term priorities to be addressed in the move towards
EU integration. The most recent EP agreement adopted in November 2007 stipulates as the main
priority the adoption of the basic legislative framework for the agriculture sector. To help this
process, BiH had € 226 million available over the period 2007-2009, of which 90% is directed to
projects under the Instrument for Pre-accession Assistance (IPA) Component I - Transition
Assistance and Institution Building – following the priorities established in the EP. The rest will
fund Cross Border Cooperation projects.
16. The World Bank-funded Agricultural and Rural Development Project (ARDP 2007-
2012) aims to support this process through3 strengthening the relevant agricultural institutions
and helping BiH to access future support under the EU IPARD. As part of its ARDP‘s Rural
Development Component, capacities for rural development planning and Monitoring and
Evaluation (M&E) have been developed in each of the Entities to implement rural development
3 ARDP activities include: a) Improving Agricultural Information Systems, based on the European Partnership
agreement that identified as a priority improved collection and management of agricultural data; b) Strengthening
Veterinary, Food Safety and Plant Health Protection to harmonize and enforce veterinary and phytosanitary
regulations, standards and controls compatible with the EU directives on food hygiene, inspection and certification;
c) Strengthening Inspectorate Capacity for EU compliant food safety, plant health and animal health inspection; d)
Strengthening Agricultural Advisory Services; e) Strengthening Rural Development Program Planning and
Coordination through establishing a Rural Development Coordination Unit; and f) Strengthening the systems for
providing rural development payments including the provision of incremental funds.
6
programs that provide partial investment grants based on applications from farmers to increase
the competitiveness of their operations. Field and related equipment for irrigation could qualify
under this program. In addition, current donor activities such as the FARMA project jointly
funded by USAID and SIDA that supports advisory services and business planning to
commercial farmers and supply chains as well as the ongoing International Fund for Agriculture
Development (IFAD) project implemented through the Project Implementation Unit (PIU)s in
both Entities can be linked with the farmers in the newly irrigated areas. Both of these projects
have been working on improving agricultural production and quality requirements that are
necessary to satisfy the demands of the increasingly discerning and informed local customer, and
accessing EU markets. Such parallel operations will help improve farmer capacity and access to
markets, which in turn will increase the returns on the IDP investments in irrigation systems and
institutions.
II. Project Development Objectives
17. The Project Development Objective (PDO) is to improve the performance of the
irrigation systems and the irrigation institutions to support agricultural producers in the project
areas.
18. The PDO would be achieved through: (i) rehabilitating irrigation and drainage
infrastructure, including construction, reconstruction, upgrading, and modernization, on existing
agricultural land; (ii) introduction of new technologies in irrigated agriculture; and (iii)
institutional development, strengthening of water resources management institutions and
introducing a participatory approach to water management. The project would support better
water resources planning and management for sustainable use of the water resources in irrigation
and drainage, mitigation of the impact of droughts and floods, and in general preparing more
suitable adaptation strategies that can also cope with climate change. Project Beneficiaries
19. Project beneficiaries are primarily commercial farmers, including smallholders operating
slightly above subsistence, but willing to move to a more commercial operation if more assured
water could be made available, reducing the production risks from dry summers. Other direct
beneficiaries are the fairly large commercial agribusinesses that emerged from the privatized
remnants of the former Kombinats4 and still play major role in supporting the local small
farming community. They play a major role in providing; (i) an outlet for marketing of produce
and transport, (ii) discounted machine services for field preparation but also at harvesting, as
well as (iii) input supply of seeds and fertilizer that the companies buy in large bulk quantities
4 The BiH agricultural policy is concerned with its competitiveness in the EU context, and the reality of dealing with
many small holders and still fallow or under-utilized agricultural land resources throughout the country left idle
from the breakup of the former vertically integrated agro-kombinats. However, the ageing rural population is
expected to lead to land consolidation into larger production units and/or pull together farmers associations to share
resources, and involve more mechanization. Similarly, some of the processing capacity that was privatized has
undergone restructuring under new ownership and a series of new companies with full HACCP certification and
modern processing facilities and established markets are looking to increase the share of local produce to fill their
processing capacity.
7
for their own use but also sell on to smaller farmers at cost. Indirectly, improved/increased
production will also benefit the agricultural processing industry (value-chain producers and
consumers) which presently imports substantial produce to satisfy its demands for large
quantities. The project beneficiaries also include government irrigation line and local agencies
whose capacity will be enhanced (on subproject selection, design, implementation, Operations
and Maintenance (O&M), tariff design, and irrigation policy).
The PDO-level indicators are:
20. (i) Incremental areas with improved irrigation systems (hectares)5; and (ii) Number of
direct beneficiaries6 without (tail-end) water shortage
7 or (in few SPs) without drainage problems
(this is a ―Core Indicator‖, with the female percentage being a ―Supplemental Indicator‖).
The Intermediary-results indicators are:
21. Component 1: Incremental irrigation-water added8 (in water volume per year, compared
to the additional irrigation-water requirements9 that correspond to crop maximum yield).
22. Component 2: (i) Number of end-user O&M agreements signed and adopted (to improve
water use on-farm, and to undertake or share cost for off-farm O&M); (ii) Improved rate of
O&M fee collection (in percentage) within two seasons after starting the irrigation service; and
(iii) Conducive regulatory framework for irrigation management (Irrigation Rulebooks
finalized).
23. The M&E activity would also monitor the following indicators quantitatively (otherwise,
if data is unavailable, qualitatively through debriefing the beneficiaries): (i) Water reliability in
quantity (e.g. expressed in ―irrigation conveyance and distribution efficiencies‖, and/or in ―water
productivity‖ in US$ per Cubic Meter) and in quality (e.g. expressed in improvement of the
ambient water-quality parameters, and/or in the ―Water Quality Index‖); (ii) incremental
agricultural production; (iii) improved drainage in terms of days of flooding; (iv) WUA
5Ultimate improvements are expected either horizontally (expand area of same crop) and/or vertically (increase yield
per hectare of same crop, switch from cereal to cash crop, grow additional crop i.e. higher cropping intensity, or
inter-cropping). As it is difficult to anticipate these changes or control them under IDP, this PDO indicator would
express only the incremental ―command area‖ associated with the introduced system rehabilitation/modernization. 6The beneficiaries, surveyed annually, include the directly-benefiting irrigators and their households, and the added
on-farm hired labour. The baseline average estimate per hectare is: 2 family members plus 0.25 employed labour,
thus a total of 2.25 capita/ha. Only at the ICR, the indirect beneficiaries may also be added to the survey (e.g. off-
farm labour created due to the improved post-harvest value chain). 7 This indicator would ensure vetting the upstream-to-downstream equity of water distribution within a given SP,
thus inferring the success of integrating both Component 1 and 2 to improve: (i) inter-WUA regulatory role of the
municipality/WUAs; and (ii) intra-WUA optimal use of water. Whereas, Component 1 alone (without integrating
with Component 2) can provide investments that increase production of the entire scheme, but may not suffice in
distributing water equitably within a scheme (e.g. where canal-upstream farmers can expand their area horizontally
or grow additional crop in response to receiving more reliable water due to Component 1, hence limiting
downstream farmers). 8 Added water can be estimated via desk-based methods (e.g. knowing the increased crop yield, then using a yield-
to-water production function); and can also be monitored volumetrically via the equipment funded by Component 2. 9 Rehabilitating the irrigation infrastructure for 10,000 ha may need to add around 40 to 50 Million Cubic Meters of
water per year (or 4,000 to 5,000 CM/ha/year) to help attain the crop maximum yield.
8
performance (in terms of on-farm optimal water use and off-farm O&M); (v) percentage of
females participating in WUA membership, WUA administration and decision-making; and (vi)
improving the institutional set up and policies in the irrigation and water-management sectors.
III. Project Description
A. Project components
24. Component 1: Infrastructure Investment (Total US$38.8m, of which IDA is US$32.98m
and counterpart is US$5.82m: includes works, goods/equipment, and consulting services). This
component will finance the implementation of irrigation and drainage infrastructure
rehabilitation of about 12 SPs, of which 6 each located in RS and FBiH. The SPs are selected
from the long-lists of potential sub-projects that were prepared by the two Ministries. In FBiH
this was based notably on proposals submitted by the cantons. The SPs are all located in existing
agricultural land that in the past has been supplied with irrigation. In some of the SPs, the first
priority will be on restoring or improving drainage. The main activities include rehabilitation
with some construction, reconstruction, upgrading and modernization (only for the public/main
and semi-public/secondary parts of the irrigation system, hence not on-farm), and also the
introduction of new technologies that promote water use efficiency such as drip irrigation and
low-pressure sprinklers. The prioritization of SPs is based on a set of criteria, including
economic and financial feasibility (including the willingness of end users and local governments
to pay fees and undertake O&M), environmental and institutional sustainability, clarity of land
tenure, and readiness for implementation. Annex 2 provides a summary of the four priority SPs
selected to be financed in the first year, for which designs have been prepared to a level that is
ready for tendering. The second-phase list of potential SPs (9 SPs) that could be supported have
been pre-identified, but the final list of SPs will be finalized during implementation10
. A Project
map is provided in Annex 9 showing the proposed SPs. Also Component 1 would cover
preparing the designs and other documentation for meritorious sub-projects to be implemented
under other financing sources.
25. Component 2: Irrigation Modernization (Total US$5.8m, of which IDA is US$4.93m and
counterpart is US$0.87m: includes goods/equipment, consulting services and training). This
component would support the capacity strengthening of the Ministries and Water Agencies in RS
and FBiH, and participating municipalities and cantons in addressing: the new sector policies,
and establishing and strengthening WUAs. It will assist in developing O&M arrangements for
the introduced infrastructure/facilities, the fee determination, fee collection and management,
and related water resources and irrigation management. The Component will assist the Entities
with the good practices in irrigation-scheme design, Irrigation Advisory Services (IAS),
Participatory Irrigation Management (PIM), and preparing a regulatory framework for I&D, in
particular supporting finalization of the ―Irrigation Rulebook‖ in both entities in harmony with
EU water directives. Support will be provided to bottom-up end-user groups, including existing
agricultural cooperatives (based on administrative boundaries), or WUAs based on hydrological
boundaries that will be formed under the project. The PIM includes establishing a transparent
fee collection and irrigation payment reporting system that will provide yearly reports to the
10
Taking into account the demand driven activities in Component 2, this may result in changes in the SPs to be
supported in Phase 2.
9
annual assembly of each WUA. The IAS includes assisting farmers to access credit and/or
subsidy programs. The FBiH Ministry of Agriculture, Water Management and Forestry
(MOAWMF) and RS Ministry of Agriculture, Forestry, and Water Management (MOAFWM) as
part of their respective rural development support provide co-financing grants for on-farm
equipment and investment tied to efficient and export-oriented production. Component 2 will
strengthen farmer capacity to apply for these grants. Financing will also be available for selective
procurement of on-farm water-monitoring equipment (e.g. soil-moisture monitoring kits, water-
flow meters, ―Total Weather Station‖). The Subcomponents are described in detail in Annex 2.
26. Component 3: Project Implementation Support (Total US$2.4m, of which IDA is
US$2.04m and counterpart is US$0.36m: includes consulting/non-consulting services, goods,
training, and incremental operating costs). This would cover costs of project management
including M&E, safeguards (SP Environmental Management Plans, EMPs), audits, Management
Information System (MIS), the baseline and (final) impact assessment surveys, procurement and
Financial Management (FM) training, and office and mobile equipment.
B. Project Financing
Lending Instrument
27. The total project cost is about US$47.00 million of which US$40 million would be from
an IDA Specific Investment Credit (SIC). In the FBiH the IDA investment amounts to
US$19.50 million and in the RS it amounts to US$20.50 million. The corresponding counterpart
financing is US$7.00 million (15%) and would include contributions from the entities,
cantons/municipalities, and/or end users/WUAs.
28. The private on-farm irrigation facilities will be financed 100% by their end users/WUAs
(hence external to IDP balance sheet and fiduciary, although Component 2 will help farmers to
use these facilities efficiently). The off-farm public good-type assets would be financed 100% by
IDP (Component 1). However, several SPs, particularly in RS, would finance ―semi-public‖
irrigation assets (such as a secondary canal/pipeline), and hence would involve cost sharing of
the capital investments from the pertinent municipality and from the end-users/WUA (e.g. by
20% as per the RS Draft ―Irrigation Guidelines‖, which will be finalized through Technical
Assistance (TA) under Component 2). The Bank and BiH teams would consider that, when
WUAs are expected to contribute to the cost of such semi-public assets, their contribution could
be made ―in kind‖, e.g. by mandating these WUAs to reach-out to the adjacent small farmers for
demonstrating IDP11
and for applying in their farms the extension activities of Component 2.
11
For instance in the Novo Selo SP in RS (622 ha), the design of the introduced off-farm systems was upsized by
20% to add a capacity buffer for any unforeseen losses or to allow adding ―on-demand‖ connections from the
adjacent small-scale farmers (who currently use groundwater to irrigate small farms with a total potentially-irrigable
area of around 2,000 ha).
10
Project Cost Table (units in US$000)
C. Lessons Learned and Reflected in the Project Design
29. Bank experience with development of WUAs in Europe and Central Asia (ECA)
countries has demonstrated both the need to involve water users in the governance, management
and financing of irrigation systems and the need to create a new partnership relationship between
the government, water users and private sector organizations for governance, management,
financing and provision of support services for I&D. Bank experience has also shown that
essential incentives and accountability mechanisms to ensure productive and sustainable
irrigation and drainage systems require that distinctive roles, rights and responsibilities be
designated for government, water users and the private sector.
30. Also, Bank experience has demonstrated that basic and effective water sector reforms
cannot be designed and implemented immediately. Capacity building for strategic change,
stakeholder consultations, studies, pilot interventions and negotiations are all required to identify,
design and implement an acceptable strategy for water sector reform. This requires a step-wise
process of learning and adjustment that stretches over several years. In this project, the Bank
will focus on the preliminary phase of strategic change, which includes capacity building for
strategic change, stakeholder consultations and development of legal and institutional regulations
for WUAs and investment strategies for I&D. The project will benefit from collaborating with
the EU on their work to improve the environmental and agricultural sectors. The Bank will be
able to bring its expertise in irrigation reform and rehabilitation from the ECA region generally,
and the neighboring Balkan countries specifically.
31. The World Bank funded Small-Scale Commercial Agriculture Development (SSCAD
2006-2010) Project included a small component for small-scale irrigation improvements in the
Herzegovina region in RS and in FBiH, including assisting farmers to form new self-financing
water user groups, and strengthening the capacity of existing WUAs in managing the on-farm
Totals Including Contingencies
12/13 13/14 14/15 15/16 16/17 Total
A. Infrastructure Investment
1. Infrastructure FBIH 1,036 8,014 8,339 663 96 18,147
2. Infrastructure RS 1,276 4,685 8,685 5,939 96 20,681
Subtotal 2,312 12,699 17,023 6,602 192 38,828
B. Irrigation Modernization
1. Irrigation Modernization FBIH 922 933 814 482 520 3,671
2. Irrigation Modernization RS 475 637 428 286 329 2,155
Subtotal 1,397 1,569 1,242 768 850 5,827
C. Project Implementation Support
1. Implementation Support FBIH 225 221 223 226 228 1,122
2. Implementation Support RS 135 279 288 291 288 1,282
Subtotal 360 500 511 517 516 2,404
Total PROJECT COSTS 4,069 14,769 18,777 7,887 1,558 47,059
11
irrigation system including O&M. Most schemes were small (micro-schemes), with the largest
covering some 350 ha while works included installation of pump irrigation systems and
extensive repair of a variety of canals. Some 37 WUAs registered in the two entities by mid-
2008. Where drip irrigation systems were installed on lands previously only used for fodder
production, the areas under high value crops increased by 30% on average. Overall the
component was rated as successful where open canal systems reported increases in area irrigated
(+30%) and in crop yields (+20%).
32. Lessons can be learned from SSCAD, notably as to the institutional capability and
commitment of farmers to organize themselves into WUAs to manage part of the system and
financially contribute to the O&M through fees:
(i) While the WUAs and their unions/federations are gaining cohesion and assuming
legal responsibility for irrigation management, the fees collection for the large
systems (several hundred of ha) proved more difficult, especially for those with
public structures and multiple and diverse users. The WUAs at the SSCAD onset
needed to determine the design/implementation priorities together with the local
government, as this helps in developing a sense of ownership;
(ii) Ownership was improved when WUAs undertake/contract the work themselves. A
good approach in SSCAD has been to supply the WUAs with the necessary materials,
while the works are organized by the WUAs, ensuring that the rehabilitation or
proposed expansions are driven by demand from WUA members and farmers12; and
(iii) Because of the need to build capacity it takes few years before WUAs are fully
operational and sustainable. Municipalities needed to be supported through training,
as they had not been well aware that transfer of management responsibility to WUAs
helps to resolve the irrigation problems. The IDP regulatory framework has to
become more specific. That is why in IDP the preparation team ensured that the
eligibility criteria for the selected SPs include farmers predisposition to participate in
selecting the SP design option, form WUAs, and undertake (or pay fees for) O&M.
IV. Implementation
A. Institutional and Implementation Arrangements
33. The project will be implemented by RS MOAFWM and the FBiH MOAWMF, through
its well-functioning and experienced Agricultural Projects Coordination Unit (APCU) in RS, and
PIU in FBiH, respectively. Both bodies that have served as the focal units for preparing and
12
Farmers across BiH are committed to identifying any such new opportunities to develop local and international
markets. In a growing number of locations initiatives are thriving, creating value chains and conducive financial
environments for farming. These include the structural supply to wholesalers and supermarkets that are active in
southern Europe, contracting with companies that process vegetables and fruits and sell on various outside markets
in Europe, sugar factories, and firms that cater for specialty tourism markets (notably in the south). The experience
with SSCADP and other agricultural projects show a persistent skepticism of farmers toward government and
government-supported cooperatives. However, a substantial number of WUA is established and proven sustainable.
Thus for IDP the capability of the institutions—with the farmers being both stakeholders and partial ―implementers‖
of the project—seems adequate.
12
implementing most Donor Agriculture related projects (e.g. on-going World Bank Agriculture
and Rural Development Project). In addition both entities have experience in working with each
other on the same project and in working together to reduce administrative burdens and facilitate
implementation and problem resolution. The APCU and PIU have professional staff for
agriculture and water management, and for procurement, FM and general project oversight.
34. The project activities will be implemented by the entities, as the type of I&D
interventions is localized in nature, where the entity line ministries and local governments have
the needed mandate and adequate capacity. A consultant in each Entity will be hired for project
M&E purposes. In addition, as referred to above, M&E capacity has been built in each Entity
Ministry to monitor rural development investments who would work with these consultants to
keep track of crop patterns, yields and other irrigation and production related variables as part of
the Ministries overall mandate. Information will be compiled in a uniform format for both
entities and shared with Ministry of Foreign Trade and Economic Relations (MOFTER). A
cross-entity Technical Work Group will be established (by Component 2), whereby the two
Entities would exchange knowledge on Project procedures and lessons learned. See further
details and the organograms in Annex 3.
35. Central level in Sarajevo (FBiH-PIU) and Banja Luka (RS-APCU): The two PIUs are
at close distance from the target SPs, hence can implement Component 1 (around 12
International Competitive Bidding (ICB) works/goods contracts, 1-2 per each SP) in terms of
detailed design, supervision and fiduciary. In doing so they will be supported by: (i) one main
consulting firm (providing design-and-supervision on Component 1 and TA/training on
Component 2) or several firms taking into consideration the phased approach and geographically
dispersed locations of the 12 SPs, and (ii) around 12 individual national/international consultants
(via Component 3) including (1) 5-7 consultants for each PIU (i.e. PIU manager, Procurement
Specialist (PS), Financial Management Specialist (FMS), water engineer/hydrologist,
electro/automation engineer; M&E including safeguards/EMPs); (2) a few local consultants
(extensionists)13
for the 3 field units that will be established by FBiH-MOAWMF (mentioned
hereafter).
36. Decentralized level: The irrigation advisory and WUA formation/capacity building
activities of Component 2 in the SPs will be implemented with the help of existing field
Extension Units of RS-MOAFWM which will be strengthened through the Project, and
supported by creating 3 field units for FBiH-MOAWMF located adjacent to FBiH‘s 6 target SPs.
Those field units will assist in all IDP field activities including assisting the 2 M&E consultants
in accessing field data and debriefing farmers and the indirect (value chain) beneficiaries. The
contract for the design-and-supervision (Component 1) consulting firm may provide cross-
support to Component 2, as its Terms of Reference (TOR) will include TA/training for irrigation
advisory for WUAs, and TA on the irrigation-reform policies for the two line ministries (both
TAs being part of Component 2). If this firm is national rather than international, the PIUs will
strengthen it by hiring few international individual consultants (especially as to the relatively
new topics: irrigation advisory and water management policies).
13
Support from consultants would also be envisaged for the RS extension service under Component 2.
13
B. Results Monitoring and Evaluation
37. The PIU and APCU will be responsible for the M&E activities of the project impacts.
This activity will be financed by Components 2 and 314
. In addition, regular M&E surveys will
be coordinated with the M&E personnel of the rural development departments in the Ministries
of each Entity to monitor changes in crop patterns and yields but also farmer investments in
irrigated fields as part of their regular mandate. Information from both Entities will be shared
with MOFTER.
38. The project will finance the M&E activity (mainly under Component 3), facilitated by (i)
hiring one M&E consultant (who will also cover Safeguards/EMPs) in each Entity PIU, and (ii)
establishing MISs in each Entity PIU (in FBiH MOAWMF, RS MAFWM, and MOFTER there
are existing GIS-based databases that will be utilized/enhanced to fulfil the needed MISs in the 2
Entities). The PIU and APCU will seek the good practices for preparing the TOR of the M&E
consultants, and will use the MIS to track progress in project implementation. The M&E activity
will include undertaking baseline and (final) impact assessment surveys, in addition to using the
MIS. The data collected will include crop budgets, water-use data15
, female percentage of the
direct beneficiaries (for the aforementioned PDO Core Indicator), etc.
39. The M&E activity will thus monitor: (i) project physical progress (e.g. works completion
percent versus planned percent) and (ii) evaluate project socioeconomic and environmental
impacts (the aforementioned indicators). The impact studies would be presented in semi-annual
progress reports (to be sent to the Bank and shared with MOFTER). These progress reports
should also include a chapter reporting on safeguards (progress of the EMPs), including a short
―environmental audit‖ of the civil-works contractors to ensure their compliance with the EMPs.
C. Sustainability
Ensuring financial sustainability of the introduced off-farm infrastructure/facilities
40. Component 2 will address this sustainability aspect by providing: (i) TA to RS and FBiH
to help finalize their irrigation-financing ―Rulebooks‖ (guidelines); (ii) strengthen the (on-farm)
Irrigation Advisory Service within the agronomic extension units of MOAWMF, including
helping farmers in IDP target schemes to access credit or demonstration subsidies for the on-
farm equipment and for optimal water use (―more crop per drop‖ and ―less drop per crop‖); (iii)
PIM to form and empower WUAs (as needed in the applicable IDP schemes); and (iv) facilitate
signing tripartite O&M agreements among the end beneficiaries/WUA, the ministry/canton
(assets owner), and the municipality/utility (i.e. the O&M service provider) for the SPs. It is
expected that O&M commitment letters for each of the 4 priority SPs will be signed before IDP
effectiveness, including the: (i) letter by the municipality (or its affiliated utility, or WUA)
entrusted to undertake O&M of the introduced off-farm assets; and (ii) letter by farmers/WUAs
reflecting their predisposition to contribute adequate end-user fees toward these O&M costs.
14
Financed by Component 2 as to the field-based monitoring equipment (e.g. total weather stations), and by
Component 3 as to the M&E consultants and ministry-based MIS. 15
As needed to measure technical indicators such as the incremental water productivity, and also to undertake the
economic analysis for the ICR.
14
41. During IDP implementation, the exact O&M fees level and collection mechanism16
will
be identified through (updating) the Project Operation Manual (POM), in consistency with the
(to-be-finalized) Irrigation Rulebooks. These mechanisms will then be legalized through signing
(tripartite) agreements between the end beneficiaries/WUA, the ministry/canton (assets owner),
and the municipality/utility (i.e. the O&M service provider, if not the WUA).
42. Resilience to Climate Change: During Project appraisal the Bank team has undertaken a
fast-tracked study to assess the Project‘s resilience to climate change until the year 2030. The
study suggested that the Project is fairly resilient to climate change, and moreover, its activities
(the ―supply augmentation‖ facilitated by Component 1 and ―demand management‖ facilitated
by Component 2) could improve adaptation to climate change. See details in Annex 2.
V. Key Risks and Mitigation Measures
Risk Ratings Summary Table
Risk Rating
Stakeholder Risk Moderate
Implementing Agency Risk Moderate
- Capacity Moderate
- Governance Low
Project Risk Moderate
- Design Moderate
- Social and Environmental Moderate
- Program and Donor Low
- Delivery Monitoring and Sustainability Moderate
Overall Implementation Risk Moderate
Overall Risk Rating Explanation
43. The overall risk rating is Moderate, likelihood-driven. The economic fundamentals for
the project are sound, and the gradual alignment of BiH‘s agricultural policies with the EU
Common Agricultural Policy (CAP) will further create long-term conducive arrangements,
markets and value chains that will benefit investment in irrigation. Nonetheless, as these reform
processes and the emergence and consolidation of markets can take time, it is possible that the
financial incentives to irrigate certain crops or certain locations can be temporarily affected. A
16
Such fees can be based on: (i) volumetric water metering or (ii) a proxy per area cultivated (per ha) adjusted by
crop type/intensity (practical where collection rates are low, or with open-canal systems where water regulation is
level-based rather than discharge-based). Both approaches are referred to in the FBiH Draft Irrigation Rulebook.
15
major risk concerns poor cooperation between the Entities at political level that potentially can
paralyze decision-making at Entity level. On the other hand, the experience is that at the
technical and operational levels the agencies actually do share experience and cooperate, and
make progress by being flexible. In addition, the project does not particularly depend on State
level decisions or interventions for successful implementation. Overall, the institutional
arrangements, implementation capacity and readiness are satisfactory, although on some
regulatory issues such as establishing WUAs and the recovery of irrigation fees, support will be
sought from the Borrower on the strengthening of regulations. In general, at the levels of the
implementing agencies, local governments and farmers, the main risk for IDP concerns some
lack of experience and capacity for certain tasks such as: (i) design and supervision of works and
(ii) post-construction O&M. These will likely create regular, but manageable, challenges during
implementation, that will be mitigated by: (i) engaging farmers and municipalities early in
selecting the design option, and securing up-front written commitment letters as to O&M
(already done by appraisal); and (ii) by providing on-the-job capacity building during
implementation through Component 2 for farmers/WUAs (and through the design-and-
supervision TA under Component 1, for the water ministries and local utilities).
VI. Appraisal Summary
A. Economic and Financial Analysis
44. As the irrigation and drainage SPs to be supported under IDP will be fully determined
during implementation, the economic and financial analysis for selected representative SPs have
been undertaken during the appraisal to illustrate benefits from the project. During the appraisal,
the analysis was made on the Gorazde (FBiH) and Novo Selo (RS) SPs, identified by BiH as two
of the priority SPs selected for IDP support during its early stage. Gorazde is the most expensive
SP under IDP in terms of unit costs per hectare.
45. In Gorazde, investments will install six shared pumping stations, low-cost water
reservoirs, buried PVC pipes to water conveyance, and provide turnouts (hydrants) to groups of
farmers. These off-farm investments would reach US$2.00 million. The area is located in the
Municipality Foča-Ustikolina, Canton Bosansko-Podrinski, and the water source is the Drina
River along the south west banks of Gorazde Town. Total gross benefited area would be about
200 to 300 ha where irrigation has been practiced through small-scale individual irrigation
systems for many years. Crop and farm models (see Annex 7) have been simulated for the
relevant crops using ―with‖ and ―without‖ scenarios, which differ on the expected yields and
production costs as irrigation is made available and reliable. On average, crop yields are
expected to increase by about 50% in the project areas. But for those farmers that initially have
no access to water and due to the project are able to receive irrigation, the increase could be 2 to
3 times their current levels. As farm sizes are small, some land consolidation is expected, as well
as the development of a leasing market for land. These project improvements would allow for
increases in household income by about 55 to 134 %, depending on the farm size and cropping
patterns. The overall economic rate of return (ERR) was estimated at 16.3 %, and the Net Present
Value amounts to US$456,667 using a discount rate of 12 %. The economic analysis considered
costs and benefits from the country‘s perspective. Costs and benefits were valued at market
prices in most of the cases because there are very few significant market distortions in
16
agricultural prices in BiH. A shadow pricing conversion factor was used only for the project
investments (0.83) which accounts for an average 17 % of taxes included on all investments.
46. A sensitivity analysis was performed assuming: (i) higher investment costs, and (ii) a
reduction in the level of cropping change/diversification in the area. If all investment costs
would be 20 % above the base assumption, the ERR would be reduced to 13.4 %. If crop
diversification would be reduced to 50% of the base assumption, the ERR would be reduced to
12.5 %. Only when both adverse events occur simultaneously (which is less likely), the ERR
could drop to 9.8 %. Similar results were obtained for the Novo Selo SP in RS (see Annex 7).
Based on these economic, financial and sensitivity analysis, especially for Gorazde SP which is
the most expensive SP (in unit cost) under IDP, it can be concluded that the planned IDP
investments have a high probability of inducing in a significant development impact.
B. Technical
47. Designs for works under the SPs under Phase 1 have been prepared by a team of local
consultants. Designs were revised based on recommendations from the Bank task team.
48. There is a need to increase the irrigation-design capacity in the responsible agencies in
the Entities, to use the current best-practice design parameters in designing the irrigation
systems. Therefore, senior irrigation experts will complement the PIUs to provide assistance with
drafting Terms of Reference, setting appropriate design standards and procedures, and to support
the design-and-supervision firms preparing the preliminary and final designs for the Phase 2 and
Phase 3 SPs. Preliminary designs for Phase 1 SPs are already according to appropriate standards
(as per the due diligence from the Bank team). In addition, under Component 2, a training
program for design-engineering firms will be established in order to increase the knowledge of
both young professionals and senior engineers on modern irrigation standards.
49. Contractors in the region have good experience with implementing piped water supply
systems, also under World Bank-financed projects, like Mostar Water Supply and Sanitation,
Urban Infrastructure and Service Delivery and SSCADP in BiH, IDP in Serbia, and other
infrastructure projects. Construction of piped irrigation systems is fairly similar, and hence there
are no foreseeable obstacles to implementing the civil works according to the schedule. Under
this project, construction supervision firms will be contracted to supervise the works, and also
the capacity and experience of these firms in the region are assessed satisfactorily.
C. Financial Management
50. An assessment of the financial management capacity was carried out by the Bank in
December 2011. The assessment concluded that the financial management arrangements are
acceptable to the Bank and that the overall financial management risk is moderate with the
application of the mitigation measures.
51. The APCU and PIU will maintain a financial management system acceptable to the Bank.
The project financial statements, including Statement of Expenditure (SOEs) and Designated
Account (DA) Statements will be audited by independent auditors acceptable to the Bank and on
17
terms of reference acceptable to the Bank. The annual audited financial statements and the audit
report will be provided to the Bank within six months of the end of each fiscal year. The APCU
and PIU shall also prepare and furnish to the Bank not later than forty five (45) days after the end
of each calendar quarter, interim unaudited financial reports for the project covering the quarter,
in form and substance satisfactory to the Bank.
52. Both APCU and PIU are currently implementing the World Bank funded project ARDP.
The ARDP has acceptable FM arrangements. The quarterly Interim Unaudited Financial Reports
(IFRs) are submitted regularly and there are no overdue audit reports.
D. Procurement
53. The APCU and the PIU would oversee all IDP procurement activities. The APCU is
staffed by four staff comprising two PSs, and two FMSs, and the PIU is staffed by four staff
comprising two PSs, and FMSs supported by a FM Assistant. All Procurement Officers, possess
relevant experiences in using Bank‘s procurement procedures, gained under previous projects
and currently staff the procurement function.
54. The Bank PS carried out an assessment of the Implementing Agency‘s capacity to carry
out procurement for IDP. The key issues have been identified, including the fact that few
Procurement Officers have not received formal training, and they might be overloaded. At least
one out of the three ongoing projects under their responsibility is expected to close within the
next year. In order to build-in and maintain strong procurement management capacity in the PIU
and APCU, the following actions will be undertaken:
the relevant staff will be urged to attend training organized by relevant institutions or
by the Bank;
the Bank would carry out a brief training session on procurement during the Project
launch workshop and would also provide the two units with a full set of the most
recent guidelines, bidding, proposal and evaluation documents;
the Bank would provide subsequent follow-up training sessions on procurement
during implementation as deemed necessary.
55. The APCU and the PIU has developed the Procurement Plan for the IDP first 18 months,
which provides the basis for the procurement methods. It would also be available in the Project‘s
database and in the Bank‘s external website. The Procurement Plan would be updated by the
Project Team, as a minimum, annually or as required to reflect the actual implementation needs
and improvements in institutional capacity. The updated Procurement Plan would also be
submitted to the Bank for its approval.
E. Social Sustainability, Gender and Social Safeguards
56. The project expected outcomes anticipate increased inclusion and significant
participation of small and vulnerable farmers, including women. Overall the expansion of
commercial agriculture and the restructuring of semi-subsistence farmers geared to improve the
economic viability of the agricultural holdings will create on-farm and off-farm employment,
help consolidate rural communities, and encourage investment in supporting infrastructure and
18
services. The proposed SPs cover a very broad set of beneficiaries reaching from subsistence
farms to agribusiness (see Annex 8 on the first-phase priority SPs). The SPs in phase 2 and 3 will
reflect similar social characteristics and incentives for a more inclusive and equitable services.
57. No land acquisition is foreseen under the project. Provisionally the Bank policy on
Involuntary Resettlement (OP4.12) has been triggered, since the potential areas (other than the
first-year priority SPs) for project interventions have not been specifically identified. In case
land acquisition arises for any specific SP, the project has established an Environmental and
Social Management Framework (ESMF, which includes a Resettlement Policy Framework RPF),
on the basis of which, for this SP, a Land Acquisition Plan will be developed, reviewed, cleared
and disclosed publically prior to the commencement of any physical works. On social risks that
go beyond safeguards, the project will promote establishing participatory WUAs, aiming at
ensuring a more equitable access and use of the improved irrigation systems, particularly in
relation to the needs of smaller farmers, including women.
58. Strengthening Participation of Women: The project will encourage the participation of
women through the social mobilization activities under the PIM (Component 2). It will dedicate
separate sessions for women, aiming at increasing their roles throughout the subproject cycle
(including WUA administration and decision-making). Women‘s involvement in the project will
be monitored as a supplementary indicator of the PDO Core Indicator on Direct Beneficiaries,
and also in terms of female membership in the WUA.
F. Environment (including safeguards)
59. The Project has been classified as a Category B project requiring a Partial Environmental
Assessment. Since some of the schemes/SPs were not known at the time of Appraisal, an ESMF
document has been prepared, while site-specific EMPs have been prepared for five priority SPs.
60. The Project activities focus on: (i) rehabilitating irrigation and drainage infrastructure,
including construction, reconstruction, upgrading, and modernization, on existing agricultural
land; (ii) introduction of new technologies in irrigated agriculture; and (iii) institutional
development, strengthening of water resources management institutions and introducing a
participatory approach to water management. The Project schemes (being of a small size) will
not pose significant additional demands on the water bodies. Therefore, the majority of
environmental impacts associated with the Project are limited to simple and standard
(re)construction works (dust, noise, disruptions, waste generation) with proper maintenance and
decrease of water losses in the system mandated during operation of the systems. An ESMF
document has been prepared and disclosed with meaningful public consultations in country.
Detailed EMPs made for the four priority SPs were attached to the ESMF document with
disclosure and public consultations on sites; and similar detailed SP-specific EMPs will be
prepared for the next-stage SPs.
61. Even though the actual environmental impacts during Project implementation are
minimal, and are reflected in the (re)construction/rehabilitation works with proper mitigation
measures, the positive environmental impacts and effects of the overall Project will be
significant. First and foremost the usage of water for irrigation will be better planned and
organized at the local level. Adequate maintenance of irrigation systems will help decrease the
19
water losses within the system, and the water usage will be rationalized through improved
methods of irrigation. Through the establishment of WUAs, the planned and rational method of
water use will be strengthened, and the irrigation users of water will have an organization that
would be able to represent them as an equal partner in future planning of river basin management
or any other discussions between water users among sectors such as power, tourism, water
supply etc.
62. Even though the Pest Management policy (OP4.09) has not been triggered, the ESMF
document provides an overview of the pest management policies in Bosnia and Herzegovina, as
well as the progress in this sector made by the World Bank financed ARDP. The ESMF also
provides a framework for training and education of farmers, if necessary.
Other Safeguards Policies Triggered (if required)
63. International Waterways Policy of the Bank (OP7.50): The current IDP design
provisionally entails triggering OP7.50; however, project analysis suggests there will be no
impact (from the first-stage 4 priority SPs) on the quantity or quality of the water available to the
riparians. Thus, Bank management has agreed that the project falls within the exception to the
notification requirement under paragraph 7(a) of OP7.50. Nevertheless, as per paragraph 7(b) of
OP7.50, the FBiH and RS (MOAWMFs) will remain responsible for examining, and acting on,
any emerging riparian issues (if any) as IDP advances, i.e. depending on the findings of the SP-
specific EMPs for the next-stage SPs.
64. Conditionality
Effectiveness conditions:
1. Project Agreement signed between IDA and either of the two Entities; and
2. For the Entity which met the above condition: (i) Subsidiary Agreement signed between
this Entity and the State (MOFT) and (ii) Project Operation Manual (POM) prepared by
this Entity and accepted by IDA.
Disbursement conditions:
1. Project Agreement signed between IDA and the Entity where disbursement is needed;
2. Subsidiary Agreement signed between the State (MOFT) and the Entity where
disbursement is needed; and
3. Legal opinion stating that these Project and Subsidiary Agreements are authorized.
20
Annex 1: Results Framework and Monitoring
PDO Statement
The Project Development Objectives (PDO) is to improve the performance of the irrigation systems and the irrigation institutions to support agricultural
producers in the project areas. .
Project Development Objective Indicators
Cumulative Target Values Data Source/
Methodology
Responsibility for
Data Collection Indicator Name Core Unit of Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency
Incremental areas with
improved irrigation systems
Yes Hectares 0 0 4,000 6,000 8,000 9,000 Annual
MIS fed by field
visits, baseline and impact assessment
surveys
(Component 3)
PIU and APCU.
Supported by two M&E and
safeguards
consultants
Direct beneficiaries without
(tail-end) water shortage or drainage problems.
Supplemental indicator:
Female percentage
Yes
Number 0 0 8,000 12,000 16,000 18,000 Annual Idem Idem
Incremental
Female percentage 0 0
0
0
5 10 Annual Idem Idem
Intermediate Results Indicators
Cumulative Target Values Data Source/
Methodology
Responsibility for
Data Collection Indicator Name Core Unit of Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency
Incremental irrigation-water added (Component 1)
Million Cubic Meters per Year
0 0 10 15 20 25 Annual
Baseline and impact
assessment surveys. Volumetric
metering or desk-based method.
PIU and APCU.
Supported by two M&E and
safeguards consultants
Number of end-user O&M
agreements signed and
adopted (Component 2)
Number 0 0 2 4 7 10 Annual
MIS fed by field
visits, baseline and impact assessment
surveys.
Idem
Improved rate of O&M fee
collection within two
seasons after starting the irrigation service (Comp. 2)
Percentage 30 (TBC) 30 35 50 60 70
Semi-
annual Idem Idem
Conducive regulatory
framework for irrigation
management (Comp. 2)
Number of
Irrigation Rulebooks
finalized
0 0 0
1
2
2
Annual NA PIU and APCU.
21
Annex 2: Detailed Project Description
Subproject selection and planning of interventions
1. Based primarily on slope and soil suitability, around 168,000 ha is considered to have good
potential for irrigation based on a study by the Federal Institute for Agro-Pedology in Sarajevo,
but it is unlikely that all of this area would be feasible on economic grounds. In RS, around 4,500
ha were irrigated in 1991 with some 1,700 ha currently irrigated including some schemes
improved with SSCAD project support. Around 115,000 ha are considered to have good potential
for irrigation based on a study by the autonomous Institute for Water Management in Bijeljina,
RS. Considering the terrain conditions, RS may have an overall larger area that is economically
attractive for irrigation investments than the Federation.
2. Across BiH Crop yields, and potential options for growing high-value crops and double-
cropping, are restricted without irrigation primarily due to prolonged dry spells during summer.
This problem is especially evident in the Mediterranean south-west, where yields may be 30-40%
less. For example, in Ljubuski in FBiH, typical yield reductions are estimated to be in the order of
37%. In the northern areas along the Sava river typical yield reductions may be around 20-30%,
with less in the central and mountain areas.
3. Each irrigation scheme, in effect, would need to be carefully tailored to the local water
resources and hydrological conditions. In some locations, the water would need to be drawn from
groundwater and in others from surface waters, or through conjunctive water use. The surface
water can be drawn in some locations from small local creeks whilst in others it needs to be
pumped or abstracted from larger rivers, or reservoirs. Torrential water flows may also be a
problem in river valleys, such as near Tuzla, requiring flood protection measures. Extensive
drainage is required in the plains areas such as along the Sava and Neretva rivers, with in some
instances the same canalizations to be used for both water adduction and for flood water
management, depending on the season. In a number of locations, also in the Sava plain, the need
emerges to integrate irrigation water development and management into an overall local water
management strategy. For example, in the Bijeljina region, the irrigation takes place in the plain
area bordering the Sava and the Drina rivers in the north and east, respectively, which are running
along the border with neighboring Croatia and Serbia. In the summer, these rivers may in the
future not be able to meet the growing demand from the towns and industry as well as agriculture
without affecting water use rights elsewhere. The plain, however, also receives seasonal high
water discharge from the mountain torrents in the south. To store water in order to provide a
reliable water supply year-round, and simultaneously control peak flood discharge, reservoirs may
become feasible solutions in the medium term. Finally, the quality of the water may increasingly
become an issue, as some surface water is suffering from pollution, whilst the drainage waters
from irrigated fields may also carry excess fertilizer and pesticides into rivers and lakes.
4. Constraints to irrigation improvements include (i) land fragmentation, with parcels often
only 0.2 to 0.3 ha per plot; (ii) the intensive efforts still required to form WUAs, and potential
difficulties in collection of water use fees; (iii) the relatively high cost of schemes partly due to the
dilapidated nature of the former systems; (iv) the environmental issues especially in the Neretva
river valley; and (v) institutional and regulatory issues with respect to water charges. Inadequate
22
advisory services, especially in FBiH, lack of available funds for on-farm improvements, and
market limitations are also important constraints.
5. The proposed project thus aims to improve the performance of the irrigation systems and
the irrigation institutions to support agricultural producers in the project areas. This objective
would be achieved through: (i) rehabilitating irrigation and drainage infrastructure, including
construction, reconstruction, upgrading, and modernization, on existing agricultural land; (ii)
introduction of new technologies in irrigated agriculture; and (iii) institutional development,
strengthening of water resources management institutions and introducing a participatory approach
to water management.
6. Component 1: Infrastructure Investment (83% of project cost, US$38.80m). This
component will finance the implementation of I&D infrastructure rehabilitation works in about 12
SPs, of which 6 each located in RS and FBiH. The sub-projects are selected from the long-lists of
potential SPs that were prepared by the two Ministries. In FBiH this was based notably on
proposals submitted by the cantons. The SPs all take place on existing agricultural land that in the
past has been provided for irrigation services In some of the SPs the first priority will be on
restoring or improving drainage to ensure proper water management. The works will comprise
rehabilitating irrigation and drainage infrastructure, including construction, reconstruction,
upgrading, and modernization, on existing agricultural lands; and introduction of new technologies
in irrigated agriculture, especially drip irrigation and low-pressure sprinklers.
7. The RS has prepared a comprehensive Study and the Action Plans tabulating estimated
costs for all existing and potential new schemes17
(SPs); it has also prepared a first study towards
pre-feasibility analysis in 2009. For both entities, in May-September 2010 international
consultants prepared feasibility studies for the pre-selected 12 SPs based on local baseline data,
and crop and farm budgets. Financial Internal Rate of Returns ( FIRRs ) of the 12 SPs vary from
9% to 60% but with a median value of 20-30% (the lower FIRRs relate to drainage projects where
a part of the benefits cannot be quantified without deeper study). The B/C ratios vary from 1.25 to
above 3. Average investment cost per ha varies from US$1,500 to 3,000/ha, with the unit costs
being somewhat higher in RS than in FBiH. In general, the feasibility of the investments seems
robust.
8. The prioritization of SPs thus was based on selection criteria, including economic and
financial feasibility (including the capability and commitment of the users and local governments
to pay fees and for O&M), technical adequacy, environmental and institutional sustainability,
clarity of land tenure, and readiness for implementation. The project will be implemented in three
17
The Action Plan takes a comprehensive approach of all potentially attractive schemes, and specifies, per scheme,
the expenditures for (i) Phase I: Rehabilitation of existing schemes (incl. drainage, main intake and distribution works,
roads, etc.) on 7262 ha; (ii) Phase II, Stage 1: Development of new irrigation areas on 40,203 ha; (iii) Phase II, Stage
2: Hydro-technical melioration (incl. flood protection, drainage, reservoirs, rural roads, etc.); (iv) Phase II: Land
redistribution and agro-technical melioration; and (vi) Phase II: Foundation investment (incl. data and maps, studies,
etc.). The expenditure for Phase I alone already would amount to about KM 147 million (about US$80 million, or
about US$10,000/ha). A multi-criteria analysis is applied to rank the schemes; however, the ranking does not involve
a rigorous economic and institutional feasibility analysis.
23
phases. Phase 1 will comprise about 4 schemes18
that would be completely prepared by mid
CY2012 with respect to detail design, institutional readiness, safeguards, environmental and
construction permits, and procurement of contractors, in order to start the works during the first
year of the project. A summary for these 4 SPs is presented in the Table below. About 9
additional sub-projects will be in different stages of readiness by Effectiveness and will be
grouped into Phases 2 and 3. This component will fund the Phase 2 and 3 sub-projects
preparation, as well as for their subsequent implementation. It will be considered whether the
funding can also cover preparing the designs and other documentation for meritorious sub-projects
to be implemented under other financing.
9. Component 2: Irrigation Modernization (12% of project cost, US$5.8m). This
component would support the capacity strengthening of the Ministries, the Water Agencies, the
Irrigation Extension services in RS and FBiH, and participating municipalities and cantons in
addressing: the new sector policies, establishing and strengthening WUAs, the O&M arrangements
for the introduced infrastructure/facilities, the fee determination, fee collection and management,
and related water resources and irrigation management. It will support establishing a transparent
fee collection and irrigation payment reporting system that will provide yearly reports to the
annual assembly of each WUA. The Component will also fund on-farm IAS, PIM, selected on-
farm water monitoring equipment, and assist farmers access to credit and/or subsidy programs for
on-farm equipment for optimizing irrigation use (―more crop per drop‖ and ―less drop per crop‖).
This Component thus includes 3 main Subcomponents.
a. Subcomponent (2a) Agency-level Strengthening: This subcomponent will support
the: (i) Development of the regulatory framework for operating irrigation schemes
(tariff methodology, benchmarking of financial and technical performance, etc); and
(ii) Support the preparation of future irrigation strategies for the Entities. This
subcomponent would also support establishing a Technical Working Group
comprising representatives of both Entities to enhance the learning from experiences
across the country and help improve policy coordination;
b. Subcomponent (2b) Farm-level Irrigation Advisory Service (IAS) and
Modernization: This subcomponent would finance (i) Strengthening the knowledge
of the Entities field-level advisors on IAS, train WUAs on O&M, including on water
quality and environmental aspects of irrigation and drainage); (ii) support on-farm
demonstrations of water-saving good practices (e.g. irrigation re-scheduling, laser
land leveling, help WUAs access subsidy/credit on low-pressure sprinklers and drip
networks); and (iii) finance on-farm water-management equipment for each SP
serving no less than 1,000 ha (soil-moisture monitoring kits, water-flow meters,
―Total Weather Station‖ on specific/demo SPs to help compute the soil-water balance
components, including evapo-transpiration, effective rainfall, upward capillary); and
c. Subcomponent (2c) On-demand training: This will finance demand-driven training
for WUAs, related to improved agricultural technologies and practices and linking to
markets.
18
These are the Novo Selo, in Bijeljina and Pelagicevo (RS), respectively, and Mostarsko polje, Siroki Brijeg and
Gorazde, respectively (FBiH).
24
10. Component 3: Project Implementation Support (5% of project cost, US$2.4m). This
would cover costs of project management by each entity/PIU, including M&E, safeguards
(EMPs), audits, MIS, procurement and FM training, office and mobile equipment, and baseline
and (final) impact assessment surveys.
Table A1: Priority Subprojects for the first year of IDP
SP
Salient Features
FBiH RS
Mostarsko polje Gorazde Pilagecevo Novo Selo
Baseline area ha 2,916 ha 153 ha 202 ha 622 ha
Crops Mixed arable, vegetables
(also in greenhouses), fruit
trees.
Foca Municipality:
vegetables open
field, greenhouses,
orchard.
Goradze
Municipality (5
plots): Orchard,
mainly apples
Grains, corn,
sunflower, soya,
industrial tomato.
Grains, alfalfa,
seeds, industrial
tomato, sugar beet,
potatoes, carrots,
corn, sunflower.
Water-user type Five main plots, each being
a big group of individual
farmers.
Several small
farmers. Low
incomes.
Firm (former
kombinat). In two
plots: Gojkovo
(surface-water
source) and Stakica
(tubewell source).
Mainly a firm (622
ha, former
kombinat). Potential
additional
beneficiaries are the
adjacent small
farmers with total
irrigable 2,000ha
(now irrigating only
on groundwater).
Current off-farm
irrigation
system/problems
(onfarm always
privately-owned
piped; not
financed by
IDP).
Short of water. Existing
gravity-based surface-canal
system (main and
secondaries). Two tail-end
plots not left with enough
water (370 households, 200
ha).
No off-farm
distribution system
in place. Farmers
next to river pump
water directly,
whereas distanced
ones move water
from river by trucks.
Outdated piped
system.
Outdated piped
system.
Off-farm
irrigation system
introduced by
IDP.
Renovate 3 dilapidated
Aqueducts. Lining and
extension of main canal and
rehab secondary canals.
Rotational irrigation
delivery (hence a reduced/
rationalized quota for each
plot).
Establish a new
pumping-based
distribution system
from water source to
farms. Includes
adding a low-cost
surface reservoir.
Rotational delivery.
Submerged
centrifugal pumps.
Low pressure
Sprinklers for large
plots and drips for
small plots.
Rotational delivery.
These will use an
existing small
impoundment
(surface reservoir)
for Gojkovo plot.
24 kilometers of
new pipelines. Low-
pressure sprinklers
for large plots and
drips for small plots.
7 new wells up 12m
depth. Design
upsized by 20%
buffer to allow
adding ―on-
demand‖
connections from
the adjacent small-
scale farmers.
Rotational delivery.
Subproject off-
farm investment.
US$5.0 million US$2.00 million US$1.2 million US$2.9 million
25
Off-farm O&M
arrangement
Paid by WUA (to be
formed).
O&M performed by water
utility delegated by the
municipality.
Paid by WUA (to be
formed).
O&M performed by
the municipality.
By the firm By the firm
Key IDP impact Tail-end water shortage
eliminated. Improved yields
all over the scheme.
Grow additional
crop. Hired labor
doubled. Improved
value chain.
Grow additional
crop. Hired labor
increased from 36 to
around 60.
Improved value
chain.
Expand horizontally
and vertically.
Much more
industrial tomatoes.
Demo to adjacent
small-scale farmers
(who may thereby
decide to connect).
11. For environmental safeguards purposes, the project would be Category B. For the 4
schemes of Phase 1, EMPs will be prepared. In addition, an ESMF has been prepared to guide
assessment of the environmental impact of Phase 2 and 3 schemes and identification of
environmental mitigation measures needed to address their environmental impact if any. The
activities will include rehabilitation and upgrading of the main and secondary irrigation pipes and
canals, ponds and tanks, and related water conveyance infrastructure; rehabilitation and upgrading
of existing pumping stations; cleaning and rehabilitation of main and secondary drains, gates,
pipes and ancillary structures. No dams will be involved. The Project will focus on existing
agricultural land with existing irrigation schemes, and no conversion of land or works on natural
habitats is envisaged. The Project will finance activities related to agricultural land, and no
activities on forested land are foreseen. The ESMF outlines considerations for determining any
transboundary and watershed related impact (where relevant) and includes a record of public
consultations and major comments. A Site-specific EMP will be prepared for each sub-project, to
include, in addition to issues described in the ESMF, an analysis of the cumulative impact of the
proposed sub-project, including its impact on the water resource from which it draws water, and
on other water users in the (sub-) catchment area. Similarly, land acquisition would be governed
by the RPF (given in the ESMF); no resettlement is anticipated.
12. Climate change: The impact of 3 possible climate change scenarios on the proposed
irrigation systems located in the Sava basin (Novo Selo and Pelagicevo SPs) were analyzed at
Project appraisal. The climate scenarios were based on the regional EBU-POM (Eta Belgrade
University - Princeton Oceanic Model) and on a climate trends analysis done under the World
Bank study on South-Eastern Europe Water and Climate Adaptation.
13. The analysis suggested that the irrigation systems in Novo Selo and in Pelagicevo are
fairly resilient against the climate change scenarios for 2020 and 2030. Due to the relatively small
sizes of the Project's irrigation systems, the overall water balance will not be considerably affected
under these scenarios. Where peak irrigation-water demand in July and August may increase by
10%, this demand increment can be met by increasing the operating hours of the irrigation systems
from a minimum of 15.3 to a maximum of 17.7 hours per day.
14. Two of these 3 scenarios predict an increase in rainfall (i.e. supply) that offsets a
comparable increase in evapo-transpiration (ET, i.e. demand). The most pessimistic scenario of
these 3 scenarios predicts increasing the soil-moisture deficit (i.e. gap between ET and rainfall,
26
which warrants increased irrigation) by around 15% by year 2030, but this would still be
manageable as long as:
WUAs/farmers would by this time learn how to adapt to climate change (e.g.
following the PIM and IAS activities introduced by the Project‘s Component 2);
and/or
The concept of enhanced "conjunctive use" between surface and groundwater is
adopted (e.g. facilitated by Project Components 1 and 2), i.e. to pump more
groundwater during the summer peak to utilize the groundwater stored during the
rainy season (especially if climate change would increase rainfall in the non-
summer/winter season, in a way that increases the recharge to groundwater).
15. Selection Criteria for the SPs: Proposed irrigation SPs/schemes will be eligible for
funding under IDP if they meet the criteria set out below. The SPs may include investment and
activities related to drainage and protection of valuable agricultural land and assets from
inundation. An SP is considered to include all infrastructure components corresponding to a
complete operational irrigation (and drainage) system, or in the case of large schemes, to include
all infrastructure systems corresponding to a rational self-contained development phase or portion
of the overall scheme. The selection will be based on a process. The PIU and APCU will prepare
and update a ―long list‖ of potentially qualifying SPs. A first list has been developed for RS and
FBiH as part of the 2010 Pre-feasibility Analysis of Irrigation Schemes. Based on the selection
criteria below, a ranking of priority will be assigned, from where the most meritorious SPs will be
chosen for preparation and implementation, following the Entity and World Bank rules. The
considerations to be applied include the following, but may not be limited to these:
16. Strong local demand and ownership, and readiness. The most convincing indicator for a
successful irrigation investment is that the group of future water users on the site, and their local
government, are fully aware of the selection criteria below, have prepared a convincing proposal,
and show a high degree of commitment and readiness. This commitment and readiness will be
gauged by, in particular:
1. Farmers have already a realistic notion that they will financially contribute by paying
for on-farm investments, and for annual O&M fees. These expenses should be not
more than 25% of the expected benefits from the new or additional crop income
created by the irrigation.
2. Farmers and local government are committing, in writing, to pay a portion of the
main investment costs (10 or 20%, or more). In principle, the higher the committed
local fund, the more preferred the SP.
3. Farmers are able to show concrete specific plans for introducing higher-value crops
and for the improved marketing of their new produce.
4. Where the SP/ scheme will benefit a group of farmers, concrete steps are being taken
to establish a WUA.
5. Each farmer/ water user submits a written letter of commitment that (i) s/he will
become member of the WUA, will use the irrigation water, and agree on jointly
agreed water use rotation plans, (ii) s/he will pay the regular O&M/ water fee as
billed by the local water utility, (iii) s/he will pay for or arrange for the on-farm
investment (everything beyond the standpipe), (iv) s/he will contribute X % (TBD in
27
the POM) to the cost of the main system (as applicable), and (v) s/he will abide by
the Irrigation Rulebook and any other relevant regulation.
6. The local government submits a written letter of commitment that (i) it will extend
training and extension support to the water users, and (ii) it will agree with the water
users on the assignment of its water utility, public works department, or other
suitable agency, with the O&M tasks of the system, against which the utility or
agency will collect the O&M fees from the farmers. Alternatively, the WUA can
assume such tasks itself, contract it out to a contractor, or agree with an Entity-level
agency to carry out these tasks.
17. Sound economic and financial feasibility. The SP economic and financial analysis should
be undertaken, comparing the following:
1. Per-hectare investment cost (USD/ha) covering all necessary investment for the main
water supply (pumps, reservoirs, main pipes, site preparation, power connection and
all related costs, but excluding on-farm expenditures to be borne by the water user
such as irrigation beams, pipes and hoses, small tank, etc.). Costs should be below
USD2,000/ha.
2. Economic and financial analysis, to be based on the comparison between the with-
project and without-project, and taking into account the life duration, annual O&M
expenditures and water use cycles of the system, and the qualitative and market-
based information concerning the intended realistic improvements in crop types, crop
yields, and/or cropping area expansions, and the net incremental income that will be
generated that can be directly imputed to the investment. The Economic Rate of
Return should exceed 12% in case of full irrigation, or 9% in case of demonstrable
additional social benefits that may be difficult to quantify, such as in the case of flood
protection or improved drainage that would also benefit non-agricultural interests.
3. The water users/ farmers who will benefit from the investment should have
demonstrably commercially viable farm operations. Larger farms (e.g., larger than 2-
5ha, depending on crop type, livestock presence, and full-time labor input) are more
likely to be able to generate enough annual revenue to pay on-farm investments and
annual O&M fees to run the system. Depending on the case, some smaller farmers
can join the scheme and association. In general, irrigation investments in small areas
of less than 100ha are unfeasible, however, for each case a complete cost-benefit
analysis is necessary. Schemes with limited costs (for minimal rehabilitation or
modernization) and high incremental income, will have higher ERR and are,
therefore, priority.
18. Minimal complexity and environmental and social safeguards issues. Technical,
environmental, social and other complexities can potentially jeopardize or reduce potential
viability:
1. Modest environmental safeguards issues: Possible complexity may arise from non-
secure water supply for the farmers, due to unreliable precipitation or local
hydrological conditions, or due to uncertainty over existing legal rights to the water
by other water users. Sites where water capture and conveyance are difficult, or
28
drainage is problematic for example due to uncertainty over longer term water
management decisions, should rank low on the priority list. Other complexity
aspects include the vicinity of Nature parks or Natura 2000 and Ramsar sites. Other
issues to be addressed concern disposal of dirt and materials, and increased use of
pesticides and fertilizer.
2. Secure land tenure. Sites where land ownership is disputed, or where land leases are
shorter than 15 year, are to be avoided.
3. Modest social safeguards issues: Preference will be given to sites without significant
land acquisition or resettlement issues. Preference will be given to schemes where
the benefits of irrigation will accrue to a larger number of people, especially family-
held farms. Agricultural firms are acceptable as beneficiary, but only to a modest
degree.
4. Impact on poverty and social advancement: Preference will be given to schemes
where the irrigation investment will have a demonstrably large impact to lift local
incomes, generate local jobs, contribute to local social cohesion by spreading the
benefits, and contribute to development of commercially viable farms.
5. Sites with potential risks regarding mines or unexploded ordnance cannot be funded.
Areas known to have been mined, should have a certification that they are mine-free.
19. Completeness. The timeframe for implementation, and the scope of the proposed SP/
scheme should be limited in comparison to the overall project. For some of the larger and/or more
complex potential SPs this would result in slicing the SP in smaller self-contained rational discrete
and/or contiguous phases of development of the overall scheme.
20. Regional distribution. As the project aims to offer fair chances for development to all
municipalities, the SPs should aim for a reasonably balanced distribution over the territory of each
Entity, and strictly based on technical and economic selection criteria.
29
Annex 3: Implementation Arrangements
1. Project institutional and implementation arrangements
Project administration mechanism
1. Water Management including irrigation is under the responsibility of the two Entities.
Each entity has its own Water code and is responsible for its implementation. Both entities have
developed their own legislation and regulatory framework with the support of EU and have their
own institutional arrangements reflecting the respective administrative levels. Therefore, the legal
framework for water is largely harmonized with the EU one.
2. In RS and FBiH, the project will be implemented by the Ministry of Agriculture, Forestry
and Water Management (MoAFWM) and the Ministry of Agriculture, Water Management and
Forestry (MoAWMF) that already have ample experience with projects financed by the Bank
(such as SSCADP and the Neretva-Trebisnjica Project) as well as other financiers (IFAD, bilateral
donors, etc.). They also are the direct counterpart for the EC in matters relating to agriculture and
water management. As an important positive feature for the purpose of IDP implementation, the
Ministries have three essential responsibilities under their purview, namely, water management
(irrigation and the oversight over the Water Agencies), agricultural policies (such as market
development, value chain support, subsidy arrangements, etc.), and agricultural extension services
(operated through a semi-independent Extension Agency). The Ministries have each a well-
functioning and experienced Agricultural Projects Coordination Unit (APCU) in RS, and PIU
(Project Implementation Unit) in FBiH, respectively, that have served as the focal units for
preparation and implementation of all related projects.
3. The Project institutional links and responsibilities are reflected in the two diagrams below
(also see Annex 5 on utilizing government consultants at the central and field levels). The two
ministries assisted by the PIU and APCU have capacity to administer/implement the project at the
central and field levels.
4. Most of the activities proposed under the Project are part of the everyday work of the
Ministries, hence do not require establishing a parallel structure or a full scale Project
Implementation Unit. The two units within FBiH MoAFWM and RS MoAWMF, with the support
of the Ministries, would be responsible for the technical implementation of project activities,
which includes: (i) preparing Terms of Reference (ToRs) and technical specifications; (ii)
designing training programs; (iii) supervising consultants; (iv) analyzing products delivered by
consultants; and (v) participating in procurement evaluation committees. Professionals of these
Ministries (civil servants) would facilitate the technical inputs for specific project implementation
activities and would work directly with the units.
30
IDP Implementation and Decision Making Organogram
FBiH
SA
RS SA
MOFT
fFinance
MOF MOF
MAWMF
PIU
MAFWM
APCU Joint Technical
working team
MOFTER
Canton
Municipality
Beneficiaries
Municipality
Beneficiaries
Explanation of the implementation and decision diagram
5. Ministry of Finance and Treasury (MOFT) at the level of the State has subsidiary
agreements with the Ministries of Finance of both entities. The respective Ministries of Finance
(MOF) in both the Republika Srpska (RS) and the Federation of Bosnia and Herzegovina (FBiH)
ensure that the implementing Ministries, the Ministry of Agriculture Water Management and
Forestry (MAWMF) in the FBiH and the Ministry of Agriculture Forestry and Water Management
(MAFWM) in the RS abide by the legal agreements for the use of credit funds.
6. The Joint technical working group is an informal group of technical specialists from the
various levels of government that will help with developing regulatory framework that is
applicable to both entities in view of streamlining procedures and regulations in so far as practical.
7. The APCU and PIU Directors will report to the Minister of FBiH MoAFWM and RS
MoAWMF respectively. The main role of the Directors will be to coordinate implementing all
31
project activities. To ensure smooth coordination of project implementation and communication
among the major stakeholders, the Project Directors will act as main liaison with: (i) the World
Bank; (ii) representatives of the Ministries; and (iii) representatives of the MoF.
8. Procurement, financial management and disbursement issues would remain the
responsibility of the APCU and the PIU within the Line Ministries, which are already in charge of
fiduciary arrangements for another Bank-financed project. The main responsibilities of the units
include: (i) day-to-day project management, (ii) coordination with the Bank and project
stakeholders; (iii) coordination and facilitation of interaction with project stakeholders; (iv)
monitoring and evaluation (M&E) of project activities; (v) preparation of annual progress reports;
(vi) preparation of quarterly unaudited financial reports and annual audited financial statements;
(vii) preparation of procurement plans; and (viii) briefing on the status of project implementation.
Operation and maintenance
9. As for O&M of the introduced investments (see O&M diagram below), during IDP
implementation, the exact O&M arrangements will be identified through updating the Project
Operation Manual (POM), in consistency with the (to-be-finalized) Irrigation Rulebooks. These
O&M arrangements will then be legalized through signing (tripartite) agreements between the end
beneficiaries/WUA, the ministry/canton (assets owner), and the municipality/utility (i.e. the O&M
service provider, if not the WUA). The diagram below illustrates an example for a representative
subproject (the bulk-water source being an open canal).
32
Description of O&M and resources flows diagram
10. The diagram shows the flows of resources to ensure adequate O&M of the rehabilitated
systems. The two PIUs will coordinate with the various levels of their respective government
structures for the mobilization of farmers, organizing consultation meetings among stakeholders of
a concerned system to ensure a design that has the widespread support of the community. The two
PIUs will work with beneficiaries and local government to define the roles of each party as it
relates to the construction and later maintenance of the systems including agreeing on a financing
mechanism to ensure O&M expenditures are adequately met. These financing mechanisms will be
Owner
(Entity/Canton/Municipality)
O&M scheme
case 1: open canal
F
Farmer
F
Farmer
F F
WUA
Fee
Fee
Electricity
Company
Water Utility
Company
Irrigation Advisory
Service
Knowledge
Technical assistant
Ministry of
Agriculture Subsidy
Program
Income
Water fee
Connection fee
Irrigation cost
Membership fee
Expenditure
Operation cost
Maintenance cost
Water
Electricity
Administration & Salary P
aym
ent
Pay
men
t
Irrigation cost
33
substantially determined by the system design and the jurisdiction under which water abstraction
is made and what services the system provides beyond the immediate beneficiary i.e. farmers who
are members of WUAs and farm enterprises who benefit from the investment. Since the systems
are relatively small and locally contained, emphasis is given to local solutions that provide an
optimal compromise between the Farmers and WUA, the municipality its local water utility, and
the power company in so far as each of these apply. The detailed arrangements will be reflected in
the O&M manual that will be developed for each system in consultation with final beneficiaries
and that will have to be observed by the final users who received the right to operate and use this
infrastructure.
11. The advisory services provided to farmers will be provided in so far as available through
the existing structures of the extension service. As noted previously a nascent agency represented
at the level of each municipality exists in RS. This service will provide the coordination input for
organizing demonstrations, field days and technical advice to farmers to help them optimize their
agricultural production and revenues as a result of the irrigation investments.
12. In the FBiH the PIU will establish temporary local offices staffed with specialists to help
mobilize farmers, support the establishment and registration of WUAs, help organize
demonstrations and provide agronomic advise to local producers. The demands change from one
system to the next, since some areas such as Mostarsko Blato have a vast experience with
horticultural production including access to markets, while new production, such as in Gorazde
will need substantial assistance to farmers in formulating production plans, assist with logistics
for bringing produce to markets and advisory help with production optimization.
13. In FBiH the Cantons and municipalities have substantial local authority and important
roles in agricultural policy implementation. They are able to communicate more readily with
farmers than do the municipalities in RS, where the administration system is more centralized.
Nonetheless, in both RS and FBiH many local governments are vocal in making irrigation (re-)
development a priority. The local governments and notably the Cantons also offer incentive to
promote agriculture and provide agricultural extension services that complement those of the
Ministry. Draft regulations to determine the water pricing structure and mechanism, as well as
registration needs of users have been developed, but will need TA for completion. Cantons and
municipalities do not have much experience in transferring the management responsibility to
WUAs, except limited experience from SSCAD. Thus they will need some training on how to
transfer management responsibility and the benefits of such approach.
14. Besides being beneficiaries, farmers have important role in the project. Their role is to
organize themselves and form WUAs in which they will demonstrate their ownership through
their work (in-kind contribution) on O&M or paying fees. WUAs and their unions/federations
will assume legal responsibility for irrigation management including collection of water fees and
water distribution schedules, participate in decision making on selection of design options.
34
Financial Management, Disbursements and Procurement
Financial Management
15. Financial Management Assessment. The financial management arrangements for the
project are acceptable. The significant strengths that provide a basis of reliance on the project‘s
financial management arrangements include:
a. Both APCU and PIU have been implementing a Bank funded project, namely the
Agriculture and Rural Development Project. Furthermore the APCU is also
implementing the Bank-supported (with Trust Fund) Neretva and Trebisnjica River
Basin Management Project,
b. Project fiduciary function has already been fulfilled with experienced consultants.
16. No significant weaknesses were identified before the negotiations. The overall financial
management risk for the project is moderate. The inherent risk of the project is rated as moderate,
while the controls risk is rated as substantial before the mitigation measures. After introduction of
the mitigation measures the control risk is reduced to moderate.
Budgeting and Counterpart Funding Arrangements
17. The Project Coordination Units in the two Entity-level ministries will prepare annual plans
based on detailed procurement planning. Existing FM staff in the FBiH PIU and RS APCU has
adequate capacity for planning and budgeting in terms of human resources, availability of quality
information and IT system. The FBiH PIU and RS APCU will prepare budgets for all Project
components for each Entity separately. The budgets will be entered in the accounting software
and actual versus planned information analyzed and explained. Budgeting and accounting in both
FBiH PIU and RS APCU are appropriate.
Flow of funds
18. The implementation of project activities will be under the APCU and PIU. The APCU and
PIU will manage project implementation and will be responsible for such functions as:
procurement, financial management, monitoring and evaluation, and reporting. The fiduciary
functions would be conducted by hired consultants (possibly extending the contracts of those hired
under the ARDP).
Accounting and Maintenance of Accounting Records
Information systems. The FBiH PIU and RS APCU installed and implemented a
financial accounting and reporting software that is successfully being used in several
Bank-financed Projects. The software has the necessary capabilities to produce the
required reports and maintain a trail of transactions in verifiable manner.
Accounting policies and procedures. Accounting procedures are set out in the FM
Manuals. The FM Manuals contain procedures for the flow of accounting information
and records between the FBiH PIU and RS APCU and other stakeholders.
35
Additional accounting policies applied to the Project adhere to the following principles:
Cash accounting as the basis for recording transactions;
Reporting in Euros (reporting currency);
Quarterly IFRs prepared by each FBiH PIU and RS APCU; and
All GCF reflected in the financial reports.
Internal Controls and Internal Audit
19. The FBiH PIU and RS APCU have adequate internal controls for the project. The internal
controls for the project will follow the procedures described in the Financial Management Manual.
Regular reconciliation of bank accounts, adequate segregation of duties, proper accounting
policies and procedures and monthly reconciliation of disbursement summaries of the World Bank
with accounting records will be performed. Designated Accounts reconciliation statements, Client
Connection figures will be reconciled monthly with the accounting records. IFRs would be
reconciled quarterly with the accounting data. The IFRs will be reconciled quarterly with the trial
balance out of which they are prepared, including the relevant bank statements. Evidence of the
reconciliation made will be kept in project records. The APCU and PIU will maintain, print and
store all back up documentation (trial balance, bank statements, journal entries etc.) for the
quarterly IFRs in a file.
Periodic Financial Reporting
20. The FBiH PIU and RS APCU shall prepare and furnish to the Bank not later than forty five
(45) days after the end of each calendar quarter, interim unaudited financial reports ―IFRs‖ for the
project covering the quarter, in form and substance satisfactory to the Bank. The formats of the
IFRs have been agreed and confirmed. Each IFRs which include Project Sources and Uses of
Funds, Uses of Funds by Project Activity, Balance Sheet, Statement of Expenditures and
Designated Account Reconciliation Statement. If the Credit currency differs from the currency of
the Designated Account (DA), the DA reconciliation statement will be presented in the currency
of the relevant DA. Under the on-going projects, quarterly interim un-audited Financial Reports
(IFRs) have been submitted regularly to the Bank and were found acceptable.
External Audit
21. The APCU and PIU will be responsible for the timely compilation of the annual project
financial statements for the independent external audit. Project financial statements (including
SOE and DA activities) will be audited by an independent auditor acceptable to the Bank. Each
audit of the Project Financial Statements shall cover the period of one (1) fiscal year of the
Borrower, commencing with the fiscal year in which the first withdrawal was made under the
Credit. The terms of reference for the audit have been agreed with the Bank, and will be attached
to the Minutes of Negotiation. In addition, the auditors are expected to deliver management letters
in relation to the project. Each management letter will identify internal control deficiencies and
accounting issues, if any. The audit reports, audited financial statements and management letter
will be delivered to the Bank within six months of the end of each fiscal year. The audited Project
Financial Statements will be made publicly available in a timely fashion and in a manner
36
acceptable to the Bank. All project audits in Bosnia and Herzegovina are covered by an umbrella
agreement with one audit firm.
Disbursements
22. There will be two Designated Accounts (DA) opened for the Credit proceeds, namely one
for each entity. The DAs will be opened in a commercial bank acceptable to the World Bank.
Credit funds will flow from the World Bank to the Designated Accounts and then from Designated
Accounts to contractors on the basis of the approved invoices. There will also be a possibility to
use special commitments (in case of goods imported) or direct payments methods from World
Bank to contractors for larger payments as indicated in the Disbursement Letter. The project FM
personnel will prepare the application for withdrawals to be submitted to the Bank and the
payment orders for suppliers. Such procedure would be described in detail in the FM chapter of
the Project Operational Manual (POM).
23. Disbursement from the Credit Account will follow the traditional method, either through
reimbursement, direct payment to suppliers, issuance of the Bank‘s Special Commitment,
payments from and replenishment of the DAs with the use of SOEs or with full documentation.
Withdrawal applications for the replenishments of the DAs will be sent to the Bank in accordance
with the Disbursement Letter. Supporting documents for SOEs, including completion reports and
certificates, will be retained by the APCU and PIU and made available to the Bank during project
supervision. Disbursements for expenditures above the SOE threshold levels will be made against
presentation of full documentation relating to the expenditures. The reimbursement of
expenditures from the DAs may be made on the basis of certified SOEs, based on the SOE
thresholds defined in detail in the Disbursement letter. The ceiling and authorized allocation for
the DA will be defined in the project Disbursement Letters. The DAs will be denominated in
EUR.
24. Local contribution under the project would include contributions from the line Ministries,
target Municipalities and end users (WUAs), and would amount to a total US$7.00 million
(around 15% of the total project costs, US$47.00 million).
Withdrawal of the Proceeds of the Credit
Category Amount of the Credit Allocated
(expressed in US$m)
Percentage of Expenditures
to be Financed (Inclusive of
Taxes)
(1) Goods, works, non-consulting services,
consultants‘ services, training, and operating
costs for Part A: FBiH
19.50 85%
(2) Goods, works, non-consulting services,
consultants‘ services, training, and operating
costs for Part B: RS
20.50 85%
TOTAL AMOUNT 40 85%
37
Financial Management Conditions and Covenants
25. The APCU and PIU will continue to maintain a project financial management system
acceptable to the Bank. The project financial statements will be audited by independent auditors
acceptable to the Bank and on terms of reference acceptable to the Bank. The annual audited
statements and audit report will be provided to the Bank within six months of the end of each
fiscal year. Quarterly IFRs will be forwarded to the Bank no later than 45 days after the end of
each quarter.
26. There are no conditions for negotiations or project effectiveness.
Supervision Plan
27. As part of its project supervision, the Bank will conduct risk-based financial management
supervisions, at appropriate intervals, in the following ways: (a) review the project‘s quarterly
financial reports, the project‘s annual audited financial statements, the auditor‘s management letter
and remedial actions, if any; and (b) during the Bank‘s on-site supervision missions, review the
following key areas (i) project accounting and internal control systems; (ii) budgeting and
financial planning arrangements; (iii) disbursement management and financial flows, including
counterpart funds, as applicable; and (iv) any incidences of corrupt practices involving project
resources. As required, a Bank-accredited Financial Management Specialist will assist in the
supervision process.
28. Procurement: Procurement for the IDP Project would be carried out in accordance with
the World Bank‘s ―Guidelines: Procurement under IBRD Loans and IDA Loans‖, dated January
2011, ―Guidelines: Selection and Employment of Consultants by World Bank Borrowers‖, dated
January 2011, and the provisions stipulated in the Legal Agreement. For each contract to be
financed by the credit, the different procurement methods or consultant selection methods, the
need for prequalification, estimated costs, prior review requirements, and time frame are agreed
between the Borrower and the Bank project team in the Procurement Plan. The Procurement Plan
would be updated at least annually or as required to reflect the actual project implementation
needs and improvements in institutional capacity.
29. Results of the procurement risks assessment: The APCU and the PIU has been
established within the RS Ministry of Agriculture, Forestry and Water Management (MoAFWM)
and the Federal Ministry of Agriculture, Water Management and Forestry (MoAWMF). The units
are responsible for the following functions: (i) procurement; (ii) financial management; and (iii)
disbursement and auditing arrangements.
30. The procurement thresholds for procurement of goods, works and consultancy contracts
are set in accordance with the latest ECA regional thresholds. In addition to the prior review
supervision, to be carried out by the World Bank, two supervision missions per year are going to
carry out post review of procurement actions.
38
31. All procurement and financial management functions would be delegated to the units. The
APCU is staffed by four key staff comprising a two Procurement Specialists, and a two Financial
Management Specialists. The PIU is staffed by four key staff comprising a two Procurement
Specialists, and a Financial Management Specialist supported by a Financial Management
Assistant. All Procurement Officers, possess relevant experiences in using Bank‘s procurement
procedures, and currently perform the procurement function.
32. A Bank Procurement Specialist carried out an assessment of the capacity of the APCU and
the PIU to implement procurement actions for the IDP Project. The APCU is managing two
IFAD‘s projects, but one of those projects is expected to close in 2012.
33. The key issues and risks concerning procurement for implementation of the Project have
been identified and include the fact that some of Procurement Officers have not received any
formal training (such as by ILO, Turin), and they might be overloaded.
34. As an action plan for building the agency‘s capacity and in order to build-in and maintain
strong procurement management capacity in the APCU / PIU, the Bank recommends the
following actions:
in order to get a better understanding of the Bank‘s new procurement and consultant
guidelines, as well as the new bidding and proposal documents, the relevant staff involved
in the procurement management process should attend appropriate trainings organized by
relevant institutions or by the Bank; and
the Bank would carry out a brief training session on procurement, during the Project
launch workshop, as well as will provide the agency with a full set of the most recent
guidelines, bidding, proposal and evaluation documents.
35. If needed, during implementation the procurement capacity of the APCU / PIU would be
reassessed to determine whether additional supports should be put in place.
36. Given the procurement capacity of the APCU and the PIU, the overall Project risk for
procurement is medium.
37. A General Procurement Notice (GPN) would be published in the mid 2012 issue of
Development Business announcing goods and consulting services to be procured, and inviting
interested eligible suppliers and consultants to express interest and to request any complementary
information from the Borrower.
38. Specific Procurement Notices (SPN) would be published in the on-line edition of the
Development Business for all International Competitive Bidding (ICB) contracts, and in the
printed edition at the option of the Borrower. For goods to be procured through ICB, individual
bidding opportunities would also be advertised in a major local newspaper on the same (or within
five) day(s) of the on-line publication. The local advertisements would be written in English and,
at the option of the Borrower, would also be in the local language. For consultants‘ contracts
above US$200,000, SPN/Request for Expression of Interest will be advertised in the online edition
of the Development Business and in at least one major national newspaper of wide circulation (in
the national and English languages). Civil servants are eligible to be hired as individual
39
consultants or as members of a team with financing under the Credit provided they are on leave of
absence without pay and they have not been working for any of the Beneficiary Agencies
immediately prior to taking leave of absence.
39. Procurement of goods: Goods procured under this Project include Information
Technology (IT) comprised of off-the-shelf hardware and software as well as the design and
development of new systems. In addition to the main IT equipment various peripherals would be
procured. Other goods would include pumps, gates, pipes and ancillary structures, office and
laboratory equipment, furniture, small equipment (including office equipment), training and
printing material. All Goods procurement will be done using the Bank‘s Standard Bidding
Document (SBD) for all ICBs. The SBDs for procurement of information systems would be used
for procurements of all IT equipment estimated to cost over US$100,000 per contract, both the
Supply and Installation of Information Systems - Single Stage Bidding or Supply and Installation
of Information Systems - Two Stage Bidding (recent version) document would be used. Major
contracts for IT would also include the delivery of incidental services such as installation,
commissioning and training of beneficiaries in their use and maintenance. In addition, the sample
procurement documents and forms developed in the ECA Region for small value procurement
would be adapted to suit the Project needs for procurement. All goods would be grouped, to the
extent possible, to encourage competitive bidding. The following methods of procurement would
be followed:
ICB: Computer equipment and software, pumps, gates, pipes and ancillary structures, office
and laboratory equipment, furniture, small equipment (including office equipment) under
the Project for contracts above US$100,000 equivalent per contract would be procured
using International Competitive Bidding (ICB). Bid documentation would be prepared
using the latest version of the Bank Standard Bidding Document (SBD) for the
Procurement of Goods. Procurement of large value IT systems including the development
of software would be carried out using the specialized Standard Bidding Documents for
Information Systems, single and two stage bidding, as appropriate;
Standard shopping procedures would be used for readily available off-the-shelf goods,
including office and computer equipment for all project beneficiaries, minor IT equipment,
and for small print runs of publicity materials. All items would have standard
specifications, estimated to cost less US$100,000 equivalent per contract. This procedure
would be based on obtaining and comparing price offers from at least three suppliers from
at least two different countries in accordance with a paragraph 3.5 of Procurement
Guidelines. The regional sample format for shopping ―Invitation to Quote‖ June 2011
would be used. In addition, for the procurement of IT technology it would be mandatory
for the shortlist to be drawn, inter alia, from the companies registered on the ECA
Regional shopping web site: www.worldbank.org/shop-it;
Direct contracting: Where certain goods are available only from a particular supplier or in
cases where compatibility with existing equipment so requires goods may be procured
under direct contracting (single source) with prior approval from the Bank (in accordance
with a paragraph. 3.6 of the Procurement Guidelines).
40
40. Procurement of works: Works under the IDP Project envisaged are irrigation and drainage
infrastructure works in the form of about 12 sub-projects, of which 6 each located in RS and
FBiH. To the extent possible, contracts for these works will be grouped into bidding packages
estimated to cost more than: US$500,000.00 equivalent and procured following International
Competitive Bidding (ICB) procedures, using relevant Bank-issued Standard Bidding Documents
for procurement of works. Contracts for works which cannot be grouped into larger bidding
packages and estimated to cost less than US$500,000.00 equivalent per contract may be procured
using NCB procedures and bidding documents for procurement of works satisfactory to the Bank.
41. Selection of consultants: The majority of consultancy services would be procured as
short-term targeted individual consultant inputs or small inputs where a local and foreign adviser
should work together. Where feasible, however, these may be combined into larger tasks where
the benefits of backstopping support may be beneficial. Short lists of consultants for services
estimated to cost less than US$100,000 equivalent per contract may be composed entirely of
national consultants, in accordance with the provisions of paragraph 2.7 of the Consultant
Guidelines and with the prior agreement of the Bank. The following procurement procedures
would be used for selection of consultant services:
Quality and Cost Based Selection (QCBS) procedure, as described in Section II,
paragraphs 2.1 to 2.35 of the Consultant Guidelines would be used if necessary for
assignment under all components of the Project;
Least Cost Selection (LCS) procedure would be used for selection of an auditor to
carry out audits of the financial statements of the Project. The shortlist should comprise
only firms selected from the Bank‘s list of eligible firms;
Selection under a Fixed Budget (FBS) may be used for assignments related to public
relations and institutional campaigns. In accordance with paragraph 3.5 of the
Consultants Guidelines, the Request for Proposals shall indicate the maximum
available budget and a firm would be selected that offers the best quality technical
proposal within that available budget;
Selection Based on Consultants’ Qualifications (CQ) would be used for contracting
firms for certain assignments under all components of the Project for which the value
of the assignments is estimated to cost less than US$100,000 equivalent per contract.
Shortlists will be drawn up in response to an advertisement in the national press or
Development Business;
Individual Consultants (IC): many specialized activities, where specific skills are
needed for short period of time, at scattered intervals and which would not be practical
to package with the assignments for consulting firms described above, would be best
served through the recruitment of individual consultants (both foreign and national) to
assist in capacity building and institutional strengthening within all components of the
Project, and to assist the APCU/PIU in various technical tasks. Selection of individual
consultants would be carried out in accordance with Section V of the Consultant
Guidelines. Individuals would be selected based on their qualifications for the
41
assignment, by comparing the CVs obtained in response to an advertisement in the
national press or Development Business;
Sole Source (SS): Consultants and training services may be hired under sole source
contracts with the prior approval of the Bank, in accordance with paragraphs 3.8 to
3.11 of the Consultants Guidelines and following the agreed Procurement Plan.
42. Training activities: Training is an integral element of the Project‘s capacity building
subcomponents. The Credit would finance training programs, including training workshops, study
tours and local training. Expenditures related to such training activities include: means
expenditures incurred in connection with training, workshops, seminars and study tours, and other
training activities not included under goods and service providers‘ contracts, to be carried out
under the Project, including fees, travel costs and per-diem allowances for the trainers and travel
costs and per-diem allowances for the trainees, cost of training materials, space and equipment
rental, and other related expenditures; all such expenditures shall be based on plans adopted by the
APCU/PIU and satisfactory to the Bank, which shall include proposed budgets and terms of
reference.
43. The APCU/PIU would be expected to prepare and submit the training plan to the Bank
every year. This plan would define the agreed procedures that would be used for procurement of
various training services. The estimated budget, list of participants and draft agenda for each
training event would be subject to Bank‘s prior review. However, this may be done through the
Annual Plan. Expenditure items for training activities, including study tours, would be reported
under a statement of expenditures. The status of the training plan would be included as part of the
quarterly progress reports, and would be updated and/or modified as may be mutually agreed
between the units and the Bank.
44. Incremental operating costs means reasonable incremental expenses incurred on account of
Project implementation, management and monitoring, including office supplies, publication of
procurement notices, vehicle operation, office and equipment maintenance and repair,
communication, translation and interpretation, travel and supervision costs, and other
miscellaneous costs directly associated with Project, but excluding salaries of officials and
employees of the Borrower.
45. Procurement Plan: The APCU and the PIU have developed the Procurement Plan for the
first 18 months of project implementation, which provides the basis for the procurement methods.
It would be available in the Project‘s database and in the Bank‘s external website. The
Procurement Plan would be updated by the Project Team, at least annually or as required to reflect
the actual project implementation needs and improvements in institutional capacity. Updated
Procurement Plans would also be submitted to the Bank for its approval.
General:
Bank‘s approval date of the Procurement Plan: March 22, 2012.
Date of General Procurement Notice: estimated May 2012.
Period covered by this Procurement Plan: 18 months.
42
Goods, works and non-consulting services:
Prior review threshold: procurement decisions subject to prior review by the Bank as
stated in Appendix 1 to the Guidelines for Procurement:
Procurement Method Prior Review Threshold US$ equivalent
Comments
ICB (Goods) > 100,000 All subject to prior review
ICB (Works) packages > 500,000 All subject to prior review
NCB (Works) packages < 500,000 First two works contracts
subject to prior review
(Non-Consultant Services)
packages < 500,000 First two works contracts
subject to prior review
Direct contracting* - All subject to prior review
* all contracts subject to justification.
Reference to (if any) Project Operational Manual: POM.
Any Other Special Procurement Arrangements: none.
Summary of the procurement packages planned during the first 18 months after project
effectiveness (including those that are subject to retroactive financing and advanced
procurement):
43
Description
Estimated
Cost
US$
equivalent
Procurement
Method
Domestic
Preference
(yes/no)
Review
by Bank
(Prior /
Post)
Comments
Zone B. Works from fork junction on
aquaduct to aquaduct in Ugrovaca
550,000 ICB No Prior
Zone C. Works from aquaduct in
Ugrovaca to Mokro and Turcinovica
610,000 ICB No Prior
Zone D. Works from Buk-Biograci 710,000 ICB No Prior
Zone H. Works from Biograci-Ljuti
Dolac (expansion of the system)
645,000
ICB No Prior
Zone J. Works from Drainage area D,
E and F
570,000 ICB No Prior
Common infrastructure works-
Drainage (Zones A to E)
1,820,000 ICB No Prior
A. Zones I-A to IIIB Works 3,100,000 ICB No Prior
AL 420 area – Pumping station
building
580,000 ICB No Prior
AL 420 area – Distribution system 1,150,000 ICB No Prior
AL 420 area infrastructure works 2,600,000 ICB No Prior
Novo Selo Stationary Pipe Network 2,200,000 ICB No Prior
Gojkovo Selo infrastructure works 900,000 ICB No Prior
Pustara infrastructure works 1,600,000 ICB No Prior
Popovo Polje distribution system 5,000,000 ICB No Prior Popovo Polje
works will
likely start
after the first
18 months
Popovo Polje drainage system
rehabilitation
3,500,000 ICB No Prior Idem
Popovo Polje Pumping station and
transport system works
1,250,000 ICB No Prior Idem
Selection of consultants:
Prior review threshold: selection decisions subject to prior review by the Bank as stated
in Appendix 1 to the Guidelines Selection and Employment of Consultants: Selection Method Prior Review
Threshold
(US$
equivalent)
Comments
Competitive Methods (Firms) QCBS > 100,000 All subject to prior review
Competitive Methods (Firms) LCS Any amount First contract subject to prior review
Competitive Methods (Firms) CQ > 50,000 All subject to prior review
Competitive Methods (Firms) CQ < 50,000 First two contracts subject to prior review
Individual Consultants (IC) > 50,000 All subject to prior review
Individual Consultants (IC) < 50,000 First two contracts subject to prior review
Single Source (Firms and Individuals)* - All subject to prior review
ToRs for Consulting Contracts All methods
/values
All subject to prior review
* all contracts subject to justification Note: QCBS = Quality and Cost-Based Selection; LCS = Least-Cost Selection; CQ = Selection based on
Consultants‘ Qualifications.
44
Short list comprising entirely of national consultants: short list of consultants for
services, estimated to cost less than US$100,000 equivalent per contract, may comprise
entirely of national consultants, in accordance with the provisions of paragraph 2.7 of
the Consultant Guidelines.
Any other special selection arrangements: none.
Consultancy Assignments with Selection Methods:
1 2 3 4 5 6
Ref.
No.
Description of Assignment
Estimated
Cost
US$
equivalent
Selection
Method
Review
by Bank
(Prior /
Post)
Comments
1. Engineering & Supervision
(covering around 10,000 hectares)
Total of 3.25
million in
approx. 14
packages
QCBS Prior Subject to
update in
procurement
plan
2. Audits of Project Financial
Statements Implementation
90,000 LCS Prior
Other:
Ex-post review: All other contracts below Bank‘s prior review threshold are subject to
Bank‘s selective ex-post review. Periodic ex-post review by the Bank would be
undertaken during regular supervision missions. Procurement documents, such as
bidding documents, bids, bid evaluation reports and correspondence related to bids and
contracts would be kept readily available for Bank‘s ex-post review during supervision
missions or at any other points in time.
46. Record keeping: The APCU / PIU would maintain complete procurement files which
would be reviewed by Bank supervision missions. All procurement related documentation that
requires Bank prior review would be cleared by Procurement Accredited Staff and relevant
technical staff. No packages above mandatory review thresholds by RPA are anticipated.
Procurement information would be recorded by the APCU / PIU and submitted to Bank, as part of
the quarterly IFR and annual progress reports. SEPA software is going to be used as the
mechanisms in place to ensure that procurement plans are monitored and updated regularly.
Environmental and Social (including safeguards)
Measures taken to address safeguard issues
47. An Environmental and Social Management Framework (ESMF) has been prepared and
disclosed with meaningful public consultations prior to Appraisal of the Project. The ESMF also
provides a Checklist EMP for future reconstruction works that is meant to facilitate identification
and mitigation of environmental impacts for already existing irrigation schemes. Five site-specific
EMPs have also been prepared for five priority schemes.
45
Mechanisms to supervise and monitor agreed plans
48. Almost all of the associated impacts and mitigation measures deal with small-scale
construction impacts and will become the responsibility of the site contractor and supervisor
through the bidding and contractual documents. Majority of the measures during operation will be
the responsibility of the WUAs. The overall compliance with the EMP will be conducted by the
respective PIUs and supervised by the World Bank task team.
Environmental and social risks or issues beyond the coverage of the safeguards policies
49. There are no anticipated negative environmental impacts that go beyond the coverage of
safeguard policies. The positive impacts reflected in more rational and inclusive water use and
better water use planning will definitely go beyond the project and beyond the safeguard policies.
On social risks that go beyond safeguards, the project will promote establishing participatory
WUAs, aiming at ensuring a more equitable access and use of the improved irrigation systems,
particularly in relation to the needs of smaller farmers.
Monitoring & Evaluation
Data sources, client M&E capacity, additional cost/arrangement required to support M&E
50. The project will finance a M&E activity under Component 3, facilitated by (1) hiring one
M&E consultant (who will also cover Safeguards/EMPs) on each Entity PIU, and (2) establishing
Management Information System (MIS) on each Entity PIU (in FBiH MOAWMF there is existing
GIS-based database that will be enhanced to function as MIS for FBiH-IDP). The project
activities including M&E will be implemented with the help of existing field Extension Units of
RS-MOAFWM, whereas supported by creating 3 field units for FBiH-MOAWMF
(consultants/extensionists, few goods, housed in leased units adjacent to FBiH‘s 6 target SPs).
Those field units will assist in all IDP field activities including assisting the 2 M&E consultants in
accessing field data and debriefing farmers and the indirect (value chain) beneficiaries. The M&E
will include undertaking baseline and (final) impact assessment surveys.
How the M&E outcomes will assist in project implementation
51. The M&E activity will monitor: (1) project physical progress (e.g. works completion%
versus planned%) and (2) evaluate project socioeconomic and environmental impacts (Annex 1).
The impact evaluation studies would be presented in semi-annual progress reports (to be sent to
the Bank and MOFTER). These progress reports should include a chapter reporting on safeguards
(progress of the EMPs), including a short ―environmental audit‖ of the civil-works contractors to
ensure their compliance with the EMPs. If by the MTR the M&E outcomes indicate that IDP is
encountering delay in meeting the outputs (works/equipment) or a lack of meeting the
core/intermediary outcomes, the mitigations proposed in ORAF will be introduced, including: (1)
revisiting the procurement plan (e.g. slicing instead of packaging to expedite tendering and
execution); and (2) restructuring (e.g. increase budget allocated to Component 2 using cost
savings/reductions in Component 1).
46
Annex 4: Operational Risk Assessment Framework
47
48
49
50
Annex 5: Implementation Support Plan
Client implementation capacity
1. Central level in Sarajevo (FBiH-PIU) and Banja Luka (RS-APCU). The two PIUs in
FBiH and RS are within a few hours drive from the target SPs, hence can implement Component
1 (around 12 ICB works/goods contracts, 1-2 per each SP) in terms of detailed design, supervision
and fiduciary. In doing so they will be supported by one major consulting firm (providing design-
and-supervision on Component 1 and TA/training on Component 2) or several consulting firms
taking into consideration phased approach and geographically dispersed locations of irrigation
schemes, and around 12-15 individual national/international consultants (via Component 3)
including: (1) 5-7 consultants for each PIU (i.e. PIU manager, PS, FMS, engineers/hydrologists;
M&E (including safeguards/EMPs); (2) a few local consultants (extensionists) for the 3 field units
that will be established by FBiH-MOAWMF (mentioned hereafter).
2. Decentralized level: The irrigation advisory and WUA formation/capacity building
activities of Component 2 in the SPs will be implemented with the help of existing field Extension
Units of RS-MOAFWM, and supported by creating 3 field units for FBiH-MOAWMF located
adjacent to FBiH‘s 6 target SPs. Those field units will assist in all IDP field activities including
assisting the 2 M&E consultants in accessing field data and debriefing farmers and the indirect
(value chain) beneficiaries. The contract for the design-and-supervision (Component 1) consulting
firm may provide cross-support Component 2, as its TOR will include TA/training for irrigation
advisory for WUAs, and TA on the irrigation-reform policies for the two line ministries (both TAs
being part of Component 2). If this firm is national rather than international, the PIUs will
strengthen it by hiring few international individual consultants (especially as to the relatively new
topics: IAS and water policies).
3. Disbursement and procurement clearances: For each entity ministry, MOFT will open two
Designated Accounts (DA), at a bank acceptable to IDA and in cooperation with the entities, to
receive IDA advances. The two entities will each open a local project account to receive
local/municipality/WUA counterpart contributions in order to co-finance project activities.
Signatories of the Withdrawal Applications from the Credit Account would be key authorized
MOFT officials. The procurement tender and contract clearances will be obtained from the
Federation and RS line ministry officials. The progress of works or supplied goods/equipment
will be co-supervised by the PIUs and ministry staff; and the same will co-sign the
works/equipment receipt certificate and one-year performance certificate.
Implementation Support Plan
4. The Bank team will hold a project-launch workshop once the IDP is declared effective.
Afterwards, the Bank will field semi-annual supervision missions.
5. Coordinating IDP supervision with other missions: The IDP supervision missions would
occasionally be coordinated with missions of the other ongoing projects with the same ministries
in RS and FBiH. The IDP procurement, FM and safeguards missions could be undertaken as part
of the periodic fiduciary support done concurrently across operations of all Bank sectors in BiH
(the PS, FMS and Environmental Specialist are based in the country unit). An exception to the
51
latter would be the project-launch workshop, MTR and ICR missions, where it is likely that the
entire task team participates concurrently. Procurement prior reviews will be ongoing whereas
post reviews will be annual.
6. The Bank team will assist the PIUs in drafting the TOR of the M&E consultants, and the
PIUs will use the project MIS to track progress in project implementation. As for safeguards, the
Client will closely follow implementation of the EMF through the following:
i. Ensure that the SP-specific EMPs have been prepared on time and disclosed with
public consultations for all new locations, in line with the EMF or using the Checklist
EMP instead.
ii. All EMPs will be included in respective bidding documents both for construction and
supervision. Contracts for construction and supervision will include provisions binding
the hired party to implement the EMP measures and/or to supervise them, with
adequate reporting submitted to the Client and therefore to the World Bank. iii. World Bank environmental specialist will conduct regular implementation support and
supervision of EMF implementation providing comments and inputs directly to the Client,
including site visits and on-the-spot checks with both the contractor and supervisor during
ongoing works.
I. What would be the main focus in terms of support during project implementation
Time Focus Skills Needed Resource
Estimate
Partner
Role
First
twelve
months
Start of implementation:
Implementation support to
4 pilot schemes
Preparation for the phase
2 (4-5 additional schemes)
M&E establishment
Project management
Operational skills
Irrigation skills
Rural development
skills
FM
Procurement
Environmental and
social safe guards
M&E
$120,000/year NA
12-48
months
Implementation of second and third
phase irrigation schemes:
Implementation support to
9 schemes
M&E
Project management
Operational skills
Irrigation skills
Rural development
skills
FM
Procurement
Environmental and
social safe guards
M&E
$100,000/year NA
Other Design TA
Institutional strengthening
(WUAs, O&M, fees
determination etc.)
Expert in irrigation
design
Expert in institutional
(WUAs O&M, and
tariffs)
$30,000 NA
52
II. Skills Mix Required:
Skills Needed Number of
Staff Weeks
Number of Trips Comments
TTL and Irrigation
Specialist
8/year 2 HQ staff
Rural Development
Specialist
3/year 2 HQ staff
Operational Specialist 8/year Local trips Local staff
Procurement specialist 4/year Local trips Local staff
FM Specialist 3/year Local trips Local staff
Environmental Specialist 3/year Local trips Local staff
Social Development
specialist
3/year 1 HQ staff
53
Annex 6: Team Composition
World Bank staff and consultants who worked on the project
Name Title Unit
Guy J. Alaerts Lead Water Resources Specialist, Task
Team Leader
Ahmed Shawky Sr. Water Resources Specialist, Co-TTL Daniel Gerber Rural Development Specialist David Meerbach Water Resources Specialist (Institutions) Mirjana Karahasanovic Operations Officer Kunduz Masylkanova Project Economist (FAO-CP) Juan Morreli Project Economist (FAO-CP)
Luis Samoilov Irrigation Designed (FAO-CP) Esma Kreso Environmental Specialist Naima Hasci Sr. Social Specialist Bekim Ymeri Social Scientist Nikola Kerleta Procurement Analyst Iwona Warzecha Senior Financial Management Specialist Anneliese Viorela Voinea Financial Management Specialist Lamija Marijanovic Financial Management Specialist Jose Janeiro Finance Officer Sara Gonzalez-Flavell Sr. Legal Counsel Jesna Mestnik Senior Disbursement Officer Samra Bajramovic Program Assistant Coral Bird Temporary Adam Shayne Lead Counsel
54
Annex 7: Economic and Financial Analysis
Background
1. The economic and financial analysis is prepared on the Gorazde (FBiH) and Novo Selo
(RS) Sub-Projects (SP), being two representative SPs in IDP and two of the four priority SPs. The
Component 1 will finance implementation of irrigation and drainage (I&D) infrastructure
rehabilitation of about 12 SPs, of which 6 each located in RS and FBiH. The SPs are selected
from potential SPs identified and prepared by the two Entities‘ line Ministries, and are all located
in existing agricultural land that in the past has been supplied with irrigation. The main activities
include rehabilitating irrigation and drainage infrastructure, including construction, reconstruction,
upgrading, and modernization; and introduction of new technologies in irrigated agriculture. The
prioritization of SPs is to be based on a set of criteria, including economic and financial feasibility,
environmental and institutional sustainability, clarity of land tenure, and readiness for
implementation. Four priority SPs selected to be financed in the first year, for which designs have
been prepared to a level that is ready for tendering. A second-phase list of potential SPs (8 - 9
SPs) that could be supported are pre-identified, but the final list will be finalized during
implementation.
2. The Component 2 will assist the Entities with the good practices in irrigation-scheme
design, Irrigation Advisory Services (IAS), Participatory Irrigation Management (PIM), and
preparing a regulatory framework for I&D in both Entities in harmony with EU water directives.
Support will be provided to user groups, including existing agricultural cooperatives, or WUAs
based on hydrological boundaries that will be formed under the project. The PIM includes
establishing a transparent fee collection and irrigation payment reporting system that will provide
yearly reports to the annual assembly of each WUA. The introduction of new technologies that
promote water use efficiency (drip irrigation and low-pressure sprinklers) will be promoted, and
assistance will be given to farmers in their efforts to improve on-farm investments. The IAS will
assist farmers to access credit and/or subsidy programs. Both components are expected to induce
agricultural production development in the project areas. Beneficiaries would include primarily
commercial farmers and smallholders operating slightly above subsistence, but willing to move to
a more commercial operation if irrigation water could be made available, reducing risks from dry
summers.
3. An economic and financial analysis was prepared for two of the four subprojects to be
financed during the first phase: (i) the Gorazde SP, identified by the FBiH is probably the most
expensive project (in terms of investment per hectare) involving very small and scattered farmers
along the banks of the Drina river, south-west of Gorazde town19
, with a net irrigable area of about
150 ha; and (ii) the Novo Selo SP located in Beijeljina Municipality, which uses groundwater
from the Drina/Sava river basin and was one of the RS prioritized five subprojects selected for
IDP support.
19
The Gorazde SP area is located in the Municipality Foča-Ustikolina, Canton Bosansko-Podrinski.
55
The Gorazde Subproject
4. In the Gorazde SP investments will install six shared pumping stations, water reservoirs
and buried PVC pipes to water conveyance, and provide turnouts (hydrants) to groups of farmers.
Total gross benefited area would be about 200 to 300 ha where irrigation has been practised
individually through small-scale irrigation devices for many years. However, limited extent of
suitable land, lack of funds for investments, and the turmoil during the Bosnian war, has slowed
the development of agricultural production. The existing local cooperatives have developed good
access to the Sarajevo market for their members‘ good quality fruits. Many farmers also cultivate
vegetables in plastic greenhouses and can grow up to 3 crops a year accessing markets in the early
season when higher prices prevail. At present only 20 ha of the area is being irrigated and existing
systems are on individual basis. The area is about 70% cultivated – mostly rain fed - and yields are
well below its potential because of the water deficits. In the last 5 years near 200 greenhouses have
been installed (100 square meter each), as farmers began to realize the existing potential of the
area.
5. Water demand for the Gorazde scheme will be fully met from the Drina River, one of the
largest tributaries of the Sava River. Peak demand for irrigation (July – Sept) would only divert an
amount of water equivalent to less than 1% of the lowest recorded river flows. Farmers will be
further organised into WUAs for which some progress has already been made. Improved access to,
and a more reliable irrigation system, will allow farmers to increase their cropping intensity and
grow a wider choice of vegetables and fruit crops as microclimate offers comparative advantage in
the area. Average yields are expected to increase by about 50%, and for those farmers that have no
access to water, the increase could be 2 to 3 times their current levels. As farm sizes are small,
some land consolidation is expected, as well as the development of a leasing market for land.
6. The total capital cost for the development of the Gorazde SP has been estimated at BAM
3.0 million (BAM 20,000/ha; USD13,330/ha) and the area under irrigation would be increased
from 20 ha to 150 ha benefiting about 375 farmers with an average farm size of 0.4 ha. For this
financial and economic analysis, crops considered for the ―with‖ and ―without‖ project scenarios
are the same as those being today cultivated as they are well adapted to the area. They include
high value crops (potato, vegetables and fruits). This paves the way for the achievement of good
results from the proposed investments. As farmers start making higher returns with the shared
improved system, they will continue to invest in water saving technologies (sprinklers, drip
irrigation, etc.) that will enable them to cultivate a larger proportion of their land.
7. Crop models for the relevant crops were prepared showing both ―with‖ and ―without‖
scenarios, which differ on the expected yields and production costs as irrigation water is made
available and reliable, and as the IDP second component support the capacity of the participating
municipalities and cantons in addressing the modernization of irrigation practices, and the
development and strengthening of the WUA and cooperatives to support water management,
production and marketing. The resulting net income before and after labor costs, provides an
estimate of the incremental family benefit that would be attained with the relevant crops once the
project improvements are operational. The detailed Tables 1 to 11 in Appendix 1 (project files)
illustrate the 11 crops considered for the analysis. Table 1 below shows the main results using
2011 market farm gate prices. The “without project” columns show the current situation, and the
56
“with project” columns show the average expected results. Due to the expected increases in yields
from 6 to 67 percent, the net income per hectare would increase from 36 to 664 percent.
8. The expected improved average yields and returns shown in Table 1, together with some
further diversification from cereal and fodder crops towards a higher proportion of fruit and
vegetables, constitutes the basis for the estimation of the financial and economic benefits of the
proposed interventions aimed to improve productivity of farming activities which is the livelihood
basis of most rural families in the area.
Table 1. Average yield and income by crop due to project improvements in Gorazde
Crop/Activity yields (kg/ha) Income after labor costs (BAM/ha)
Crop/Activity Without
Project
With
project
Increase
%
Without
Project
With
Project
Increase
%
1. GRASS CLOVER
2. WHEAT
3. POTATO
4. MAIZE
5. GREEN PEPPER (FIELD)
6. TOMATO (FIELD)
7. GREEN PEPPER (GREENHOUSE)
8. TOMATO (GREENHOUSE)
9. APPLES (EXISTING)
10. RASPBERRIES
11. GRAPES (NEW ORCHARD)
5.5
3.2
18
4.5
10
11
10
11
22
6.7
-
8.0
4.5
25.5
7.5
15
15
15
15
32
7
16
45
41
42
67
50
36
50
36
45
6
-
305
36
2,100
220
1,410
2,200
3,010
3,880
4,820
2,980
-
1,200
275
5,100
300
4,225
3,600
8,260
7,130
11,340
6,240
8,040
293
664
142
36
200
64
174
83
135
109
-
Note: Yield increases are estimates based on a development period of three years after project implementation: i.e. an
increase of 45 percent would imply an annual yield growth of about 15 percent for each of the three years after project
works completion.
9. Farm models combining typical cropping patterns for the Gorazde area were prepared for
representing the existing rural household systems, and for assessing the financial impact of the
project. Production levels before and after the development of the irrigation structures, result in
increases in gross income and in costs of production. Models also incorporate family income from
pensions or off-farm employment to estimate the expected impact on total household net income
(see detailed farm budgets in Project Files, Tables 12 to 14). The following Table 2 summarizes
the expected results on typical beneficiaries in the SP area.
Table 2. Farm models: estimated income increases (in BAM/farm)
Typical farm models in
Targeted areas
Farmers net income
Income
increase
Income
increase
in %
Without
project
With
project
Small farm cultivating field crops
Small farm with potatoes, fodder and greenhouse
Small farm with fruits and vegetables
2,282
6,003
3,853
5,345
11,710
5,964
3,063
5,707
2,111
134
95
55
10. The Table shows that the project improvements would allow for increases in household
income by about 55 to 134 percent, depending on the farm size and cropping patterns. Household
models confirm the financial feasibility of the project interventions and the significant impact that
irrigation development could induce on the beneficiaries’ income.
57
ECONOMIC ANALYSIS AND SENSITIVITY ANALYSIS
11. For the economic analysis it was assumed that the cropped area would increase from 120
to 140 ha, and the area under irrigation would be increased from 20 to 140 ha, taking over
previously rain fed areas. Investments are also expected to induce some additional diversification
from traditional field crops like wheat and fodder towards fruits and vegetables. A conservative
diversification rate was assumed given that not many farmers are in financial or capacity
conditions to invest in new orchards. The following Table 3 show the modest cropping pattern
changes assumed for this assessment.
12. Table 4 shows the aggregate economic budget for the Gorazde subproject area. The overall
economic rate of return (ERR) was estimated at 16.3 percent, and the Net Present Value amounts
to BAM 685,000 (US$ 456,667) using a discount rate of 12 percent. The analysis considered costs
and benefits from the country‘s perspective. Costs and benefits were valued at market prices since
there are very few significant market distortions in agricultural prices in BiH. A shadow pricing
conversion factor was used only for the project investments (0.83) which accounts for an average
17 percent of taxes included on all investments.
Gorazde Cropping Pattern Table 3
Without Project With Project Diversification Rate
ha % ha %
Field Crops 50 42% 30 21% 60%
Fodder 20 17% 10 7%
Wheat 15 13% 10 7%
Maize 15 13% 10 7%
Field Roots and Vegetables 60 50% 90 64% 150%
Potatoes 20 17% 30 21%
Tomato 20 17% 30 21%
Green Pepper 20 17% 30 21%
Greenhouse Vegetables 4 3% 8 6% 200%
Tomato 2 2% 4 3%
Green Pepper 2 2% 4 3%
Fruits / Orchards 6 5% 12 9% 200%
Rasberries 1 1% 2 1%
Apples and other orchards 5 4% 10 7%
TOTAL 120 140 117%
Of which under irrigation 20 140 700%
58
13. As can be seen in Table 3 the IDP off-farm investments would reach BAM 3 million. On-
farm investments to be done by beneficiaries were estimated at about BAM 300,000. The annual
value of production in the area is expected to be doubled from about BAM 812,000 to BAM 1,75
million. A sensitivity analysis to adverse factors: (i) higher investment costs, and (ii) reduction in
the level of crop diversification was performed, and showed the following results:
If all investment costs would be 20 percent over the estimated BAM 3.3 million
(including the BAM 3 million financed by the project) the ERR could be reduced to
13.4 percent.
If crop diversification would be reduced to 50% of the assumed level, the ERR would
be reduced to 12.5 percent.
If both adverse events would occur simultaneously, the ERR would drop to 9.8 percent.
14. Based on the economic, financial and sensitivity analysis results presented for the Gorazde
SP, which is the most expensive of those to be financed under the IDP, it can be concluded that the
planned IDP investments have a high probability of inducing in a significant development impact.
The Novo Selo Subproject
15. This scheme is located in the Municipality of Bijeljina in mainly a plain and fertile area,
with an average altitude of 90 meters and occupying the end part of the northeastern part of BiH.
Gross area is 693.30 ha, while net irrigation area is 622 ha. Although the irrigation system is still
in function, investments are required to overcome the damages resulting from years of war and
lack of adequate maintenance. The land planned for the irrigation system reconstruction is State
owned, and is currently managed by the Farm ‗Semberija‘ with a granted fifteen-year land lease
contract.
Gorazde Subproject Subproject Model Table 4ECONOMIC BUDGET (AGGREGATED)
(In BKM '000) Without Project With Project
1 3 to 20 1 2 3 4 5 6 9 to 20
Main Production
Fruits 80.8 88.7 80.8 84.8 91.8 112.3 145.3 168.9 267.5
Potatoes 147.0 176.4 147.0 161.7 177.6 246.2 333.8 366.5 374.9
Vegetables 419.8 464.0 419.8 441.9 491.4 695.9 931.2 1,009.9 1,032.0
Crops 75.5 83.1 75.5 79.3 91.5 87.8 72.2 74.4 74.4
Sub-total Main Production 723.1 812.1 723.1 767.6 852.3 1,142.2 1,482.4 1,619.6 1,748.7
Production Cost
Investments
Rehabilitation/improvement Investments - - 50.0 1,266.1 448.8 249.1 - - -
Institutional Strengthening and TA - - 8.5 234.3 76.3 42.3 - - -
Project Management - - 3.5 93.0 31.4 17.4 - - -
On Farm Investments - - - 29.9 96.3 81.3 16.6 6.6 -
Sub-total Investment Costs - - 62.0 1,623.2 661.0 408.4 53.1 13.6 -
Operating Costs 444.1 485.8 444.1 464.9 500.6 616.6 731.3 746.4 775.9
OUTFLOWS 444.1 485.8 506.0 2,088.1 1,161.7 1,025.1 784.4 759.9 775.9
Cash Flow 279.1 326.4 217.1 -1,320.5 -309.3 117.2 698.0 859.7 972.8
_________________________________
IRR = 16.3%, NPV = 684.81
59
16. Agricultural production on the region is orientated towards pastures and crop production to
satisfy the local industry demands. Although various crops are cultivated, their range and yields
are limited due to water stress and poor irrigation. The major crop yields are much lower than
those that could be achieved with adequate supplementary irrigation. Fodder is the main crop
(20%), while grains production occupies most of the rest of the subproject area (wheat, barley,
corn, soybean and sunflower). Corn for fodder is also grown. Regarding vegetables production,
peas and beans for processing are common. The company management has come to agreements in
the recent past with the representatives of ―Sava Semberija‖, a processor from Bijeljina for peas
and beans supply, which can lead to production diversification and growth of the Sub-project
location.
17. Irrigation systems in Novo Selo scheme are supplied with groundwater and a relatively
simple system with large lateral irrigation machines supplied with water from shallow drills using
groundwater from 18 drilled wells, 315 mm in diameter and 6 to 8 m in depth. The distance
between wells varies from 100 to 200 m. Water is pumped from the drills by means of small diesel
pumps, connected to the irrigation machines using flexible polyethylene pipes, 150 mm in
diameter and 100 m in length. Irrigation machines are run by a power generator connected to the
machine. Once the machine reaches the limit of the flexible pipe from one well, the overall system
of portable pumps and pipelines must be moved to the new well, which requires substantial time
and reduces the efficiency of the irrigation machines.
18. In order to cover the overall territory with irrigation, 13 linear irrigation machines are been
used, but only six of them are currently in function. The overall area is currently irrigated, but it is
far from an optimum level, adversely affecting yields. Linear irrigation system operates at a
relatively low pressure (~2.0 kg/m2) and a seven‐ day rotation is applied in the time of the highest
irrigation demands. It is currently estimated that less than 50% of the scheme land is being
provided with less than adequate irrigation. Major problem refers to the insufficient number of
irrigation machines, as well as the costs and time needed to supply the machinery with water.
19. Based on the Irrigation System Revitalization and Modernization Project for Novo Selo, in
October 2011 the Municipality of Bijeljina prepared with the Water Management Institute ―Zavod
za vodoprivredu‖ Bijeljina, the water quantities requirements for irrigation based on the adopted
irrigation norm of 30 mm with 9-day turns for the net irrigation area of 622 ha. Considering 15%
losses on transport and distribution of water in the system and a working time of 16 hours per day,
the total water required for the irrigation system is 422.4 liters/second. The proposed IDP would
reconstruct the irrigation system, and the surface drainage system to ensure sufficient water
quantities, especially for irrigation during summer months, and adequate drainage. Access to
water, water supply reliability and irrigation efficiency would be improved within the frame of this
SP to stimulate commercial agriculture in the area.
20. The construction, reconstruction, upgrading, and modernization activities will include:
(i) Construction of an underground stationary system instead of the mobile distribution
system, subject to movements during irrigation, using HDPE pipes, diameter
110/102, 150/148, 225/208,6, 315/292,2, and 355/329,2, in the length of 18.220 km,
with hydrants for each machine to facilitate irrigation and effective use of machinery,
(ii) Construction of pumping stations and water intakes on wells,
(iii) Installation of two prefabricated tower substations TS 150 kVA and TS 250 kVA,
60
(iv) Rehabilitation and repair of existing linear irrigation machinery,
(v) Procurement of new linear irrigation machinery, to replace vandalized and destroyed
machines,
(vi) Surface drainage system cleaning,
(vii) Revitalization of the gravel road network, or extension of existing and construction
of new roads, as well as asphalting of roads on the pipeline route.
21. As in the case of the Gorazde SP, crop models representing the current and proposed
situations show the yields, gross and net revenues of the crops being cultivated and of those that
would be planted as irrigation is rehabilitated to the planned level. A major change in cropping
pattern is scheduled, switching from low profit field crops into higher value vegetables. The only
current crops that would continue to be cultivated are wheat, barley and maize for grain, while
soybeans, rapeseed and alfalfa (grass clover) will be substituted by maize for production of seed,
maize for silage, peas, carrot, potatoes, and green beans; based on contractual arrangements with a
major vegetable processor in the area.
22. Table 5 summarizes the budget results presented in the detailed Tables in Project Files.
Table 5. Average yield and income by crop due to project improvements in Novo Selo
Crop/Activity yields (kg/ha) Income after labor costs (BAM/ha)
Crop/Activity Without
Project
With
project
Increase
%
Without
Project
With
Project
Increase
%
1. GRASS CLOVER
2. WHEAT
3. BARLEY
4. MAIZE GRAIN
5. SOYBEANS
6. RAPESEEDS
7. MAIZE SEED
8. PEAS
9. CARROTS
10. POTATO
11. GREEN BEANS
12. MAIZ SILAGE
6
4.8
5
5.7
2.7
2.8
-
-
-
-
-
-
-
6
5.5
10
-
-
3
6
30
40
7
45
-
25
10
75
-
-
-
-
-
-
-
-
1,355
794
52
220
551
557
-
-
-
-
-
-
-
976
484
1,496
-
-
3,196
2,153
2,686
3,606
2,178
486
-
23
831
580
-
-
-
-
-
-
-
-
Note: Yield increases are estimates based on a development period of three years after project implementation: i.e. an
increase of 75 percent would imply an annual yield growth of about 25 percent for each of the three years after project
works completion.
23. Improved average yields and increased returns due to crop diversification are shown in
Table 5, constituting the basis for the estimation of the financial and economic benefits of the
proposed interventions. Table 6 show the current cropping pattern (without project) including the
substitution of rapeseed for maize for seeds planned even under the present state of the facilities;
and the cropping pattern after the investment of BAM 7.3 million (BAM 11.736 or US$7,824 per
ha), which would allow switching 50 percent of the area to vegetables, as well as the increased
cropping intensity from 100 to 132 percent. The proposed investment includes BAM 5.3 million
(83 percent) for the rehabilitation of the irrigation system financed by IDP and BAM 2 million (27
percent) for renovation of the irrigation machinery to be financed by the benefited company.
61
24. Table 7 show that even if the Novo Sela company would have to repay back all IDP
investment in 7 years (with 2 year grace period and 8 percent interest rate), the Financial Rate of
Return (FRR) would be 19.7 percent, and the NPV 1.7 million (12 percent discount rate). This
positive result derives from the possibility to switch to more valuable crops as water is made
available and reliable, and in the required quantities; and to the cropping increased intensity of
production. The annual gross value of production is expected to increase from BAM 1.23 million
to BAM 3.27 million (166 percent), while the company‘s annual net benefits would jump from
BAM 64,000 to BAM 1.3 million.
Novo Selo - Bijeljina Production Plan FM Table 6CROPPING PATTERNS/ACTIVITY LEVELS
(In Hectares) Without Project With Project
Unit 1 2 3 to 20 1 2 3 4 to 20
Cropping Intensity Percent 100. 100 100 100 109 119 132
Cropping Pattern
Existing Technology
Wheat ha 155 155 155 155 30 10 -
Barley ha 97 97 97 97 - - -
Maize Grain ha 191 191 191 191 101 51 -
Soyabeans ha 50 50 50 50 30 10 -
Maize Seed ha - 22 57 - - - -
Grass Clover ha 72 72 72 72 37 - -
Rapeseed ha 57 35 - 57 22 - -
Sub-total Existing Technology 622 622 622 622 220 71 -
New Technology
Wheat ha - - - - 105 105 105
Barley ha - - - - 97 97 97
Maize Grain ha - - - - 50 50 50
Peas ha - - - - 48 98 149
Carrots ha - - - - 20 40 50
Potatoes ha - - - - 20 40 50
Green Beans ha - - - - 50 110 150
Maize Seed ha - - - - 35 72 72
Maize Silage ha - - - - 30 60 100
Sub-total New Technology - - - - 455 672 823
Total Cropped Area 622 622 622 622 675 743 823
62
ECONOMIC ANALYSIS AND SENSITIVITY ANALYSIS
25. Table 8 shows the aggregate economic budget for the Novo Selo SP area. The overall
economic rate of return (ERR) was estimated at 18.1 percent, and the Net Present Value amounts
to BAM 2,12 million (US$ 1.4 million) using a discount rate of 12 percent. The analysis
considered all costs (including the company‘s self financed BAM 2 million for renovation of the
linear irrigation machinery) and expected benefits from the country‘s perspective. Costs and
benefits were valued at market prices since there are very few significant market distortions in
agricultural prices in BiH. As with Gorazde scheme, a shadow pricing conversion factor was used
only for the project investments (0.83). A conservative diversification and intensification rate was
used based on existing arrangements with vegetable processors from the scheme area.
NOVO SELO FINANCIAL BUDGET Table 7(In BKM '000) Without Project With Project
1 4 to 20 1 2 3 4 5 to 6 7 8 to 20
Main Production
Potato NS - - - 138 322 460 460 460 460
Vegetables - - - 432 1,061 1,691 1,691 1,691 1,691
Crops 938 1,228 938 972 1,087 1,118 1,118 1,118 1,118
Sub-total Main Production 938 1,228 938 1,542 2,469 3,269 3,269 3,269 3,269
Production Cost
Investment
Rehabilitation/improvement Investments - - 925 3,731 - - - - -
Institutional Strengthening and TA - - 92 373 - - - - -
Project Management - - 31 123 - - - - -
On Farm Investments - - 1,500 500 - - - - -
Sub-total Investment Costs - - 2,548 4,727 - - - - -
Operating
Purchased Inputs
Seeds/Seedlings 90 119 90 251 435 568 568 568 568
Fertilizers 177 203 177 241 328 401 401 401 401
Agrochemicals 44 53 44 57 77 88 88 88 88
Irrigation Costs 194 226 194 277 265 168 168 168 168
Process Inputs 199 199 199 242 318 395 395 395 395
Fixed Costs 350 250 350 200 100 100 100 100 100
Sub-Total Purchased Inputs 1,053 1,049 1,053 1,268 1,522 1,721 1,721 1,721 1,721
Hired Labor
Labor 77 86 77 100 140 183 183 183 183
Sub-total Operating Costs 1,130 1,135 1,130 1,368 1,662 1,904 1,904 1,904 1,904
Sub-Total Production Cost 1,130 1,135 3,678 6,095 1,662 1,904 1,904 1,904 1,904
OUTFLOWS 1,130 1,135 3,678 6,095 1,662 1,904 1,904 1,904 1,904
Cash Flow Before Financing -193 93 -2,740 -4,553 807 1,365 1,365 1,365 1,365
Net Financing -28 -28 2,759 3,869 -1,369 -1,378 -1,505 -1,505 -48
Cash Flow After Financing -221 64 18 -684 -562 -13 -140 -140 1,317
Sub-Total Change in Net Worth - - -962 - - - - - -
Farm Family Benefits After Financing -221 64 -944 -684 -562 -13 -140 -140 1,317
_________________________________
IRR = 19.7%, NPV = 1,718.56
63
26. A sensitivity analysis to adverse factors: (i) higher investment costs, and (ii) a reduction in
the level of crop diversification in the area was done, showing the following results:
If all investment costs would be 20 percent over the estimated BAM 7.3 million the
ERR could be reduced from 18.1 percent to 14.7 percent.
If crop diversification would be reduced to 50% of the assumed level, the ERR would
be reduced to 12.1 percent.
If both adverse events would occur simultaneously, the ERR would drop to 9.3 percent.
27. Based on the economic, financial and sensitivity analysis results presented for the Novo
Selo SP, it can be concluded that the planned RS‘s selected IDP investment has a high probability
of success, even without quantifying the development impact that its improvement could have in
the region where more than fifteen thousand small farmers, with an average size of 3.3 ha, are
farming in excellent soils (class II and I), and where there are also abundant water resources
available without being utilized.
Novo Selo Subproject Subproject Model Table 8
ECONOMIC BUDGET (AGGREGATED)
(In BKM '000) Without Project With Project
1 2 3 to 20 1 2 3 4 to 20
Main Production
Potato NS - - - - 138 322 460
Vegetables - - - - 432 1,061 1,691
Crops 938 1,065 1,228 938 972 1,087 1,118
Sub-total Main Production 938 1,065 1,228 938 1,542 2,469 3,269
Production Cost
Investment
Rehabilitation/improvement Investments - - - 768 3,096 - -
Institutional Strengthening and TA - - - 77 310 - -
Project Management - - - 25 102 - -
On Farm Investments - - - 1,500 500 - -
Sub-total Investment Costs - - - 2,115 3,923 - -
Operating
Purchased Inputs
Seeds/Seedlings 90 101 119 90 251 435 568
Fertilizers 177 188 203 177 241 328 401
Agrochemicals 44 48 53 44 57 77 88
Irrigation Costs 194 206 226 194 277 265 168
Process Inputs 199 200 199 199 242 318 395
Fixed Costs 350 300 250 350 200 100 100
Sub-Total Purchased Inputs 1,053 1,043 1,049 1,053 1,268 1,522 1,721
Labor
Labor 77 81 86 77 100 140 183
Sub-total Operating Costs 1,130 1,124 1,135 1,130 1,368 1,662 1,904
Sub-Total Production Cost 1,130 1,124 1,135 3,245 5,291 1,662 1,904
OUTFLOWS 1,130 1,124 1,135 3,245 5,291 1,662 1,904
Cash Flow -193 -58 93 -2,307 -3,749 807 1,365
_________________________________
IRR = 18.1%, NPV = 2,124.92
64
Annex 8: Social Development and Sustainability
1. The project expected outputs and outcomes anticipate increased inclusion and active
participation of small and vulnerable farmers in the benefits of the improved irrigation schemes.
Overall the expansion of commercial agriculture and the restructuring of semi-subsistence farmers
geared to improve the economic viability of the agricultural holdings will create on and off-farm
employment, help consolidate rural communities, and encourage investment in supporting
infrastructure and services. The proposed pilot schemes cover a very broad set of beneficiaries
reaching from subsistence farms to agribusiness. The investments in phase 2 and 3 will reflect
similar social characteristics described in the pilot areas below.
2. The area around Gorazde was heavily fought over during the war, which had led to the
flight of much of the population. For a number of years the area benefited from substantial
assistance from NGO and donor support to returning refugees. This aid has been waning over the
past few years and local residents are now increasingly looking at means to earn an income from
local activities. Agriculture is thought to have significant potential and marketing of local produce
benefits form an excellent reputation in the Sarajevo markets. Unlike in many other areas of BiH
the rural residents of Gorazde are relatively young and willing to invest in their land to take
advantage of the production and income opportunities provided by agriculture. The area used to
be under the management of a Kombinat and has a history of agricultural production, but the
system completely collapsed after the war and the community sees the rehabilitation of the
irrigation system as a means to revive the area and provide employment.
3. In Mostarsko Blato, the irrigation systems were built at the time of the Austro Hungarian
Empire and were later part of the irrigation system of a large agrokombinat that managed the
system. With the collapse of the kombinat, the open canal system has fallen into disrepair with
little dedicated resources for operation and maintenance. It is expected that the rehabilitation fo
the canals and improvement of water supply to the tail end in particular with help local farmers
with their production. Irrigation has never really stopped, as the area is one of the most productive
agricultural areas in the country with substantial greenhouse production and know how for
horticultural production. The relative proximity of the wholesale market in Caplijna offers an
opportunity for marketing of the produce in addition to supply the city of Mostar and its
surroundings. A key challenge will be to have farmers gain trust and organize themselves into
functional user groups in order to efficiently manage the distribution of water and forming of
WUAs.
4. In Pelagicevo and Novo Selo the systems both belong to companies that have emerged
from the privatization of the former agrokombinat that used to exist in the area. These companies
still provide substantial employment in their respective community and play a major economic
role in their respective areas. The companies fit into a strategy that aims at reviving the
agricultural sector in the region including rebuilding some of the former processing capacity that
used to be operated by the kombinats. Some of the new processors that have emerged in the area
can fruit and vegetables, process sugar beets, and market their produce across border. The
majority of them heavily invested in modernizing their production and have HACCP certification.
These companies have strong support by the local communities as they provide substantial
benefits to the other farmers in the region including machine services to smaller farmers,
65
marketing outlets for small farm production, provision of inputs such as seeds and fertilizer as
well as pest management services and advisory support. Contract farming with small farmers
buying young claves for finishing of fattening is also a common activity. The investments would
provide benefits well beyond the direct impact of companies since these contract agreements for
crops and livestock production could be substantially expanded.
5. With regard to social sustainability/safeguards issues the project activities do not anticipate
any significant negative impacts and particularly no resettlement. Provisionally the Bank policy
OP4.12 on Involuntary Resettlement has been triggered. In case land acquisition is envisaged for
any specific SP, the project has established a Resettlement Policy Framework (RPF) as part of the
ESMF, on the basis of which, for this SP, a Land Acquisition Plan will be developed, reviewed,
cleared and disclosed publically prior to the commencement of any physical works. On social
risks that go beyond safeguards, the project will promote establishing participatory WUAs, with
the aim of ensuring a more equitable access and use of the improved irrigation systems,
particularly in relation to the needs of smaller farmers.
6. Strengthening Participation of Women: The project will encourage the participation of
women through the social mobilization activities under the PIM (Component 2). It will dedicate
separate sessions for women, aiming at increasing their roles throughout the subproject cycle
(including WUA administration and decision-making). Women‘s involvement in the project will
be monitored as a supplementary indicator of the PDO Core Indicator on Direct Beneficiaries, and
also in terms of female membership in the WUA.
AL 420AL 420ODZAK SAMACODZAK SAMAC
PUSTARAPUSTARA
ZIVINICE AZIVINICE A
ZIVINICE BZIVINICE B
ZLATAC-ZLATAC-SOPILJASOPILJA
VISICKAVISICKAKASETAKASETA
POPOVOPOPOVOPOLJEPOLJE
MOKROMOKROPOLJEPOLJE
GOJKOVO POLJEGOJKOVO POLJE
PILAGICEVOPILAGICEVO
NOVONOVOSELOSELO
MOSTARSKOMOSTARSKOPOLJEPOLJE
GORAZDEGORAZDE ˇ ˇ
AL 420ODZAK SAMAC
PUSTARA
ZIVINICE A
ZIVINICE B
ZLATAC-SOPILJA
VISICKAKASETA
POPOVOPOLJE
MOKROPOLJE
GOJKOVO POLJE
PILAGICEVO
NOVOSELO
MOSTARSKOPOLJE
GORAZDE ˇ
GracanicaGracanica ˇ
PrijedorPrijedor
Sanski MostSanski Most
BihacBihac ´
TesliTeslicc ´TuzlTuzlaa
BijeljinaBijeljina
SrebrenicaSrebrenica
TravniTravnikkZenicaZenica
MostarMostar
Bosanska GradiskaBosanska Gradiska(Srp. Gradiska)(Srp. Gradiska) ˇ
ˇ Bosanski BrodBosanski Brod(Srp.Brod)(Srp.Brod)
FocaFoca(Srbinje)(Srbinje)
ˇ
BrckoBrcko ˇ ˇ
DeDerventrventaa
BanjaBanjaLukaLuka
KljucKljuc
BosanskaBosanskaKrupaKrupa
CazinCazin
BosanskiBosanskiPetrovacPetrovac
DDrvarvarr
Kotor Kotor VaroVaross ˇ ˇ
MaglajMaglaj
VlasenicaVlasenicaKladanjKladanj
LivnoLivno
JablanicaJablanica
BugojnoBugojno
JajceJajce
VareVaress ˇ ˇ
VisokVisokoo
StolacStolac
BilecaBileca ´
TrebinjTrebinjee
GackoGacko
KonjicKonjic
PalePaleVisegraVisegradd
Bosanska NoviBosanska Novi(Novi Grad)(Novi Grad)
SARAJEVOSARAJEVO
REPUBLIKA SRPSKAREPUBLIKA SRPSKA
REPUBLIKAREPUBLIKASRPSKASRPSKA
DDii
nnaa
rrii
cc
AAll
ppss
Vlasic Mts. Vlasic Mts.
ˆ
´
FEDERATION OFFEDERATION OFBOSNIA ANDBOSNIA AND
HERZEGOVINAHERZEGOVINA
Gracanica ˇ
Prijedor
Sanski Most
Bihac ´
Teslic ´Tuzla
Bijeljina
Srebrenica
TravnikZenica
Mostar
Bosanska Gradiska(Srp. Gradiska) ˇ
ˇ Bosanski Brod(Srp.Brod)
Foca(Srbinje)
ˇ
Brcko ˇ
Derventa
BanjaLuka
Kljuc
BosanskaKrupa
Cazin
BosanskiPetrovac
Drvar
Kotor Varos ˇ
Maglaj
VlasenicaKladanj
Livno
Jablanica
Bugojno
Jajce
Vares ˇ
Visoko
Stolac
Bileca ´
Trebinje
Gacko
Konjic
PaleVisegrad
Bosanska Novi(Novi Grad)
SARAJEVO
REPUBLIKA SRPSKA
REPUBLIKASRPSKAFEDERATION OF
BOSNIA ANDHERZEGOVINA
MONTENEGRO
SERBIA
CROATIA
ALBANIA
CROATIA
Di
na
ri
c
Al
ps
Vlasic Mts.
ˆ
´
Una Sava
Sana
Una
Sava
Drin
a
Drina
Neretva
Tara
Lim
Vrbas
Spreca
Jablanicko jezero
ˆ
Bosna
Krivaja
Piva
Vbr
as
Bo
sna
Adriat ic Sea
To Karlovac
To Sveti Rok
To Medak
To Obrovac
To Zadar
To ZagrebTo Bjelovar To Osijek
To Belgrade
To Belgrade
To Valjevo
To Kraljevo
To Sjenica
To Podgorica
To Shkodër
16°E
45°N
44°N
43°N
45°N
44°N
43°N
17°E 18°E 19°E
16°E 17°E 18°E 19°E
Brcko DistrictBrcko DistrictˇBrcko Districtˇ
BOSNIA andHERZEGOVINA
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.
IBRD 39024
JANUARY 2012
0 10 20 30 40
0 10 20 30 Miles
50 Kilometers
BOSNIA AND HERZEGOVINA
IRRIGATION DEVELOPMENT PROJECT
TOWNS
NATIONAL CAPITAL
MAIN RIVERS
MAIN ROADS
INTER-ENTITY BOUNDARY LINES
INTERNATIONAL BOUNDARIES
PRIORITY SUBPROJECTS
SUBPROJECTS TO BE CONFIRMED
