Document of The World Bankdocuments.worldbank.org/curated/en/... · P107998 25-Nov-2008 23-Oct-2009 16-Jun-2013 28-Feb-2014 31-Oct-2017 ... 12 13-Jan-2015 Moderately Satisfactory

Document of

The World Bank FOR OFFICIAL USE ONLY

Report No: ICR00004181

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IBRD-76290; IDA-45400; TF-11456; TF-15881)

ON A LOAN

IN THE AMOUNT OF EURO 17.0 MILLION

(US$25.0 MILLION EQUIVALENT)

AND A CREDIT

IN THE AMOUNT OF SDR 9.6 MILLION


AND

EU INSTRUMENT FOR PRE-ACCESSION ASSISTANCE GRANTS



AND


(US 4.7 MILLION EQUIVALENT)

TO

BOSNIA AND HERZEGOVINA

FOR A

SECOND SOLID WASTE MANAGEMENT ( P107998 )

April 20, 2018

Social, Urban, Rural And Resilience Global Practice

Europe And Central Asia Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective {Nov 28, 2017})

Currency Unit = EURO

1 EUR = US$1.47 (at Appraisal)

1 EUR = US$1.18 (at Completion)

FISCAL YEAR

July 1, 2017- June 30, 2018

ABBREVIATIONS AND ACRONYMS

BH Bosnia and Herzegovina

CPS Country Partnership Strategy

DPA Dayton Peace Accord

EF Environmental Framework

EIA Environmental Impact Assessment

EMP Environmental Management Plan

ENPV Economic Net Present Value

ERR Economic Rate of Return

EU European Union

FBiH Federation of Bosnia and Herzegovina

FM Financial Management

FRR Financial Rate of Return

GDP Gross Domestic Product

IDA International Development Agency

ISR Implementation Status and Results

LFG Landfill Gas

LTP Leachate Treatment Plant

MTR Mid Term Review

NPV Net Present Value

PAD Project Appraisal Document

PDO Project Development Objective

PIT Project Implementation Team

PMU Project Management Unit

RS Republika Srpska

SIDA Swedish International Development Cooperation Agency

SWM Solid Waste Management

SWMP-1 First Solid Waste Management Project

SWMP-2 Second Solid Waste Management Project

TA Technical Assistance

TTL Task Team Leader

WAD Waste Allocation District

Regional Vice President: Cyril E Muller

Country Director: Linda Van Gelder

Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez

Practice Manager: David N. Sislen

Task Team Leader(s): Kremena M. Ionkova

ICR Main Contributor: Gary Claude Goliath

TABLE OF CONTENTS

DATA SHEET .......................................................................................................................... 1

I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 6

A. CONTEXT AT APPRAISAL .........................................................................................................6

B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) ..................................... 10

II. OUTCOME .................................................................................................................... 12

A. RELEVANCE OF PDOs ............................................................................................................ 12

B. ACHIEVEMENT OF PDOs (EFFICACY) ...................................................................................... 13

C. EFFICIENCY ........................................................................................................................... 20

D. JUSTIFICATION OF OVERALL OUTCOME RATING .................................................................... 22

E. OTHER OUTCOMES AND IMPACTS (IF ANY) ............................................................................ 22

III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 24

A. KEY FACTORS DURING PREPARATION ................................................................................... 24

B. KEY FACTORS DURING IMPLEMENTATION ............................................................................. 24

IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 26

A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................ 26

B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ..................................................... 26

C. BANK PERFORMANCE ........................................................................................................... 27

D. RISK TO DEVELOPMENT OUTCOME ....................................................................................... 28

V. LESSONS AND RECOMMENDATIONS ............................................................................. 29

ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 31

ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 42

ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 44

ANNEX 4. EFFICIENCY ANALYSIS ........................................................................................... 45

ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 63

ANNEX 6. SUPPORTING DOCUMENTS (IF ANY) ..................................................................... 69

The World Bank Second Solid Waste Management ( P107998 )

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DATA SHEET

BASIC INFORMATION

Product Information

Project ID Project Name

P107998 Second Solid Waste Management

Country Financing Instrument

Bosnia and Herzegovina Investment Project Financing

Original EA Category Revised EA Category

Partial Assessment (B) Partial Assessment (B)

Related Projects

Relationship Project Approval Product Line

Additional Financing P143973-Second Solid Waste Management Project - Additional Financing for EC IPA RETF

IBRD/IDA

Supplement P144111-Second Solid Waste Management Project Additional Financing - EC IPA

18-Dec-2012 Recipient Executed Activities

Organizations

Borrower Implementing Agency

Ministry of Finance and Treasury, Bosnia and

Herzegovina

Federation Bosnia and Herzegovina Ministry of

Environment and Tourism, Republica Srpska - Ministry

of Spatial Planning, Civil Engineering and Ecology


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Project Development Objective (PDO) Original PDO

The overall project development objective is to improve the availability, quality, environmental soundness, and financial viability of solid waste management services in participating utilities/regions. PDO as stated in the legal agreement

The objective of the Project is to improve the availability, quality, environmental soundness and financial viability of solid waste management services in participating utilities.

FINANCING

Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$)

World Bank Financing

P107998 IBRD-76290 25,000,000 11,953,869 10,184,285

P107998 IDA-45400 15,000,000 9,166,701 8,405,831

P107998 TF-11456 6,511,625 5,442,829 6,422,329

P107998 TF-15881 4,767,353 3,155,168 3,145,858

Total 51,278,978 29,718,567 28,158,303

Non-World Bank Financing

Borrower 3,500,000 0 0

Total 3,500,000 0 0

Total Project Cost 54,778,978 29,718,567 28,158,303

KEY DATES

Project Approval Effectiveness MTR Review Original Closing Actual Closing

P107998 25-Nov-2008 23-Oct-2009 16-Jun-2013 28-Feb-2014 31-Oct-2017

P144111 18-Dec-2012


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RESTRUCTURING AND/OR ADDITIONAL FINANCING

Date(s) Amount Disbursed (US$M) Key Revisions

04-Nov-2013 11.59 Change in Loan Closing Date(s)

23-Dec-2014 14.97 Change in Results Framework Change in Components and Cost Cancellation of Financing Change in Financing Plan Reallocation between Disbursement Categories

26-Feb-2016 17.00 Change in Loan Closing Date(s)

29-Jun-2016 17.77 Cancellation of Financing

19-Apr-2017 18.45 Reallocation between Disbursement Categories

KEY RATINGS

Outcome Bank Performance M&E Quality

Moderately Satisfactory Moderately Satisfactory Substantial

RATINGS OF PROJECT PERFORMANCE IN ISRs

No. Date ISR Archived DO Rating IP Rating Actual

Disbursements (US$M)

01 21-Jun-2009 Satisfactory Satisfactory 0

02 23-Dec-2009 Satisfactory Moderately Satisfactory .06

03 16-Mar-2010 Satisfactory Moderately Satisfactory .06

04 30-Jun-2010 Satisfactory Moderately Satisfactory 1.63

05 31-Oct-2010 Satisfactory Satisfactory 1.63

06 11-May-2011 Satisfactory Moderately Satisfactory 2.35

07 01-Jan-2012 Satisfactory Moderately Satisfactory 4.62

08 26-Aug-2012 Satisfactory Moderately Satisfactory 6.60

09 27-Dec-2012 Satisfactory Moderately Satisfactory 8.21

10 08-Dec-2013 Moderately Satisfactory Moderately Unsatisfactory 11.66

11 24-Jun-2014 Moderately Satisfactory Moderately Unsatisfactory 13.57


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12 13-Jan-2015 Moderately Satisfactory Moderately Unsatisfactory 15.04

13 16-Oct-2015 Moderately Satisfactory Moderately Unsatisfactory 16.56

14 14-Jun-2016 Moderately Satisfactory Moderately Unsatisfactory 17.57

15 11-Oct-2016 Moderately Satisfactory Moderately Satisfactory 17.86

16 17-Mar-2017 Moderately Satisfactory Moderately Satisfactory 18.50

17 07-Sep-2017 Moderately Satisfactory Moderately Satisfactory 18.76

18 01-Nov-2017 Moderately Satisfactory Moderately Satisfactory 18.81

SECTORS AND THEMES

Sectors

Major Sector/Sector (%)

Water, Sanitation and Waste Management 100

Waste Management 90

Public Administration - Water, Sanitation and Waste Management

10

Themes

Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Urban and Rural Development 100

Urban Development 100

Urban Infrastructure and Service Delivery 100

ADM STAFF

Role At Approval At ICR

Regional Vice President: Shigeo Katsu Cyril E Muller

Country Director: Jane Armitage Linda Van Gelder

Senior Global Practice Director: Wael Zakout Ede Jorge Ijjasz-Vasquez

Practice Manager: Wael Zakout David N. Sislen

Task Team Leader(s): Aniruddha Dasgupta Kremena M. Ionkova

ICR Contributing Author: Gary Claude Goliath


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*Please note: While the Financing Table above indicates that the ‘original amount’ for the project was $51.28 million, the recipient-executed trust funds (TF15881 and TF11456) were in fact approved as Additional Financing after the commencement of the project. TF 15881 became effective in May 2015 and TF 11456 became effective in September 2012.


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I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES

A. CONTEXT AT APPRAISAL

Context 1. Country Context. The decentralized institutional structure of Bosnia and Herzegovina (BH) dates to the 1995 Dayton Peace Accords (DPA) and assigns most power to the two entities: the Federation of Bosnia and Herzegovina (the Federation or FBiH) and Republika Srpska (RS), plus the special district of Brcko. FBiH is divided into ten cantons and 74 municipalities, while RS has direct relations between the entity government and the 64 municipalities.

2. In both entities, municipalities are the key providers of essential public services, including solid waste management.

3. Sector Context. Despite being a lower middle-income country, historic underinvestment resulted in BH having a solid waste management (SWM) system that was incapable of effectively disposing and treating the waste generated. Before the war, waste collection was organized at the local level, separation of waste and recycling was rudimentary, and urban waste was transported and dumped in local landfills with limited environmental controls.

4. Following the end of the Bosnian war (1992-1995), in the absence of sufficient infrastructure, significant quantities of waste were disposed of in wild dumps, roadsides, small village dumps, rivers, and quarries. Where municipalities did dispose of waste in “official” dump sites, these were typically open dumps rather than controlled or sanitary landfills. Runoff and leachate infiltration from these dump sites are hazards for groundwater aquifers especially in some areas of BH that provide the main source of water supply. The most serious problems caused by such dump sites included deterioration of groundwater quality, destruction of vegetative cover, and the proliferation of disease vectors like insects and rodents.

5. In 2000, a countrywide Solid Waste Management (SWM) Strategy, funded by the European Union (EU) was the first ‘think piece’ on solid waste after the war. For BH to have an environmentally sound SWM system, the EU recommended a wide range of technical, institutional and financial upgrading measures required for the subsequent 15-20 years. This strategy introduced the concept of regional landfilling as a foundation for a financially and environmentally sustainable SWM system in BH, and recommended the construction of 16 regional landfills in 16 waste allocation districts (WADs) across the country.

6. In 2002, the First Solid Waste Management Project (SWMP-1), supported by International Development Agency (IDA) funding of US$18 million, was launched to support the priority first phase (2002-2008) of the SWM strategy. The project financed the rehabilitation of existing disposal sites, established regional landfills, wild dump closures, collection infrastructure and support equipment and transfer stations. Successful project implementation led BH to seek additional IDA financing and in June 2005 the Bank approved an additional US$8 million credit to the country.

7. In 2003, BH was recognized as a potential EU candidate country by the European Council, providing an additional incentive for BH to improve its waste management system in line with the waste hierarchy principle that has been endorsed by the EU. Alongside partially adopting the EU acquis related to environment and waste management, BH embarked on a reform agenda to boost its institutional capacity and substantially embedded the BH SWM Strategy of 2000 into law. The Waste Management Law (FBiH amended 2009; and RS 2013) established the legislative framework and clarified the responsibilities of solid waste agencies within both entities and the cantonal and municipal authorities. The Law addressed (a) waste management priorities and principles; (b) waste management responsibilities of agencies;


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(c) roles of the waste producers, collectors, transporters, and disposers; (d) hazardous/clinical wastes; (e) trans-boundary movement of wastes; and (f) regulation, licensing, inspection, and sanctions.

8. At the time of project appraisal for the Second Solid Waste Management Project (SWMP-2) in 2008, BH had already made significant progress in improving its solid waste management system, extending SWM coverage and limiting wild dumping. However, it still had basic, but insufficient SWM infrastructure network, and the rapidly growing volume of solid waste was still outstripping municipal utilities’ ability to keep pace. The SWM sector in BH had low coverage in relation to peers at similar income levels – especially in rural and suburban areas; sector financing was inadequate for the country’s needs – tariffs and their collection are low and variable – with utilities not operating according to commercial principles; and SWM capacity was extremely low within the government.

9. The SWM sector in BH is primarily financed by the local government and its utilities, with some support from outside donors. BH’s central government does not provide any direct financial support to the local government for the sector.

10. Rationale for Bank Involvement. As the World Bank had played a catalytic role in the implementation of SWM in the country as a partner in SWMP-1 and was a source of knowledge in the sector, the government of BH approached the Bank for an additional project which would invest USD 40 million in six to eight more regional landfills. These investments were required to bring BH closer to achieving full sector coverage as per country’s SWM strategy, and in line with the Country Partnership Strategy (CPS) at the time. Given that approximately only 25% of BH’s households had access to the formal waste management system at the time of approval, BH needed a partner who could: (1) assist with funding and (2) could provide the necessary guidance and expertise to execute investments effectively

Theory of Change (Results Chain)

11. The higher-level objectives for the Project were to (a) improve public health and quality of life by reducing exposure to pollutants and disease vectors from solid waste; (b) improve municipal institutional capacity by establishing up-to-date technical and financial solutions for SWM; (c) enhance environmental policy by improving the scope and depth of SWM strategies and facilitating recycling and waste-reduction programs nationwide; and (d) improve local governance by enhancing cooperation among municipalities.

12. The project’s development objective (PDO), formulated from the above-mentioned country objectives, was to “improve the availability, quality, environmental soundness and financial viability of solid waste management services in participating utilities”. These utilities, comprised of multiple municipalities in a geographic region, are public companies who are charged with managing SWM.

13. The Results Chain below depicts the links between the project’s activities, outputs and outcomes.


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14. Project Assumptions. For the project activities to successfully link to results, the project design made three critical assumptions:

• The design assumed that the inclusion of the RS PMU, in addition to one at FBiH, would create sufficient administrative and implementation capacity to co-ordinate, plan, build and operate new sanitary landfills.

• The design assumed that most participating municipalities and utilities could afford to take on additional debt and service the repayments. As noted previously, the central government does not provide direct financial support to the SWM sector, and individual utilities need to have sufficient financing capacity to finance improvements.

• There would be willingness from municipalities to participate in regional landfilling initiatives.

Project Development Objectives (PDOs)

15. The project development objective was to “improve the availability, quality, environmental soundness and financial viability of solid waste management services in Participating Utilities”1.

No revisions to the PDO were made throughout the project.

Key Expected Outcomes and Outcome Indicators

16. Project Outcomes. Four clear outcomes are contained in the PDO. The project should, for the Project participating utilities, to: (a) improve the availability of SWM services; (b) improve the quality of SWM services; (c) improve the environmental soundness of SWM services; and (d) improve the financial viability of the SWM services.

The PAD defined four key PDO indicators related to each of these four outcomes. The table below shows how the PDO linked each of the expected outcomes to a corresponding PDO indicator.

Expected Outcome PDO Indicator

(a) Improve the availability of SWM services

Increased percentage of households in targeted area served by the formal waste management system; and increased number of people in urban areas have access to regular solid waste collection services

(b) Improve the quality of SWM services Improved disposal management system as evidenced by number of wild dumps closed.

(c) Improve the environmental soundness of SWM services

Improved ground water quality at disposal sites as evidenced by leachate quality.

(d) Improve the financial viability of SWM services provided

Increased cost recovery rate of participating utilities.

1 The Project Appraisal Document defines the PDO as “improve the availability, quality, environmental soundness and financial viability of solid waste management services in participating utilities/regions”. The legal document does not highlight regions, only utilities. For the project, these terms are treated as interchangeable because the utilities are made up of multiple municipalities (i.e. regions).


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Components

17. The project was divided into two parts – Part 1 for FBiH, and Part 2 for RS. Each part consisted of three components: (a) Waste Management, (b) Capacity Building, and (c) Project Management and Operating Costs.

18. The design flexibility created the potential for some variation between components, however the estimates made at PAD stage did not vary considerably in comparison to actual allocation. The PAD allocated approximately 90% of the project to Component A – Waste Management. As at December 2017, disbursements to this component were at 94% of total expenditure.

% of Total

PAD Disbursed*

Component A 90% 94%

Component B 5% 4%

Component C 5% 2%

*at January 2018, USD-EUR exchange per PAD (EUR1=USD1.47)

A

B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE)

19. Several notable changes occurred during project implementation. A summary of these is in the table below.

Date Key Change

Restructuring 1 Nov-13 Extension of Closing Date

Restructuring 2 Dec-14

Cancellation of Financing; Reallocation between Disbursement Categories; Change in Results Framework; Change to Components and Costs; Change in Financing Plan

Restructuring 3 Feb-16 Extension of Closing Date

Restructuring 4 Jun-16 Cancellation of Financing

Restructuring 5 Apr-17 Reallocation between Disbursement Categories

20. Extensions of Closing Date. The project was extended twice for a cumulative period of 3.5 years (44 months), a 70% increase over the original 63 months.

The first extension was for 2 years, and altered the closing date from February 28, 2014 to February 28, 2016. This extension was needed to overcome slow start of the project implementation resulted from a delay in project effectiveness (7 months) caused by delays in signing Subsidiary Credit Agreements and adopting revised Operations Manual; slow implementation and coordination challenges experienced by the PMUs; and delays resulting from the 2011 parliamentary elections.

The second extension was for 1 year 8 months to extend the project closing date from February 28, 2016 to October 31, 2017. This extension was required to compensate for project implementation delays caused by


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protracted municipal negotiations and/or failures to reach inter-municipal agreements needed for regional landfills construction; compounded by very long delays in receiving construction, urban and environmental permits for landfills (discussed in more detail below).

21. Changes to Intermediate Indicators. A cancellation of funds was effected in December 2014, resulting in changes to several Component A indicators:

• Increased number of established municipal solid waste districts.

The target was revised from 16 inter-municipal districts to 13.

• Increased number of rehabilitated sanitary landfills become operational.

The PAD anticipated the rehabilitation of 8 landfills to sanitary status – a change from 4 at

baseline, to 12 at project completion. The target was revised from the original target of 12

operational landfills to 7 during the project.

• Implementation of cost recovery plans in solid waste management utilities.

The PAD anticipated that 9 utilities would have implemented cost recovery plans. This was

revised down to 7.

• Increased share of collected solid waste disposed in regional sanitary landfills. The PAD

anticipated that 60% of BH’s collected waste would not be disposed of in sanitary landfills by

project conclusion. This was reduced to 40%.

Suspension of Disbursements. Due to successive delays in receiving environmental, building and urban permits, and failures in meeting agreed targets established, that the Bank suspended the currency equivalent of $5.9m in IBRD and $2.7m in IDA financing in June 2016. This suspension related to three sub-projects, namely: Gornji Bakuf, Bihac and Zivinice. This suspension was effected after continuous attempts to resolve implementation delays. This suspension was never lifted and the three sub-projects were never implemented.

The primary reason cited for cancellations, suspensions and extensions to time is a lack of timeous implementation for the various sub-projects.

Revised PDOs and Outcome Targets

Revised PDO Indicators

22. Additional PDO Indicator. The initial PDO and outcome targets were not revised during the project. However, an additional PDO indicator, “Increased Percentage of households in target area served by formal waste management system”, was included in the project during implementation. This indicator appears in the ISR in October 2010, but is not included in the Mid-Term Review in June 2013. It is then validated in the Restructuring Paper in December 2014. The revision will be discussed substantively in the assessment of achievements below.


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Revised Components

23. No revision of components occurred during the project. Changes to the overall project funding impacted the components proportionally.

Other Changes

24. IPA Trust Funds. As a pre-accession country, BH qualifies for the Instrument for Pre-Accession Assistance (IPA). Two IPA Recipient-executed Trust Funds (total $9.4m) were granted during the project (Sept 2012 and May 2015), both co-financing project components.

• EC-IPA TF 114566 ($6.5m): The trust fund financed (a) the construction of a recycling plant at the landfill Mostar; and (b) the rehabilitation of old landfill and extension of new landfill in Banja Luka.

• EC-IPA TF 15881 ($4.7m): The trust fund financed (a) the rehabilitation of landfill “Klepovica” in Neum municipality; (b) the expansion of the sanitary landfill “Smiljevici” in Sarajevo; (c) the closure and remediation of wild dump sites in Bosanska Krupa and Srebrenik.

25. Changes to Project Size. The project size changed through cancellations (Dec 2014), suspensions (June 2016) and the addition of trust funds. The net effect of these changes has been a reduction in project size from $40m to $34m (15%). An additional $3m is expected to be cancelled at project closure.

Rationale for Changes and Their Implication on the Original Theory of Change

26. Due to challenges in receiving environmental, urban and building permits for upgrading non-sanitary regional landfills to sanitary landfills, more project funds were allocated to a) increasing the capacity at existing sanitary landfills, and b) rehabilitating wild dumps. The performance based approach adopted by SWMP-2, per the PAD, allowed for this focus to evolve, while maintaining the project development objective.

27. Closing date extensions granted during the project allowed the PDO to be achieved, despite these delays. Though it should be noted that the extensions were significant at 70%.

II. OUTCOME

A. RELEVANCE OF PDOs

Assessment of Relevance of PDOs and Rating

28. Relevance Rating: High.

29. The Country Partnership Framework (CPF) for the period FY16-FY20 emphasizes that the SWM sector remains a

high priority sector for BH due to (1) continued degradation of natural resources resulting from a lack of waste disposal and treatment capacity (Objective 3A); and (2) a lack of public service delivery (Objective 1C). Objective 3A in the CPF


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proposes further lending for a Third Solid Waste Project to increase availability; reduce the environmental risks posed by inadequate SWM infrastructure; and affordably build this additional infrastructure.

30. A Third Solid Waste Project would need to incorporate additional lessons learned from the SWMP-2, as the SWMP-2 learned from its predecessor, SWMP-1, to adapt to a more mature sector. As the SWMP-2 set more ambitious availability targets and operationalized regional landfilling and environmental monitoring (in comparison to the SMWP-1), so a Third project could expand these operations, while also complementing and informing a strategic national reform agenda for the sector.

B. ACHIEVEMENT OF PDOs (EFFICACY)

31. Overall achievement of the PDO.

Efficacy Rating: Substantial.

The project’s PDO statement has four specific outcomes:

• to improve the availability of solid waste management services in Participating Utilities,

• to improve the quality of solid waste management services in Participating Utilities,

• to improve the environmental soundness of solid waste management services in Participating Utilities, and

• to improve the financial viability of solid waste management services in Participating Utilities.

These four outcomes were tied to 5 PDO indicators.

Outcome PDO Indicator Achievement Rate

Improved Availability Increased percentage of households in targeted area served by the formal waste management system

66% availability v 62.5% targeted availability

Number of people in urban areas provided with access to regular solid waste collection under the project

740 000 urban population served versus target of 574 000

Improved Quality

Improved disposal management system as evidenced by number of wild dumps closed.

96% of targeted 300 wild dumps closed

Improved Environmental soundness

Improved ground water quality at disposal sites as evidenced by leachate quality.

71% of sites have leachate discharge that meets standards v

66% target

Improved Financial Viability Increased cost recovery rate of participating utilities.

5 out of 6 utilities cover costs versus 50% target

Assessment of Achievement of Each Objective/Outcome Project Development Objective 1: Improved Availability PDO Indicator 1 and 5 are specifically related to the availability of the solid waste management system to a larger percentage of people and households. Both targets have been exceeded. Under the project, and as a direct result of the creation of the new landfills and the expansion of others, the SWM system in BH is now formally available to 66%


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of the population, compared to 25% at project inception, and a target of 62.5%. Project Development Objective 2: Increase in Quality This PDO is measured by the number of wild dumps closed under the project. Though the target of 300 wild dump closures was not achieved, a substantial 96% of this target was reached. Despite narrowly missing the target in absolute numbers, the project rehabilitated and closed some very large dump sites in BH. The closure of wild dumps, and the diversion of waste to regional landfills contributes significantly to system quality by ensuring more environmentally friendly closure procedures and diversion of all future waste to a regional landfill (thereby arresting further environmental damage. Srebrenik and Bosanska Krupa were the first two landfills closed in BH in accordance with EU directives. These serve as a model and demonstration for future wild dump closures in BH. Project Development Objective 3: Improved Environmental Soundness This PDO measures the improvement of groundwater quality at the disposal sites, by measuring that the discharge from the landfill complies with local standards. The project aimed to have 66% of landfill sites meet minimum national levels of leachate quality, and achieved a rate of 71%. Limited monitoring was taking place at project inception, with no quantitative data for the baseline. Project Development Objective 4: Improved Financial Viability This PDO measures how many of the participating utilities cover their operational costs. The target was for half of the regional utilities to cover their operational costs, where now 5 out of the 6 participating utilities do – an achievement rate of 167%. Please note that in some cases the indicators measure those of participating utilities and the regions served by those utilities. However, some indicators are formulated to calculate benefits for the entities in which the utilities are situated. As the exact sites were not known at project appraisal, this is sensible – but the variance should be noted.


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Assessment of Achievement of Each Objective/Outcome 32. Project Development Objective 1: Availability

The project has two PDO indicators to measure the increase in availability, and several supporting intermediate indicators.

These indicators, their targets, and achievements are shown below. Both the availability targets have been achieved.

PDO Indicator 1: Increased percentage of households in target area served by formal waste management system

Baseline Target Achieved Achievement Rate

75% of households in targeted area are not served by the formal waste

management system

37.5% of households in targeted area are not served by the formal waste management

system.

34% of households unserved

66% availability v 62.5% targeted availability

The unserved population for BH is now 34%, compared to 75% at project inception2. This increase in coverage is a direct

result of project investments in new sanitary landfills, and the increased capacity that existing landfills received from the

project.

The data for coverage statistics was gathered under a survey conducted with utilities, as a part of the SWM investment

strategies for RS and FBiH. These utilities managed as assortment of disposal types – some sanitary landfills, some

controlled municipal dumps, and some regional landfills which are not classified as sanitary. Note that the baseline

‘targeted areas’ comprises RS and FBiH, and not only participating utilities.

Urban Availability

PDO Indicator 5: Number of people in urban areas provided with access to regular solid waste collection under the project


75% of urban population is not served by the regular waste mgmt.

service

50% increase against baseline value

743 000 urban residents served

>100%

The PAD did not differentiate on the availability of the formal SWM system to the rural population versus urban population. However, a fifth PDO, measuring urban availability, was included in February 2016. Target and baseline formulation. Target and baseline formulation. There are three points to note in relation to this

indicator’s baseline and target. Firstly, the formulation of baseline and the corresponding baseline value, as set, are

inconsistent with the formulation of the indicator because the indicator tries to measure the number of people with

access, whereas the baseline was formulated based on urban population not served (75% of urban population or 1 million


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people). As increasing the number of unserved population is clearly not the intent, this indicator has been interpreted for

the purposes of the ICR as requiring that the served urban population (25% or 383,090 people) is increased by 50%.

Secondly, the original target of 1.5 million residents (which can be seen in Annex 1) was erroneously calculated as 50%

increase of number of unserved urban population. Since, as said above, increasing the number of unserved population is

not the project intent, the target value should be 50% less than the baseline.

And, thirdly, while the baseline was set as a number of unserved people, the actual data collected in the course of the

project implementation referred to the number of served urban residents.

For consistency, this analysis measures the intention of the target, to increase coverage by 50%, from 25% to 37.5%. This

interpretation allows for the use of the data on the number of served urban population collected as part of the indicator

monitoring. Therefore, the baseline, target and achieved values related to PDO indicator 5 are as follows:

PDO Indicator 5: Number of people in urban areas provided with access to regular solid waste collection under the project


25% of the urban population in BH has access to regular solid waste

collection (25% of 1.5m urban residents is 383 090)

A 50% increase over baseline to 575 000

urban residents served

743 000 urban residents served by 7 operational landfills

>100%

Achievement. Using the above interpretation, this PDO indicator has been exceeded, as approximately 50% of urban residents and households in the entire country – against a target of 37.5% - are served by the landfills invested in under this project. The municipalities who dispose of waste in the 7 operational landfills in this project contain an urban population of 825,000 people, of which 743,000 people (or approximately 90% of population in urban areas under the Project) are served. Therefore, of a total of 1.5m urban residents in the entire country, this project helped to serve half of the country’s urban population. The urban coverage of these operational landfills will rise over the next 2-3 years to approximately 60% because of:

• Additional municipalities being incorporated into regional landfills;

• The immaturity of some landfills which have not yet fully incorporated all the municipalities they were

designed for; and

• Coverage rates are increasing. Where established regional landfills like Sarajevo, Mostar, and Zenica are

present, coverage levels exceed 95%. In comparison, Banja Luka is still at 84%.

2 The baseline and target assumes that the ‘targeted area’ is BH as the project did not have defined sub-projects at inception.


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The availability targets were met despite: (1) a reduction in funding; (2) a change in focus from new regional sanitary

landfills to increasing the capacity of existing landfills; and (3) implementation delays. This is because the project took on

a more urban bias as it evolved. Originally targeted landfills would have reached municipalities with 40% urbanized

population serving 550,000 urban residents. The project eventually served a group of municipalities that had an

urbanization rate of over 50%, and over 900, 000 urban residents. This explains some of the over-achievement in urban

availability.

Reduction in Funding

The reduction in funding did not impact the achievement of this PDO because cell expansion is less expensive than new

build for landfills. A new landfill over its full lifespan from construction to post-closure monitoring can cost between 10-

20% per ton more than expansion. This is because land, access roads and other assets such as weighbridges and trucks

have already been purchased and amortized – and can now be utilized more efficiently.

However, the shift from new landfills to cell expansion impacted the project by: (1) allowing a higher saturation of services

in the existing, more urban, catchment area; and (2) it extended the catchment area to surrounding areas. This adjustment

is in line with the performance-based approach adopted by the project.

33. Project Development Objective 2: Increase in Quality

In the absence of access to the formal waste management system, solid waste was being disposed of in uncontrolled wild

dumps, leading to environmental degradation and public health risks. By closing wild dumps, and providing a higher

quality landfilling alternative, the project (1) diverted solid waste from dumping to more controlled dumping; and (2)

converted potential environmental and health hazards into managed closures.

The PDO indicator for this was substantially met at 96%; and one intermediate indicator was not met.

PDO Indicator 2: Improved disposal management system as evidenced by number of wild dumps closed


145 wild dumps closed (12% of estimated total

of 1200)

300 wild dumps closed (25% of estimated

total)

Total: 283 96% of targeted 300 wild dumps closed

RS: 54 dumps closed; FBiH: 229 dumps closed

Measuring wild dumps. While the target of this indicator has been substantially met, using the number of wild dumps

closed is not the most effective indicator to use to measure quality. The size or volume associated with these wild dumps

would be a better measure. However, in areas with low data this is not always possible – as was the case in BH. Resultantly,

some large wild dump closures are not fully accounted for example Bosanska Krupa (15,000 sqm, Zenica (70,000 sqm),

and Srebrenik (10,000 sqm).

In addition, the project outperformed all intermediate indicators as the amount of sorting, recycling and gas capturing facilities exceeded the target; and only 28% of collected waste is not disposed in a sanitary manner versus a target of 40%.


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Hazardous waste. The disposal of hazardous waste was introduced as a concern in the PAD. It was however, only included as an intermediate indicator. The PAD intended that SWMP-2 would be used to research the extent of the problem and propose some solutions. While the Waste Management Strategy of RS for the period 2017-2026 deals with hazardous waste, the indicator has not been achieved.

34. Project Development Objective 3: Environmental soundness

Sanitary landfills treat solid waste until the discharge/effluent can safely be released into the environment. The

construction of these regional sanitary landfills allows an ever-increasing volume of solid waste to be treated and

monitored for environmental soundness. The environmental benefits compound as more waste is treated by sanitary

landfills over time (and therefore less in wild dumping).

All environmental soundness targets for this project have been resoundingly achieved.

PDO Indicator 3: Improved ground water quality at disposal sites as evidenced by leachate quality


Limited monitoring of leachate quality at disposal sites

2/3 of operational sites meet minimum levels

of leachate quality

5 out of 7 operational sites meet the

minimum levels of leachate quality

71% of sites have leachate discharge that meets standards v 66%

target Sarajevo not compliant.

At inception, environmental monitoring at landfills was not carried out consistently – not all landfills were monitored, and not all measurements were taken and analyzed. At present, 7 landfills are monitored (RS: Banja Luka, Bijeljina, Zvornik and Prijedor); FBiH: Sarajevo, Mostar and Zenica). Of these, 5 meet the standards for leachate quality. Prijedor and Sarajevo are not compliant. Prijedor nominally meets the leachate parameters set in its environmental permit at the point of release. However, the reason that the parameters are low is that the generated leachate is significantly diluted before released. The total pollution released, however, is still too high and was not reduced because of project implementation. While the indicator is achieved, it must be noted that the LTP in Sarajevo is not functioning. The construction of this LTP

was not a part of the project but it impacts the indicator because of how the indicator is formulated. This is worth noting

because Sarajevo accounts for 40% of sanitary landfill capacity in BH and 22% of the country’s total SWM capacity.

To remedy the situation, Sarajevo will be implementing partial treatment of its leachate in the short term to mitigate the environmental impact – and has budgeted to do so. In addition, leachate sampling is being conducted on each pipe to identify where the problem is arising, and thereby design the correct technical solutions. A pilot LTP is to be implemented in spring 2018, using its own non-project funds.


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While the discharge of untreated leachate by Sarajevo is a short-term problem, it does reveal the weakness of this target. The target, that two thirds of operational sites have leachate quality that meet national standards, only measures absolute numbers of operational sites and not the volume of waste that does not meet national standards.

Livno is not currently monitored because it is not operational, as it awaits its final permit (anticipated to be issued mid-2018). Once operational, it will be monitored one semi-annual basis.

35. Project Development Objective 4: Financial viability

The financial viability indicator for the project has been met.

PDO Indicator 4: Increased cost recovery rate of participating utilities Baseline Target Achieved Achievement Rate

Limited number of utilities cover

operational costs

1/2 of participating utilities cover

operational cost

5 out of the 6 participating utilities covers operational

costs 167%

Bijeljina does not cover operational costs

Save for Bijeljina, the utilities are all currently meeting their operations expenditure requirements, which includes those amounts payable as a part of the Bank loan (for which they are solely responsible). The constraint that utilities currently face is a lack of borrowing capacity to expand or increase operations. Current operations are sustainable in the short to medium term because operating costs are being met, and the debt used to expand services under the project is being serviced. These indicators demonstrate that progress has been made in making utilities/landfills more financially sustainable, but they do not provide a guide to the sector’s financial viability or sustainability. Also noteworthy is that the indicator’s intention is to increase the cost recovery ‘rate’ of participating utilities, while the baseline and target are less ambitious by requiring only that operational costs are covered and not measuring the change in cost recovery. Capital expansion and maintenance are therefore severely constrained, jeopardizing achievement of the long-term development outcome. By way of example, if leachate recirculation continues at Zvornik for longer than 4 years, because an LTP is not affordable, the landfill will no longer be sanitary. These are important concerns that the indicator does not measure. These funding limitations will affect all landfills to varying degrees – in some instances the replacement of critical infrastructure may be hampered, where in others in may only constrain their operating capacity. Improving collection rates, cost management and tariffs. Utilities’ collection rates vary widely, even within an entity. In Zvornik, a new landfill, they may be extremely low (currently 26%); while Prijedor and Banja Luka, both well-established landfills collect 67% and 100% respectively. The same variability exists for tariffs, with an average of 33.15 BAM in BH. This is the equivalent of between 0.5-0.6% of disposable income, versus an international norm of 1-1.5%. This variance suggests that much improvement can be made. Efforts to improve management and operations through cost reductions and maximization of landfill lifespan will improve the stability of utilities.


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Justification of Overall Efficacy Rating 36. The efficacy rating for this project is Substantial. 37. The PDO achievements in isolation would warrant a high rating given the level of achievement, as the project has meaningfully contributed to an increase in the availability of the SWM system to a large portion of the population, improved quality of SWM, and has moved BH to a more environmentally sound trajectory for the future; and the project’s activities, design and results matrix were well aligned to achieve the objectives it sought to achieve.

More qualitatively, the sustained implementation of the project over several years has progressed the country’s regulatory, legislative and compliance regime in a way that begins to mimic the EU acquis that it is trying to comply with. This, and BH’s official adoption of regional landfilling as the backbone to its SWM sector, is significant and should not be understated. Counter-balancing these positive outcomes, however, are some shortcomings. While providing insight into progress, the environmental soundness and financial viability indicators are insufficient to comprehensively measure the development objectives that the project was aiming to achieve. By measuring the volume of waste that meets environmental standards, the environmental indicator could have been improved. Similarly, the number of utilities implementing cost recovery plans does not fully measure how the cost recovery rate is increasing. The original project ambition at appraisal was scaled down through two cancellations -- both due to implementation difficulties and delays. Despite meeting the revised project scope and PDO, the project achievements would have been improved upon had it not been for these cancellations and implementation problems.

C. EFFICIENCY

38. An ex-post financial and economic analysis was conducted to assess the financial and economic performance of each individual regional landfill operator from FBiH (Zenica, Mostar, Sarajevo, Livno) and from RS (Banja Luka, Prijedor, Bijeljina, Zvornik) which have been either established or expanded through the SSWMP. 39. The analysis provides financial and economic performance indicators (FRR, NPV, ERR and ENPV) for each regional landfill and the project. The results of the analysis are in the table below.


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40. The project achieved a financial rate of return (FRR) of 11.9%. Using a 5% discount rate3, an economic rate of return (ERR) of 25.5% was achieved for the economic and social benefits of the investments. This discount rate, representing the opportunity cost of capital in the model, was derived using the prevailing rates for corporate loans with maturity of longer than 5 years. 41. The FRR and ERR are calculated by adding the costs and benefits for individual sites, and discounting the totals by the appropriate discount rate. Using this methodology, individual investments are weighted to achieve the total rates of return.

42. No comparable FRR and ERR guidelines are included in the PAD for comparison. The PAD does however, provide a simple ERR analysis of the costs and benefits of the Banja Luka landfill as a guideline. This basic analysis arrived at an ERR of 4%, which the ex-post ERR is substantially above.

43. An analysis further demonstrated which variables were impacting the various utilities’ financial outcomes to less or larger extents.

44. Inclusions and exclusions. The analysis did not include:

• The impact of Component B feasibility studies where these studies did not yield investments,

• Additional capital maintenance investments.

The economic benefits included in the analysis are:

• Prevented costs of polluted soil and ground waters and

• Prevented air pollution by increasing environmental standards

Due to data constraints, the economic analysis excluded:

Financial Rate

of Return Net Present Value

(USD mill)

Economic Rate of Return

Economic Net Present Value (USD mill)

Banja Luka 10.10% 0.85 33.70% 7.54

Bijeljina 29.90% 1.34 34.00% 3.83

Livno 16.70% 1.02 52.90% 3.49

Mostar 6.10% 0.46 21.10% 5.29

Prijedor 1.90% -0.28 n.a. n.a.

Sarajevo 0.90% -0.24 -5.50% -2.98

Zenica 29.00% 3.07 14.40% 2.17

Zvornik 0.00% -1.39 25.60% 8.41

Project Total

11.90% 8.39 25.50% 39.38

3 Per guidance note for EU cohesion countries: see http://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/cba_guide.pdf ; and http://globalpractices.worldbank.org/gsg/EnergyEconomics/Documents/Focus%20Area%20-%20Economic%20Analysis/1.%20Guidance/1.2%20World%20Bank%20Guidance/1.2.3%20OPSPQ%20Guidance%20Note%20Economic%20Analysis%202013.pdf

http://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/cba_guide.pdf


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• Avoidance of birth defects, reduced morbidity and improved health levels;

• The creation of direct and indirect jobs in the waste collection and treatment industry.

45. The economic and financial returns were impacted by implementation delays and the inclusion of IPA grants. Implementation delays: These delays have negatively affected the returns in two ways: (1) due to Zvornik and Livno’s late inclusion in the project, these two landfills have not had the opportunity to ramp up to full capacity, resulting in decreased benefits in the short term; (2) Other projects such as Neum and Zivinice, who can afford to finance investments but needed to be cancelled due to impending project closure, could have been included had their site selection and permitting processes been more efficient. EC-IPA Grants: As the EC-IPA funds do not need to be repaid, they have positively affected individual utility’s returns as.

Assessment of Efficiency and Rating

Rating: Modest

46. Both the financial and economic rates of return were robust, and met the Bank’s standard. However, due to the variability between the results from different landfills, and the negative NPVs achieved by some landfills, the overall efficiency has been rated as modest.

D. JUSTIFICATION OF OVERALL OUTCOME RATING Rating: Moderately Satisfactory

47. The project has substantially achieved its PDOs, which remain very relevant in BH, and has done so in a financially efficient manner. A split-rating is not warranted as no PDO-level outcome targets were changed.

As discussed, some drawbacks in the project’s efficacy and efficiency do, however, temper what would otherwise be a ‘satisfactory’ achievement.

E. OTHER OUTCOMES AND IMPACTS (IF ANY)

Gender

48. According to World Bank statistics, females make up 50.1% of BH’s 3.5m people. With a change in access from 25% at baseline, to 66% at conclusion, it can be inferred that the project has positively impacted the lives of approximately 730 000 females.

Institutional Strengthening

49. Co-ordination. Co-ordination between the entities, and between municipalities has historically not occurred.


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Due to the regional nature of the project, which requires inter-municipal co-operation and co-ordination, this has begun to change. Most notably, the Zvornik and Bijeljina landfills serves municipalities in both the Federation and RS – demonstrating that cross-entity co-ordination is possible in the sector. This co-ordination and relationship is expected to deepen as more municipalities are incorporated into existing regional landfills, and as additional regional landfills are created. 50. Strengthening. Capacity strengthening during the project has taken place on multiple levels. On a national and entity-level, the oversight capacity, most notably for environmental monitoring, of the responsible ministries has been increased. Environmental and other safeguard requirements are now better reported on and enforced. On a utility-level, on-the-job support and training has enhanced utility managers’ ability to manage sophisticated, sanitary landfills. This includes not only the roll-out of new capital projects, and the rigors of feasibility testing that accompany it, but also day-to-day operations. Support across financial, policy and technical aspects of SWM will continue to be provided through technical workshops (funded by the Swedish International Development Agency, SIDA) in the coming months, in a program designed by the WB.

51. Lack of indicators for Institutional strengthening. The main driver behind the institutional strengthening witnessed appears to be primarily influenced by an evolving regulatory and legislative environment for SWM. While the project can be credited with (1) impacting the law and regulations indirectly, and (2) conducting feasibility analyses and SWM entity-level strategies, the Capacity Building component provided no indicators to measure institutional strengthening gains.

Mobilizing Private Sector Financing 52. The regionalization of solid waste management activities has positive impacts on the sector’s ability to mobilize private sector financing. As utilities better manage their cost base and improve their revenues (through expansion and better tariff collection), their ability to access equity and debt financing improves.

Poverty Reduction and Shared Prosperity

53. While no specific poverty reduction and shared prosperity outcomes were identified in the PAD, some outcomes can be observed.

• Increasing the availability of SWM services to citizens in less urban locations, and more prevalently within urban locations has positive environmental, health and economic benefits for society;

• The creation of regional landfills has financial benefits for poorer municipalities and their households by allowing services to be provided at a lower cost than establishing their own independent landfills of creating regional landfills allows.

Other Unintended Outcomes and Impacts 54. The project leveraged $9.4m in co-financing from EU IPA funds. This supplemental financing directly financed recycling facilities (Mostar), a gas collection system (Banja Luka), the construction of expanded sanitary cells (Banja Luka and Sarajevo), and the closure of wild dumps (Bosanska Krupa and Srebrenik).


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55. Because these IPA funds are grants from the EU, the financing costs for those municipalities benefiting from them

are lower than had they borrowed.

III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME

A. KEY FACTORS DURING PREPARATION

56. Project Design. As is evident from the results chain, the PDO was realistic and clear, and the project was structured logically among its complementary components, which were well aligned to the set objectives and required long-term outcomes.

57. The project benefited from knowledge created during the SWMP-1. Through the eligibility criteria, identified sub-projects could be tested for their feasibility, and backed with project funds. Where sub-projects were proven infeasible, they could be substituted for better performing investments. This ensured that both the required efficacy and efficiency of the project could be achieved. The large wild dump closures at Bosanska Krupa and Srebrenik were not a part of the initial sub-projects identified, but were subsequently incorporated – with good environmental and demonstration impacts for the country.

58. Project Risks. The project risks were appropriately identified and calibrated, with relevant mitigation measures put in place. The previous experience of PIU staff in World Bank procedures and projects contributed to a good understanding of the risks.

59. Readiness for Implementation. There are two dimensions that impacted readiness for implementation. Firstly, the SWMP-1 overlapped with the SWMP-2 by almost 1 year; and with its already limited capacity and resources diverted to SWMP-1 closure, the SWMP-2 was not yet ready to be implemented by the PMUs. Secondly, the evolving complexity and sophistication of the regulatory and approving environment was not fully accounted for in the project’s design, resulting in delays in execution.

B. KEY FACTORS DURING IMPLEMENTATION 60. The implementation risk for this project was always identified as being substantial – this rating was corroborated by the implementation performance. 61. The project was extended twice by a margin of 70% to accommodate implementation delays and achieve the project’s intended objectives, with these delays resulting in a partial suspension of project funds for Bihac, Gornji Vakuf and Zivinice.

Factors subject to government and/or implementing entity control:

62. Delays in obtaining permits because of limited capacity, an increasingly complex regulatory environment and community resistance. The process to receive all final permits is complex, and several factors impacted the timeous receipt of these permits:

• Public participation.


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In Livno, for example, the community reacted negatively to the site location, forcing the landfill to be located 500m away – in a different municipality. As a result, all conceptual designs needed to be redone. While the sanitary landfill was finally completed using project funds, its PDO impacts cannot be fully measured yet.

• Changes in the approving and regulatory environment.

In the past, only one ministry was responsible for issuing permits. This changed (around 2010) because

of amendments to law. More surveys (e.g. fire and geodetic) were required before approvals could

be granted, and construction permits could only be received a year after environmental permits had

been granted. Exacerbating these delays are local government processes for approval of physical

landfill plans which often must go through both executive and legislative branches.

63. While many of these delays emanated from legitimate legal and procedural requirements in BH, some streamlining through coordination and planning could have lessened the impact on the project. 64. There was insufficient capacity of the PMU to handle both the SWMP-1 and SWMP-2 in parallel as is evidenced by the delays in effectiveness.

Factors subject to World Bank Control:

65. Continuity. The project experienced several changes in TTLships which hampered the continuity of implementation and created some gaps in institutional knowledge. This was exacerbated by the time extensions experienced by the project. The initial presence of a TTL in-country was positive for the project given its complexities. Subsequent TTLs were not based in BH.

66. Sector maturity and complexity appear to be inadequately catered for in design. Changes to the enabling environment were prompted by the success of the SWMP-1, and could have been better integrated into the design of the project by, for example, enlarging PMUs to allow for increased co-ordination capacity or the creation of ministerial sub-committees focused on SWMP implementation.

67. The project required more intense and sustained public awareness campaigns to be undertaken sooner. The PAD specifically identified the need for public awareness campaigns given the nascence of the SWM sector and a lack of ownership of SWM issues by the public. Some awareness campaigns were conducted during the project, but should likely have been more intensive and sustained so as to, inter alia¸ achieve better results in recycling initiatives and establish, in the public’s mind, the relationship between tariffs paid and SWM services received.

Factors impacting the project outside of the control of the government and/or implementing entities: 68. Donor co-financing. Delays in receiving EU funds to complete initial feasibility studies, which were a requirement for the projects to commence, also contributed towards implementation delays. These were anticipated to be received in 2010, but were only received 2012. Technical assistance parallel financing received from SIDA in 2016 has helped propel the capacity building agenda, which will have positive on the sector in the coming years.


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IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME

A. QUALITY OF MONITORING AND EVALUATION (M&E) Rating: Substantial

M&E Design 69. Project Objectives and Results Framework. The project’s objectives were well-aligned with the project design. As discussed previously, indicators such as those for environmental soundness and financial viability could have been bolder in their articulation of baselines and targets – both in their formulation and method of measurement. Environmental soundness could have been better measured by volume, and financial viability by cost recovery rates. Additionally, the incorporation of institutional strengthening indicators could have benefited the project.

M&E Implementation

70. While M&E was generally well implemented, it could have been improved by better data collection throughout the project life. The implementation risks for this project was identified as high from the outset, and the project design, through the results framework, reflected this by requiring periodic data measurement to check progress. Based on the ISRs and Aide Memoires, this data was not created timeously throughout the project – impacting the efficacy of monitoring and evaluation. Data on system availability and dump closures for example, were not updated often, and/or updated based only on estimates. While the PDOs were met, PDO 1, 2 and 5 were only measured (not estimated) at conclusion.

M&E Utilization 71. M&E was utilized mainly to assess project progress and ensure adherence to milestones. M&E tools such as the Medium-Term Review and ISRs were useful and candid, and provided accurate indications of the project’s progress. Using these tools, the Bank was proactive in executing required project restructuring for time, or canceling or suspending funds, to ensure that the PDO was achieved. This is evidenced by the numerous restructurings of the project.

Justification of Overall Rating of Quality of M&E 72. While the quality of the monitoring and evaluation was adequate to assess achievements, and test the links in the results chain, and progress the project toward achievement of its PDO, some shortcomings, discussed above, can be observed.

B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE

73. The Financial Management rating was Satisfactory throughout project implementation with appropriate control procedures in place. A Financial Management Specialist based in the Sarajevo country office had regularly carried out the financial management (FM) implementation support missions to review project accounting and reporting arrangements, organization and staffing, internal control procedures, planning and budgeting, counterpart funding, funds flow and disbursement and external audits. The quarterly Interim Unaudited Financial Reports were submitted to the Bank for review in the agreed time frame and there were no inconsistencies for


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follow up. The RS and FBiH accounts were audited by Deloitte, who found no irregularities. 74. The Procurement rating for the project was satisfactory throughout the project. The overall risk was rated as high with several corrective measures proposed. These measures included software upgrades, revisions to the operations and financial manuals – all of which were adopted by the entities. 75. Environmental and Social Safeguards. The project was assigned as a Category B project and Environmental Assessment (OP 4.01) was triggered and complied with. The rating was downgraded from satisfactory to moderately satisfactory in the third quarter of 2016. This downgrade occurred because of the delays in receiving environmental monitoring and compliance documents for several sites.

76. Because investments were selected during the project and not at inception, an Environmental Framework (EF) tool was used to ensure the compliance of future landfill investments. Environmental Impact Assessments (EIA) and Environmental Management Plans (EMP) were then created for individual landfill, and were required under the eligibility criteria for funding. 77. Non-compliance at Sarajevo Landfill. As noted previously, the Sarajevo landfill is non-compliant with the requirements of the Environmental Management Framework and emission standards regarding its leachate and landfill gas (LFG) management. The LFG system was disconnected because of an investigation by the Prosecutor’s office into alleged mass graves on the site. While the technical part of the investigation was completed, and to the Bank’s knowledge the claim was not substantiated, the case has not yet been formally closed. In addition, at present, the landfill discharges untreated effluent directly into the environment due to an inoperative LTP. To be noted, however, is that the Sarajevo Cantonal government is actively trying to find resolution to this issue and in the short term will still partially treat the leachate until the LTP’s functionality is restored.

C. BANK PERFORMANCE

Rating: Moderately Satisfactory

Quality at Entry

78. Owing to its previous experience in the SWMP-1 in the country, and its immersion in the SWMP-1 at the time of project appraisal, the Bank could ensure an adequate quality at entry. As noted previously, this experience allowed the project to evolve new eligibility criteria for SWMP-2 investments; adequately assess fiduciary, political, and environmental risks; and sufficiently incorporate these into the project design.

79. The delays in implementation, however, temper what would otherwise be a satisfactory achievement. Some changes to the enforcing and enabling environment for SWM in BH could have been anticipated, and more mitigation strategies put in place. 80. As noted previously, the economic and financial analysis at entry was basic and did not provide a good comparison on which to base the ex-post analysis.


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Quality of Supervision 81. Regular implementation support missions were undertaken throughout the project and the necessary issues and concerns raised candidly through aide memoires, ISRs, and management letters. Where concerns were identified, the Bank acted proactively to extend time, allocate resources where possible, or suspend and/or cancel funds to achieve the desired project outcomes. 82. The project’s Implementation Progress was downgraded to Moderately Unsatisfactory in Dec 2013, and only upgraded to Moderately Satisfactory again in in June 2016 – a period during which the project was actively restructured for time, funds were cancelled and/or suspended, and components, costs and results were changed. 83. Measures to hasten implementation were taken by the Bank, but could likely have been better achieved with more field-level supervision and monitoring to provide more responsive assistance to the PMUs. This field-level supervision could have identified implementation bottlenecks more quickly, and coordinated solutions with the PMUs more hastily – and thereby achieved better results.

Justification of Overall Rating of Bank Performance 84. Based on the quality at entry and of supervision, overall Bank performance is rated as Moderately Satisfactory.

D. RISK TO DEVELOPMENT OUTCOME

85. There remain risks to the sustainability of the development outcome of this project. Sector and utility funding are emerging as a likely and impactful risk to the development outcomes. 86. Financial viability of utilities. While improvements to cost management and collection rates could be achieved through additional monitoring, benchmarking and training, and public awareness campaigns (for collection rates) - the concern about unsustainably low tariffs is more structural. Tariffs, as set by municipalities, are too low. While this benefits citizens, it jeopardizes the sustainability of the utilities. Guided by the national government, equitable and balanced decisions can be made that improve tariff structuring without placing an undue burden on citizens. Without this guidance, sector progress will be stunted, and in some cases reversed where future investments cannot be made.

87. SWM Sector Viability. At present the sector receives no financial support from the national government. As is evidenced through this project, this will limit the progress that municipalities/utilities can achieve as they begin to fund increasingly sophisticated infrastructure or fund additional coverage. In cases like Zenica, municipalities are at their debt ceilings, and cannot finance additional debt for the SWM or other sectors. The evolution toward the EU acquis will add pressure to this. Modes for additional, long-term funding from central government need to be found for municipalities to continue to maintain their progress and for long term sector sustainability to be achieved.


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V. LESSONS AND RECOMMENDATIONS

A major contribution of the project for the SWM sector development in BH was to sustain and advance the regional approach for treatment and disposal. As a second-generation project in SWM, this project was, by design, focused on infrastructure development with the objective to improve the disposal services in country. This has been a significant achievement especially given the difficult country and political context in BH; going forward, any follow up investment operation should include substantial policy dialogue and institutional and capacity strengthening at all levels of government – to further advance and sustain sector achievements. Sector financing should be at the forefront of the policy dialogue going forward. The long-term sustainability of the SWM sector in BH would be compromised without adequate funding. Municipalities are currently required to finance their SWM infrastructure and activities using their own financial resources. The central government’s expectation is that municipalities will finance an extension of coverage, maintain equipment, and advance the sector to meet the EU Waste Directive. With municipalities already under financial pressure, meeting these expectations will be extremely difficult. Globally, central government support is often required to fund the SWM sector, at least the initial capital investments, given the wider social, economic, health and environmental benefits which accrue from a well-functioning SWM sector. Going forward, it would be crucial to understand what municipalities could realistically be expected to finance given their resources, and what role the central government could and should have in funding the country’s SWM ambitions. An institutional driver at the central level for sector development and reforms should be designated and empowered. A line ministry such as a ministry of environment or a ministry of regional development is typically assigned with the responsibility to develop policies, draft legislation and oversee waste management in a country. A waste management section within such line ministry should be established, staffed with professionals and empowered to initiate and carry out the intended reforms. The waste management section could be dedicated exclusively to the waste sector and become the nucleus and driver of reforms. In contrast, BH currently underestimates the amount and complexity of work required by such a department; the line Ministries in RS and the Federation have only skeleton staff of one or two. It is worth noting, however, that the Ministry of Environment in the Federation has very recently, post project closure, established a SWM section under the oversight of one of a Deputy Minister for waste management. This is a major and very positive development for the sector. The SWM section is expected to lead the policy formulation, provide guidance to municipalities and regions, promote the cooperation among stakeholders including industry associations about national issues and exercise stronger institutional oversight. A strong and cogent reform agenda is important to make the SWM sector sustainable, and must be backed by a tailored and specific capacity building program. BH intends to meet the requirement of the EU Waste Directive and related legislation, and consequently increase its coverage and progress up the waste hierarchy. To implement this agenda will require significant human and financial resources, and sector reform. This sector reform should address, inter alia, current policy gaps around guidelines for tariffs; more sustained public awareness initiatives; capacity building in managerial and technical areas such as landfill optimization, revenue collection and management; and institutional strengthening at the cantonal and municipal levels.


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The SWMP-2 funded SWM strategies for both RS and FBiH which can serve as a strong foundation for planning and implementing this reform agenda. Future SWM projects’ results indicators could be better formulated As is evidenced from the project, there has been a mismatch in some PDO indicators’ intentions, formulation and methods of measurement. For example, PDO Indicator 2 measuring environmental soundness called only for a number of sites to be environmentally compliant by measuring leachate quality. This measure was met, but failed to measure that a significant landfill’s non-compliance impacts 40% of the country’s solid waste. Future indicators for this and other (Bank-wide) SWM projects could be more precisely formulated by measuring volume instead of number. The measurement of indicators should also be more consistent to allow for course corrections where necessary, and also assist the government in understanding its data gaps. In sectors that are maturing rapidly, project preparation needs to be responsive to current needs and anticipate implementation challenges. The project’s performance-based approach has contributed meaningfully to its success. However, the slowness of implementation suggests that the changing complexity of the sector in BH, and the lack of institutional coordination was not catered for. Changes to regulations for granting environmental, planning and building permits, and their implications for project timelines should be considered more thoroughly and proactively to ensure that assets invested in yield their intended results. The adoption of previous lessons learned from SWMP-1 was integral to project success. The project design embraced the lessons learned on previous projects, and the performance approach it adopted has been integral to the project’s success. While this design likely increases the implementation burden (because sub-projects are tested, may prove infeasible, and must be substituted), it ensures that municipalities who are willing and able to make investments are empowered to do so. Cross-entity collaboration in BH is possible, and is already occurring. The co-operation of municipalities across entities has been a great achievement of this project. In Zvornik, Bijeljina and Doboj, municipalities from different entities cooperate to achieve collective outcomes that are positive financially and technically, but also demonstrates that the entities can find common ground despite their historic difficulties. Creating platforms for this type of engagement appears to accelerate collaboration.

.


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ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS

A. RESULTS INDICATORS A.1 PDO Indicators

Objective/Outcome: Improve the availability of SWM services

Indicator Name Unit of Measure

Baseline Original Target Formally Revised

Target

Actual Achieved at Completion

Increased percentage of households in target area served by formal waste management system

Text 75% of households in targeted area are not served by the formal waste management system

Reduction of unserved households by 50%

37.5% of households in targeted area are not served by the formal waste management system.

36% in RS not served;

33% in FBiH not served

Aggregate HH: 34% not

served

25-Nov-2008 25-Nov-2008 31-Oct-2017 28-Nov-2017

Comments (achievements against targets): Over-achievement - 106%



Target



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Number of people in urban areas provided with access to regular solid waste collection under the project

Number 1000000.00 1500000.00 1500000.00 1500000.00

04-Mar-2010 01-Feb-2016 31-Oct-2017 28-Nov-2017

Comments (achievements against targets): The formulation of baseline and the corresponding baseline value are inconsistent with the formulation of the indicator because the indicator tries to measure the number of people with access, whereas the baseline was formulated based on urban population not served (75% of urban population or 1 million people). As increasing the number of unserved population is clearly not the intent, this indicator has been interpreted for the purposes of the ICR as requiring that the served urban population at baseline (25% or 383,090 people) is increased by 50%. The original target of 1.5 million residents was erroneously calculated as 50% increase of number of unserved urban population. Since, as said above, increasing the number of unserved population is not the project intent, the target value should be 50% less than the baseline. For consistency, this analysis measures the intention of the target, to increase coverage by 50%, from 25% to 37.5%. Target: 50% increase against baseline value (25%x1.5=37.5%). Achievement: 48% of urban residents are served by the project landfills Over-achievement: 48/37.5 = 128%

Objective/Outcome: Improve the quality of SWM services



Target


Improved disposal management system as evidenced by number of wild dumps closed

Text 145 wild dumps closed (12% of estimated total of 1200)

25% of estimated 300 wild dumps closed

300 wild dumps closed (25% of estimated total)

RS: 54 dumps closed; FBiH: 236 dumps closed (Total 290)

25-Nov-2008 25-Nov-2008 31-Oct-2017 28-Nov-2017

Comments (achievements against targets): Achievement - 96%. Large dumpsites in Sidje, Bosanska Krupa and Srebrenik closed under project.


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Objective/Outcome: Improve the environmental soundness of SWM services



Target


Improved ground water quality at disposal sites as evidenced by leachate quality

Text Limited monitoring of leachate quality at disposal sites

2/3 of operational sites meet minimum levels of leachate quality

2/3 of operational sites meet minimum levels of leachate quality

RS: 3/4 meet local standards (Banja Luka, Bijeljina, Zvornik; FBiH: 2/3 meet local standards (Mostar, Zenica). Sarajevo and Prijedor do not meet local standards.

Total: 5 out of 7 landfills meet local standards

25-Nov-2008 25-Nov-2008 31-Oct-2017 28-Nov-2017

Comments (achievements against targets): Over-achievement - 129% Note: Prijedor was downgraded since previous ISR.

Objective/Outcome: Improve the financial viability of SWM services



Target


Increased cost recovery rate of participating utilities

Text Limited number of utilities cover operational costs

1/2 of participating utilities cover operational cost

1/2 of participating utilities cover operational cost

RS: 2 of 3 utilities cover operational costs (Bijelina does not); FBiH: 3/3 cover operational costs


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(Livno not yet operational).

Total: 5 out of 6 utilities cover operational costs

25-Nov-2008 25-Nov-2008 31-Oct-2017 28-Nov-2017

Comments (achievements against targets): Over-achievement: 166%

A.2 Intermediate Results Indicators

Component: The Waste Management component supported investments to: rehabilitate existing disposal sites; close wild dumps; and improve the collection infrastructure and supporting equipment. At more advanced la



Target


Increased number of established inter-municipal solid waste districts

Text 6 inter-municipal districts established

16 inter-municipal districts established

13 inter-municipal districts established

RS: 4; FBiH: 9

25-Nov-2008 25-Nov-2008 31-Oct-2017 28-Nov-2017

Comments (achievements against targets): Achievement - 100%



Target


Increased number of rehabilitated sanitary landfills

Text 4 regional sanitary 12 regional sanitary 8 regional sanitary 6 regional sanitary landfills operational


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become operational landfills operational landfills operational landfills operational (RS: 3; FBiH: 3)

25-Nov-2008 25-Nov-2008 31-Oct-2017 28-Nov-2017

Comments (achievements against targets): Livno is now included as it is expected to become operational in mid-2018 Achievement: 86%



Target


Implementation of regular monitoring for leachate and dump site surface coverage at operational landfills

Text Regular monitoring at 2 operational landfills

Regular monitoring at 9 operational landfills

Regular monitoring at 9 operational landfills

RS: 4; FBiH: 6

25-Nov-2008 25-Nov-2008 31-Oct-2017 28-Nov-2017

Comments (achievements against targets): Over-achievement: 111% Reduced from 13 to 10 due to double counting of for leachate and site surface coverage. Landfill sites that do both are now counted as only 1.



Target


% of regional solid waste utilities complying with national environmental standards

Text 25 % of utilities comply with standards

60 % of regional solid waste utilities comply with national environmental standards

60 % of regional solid waste utilities comply with national environmental standards

RS: 4 compliant - 100%; FBiH: 2 out of 3 compliant - 66%.

Total 6 out of 7 compliant

04-Mar-2010 25-Nov-2008 31-Oct-2017 28-Nov-2017


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Comments (achievements against targets): Over-achievement: 142% Prijedor is technically compliant, but discharge volumes are a concern.



Target


Number of utilities with sorting, recycling, and/ or gas capturing facilities

Text 2 utilities with recycling and/ or gas capturing

6 utilities with recycling and/ or gas capturing

6 utilities with recycling and/ or gas capturing

RS: 3; FBiH: 5

25-Nov-2008 25-Nov-2008 31-Oct-2017 28-Nov-2017




Target


Implementation of cost recovery plans in solid waste management utilities

Text Limited number of utilities cover operational costs

9 utilities implement cost recovery plans

7 utilities implement cost recovery plans

RS: 4 (Banja Luka, Bijeljina, Prijedor, Zvornik); FBiH: 3 (Sarajevo, Zenica, Mostar)

25-Nov-2008 25-Nov-2008 31-Oct-2017 28-Nov-2017

Comments (achievements against targets): Achievement: 100% Zvornik added since last ISR.


Baseline Original Target Formally Revised Actual Achieved at Completion


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Target

Increased share of collected solid waste disposed in regional sanitary landfills

Text 72 % of collected waste is not disposed in sanitary landfills

60% of collected waste is not disposed in sanitary landfills

40% of collected waste is not disposed in sanitary landfills

FBiH: 71% of collected waste disposed in sanitary LF; RS: 91% of collected waste disposed in sanitary LF.

BH total: 78%

04-Mar-2010 25-Nov-2008 31-Oct-2017 28-Nov-2017

Comments (achievements against targets): Over-achievement: 130% ISR previously measured percentage of total waste generated that is disposed in sanitary landfills (48%). ICR measures percentage of collected waste that is disposed in sanitary landfills (78%).

Component: The Capacity Building component provided technical and engineering services to participating regions, and financed institutional strengthening and capacity building activities helping the entity-level



Target


Increased support to regional sanitary landfills as evidenced by percentage of local population agreeing to the location of landfill sites

Text 5 landfills selected with consulted population agreeing to site location

9 landfill sites supported by more than 60% of the consulted population

9 landfill sites supported by more than 60% of the consulted population

All selected landfill sites supported by more than 60% of the population.

25-Nov-2008 25-Nov-2008 31-Oct-2017 12-Mar-2017



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Target


Improve regular environmental monitoring as evidenced by increased number of solid waste utilities monitored for their compliance with national standards

Text 25 % of operational utilities monitored (4 utilities)

90 % of operating utilities monitored

90 % of operating utilities monitored

RS: 100% of regional landfills; FBiH: 100% of regional landfills and all closed dumps

04-Mar-2010 25-Nov-2008 31-Oct-2017 28-Nov-2017




Target


Intensified policy debate on hazardous waste management strategy as indicated by increased media coverage

Text No public debate on hazardous waste

Report on final draft of hazardous waste management policy in daily TV/Newspaper/Radio

Conduct a public consultation and at least one report/article on final draft of hazardous waste management strategy in daily newspaper/ or TV/Radio

RS: National SWM Strategy consultations (Strategy includes hazardous waste); FBiH: not achieved

25-Nov-2008 25-Nov-2008 31-Oct-2017 28-Nov-2017

Comments (achievements against targets): Not achieved


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B. KEY OUTPUTS BY COMPONENT

Project Development Outcome 1: Improve the availability of SWM services

Outcome Indicators

1. Increased percentage of households in target area served by formal waste management system

2. Number of people in urban areas provided with access to regular solid waste collection under the project

Intermediate Results Indicators • Increased number of rehabilitated sanitary landfills become

operational

Key Outputs by Component (linked to the achievement of the Objective/Outcome 1)

Component A: Waste Management Investments

• Percentage of households served increased from 25% to 66%

• Number of urban population served under the project increased to 50%

• 7 sanitary landfills operational, Livno expected to be operational by mid-2018.

Component B: Capacity Building

• None

Project Development Outcome 2: Improve the quality of SWM services

Outcome Indicators 1. Improved disposal management system as evidenced by

number of wild dumps closed

Intermediate Results Indicators • Number of utilities with sorting, recycling and/or gas

capturing facilities


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• Increased share of collected solid waste disposed in regional sanitary landfills

• 3. Increased support to regional sanitary landfills as evidenced by percentage of local population agreeing to the location of landfill sites



• 8 utilities have sorting, recycling and/or gas capturing facilities

• 78% of the collected waste is disposed of in a sanitary landfill Component B: Capacity Building

• All landfill rehabilitations undertaken engaged in public participation process with local population.

Project Development Outcome 3: Improve the environmental soundness of SWM services

Outcome Indicators 1. Improved ground water quality at disposal sites as evidenced

by leachate quality

Intermediate Results Indicators

• Implementation of regular monitoring for leachate and dump site surface coverage at operational landfills

• Percentage of regional solid waste utilities complying with national environmental standards

• Improve regular environmental monitoring as evidenced by increased number of solid waste utilities monitored for their compliance with national standards

• Intensified policy debate on hazardous waste management strategy as indicated by increased media coverage



• None


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Component B: Capacity Building

• Regular monitoring for leachate and dump site coverage takes place at all (10) operational landfills

• 7 utilities comply with the national environmental standards

• Some hazardous waste consultations have taken place in RS, none in FBiH

Project Development Outcome 4: Improve the financial viability of SWM services

Outcome Indicators 1. Increased cost recovery rate of participating municipalities

Intermediate Results Indicators

• Implementation of cost recovery plans in solid waste management utilities

• Increased number of established inter-municipal solid waste districts



• All established utilities implement cost recovery plans

• 13 inter-municipal districts established Component B: Capacity Building

• None


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ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION

A. TASK TEAM MEMBERS

Name Role

Preparation

Supervision/ICR

Kremena M. Ionkova Task Team Leader(s)

Karina Mostipan Procurement Specialist(s)

Lamija Marijanovic Financial Management Specialist

Delphine Alberta Hamilton Team Member

Senad Sacic Team Member

Rosanna Nitti Team Member

Ali Reza Abedini Team Member

Esma Kreso Environmental Safeguards Specialist

Ifeta Smajic Social Safeguards Specialist

IGOR PALANDZIC Team Member

Gary Claude Goliath Team Member

B. STAFF TIME AND COST

Stage of Project Cycle Staff Time and Cost

No. of staff weeks US$ (including travel and consultant costs)

Preparation

FY08 18.183 105,523.75

FY09 9.646 27,478.39

Total 27.83 133,002.14


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Supervision/ICR

FY09 .600 1,005.76

FY10 8.668 40,340.16

FY11 20.285 93,170.97

FY12 14.395 52,260.38

FY13 13.113 96,080.79

FY14 11.426 69,321.32

FY15 26.574 69,527.92

FY16 25.192 100,651.45

FY17 20.269 119,180.19

FY18 28.132 122,671.34

Total 168.65 764,210.28

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ANNEX 3. PROJECT COST BY COMPONENT

Components Amount at Approval

(US$M) Actual at Project

Closing (US$M) Percentage of Approval

(US$M)

Component A (Waste Management)

39.5 26.673 68%

Component B (Capacity Building)

2.00 1.117 56%

Component C (Project Management and Operating Cost)

2.00 0.584 29%

Total 43.5 28.374 65%

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ANNEX 4. EFFICIENCY ANALYSIS

Objective of the Analysis

The objective of this analysis is to implement the ex-post financial and economic analysis and asses the financial and economic performance of each individual regional landfill operator from FBiH (Zenica, Mostar, Sarajevo, Livno) and from RS (Banja Luka, Prijedor, Bijeljina, Zvornik) which have been either established or expanded through the Second Solid Waste Management Project (SSWMP) financed by the World Bank and partially through the EU IPA Financing. The development objective of the SSWM for BH has been to improve the availability, quality, environmental soundness, and financial viability of solid waste management services in participating utilities and regions. Under the Project which has been started in November 2008 and which will end in November 2017 the committed amount was USD 40.5 million. In this analysis the financial and economic performance indicators (FRR, NPV, ERR and ENPV) for each regional landfill and the Project as a whole should be explained and compared to same ones from the Project Appraisal where possible, in addition to other financial soundness and stability indicators.

Executive Summary of the Economic and Financial Analysis 1. Ex-post Financial and economic performance indicators (FRR, NPV, ERR and ENPV) for the project as a whole and for most of the regional landfill operators show that the targeted objectives such financial stability, viability and success of the project as a whole has been achieved. For all regional landfill operators from FBiH and RS detailed financial cash flow models were done with similar structure and assumptions which should bring consistency in evaluation and comparable results: a) 16 years period time frame for the analysis until 2028 when the WB loan is maturing (2013-2028 period of cash flow analysis), b) 5% and 6% discount rate for financial and economic analysis respectively in line with the current market and economic environment, c) revenues and costs from the official financial statements included (without amortization costs in line with financial cash flow analysis methodology) with conservative approach in forecasting their growth, d) investments costs into the landfills coming from the WB financing, withour additional investment planned in forecasted period e) monetized measurable economic benefits included in economic analysis along with exclusion of all commercial operative revenues (tipping charges) from the model to get more conservative and robust economic result f) all revenues displayed in net amounts all costs in gross amounts (for more details on all assumptions included in financial and economic cash flow model please refer to chapter 3.1. and 3.2). 2. The SSWM in technical and environmental sense was mostly oriented into introducing the proper leachate and gas control system (Banja Luka, Bijeljina, Sarajevo), expanding the new cells for landfilling in existing regional landfill operators (Mostar, Sarajevo, Banja Luka, Zvornik), closing the wild dumps in some regional areas (Banja Luka, Zenica, Srebrenik, Bosanska Krupa), establishing and building up completely new regional operators (Livno). Economic benefits which have been included in the Economic analysis and calculation of the ERR and ENPV are actually displayed as the prevented environmental costs. Direct positive effect of the Project which could be measured/monetized and included in the analysis as economic benefits are: a) reduce of leachate discharge and its pollution effect on surrounding soil and ground waters by introducing the leachate control systems (LCS) which capture the surface waters and also layers and geomembrane which prevent leachate to pollute the soil (cases of Banja Luka, Bijeljina, Sarajevo) b) In cases of other regional operators where the new cells were built, the process of recirculation of leachate is introduced until full implementation of the LCS which also reduces the leachate discharge and its

46

pollution effect to the almost same degree as the LCS c) reduction of the methane emission – GHG emissions by introduction of the gas control system (Banja Luka, Bijeljina and Sarajevo) which captures and flares the methane into CO2 which does not have the GHG effects d) closing of the wild dumps - where the appropriate layers and geomembrane were built and leachate discharge also prevented. Therefore, the total amount of the economic benefits introduced in the model range in case of avoided costs of contamination of leachate in range from USD 3.5 million in 2013 up to USD 11 million in 2023. On the other hand, economic benefit of gas control system and flaring the methane is much lower and amount to USD 184 K from 2020 onwards (when Sarajevo gas control system is expected to start to operate fully). Table below shows the summary of the economic benefits in USD per year in period under review of the analysis. Table: Economic benefits of the Project taken into account in Economic Analysis (in USD)

It should be underlined that economic benefit of methane capturing and flaring was recalculated into CO2 equivalent where the most conservative CO2 equivalent price of USD 6.73 in the EU Emission Trading System (EU ETS) was applied compared to social price of CO2 which usually goes up to USD 30. More details related to economic benefits assumptions and calculations please refer to chapter 3.2. 3. Based on the detailed financial cash flow models for each of the eight regional landfill operators and by summing up the net cash flow results of the project as a whole, followed by applying the discount rate of 5%, the project achieved NPV of BAM 14.3 million and FRR of 11.9% which is in line with the hurdle rate for the WB projects of 10%. In addition, by adding up the above described economic benefits, excluding the commercial revenues and leaving only real investments and other operational costs of the operators for the forecasted period we have developed the detailed cash flow model for each regional landfill operator and the project as a whole. After applying the social discount rate of 6%4, the economic NPV (ENPV) of the project summed up to BAM 67.3 million and ERR was 25.5% which is robust social/economic rate of return. The table below summarizes the results of financial and economic cash flow analysis for each of the eight regional landfill operators and the project as a whole (FRR, ERR in % and NPV in BAM /USD terms).

4 As suggested by the paper “Discounting costs and benefits in the WB’s Project”, 2016

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Table: Overall results of the Project

4. However, from the overview table it is quite visible that the financial and economic results of the analysis and success of regional operators differs largely. There are some of them which are very sound, stable and successful in any financial aspect and some of the operators which have several packets of financial distress and issues. 5. Therefore, we will briefly summarize the results and key findings of the financial cash flow and creditworthiness analysis for each of the eight operators under the review:

✓ Mošćanica, Zenica the SSWM project brought higher level of financial and economic return on

investment much above the hurdle rate of estimated 10% for the WB projects (FRR of was 29% with NPV of BAM 5.2 million and ERR of 14% in same period in 16y period). Peculiarly, but the ERR and ENPV in case of Zenica are lower than the FRR and FNPV as most of the economic benefits such are: the leachate control system, new cell construction, was implemented in the first phase of SWM project. All in all, according to the conducted analysis the company Regional Landfill Operator - Mošćanica, Zenica is one of the most successful regional operators in BH.

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Table: Ex post Financial Analysis Model for Mošćanica, Zenica

Table: Ex post Economic Analysis Model for Mošćanica, Zenica

✓ Deponija d.o.o. Mostar delivered different results for Financial and for Economic analysis as FRR came below hurdle rate of 10% settling at 6.1%, while ERR reached 21.1% being much above hurdle rate. It should be underlined that FRR is largely skewed downwards due to extremely high negative cash flow in 2013 as base year of the model and year of most intensive investment in amount of BAM 8.5 million in landfill operations. The sensitivity analysis for this landfill also showed that that strongest downwards pressure on the NPV had the scenario of one municipality leaves the regional landfill. On positive note, the stability and profitability ratios analysis underlined the fact that company has preconditions to finance its business expansion by raising additional debt in period ahead, while

49

municipality Mostar also has large potential in increasing debt level (up to BAM 5.1 million). Therefore, the analysis of the company Deponija Mostar d.d. showed that the company is successful despite several packed of vulnerability which emerges from the fact that the company is still in early stages of its operations development (Q3 2014).

Table: Ex-Post Financial Analysis Model for JP Deponija Mostar

Table: Ex-Post Economic Analysis Model for JP Deponija Mostar

✓ Landfill operator “Smiljevići” reported positive FRR but bellow hurdle rate (FRR=0.9%) and negative

ERR of 5.5% for 16y period in the cash flow model, which at first glance ranks the company as one of the negative stories in this project. As the landfill Smiljevici is part of the public company KJKP Rad the result/cash flow of the landfill project for 16 years period were forecasted with key assumption that landfill operator makes 10%-15% of total revenues and costs of KJKP Rad. On the other hand, the financial soundness and credit analysis of the company had to be conducted on the company as a whole. This fact must be considered when assessing the company’s financial performance and results of the conducted analysis.

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Table: Ex-Post Financial Analysis Model for Landfill “Smiljevići”

Table: Ex-Post Economic Analysis Model for Landfill “Smiljevići”

✓ The SSWM project and investment in company DEP-OT Banja Luka d.o.o. can be considered as very

successful with FRR in line with the hurdle rate of 10% while ERR reached high level of 37.7%. Furthermore, according to the financial ratio analysis, the company DEP-OT Banja Luka represents stable and profitable company in every aspect of its performance with financial indicators supporting assessment that the company is able to keep in control and finance its debt and interest coverage ratios in period ahead. Similar to the previous landfills the potential scenario in which one of the municipalities leaves the regional landfill would have the strongest negative impact on the overall financial result of the project (FRR of 1.7%). However, considering all analyzed figures of the financial and economic analysis, the SSWM project and investment in company DEP-OT Banja Luka d.o.o. can be declared as very successful.

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Table: Ex-Post Financial Analysis Model for DEP-OT Banja Luka

Table: Ex-Post Economic Analysis Model for DEP-OT Banja Luka

✓ Net cash flow model of Komunalne usluge a.d. “Prijedor for period of 16y provided weak FRR of 1.9% while ERR rate could not be calculated as the net cash flow of the project was negative for the whole forecasted period. Low FRR is dominantly result of the negative net cash flow of the project in first 4 years of the project (2013 – 2016) as it was most investment cost intensive period with total investment cost. Similar to Sarajevo, the landfill in Prijedor is part of bigger public company and therefore for the purpose of financial soundness and credit analysis, the company as a whole was

52

analyzed. In order to improve its overall business performance, the company should also reconsider its price policy and try to enforce higher tariff level and collection efficiency ratios.

Table: Ex-Post Financial Analysis Model for “Komunalne usluge a.d. “Prijedor

Table: Ex-Post Economic Analysis Model for “Komunalne usluge a.d.“ Prijedor

✓ JP Regionalna deponija” d.o.o. Zvornik is still small regional landfill operator which has been

established during the SWM project back in 2008 although it has started with its core business and landfilling activities only recently in November 2016. With only 7 employees, and with almost no

53

revenues or expenses besides operating ones, the company is still in early stage of its business lifecycle. Therefore, the reported breakeven level of FRR (0%) and ERR of 25.6% must be considered in light of this fact. Due to above mentioned short period of business performance, respectable creditworthiness or sensitivity analysis cannot be evaluated, at least not before two years after the start of the company’s performance (in 2018) as financial ratios in this stage of performance does not provide credible or reliable values necessary for respectable analysis. All in all, the future business and financial performance would mostly depend from the company’s potential to increase participation of the municipalities under the coverage, its annual levels of waste handled and collection efficiency ratio.

Table: Ex-Post Financial Analysis Model for “JP Regionalna deponija” d.o.o. Zvornik

Table: Ex-Post Economic Analysis Model for “Komunalne usluge a.d. “Zvornik

✓ And finally, the FRR of the company “EKO-DEP" doo Bijeljina was estimated to 29.9% while ERR has

reached 34.0% which, at first glance, ranks EKO-DEP d.o.o Bijeljina as one of the most successful stories in this project. However, despite the fact that the project has reported solid financial rate of return based on the net cash flow model of revenues, costs and investments, fundamental financial

54

ratio analysis of the company ECO-DEP Bijeljina points to several serious areas of financial distress which are result of poor cost and liquidity management of the company. From the stability perspective, two points must be highlighted. Firstly, liquidity ratios are very low (bellow 1) which points to the fact that the company is struggling to finance its current liabilities with current assets. And secondly, debt to equity and gearing ratio are indicating very high dependence on borrowing from external sources. Accordingly, the ability of servicing current debt and liabilities of the company is highly questionable which puts negative light on the strong FRR and ERR figures.

Table: Ex-Post Financial Analysis Model for “EKO-DEP" d.o.o Bijeljina

Table: Ex-Post Economic Analysis Model for “EKO-DEP" d.o.o Bijeljina

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1. Ex-post Financial and Economic Analysis of Regional Landfill Operators and Project

1.1. Key common assumptions for the Financial Analysis of the Regional Operators 6. For each of the eight regional landfill operators from FBiH and RS detailed financial cash flow model was done with similar structure and assumptions which should enable consistency in evaluation and comparable results. The assumptions used in the ex-post financial analysis could not be fully matched with those in the Project Appraisal as the financial and operational environment of the landfill operators has changed substantially compared to the time of the Project Appraisal preparation. Therefore, the time frame of the financial analysis was 16 years or up to 2028 (2013-2028) which is the maturity date of the loans provided by the World Bank in this project (2028 is the maturity year for most of the landfill operators, with exception of Livno with 2032). 7. Financial discount rate applied in the model of 5% is used, as the interest rate level decreased due to dramatically lowering of financing costs in era of ultra-expansive monetary policy of the ECB which had its spillover effects on the SEE markets. This was supported also by the CBBH’s data where the average interest rate for the Corporates loan above 5 years maturity and in amount of above EUR 1 million stood at 5.1% on average in 20165 which could be used as proxy for opportunity cost of capital for the model. 8. Investment costs applied in the model are solely investments/costs financed by credit lines provided by the WB and IPA EU funds under SSWM Project disbursed in period 2010-2017 to the regional landfill operators in total amount of USD 31.8 million. In forecasted period 2017-2028 only interest rate servicing costs were included, with no additional investment involved in the model. 9. Total revenues forecasts were done on individual basis depending on the operational saturation level or the annual level of the waste handled by landfill operator compared to the number of municipalities participating in landfilling or number of citizens under the coverage of particular landfill. In case of satisfying level of waste handled by the operator compared to number of citizens under the coverage (calculated on basis 0.8 kg of average waste produced/per citizen daily), operating life cycle and level of development operator, the operational revenues forecast is based on the forecast of the level of waste handled, tariff level and efficiency collection rate which all together provide Tipping charges as most important operative revenue driver for all regional operators. The incremental annual increase of the waste handled is set at conservative 1.8% annually (estimate of the SWWB Team)6 which is the level of waste generation for BH based on same number of citizens, urbanization level as in time of census 2013 and assumption of increase of household income by 4% annually in line with the long-term forecasts for BH (the IMF and EBRD economic forecasts)7. Tariff level per ton of waste was kept at the same level as in 2016 in financial model, as landfill operators kept the tariff level mostly unchanged in historical period (2012-2016). Only in cases where operators in interviews underlined that they would hike the tariff level it was included in model (mostly in cases of early stage developing operators). It should be underlined that most of the operators are working with the tariff level far from economically based cost calculations of business sustainability. Despite the fact, increase of tariff was rarely approved by the line ministries as this issue is socially and economically sensitive. The collection efficiency ratio was increased conservatively and gradually up to 90% as set in Project Appraisal forecasts.

5 http://statistics.cbbh.ba:4444/Panorama/advanced_bs.htm, October 2017 6 “Sector Reform Report” – SSWM Report, November 2017 7 “Economic Scenarios for BH” – EBRD June 2017; “World Economic Outlook”, IMF, April 2017

http://statistics.cbbh.ba:4444/Panorama/advanced_bs.htm

56

10. Total costs forecasts for the regional landfills are estimated also on conservative basis, where the Personnel costs as the most important cost category are based on assumption of the same number of employees as in 2016 (with few exceptions of newly established and small operators Zvornik, Mostar and Livno), with gross personnel costs increasing by 3% year on year on average being in line with the long-term inflation and GDP growth of BH (the EBRD forecasts). The fuel and energy costs are expected to increase by 10% in 2017, followed by 6% increase in 2018 in line with the WEO forecasts and kept at the 3% year on year growth for rest of the period being in line with forecasted growth of global demand according to the WEO forecasts. Other operational and maintenance costs were also included in the financial model being increased in line with the operational level and life cycle of other regional landfill operators who are in more advanced level of development. 11. All revenues are based on net basis (excluding VAT basis) while in calculation of the costs no amortization, depreciation or future reserve costs are included in line with the methodology of the net cash flow financial analysis. At the end, the FRR and FNPV of each operator was done as well as for the Project as a whole. 1.2. Key common assumptions for the Economic Analysis of the Regional Operators

12. For the purpose of broader Economic Analysis and positive economic aspects and effects which the Regional Landfill Operators and the Project as a whole had in BH, several economic benefits of the Project were identified, monetized and included in the net cash flow model for the calculation of the economic rate of return (ERR) and economic NPV (ENPV) of the projects. In addition, all cost cash flows were corrected with conversion factors which include fiscal corrections for traded goods (tariffs, customs, and excise taxes) and non-traded goods (shadow wage effect) bringing the cash flows from market to accounting prices. The SCF was estimated to 0.93 for BH while SWR was estimated at 0.45 - 0.50 for FBiH and RS depending on the labor taxation burden which is different in these two entities (33% in RS, 41.5% in FBiH). 13. In quantifying and calculating the economic benefits of the solid waste management and our model we have started first with identifying potential benefits which an effective solid waste management system provides8:

8 Bassi, S. (IEEP) and al, 2011., “Benefit Assessment Manual for Policy Makers: Assessment of Social and Economic Benefits of Enhanced Environmental Protection in the ENPI countries”. As part of the EU neighborhood policy, these authors drafted a manual to identify and assess the social and economic benefits that a “neighbor” country of the EU could derive from enhanced environmental protection policies that the EU is encouraging it to implement which is also the case of Bosnia and Herzegovina.

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Figure: Benefits of an Effective Solid Waste Management System

Based on this approach we have tried to estimate/monetize some of the above-listed benefits of the project being result of establishing more effective solid waste management system in these eight regions in BH under the SSWM. Our approach was based on calculating the “prevented economic costs” as a result of the project which we equalized with gained economic/environmental benefits. As we had a good quality data in these cases we have calculated/monetized and included following economic benefits in economic model: 1) prevented costs of polluted soil and ground waters and 2) prevented air pollution by increasing environmental standards in solid waste management systems in BH while other benefits such are health benefits 3) avoidance of birth defects, reduced morbidity and improved health levels; social/economic benefits 4) creation of direct and indirect jobs in the waste collection and treatment industry 5) potential for electricity generation and increasing availability of raw materials could not be estimated as faced serious lack of the data for any reliable estimate. 14. Prevented costs of soil and ground waters pollution through setting up more effective SWM system. For calculating and including this economic benefit into the model as a first step prevented quantity of leachate discharge production was calculated which would pollute soil and ground waters without setting up the SWM system in new cells in existing or/and the new landfill operators established under the second phase of the project (Livno, Zvornik). In cases where leachate treatment plants were installed and where the leachate flow in operator is regularly measured (Banja Luka, Bijeljina), the quantity of the leachate prevented (in m3/per day) is measured and reported. However, in most cases leachate treatment plants in regional operators are not fully installed so prevented quantity of leachate discharge production was calculated by following formula: Leachate potential annual production = 0.7 x Footprint of the constructed cell under the Project (m2) x Precipitation level for the city/area (m3/hour) / 1000 (m3/m) After the quantity of leachate prevented to discharge in a year was calculated ((m3/per day) * 365 (number of days in a year)) it was necessary to quantify/monetize the pollution potential of prevented leachate production in cells constructed under the project.

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For this purpose, we have used the methodology of measuring the quantity and quality of the leachate applied in hydrometric and analytic practice across different industries, so that the pollution potentiality of the leachate in different industries could be compared and cross measured by transferring it into “pollution equivalent” or level of pollution produced by one citizens in terms of tocsin and organic substances. This methodology used in international hydrometric practice is also applied by the “Rulebook of the principles and methods for calculating degree of leachate pollution by different pollutant industries which do direct measures of leachate” set by the Federal Ministry of Agriculture, Water Management and Forestry (2009)9. By measuring the quantity and structure of the leachate during 48 hours of measures in period of normal production in different industries, the structure and degree of leachate pollution could be transferred to “pollution equivalent” (PE) or equivalent number of citizens by this formula: PE (ENS) = {Eom; Esm; EN ili EP}max + Etok + Rτ (1) Where:

55

smsm

TE (PE) (2)

xK60

TE om

om (PE) (3)

12

NN

TE (PE) (4)

2

PP

TE (PE) (5)

n

1i 5

iBPK

KPK

xn6,1

1K (PE) (6)

xQ50hLC48

100E tok (PE) (7)

D

TxT

xqxTR

56,1

104

max (PE) (8)

Esm – adversity equivalent of suspended substances (PE); Eom – adversity equivalent of organic substances (PE); Eto k- adversity equivalent of tocsin substances (PE); EN - adversity equivalent of azote compounds (total N); EP - adversity equivalent of phosphor compounds (total P); Tsm – daily saturation of leachate by suspended substances (yּday); Tom – daily organic saturation of leachate put as BPK5 (yּday); TN - daily saturation of leachate by total azote by Kjeldahl (y ּday);

9 Rulebook “Principles and methods for calculating degree of leachate pollution by different pollutant industries which do direct measures of leachate” – the Federal Ministry of Agriculture, Water Management and Forestry, (2007, 2009, 2011).

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TP - daily saturation of leachate by total phosphor (y ּday); K - coefficient between KPK and BPK5, which estimates the bio discharge potential of leachate;

n

1i 5

iBPK

KPK - And sum of KPK and BPK5 u mgּL-1 for all samples

48 h LC 50 - lethal concentration (volume %) of leachate by which 50% of the test organisms die (Daphnia magna method) during 48 hours, n - number of samples; Q - daily flow of leachate (m3ּday); q - average two-hours flow of leachate (m3ּh); Tmax - max temperature of leachate (oC); TD - max allowed temperature of the leachate (30oC); 55 - coefficient which puts saturation of the leachate by suspended substances to PE; this is the value/quantity of the suspended substances produced by one equivalent citizen daily in year (y/day); 60 - coefficient which puts saturation of leachate by organic substances to PE; this is the value/quantity of organic substances (BPK5) which is produced by one equivalent citizen daily in a year (y/day); Corrective factor K and indicator of thermic pollution RT are not included in following cases: K - of the value is less than 1; RT - if the max temperature of leachate is lower than 30oC. In key formula (1) for the PE, values of Eom; Esm; EN or EP are included depending which value is higher. By calculating and transferring the leachate pollutant structure into pollution equivalent (PE), it could then be applied the monetized value of average “pollution equivalent” or by one citizen per day, estimated to BAM 2 by the Decision of the Federal Ministry of Agriculture, Water Management and Forestry10. Namely, in the article IV of this Decision, the Special Water Fee was set in paragraph 2 “at BAM 2 for each PE of leachate produced and released”. Therefore, following the Rulebook and Decision methodology the daily average pollution equivalent of the citizen is set to BAM 2, which can be applied as unit cost for pollution of leachate in different industries. In case of the SSWM Project where the leachate release, discharge and harmful effect on soil and ground waters is prevented by setting up the full leachate treatment plants system (cases of Banja Luka and Bijeljina) or by recirculating the leachate in the newly set up cells (cases of Sarajevo, Mostar, Livno and Zvornik) by applying above-described methodology and unit cost the economic benefits/“prevented costs” of leachate discharge could be calculated.

10 “The Decision of the Special Water Fees in FBiH” – the Federal Ministry of Agriculture, Water Management and Forestry, June 2017

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Based on the data of daily flow of the leachate (m3/per day) in regional landfills received through the questionnaire from operators and pollutants structure of leachate which measured by above described methodology stands on average at 80 PE per m3/day in BH and by applying BAM 2 per PE, prevented cost of soil and ground waters pollution could be calculated11. Hence, by multiplying the daily flow of regional landfill where it is measured (50 m3/day -Banja Luka; 35 m3/day Bijeljina)12 and average pollution potential of leachate per m3 which is estimated at cca. 80 PE x 365 days x BAM 2 we could calculate the prevented economic costs or economic benefit of the set SWM system under this project. Prevented cost of soil and ground water pollution = Leachate flow (m3/day) x 365 (year/days) x 80 PE (average pollution potential in PE) x BAM 2 (unit cost of PE)

15. Prevented costs of air pollution (prevented cost of GHG – methane emissions) through setting up more effective SWM system. The gases released on waste dumps (either managed or unmanaged) are structured from the CO2 and methane (CH4) emissions. The methane emissions have much stronger negative impact from the perspective of its global warming and negative environmental impact, as its global warming power is 25-26 times higher than CO2. As part of the SSWM Project the Gas control and prevention systems were installed in regional landfill operators: Banja Luka, Bijeljina and Sarajevo (Zenica was set under the first stage of the project and was not taken into calculation). In these cases, under the gas control systems the gases from the waste cells are captured and flared where the prevented costs of air pollution are estimated to 100%. For purpose of introduction of this economic benefit into the economic model the monetary value of captured waste gas emissions (methane emissions) was calculated. As a first step we had the methane flow (m3/day) which is measured by the gas control system in each of these three regional operators. The monetary value of the methane emission could be based on recalculating the methane into CO2 equivalent emissions as CO2 has its market and social value. Based on the EU Emission Trading System (EU ETS) the CO2 equivalent is traded at 6 EUR/per ton while social value of the CO2 equivalent could reach even 30 USD/ton. However, more conservative approach has been applied with 6 EUR/per ton as CO2 equivalent price in the calculation. Of course, in this scenario and calculation of the economic benefit after the introduction of the gas system in the landfill and by assuming complete combustion the one will have CH4 completely converted into CO2 versus actual CO2 emitted in any case. So, the economic benefit calculation should take into account the delta (difference) between these two amounts (CO2 amount by converting CH4 into CO2 plus regular CO2 minus regular CO2). However, this “correction” was not done as the methane capture and flaring into C02 is very small anyway in the gas systems of regional landfill operators and would not impact the overall economic benefit result. To recalculate measured methane emission in m3/day and measure it in CO2 tons equivalent we had to apply two conversion factors in our calculation, firstly conversion factor of recalculating m3 into kg

11 Questionnaires prepared for “Sector Reform Report” – SSWM Report, November 2017 12 In case where the exact flow is not measured we calculated the leachate flow potential by the formula (0.7 x footprint of the constructed cell under this stage of project (m2) x precipitation level for that city/area in BH (m/day).

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(1kg=0.678 m3) and also methane to CO2 conversion factor (25 CO2/CH4). Hence, recalculation of methane flow measured in m3/hour into CO2 ton equivalent was done by following formula: CO2 ton equivalent (BAM/year) = Methane flow (m3 CH4/hour) x 24 (hour/day) x 365 (day/year) x 0.678 (kg/m3)/1000 (kg/ton) x 25 (CO2/CH4) x 6 EUR/ton CO2 x 1.95583 (EUR/BAM) By applying this formula, the monetary value of introduced gas controls system as economic benefit could be estimated in BAM per year which was kept the same for the forecasted period until 2028.

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Bibliography

1. Albania Water Sector Investment Project, Document of The World Bank (November 2013)

2. Bassi, S. (IEEP) and al., Benefit Assessment Manual for Policy Makers: Assessment of Social and

Economic Benefits of Enhanced Environmental Protection in the ENPI countries (2011)

3. Central Bank of BH statistics on average interest rates, available at http://statistics.cbbh.ba:4444/Panorama/advanced_bs.htm, October 2017

4. “Discounting costs and benefits in the WB’s Project”, 2016

5. FBiH Law on Debt, Debt Raising and Guarantees (Official Gazette of the FBiH Nos.

86/07, 24/09 and 44/10)

6. “Guide to cost-benefit analysis of investment projects” prepared by Evaluation Unit DG Regional Policy European Commission, 2014

7. Municipal Solid Waste Management in Burkina Faso – Challenges and opportunities, The World

Bank Group (June 2017)

8. Rulebook “Principles and methods for calculating degree of leachate pollution by different pollutant industries which do direct measures of leachate” – the Federal Ministry of Agriculture, Water Management and Forestry, (2007, 2009, 2011)

9. “Sector Reform Report” – SSWM Report (2017)

10. “The Decision of the Special Water Fees in FBiH” – the Federal Ministry of Agriculture, Water

Management and Forestry (2017)

11. The European Bank for Reconstruction and Development (EBRD)., Economic Scenarios for BH (June 2017)

12. The International Monetary Fund – IMF., World Economic Outlook (April 2017)

13. The Kyrgyz Republic Bishkek and Osh Urban Infrastructure Project, Document of The World Bank (May 2016)

14. Wild, J.J., Subramanyam, K.R., Financial Statement Analysis, The McGraw-Hill Education Europe

(2013);

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ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS

MINISTRY OF PHYSICAL PLANNING, CIVIL ENGINEERING AND ECOLOGY OF REPUBLIKA SRPSKA

ABRIDGED IMPLEMENTATION COMPLETION REPORT SECOND SOLID WASTE MANAGEMENT PROJECT

Implementation period 2010 year -2017 year

November 2017

I PROJECT DESCRIPTION

1.1 GENERAL PROJECT INFORMATION

On June 2, 2009 Republic of Srpska accepted to borrow proceeds from World Bank – International

Development Agency (IDA) under Second Solid Waste Management Project in the amount of USD 6.750.000,00 and International Bank for Reconstruction and Development (IBRD) amounting to USD 11.250.000,00. Project Agreement for Republic of Srpska for credit no. 4540 BA and loan no. 7629 BA was signed on June 25, 2009 between Republic of Srpska and representatives of International Development Agency (IDA) and International Bank for Reconstruction and Development (IBRD).

Loan Agreement no. 7629 BA was signed on June 25, 2009 between Bosnia and Herzegovina and International Bank for Reconstruction and Development (IBRD). Financing Agreement no. 4540 BA was signed between Bosnia and Herzegovina and International Development Agency (IDA) on June 25, 2009.

Subsidiary loan agreement for Republic of Srpska and Subsidiary financing agreement for Republic of Srpska, between Bosnia and Herzegovina and Republic of Srpska were signed on October 9, 2009.

1.2 IMPLEMENTATION ARRANGMENTS

The Project has been implemented through Ministry of physical planning, civil engineering and

ecology of Republika Srpska, i.e. Project Management Unit (PMU) which was established within this Ministry. The PIT means the Project Implementation Team established in each Utility managing a landfill site under the Project. Under SSWM Project in Republika Srpska are established 4 Project Implementation Teams: Banja Luka, Bijeljina, Prijedor and Zvornik.

64

PMU Project was progressing satisfactorily and in accordance with agreed procurement plan. The procurement and financial activities were conducted in compliance with the provisions of the legal agreements. The procurement, financial and contracting procedures and processes were done by the PMU and PMU monitored all activities of PITs and cooperated with PITs. All mentioned activities and processes were of generally good quality, reliability, timeliness, and transparency with minor corrective actions needed by the Bank. There were no identified non-compliances with the agreed provisions of the legal agreement, inappropriate practices or questionable decisions/actions. There was no any evidence of corrupt practices. The RS PMU dully performed all obligations in accordance with PAD, Operational Manual, Financial Manual, the Legal Agreements and the World Bank’s Procurement Guidelines. Within the SSWM project, the following activities have been completed by Project Management Unit, in accordance with Procurement Plan approved by World Bank:

- Public campaign was implemented in the Republic of Srpska on built regional sanitary landfills and

improved safer waste disposal.

- Waste Management Strategy of the Republic of Srpska was implemented and monitored by PMU.

Waste Management Strategy in the Republic of Srpska was adopted by RS National Assembly. The

Waste Management Strategy is the main document which assesses the state of waste

management, determines the long-term objectives of waste management and provides

conditions for the rational and sustainable waste management.

- Development of conceptual design for waste management information system- Consultant

prepared Conceptual design for development of data base-software. Conceptual design will be

the basis for development of the Information System which will enable easy access and use for a

larger number of users at the level of individual facility, at the level of local self-government unit,

at the entities’ level and at B&H level. The aim in future is to develop the information system

which should be sustainable in the long run and functional and enable a high degree of accuracy

and reliability of the data, including processing of large amount of data.

1.3 PROJECT LESSONS LEARNED

In spite of the difficulties at the beginning of the project, and once the PITs and PMU management and key staff were in place project implementation proceeded at a fast pace. The all project activities have been carried out in accordance with Procurement Plan approved by the World Bank. The World Bank has been involved in the project, from the very beginning, preparation of the project and implementation, and their assistance has been very efficient and useful. The Bank got involved and directly assisted in solving problems which contributes to successful, implementation of the project. With the Bank’s efforts and support, other donors got involved to support and expand Waste management project in B&H. The Swedish Government through SIDA was implementing 10-milion EUR project to support municipals covered with regional landfills (Bijeljina region and Prijedor region). These funds were finance part of public campaign in both entities aimed at promoting safe and improved waste disposal. Also access to EU IPA funds as support to this project has been very important for waste management in the RS. Regional

RS PROJECT MANAGEMENT UNIT-PMU

65

landfill Banja Luka received EU IPA funds in amount of 3,0 million EUR and additional 1 million EUR was used to finance Site Selection Study and Feasibility Study for regional landfills in BH (in the RS- Gacko and Foca), and Studies were prepared successfully. Regional landfill Banja Luka implemented successfully funds from IPA grant and by the end of July 2016. After analyzing activities of regional landfills that are operational and where waste is deposited we can say that financial effect can be improved in terms of self-sustainability and efficient covering of all costs including repayment of credit in semi-year installments. Concept of municipality association and establishing inter-municipality council covered by regional landfill confirmed this type of association. By signing inter-municipal agreements with defined rights and obligations, regional landfill had to accept entire collected waste from each municipality thus creating preconditions for self-sustainability and repaying credit. To increase financial efficiency it is necessary in future: - to increase percentage of area covered by collecting waste which is now low, in rural areas, in particular. Low level of total waste collected directly affects income and reduces ability of utility communities to operate efficiently, - fee collection rate is different and varies from municipality to municipality which directly impacts on waste deposit payments, - after providing sanitary conditions for waste disposal, price of waste disposal should increase and it is directly linked to volume of total waste deposited. Larger amounts (over 200t a day) ensure lower price for disposal. - built regional landfills in some of the regions will create conditions to build transfer stations. Building of transfer stations will depend on financial funds available for regions which are defined in the Waste Management Strategy of the Republic of Srpska. The SSWMP helped identify the gaps in the sector for future development and support. In addition to infrastructure requirements, the sector needs reforms to improve regulation, monitoring and control.

66

BOSNIA AND HERZEGOVINA FEDERATION OF BOSNIA AND HERZEGOVINA

FEDERAL MINISTRY OF ENVIRONMENT AND TOURISM

[ABRIDGED] IMPLEMENTATION COMPLETION REPORT

“SECOND SOLID WASTE MANAGEMENT PROJECT”

Implementation period 2009 -2017

1. IMPLEMENTATION ARRANGMENTS

For the Federation of Bosnia and Herzegovina, The Project has been implemented through the

responsible ministry Federal Ministry of Environment and Tourism i.e. Project Management Unit- PMU in the Sector for implementation of projects.

The PIT means the Project Implementation Team established in each Utility managing a landfill site under the Project. Under SSWM Project in Federation of Bosnia and Herzegovina are established seven (7) Project Implementation Teams: Mostar, Zenica, Tomislavgrad, Livno, Gornji Vakuf, Bihać and Živinice

2. PROJECT IMPLEMENTATION

During the implementation of the Second Solid Waste Management Project no additional risks have been identified. Furthermore, experience with regard to implementation of SWMP-1 has demonstrated that mitigations measures have been efficient and were applied through project design of the Second Solid Waste Management Project, in particular through criteria to join the project and allocation of project financing based on effectiveness.

The implementation of the project has successfully started in Zenica and Mostar, regions that were included in the first phase of SWMP. Taking into consideration the lesson learned from first phase, the Second Solid Waste Management Project - SSWMP project was designed to give 18 months for the preparation of new regions and then their inclusion in the Project. For this purpose, requested and obtained technical assistance from the EU in the development study of the location and feasibility studies on new regions in FBiH and RS.

The World Bank accepted this support project and was a member of Coordinating committee. Problems came up when the EU canceled the procurement procedure and had to repeat it, so it

took time longer than planned, and the studies were completed by the end of 2012, instead of planned 2010/2011. Adoption of the Study and involvement in the Project took time and new regions were included in the Project in 2014/2015.

Another problem that took time was the long procedure of issuing the required permits, as well as to carry out the transfer of ownership and the repurchase of the state land for landfill location.

For these reasons, in June 2016, three new regions: Gornji Vakuf, Bihać and Živinice were suspended from the project.

Positive results are that the Živinice region managed to collect all permits and in January 2017 was issued a building permit allowing the start of construction of the regional sanitary landfill in the upcoming period.

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3. PROJECT LESSONS LEARNED

PMU staff were experienced and professional with continuation from I phase of SWMP and beginning of the implementation of SSWMP started satisfactory. The all project activities have been carried out in accordance with Procurement Plan approved by the World Bank. The World Bank has been involved in the project, from the very beginning, preparation of the project and implementation, and their assistance has been very efficient and useful. The Bank got involved and directly assisted in solving problems which contributes to successful, implementation of the project. With the Bank’s efforts and support, other donors got involved to support and expand Waste management project in B&H. The Swedish Government through SIDA was implementing 10-milion EUR project to support municipals covered with regional landfills. These funds were finance public campaign in both entities aimed at promoting safe and improved waste disposal. Also access to EU IPA funds as support to this project has been very important for waste management in the FBIH.

➢ EU IPA 2008 assigned 1 million EUR was used to finance Site Selection Study and Feasibility Study

for regional landfills in B&H (in the FBIH 6 Studies: Bihac; Zivinice; Travnik and Gornji Vakuf ), and

Studies were prepared successfully

➢ Regional landfill in Mostar received EU IPA 2010 funds in amount of 2.5 million EUR for

Construction of Recycling facility

➢ EU IPA 2011 SSWMP in Neum, Bos. Krupa Srebrenik and Sarajevo assigned 4.7 mill EUR and results

are relatively good. The project successfully realized in Bos Krupa and Srebrenik as well as in

Sarajevo.

After analyzing activities of regional landfills that are operational and where waste is deposited we can say that financial effect can be improved in terms of self-sustainability and efficient covering of all costs including repayment of credit in semi-year installments. Concept of municipality association and establishing inter-municipality council covered by regional landfill confirmed this type of association. By signing inter-municipal agreements with defined rights and obligations, regional landfill had to accept entire collected waste from each municipality thus creating preconditions for self-sustainability and repaying credit. To increase financial efficiency, it is necessary in future:

➢ to increase percentage of area covered by collecting waste which is now low, in rural areas, in

particular. Low level of total waste collected directly affects income and reduces ability of utility

communities to operate efficiently,

➢ fee collection rate is different and varies from municipality to municipality which directly impacts

on waste deposit payments,

➢ after providing sanitary conditions for waste disposal, price of waste disposal should increase and

it is directly linked to volume of total waste deposited. Larger amounts (over 200t a day) ensure

lower price for disposal.

➢ built regional landfills in some of the regions will create conditions to build transfer stations.

Building of transfer stations will depend on financial funds available for regions

Some very important lessons learned from this implementation should be take into consideration for the future projects.

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➢ Duration of the project implementation has to be planned taking into consideration the long

period of signing and ratification of Project until date of effectiveness ➢ Preparation of projects to be ready for implementation, provision of all permits and good quality

of technical and environmental documentation ➢ Qualified and experienced management staff ➢ Good cooperation between PMU and PITs, as well as World Bank involving and directly assisting

in solving problems which contributes to successful, implementation of the project. ➢ Improvement of technical and environmental monitoring to meet planned achievements

The SSWMP helped identify the gaps in the sector for future development and support. In addition to infrastructure requirements, the sector needs reforms to improve regulation, monitoring and control.

69

ANNEX 6. SUPPORTING DOCUMENTS (IF ANY)

List of Supporting Documents: Federation of Bosnia and Herzegovina, Draft Municipal Solid Waste Management Sector Review: Strategic Directions and Investment Planning up to 2025, July 2017 Ministry of Foreign Trade and Economic Relations of Bosnia and Herzegovina, State of the Environment Report of Bosnia and Herzegovina 2012 Republika Srpska, Draft Municipal Solid Waste Management Sector Review: Strategic Directions and Investment Planning up to 2025, July 2017 World Bank 2008, Project Appraisal Document, Second Solid Waste Management Project, Bosnia and Herzegovina, October 24, 2008 Report No.: 42799-BA World Bank / International Development Authority Loan Agreement, (Bosnia and Herzegovina, Second Solid Waste Management Project), June 25, 2009, Loan No.: 7629 BA World Bank, Implementation Status Reports, various 2009-2017 World Bank, Aide Memoires, various 2009-2017 World Bank 2010, Implementation Completion Report, Solid Waste Management Project, Bosnia and Herzegovina, December 7, 2010, Report No.: ICR00001647 World Bank, Restructuring Papers, various 2013-2017 World Bank, Concept Note for Advisory Services, Solid Waste Management in Bosnia and Herzegovina funded by the Swedish International Cooperation Agency, October 2016 World Bank 2015, World Bank, International Finance Corporation and Multilateral Investment Guarantee Agency Counter Partnership Framework for Bosnia and Herzegovina for the period FY16-FY20, November 14, 2005, Report No.: 99616-BA World Bank, Second Solid Waste Management Project (SSWMP) Ex-Post Financial and Economic Analysis of Regional Landfill Operators, November 2017.

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ANNEX 7 Summary of Project Investments

The SWMP-2 was formulated to fund activities at 8 proposed investment regions. Four sites were in FBiH – Gorazde, Mostar, Zenica and Livno; and four sites in RS – Prijedor, Zvornik, Derventa, Banja Luka. Gorazde and Derventa did not meet the eligibility criteria, as a site could not be agreed upon in both instances. Gorazde was initially to include a municipality from RS which withdrew, leading to a cancellation of the region for investment Throughout the project, additional regions for regional sanitary landfills were investigated, but were excluded for various reasons. These regions included: Tomislavgrad, Gornji Vakuf, Zivinice, Bihac and Neum. The eight regions included in the final project, and their activities are summarized below.

1. Sarajevo

Sarajevo is the largest regional landfill in BH, serving a population of 413 000 people across 9 municipalities. The region is the country’s most urbanized at 88%. The Sarajevo landfill processes approximately 225 000 – 230 000 tons of waste per year. Under the SWMP-2, a new general waste disposal cell was constructed; a recycling yard built and a new construction waste disposal cell built.

2. Banja Luka

Banja Luka is the largest regional sanitary landfill in RS, serving a population 357 000 across 8 municipalities. This landfill processes approximately 90 000 tons of waste per year. With SMWP-2 funding, Banja Luka designed and constructed a new sanitary cell; constructed a gas collection system; purchased additional landfilling equipment; purchased a leachate treatment plant; and upgraded its water and power supply network.

3. Zenica

Zenica serves a population of 337 000 people across 8 municipalities, and processes over 50 000 tons of waste per year. Zenica used the IPA 2008 funding round to obtain funds to complete its feasibilities studies. However, due to delays, these studies were only completed at the end of 2012. As part of the SWMP-2, Zenica funded the remediation, closure and landslide construction for the Sidje wild dump (70 000 square meters).

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4. Bijeljina

The Bijeljina regional landfill serves 150 000 people across 5 municipalities. The SWMP-2 funded the installation of a new leachate treatment plant, the construction a new access road, and the extension of its landfilling capacity. In addition, an excavator and landfill gas collection equipment was procured. Bijeljina now processes over 30 000 tons of waste per year.

5. Zvornik

Zvornik was recently completed as a regional sanitary landfill (2017), and has not yet fully reached its capacity. Zvornik serves 9 municipalities with a total population of 161 000. However, it currently only serves 100 000. Works undertaken as a part of the SWMP-2 include: the construction of the sanitary landfill, a perimeter fence, and equipment to be used for landfill operations.

6. Prijedor

Prijedor is an unsanitary controlled regional landfill that serves 6 municipalities comprising 136 000 people. At present, Prijedor only serves 105 000 of these, and will continue to be incorporate additional municipalities. Under the SWMP-2, Prijedor funded the reconstruction of its access and internal roads and purchased landfill equipment including a bulldozer and compactor. While the design for a sanitary landfill was created, the construction was not implemented under this project. The LTP is planned to be constructed and paid for by the utility. In the interim, leachate is being recirculated until it can be released into the environment.

7. Livno

Livno is a sanitary landfill that serves 3 small municipalities comprising 40 000 people. The SWMP-2 funded the rehabilitation of the existing landfill site into a regional sanitary landfill, and the construction of a perimeter fence around the landfill. While construction is complete, Livno is not presently operational, as it has not yet received its operating permit. The landfill is expected to be operational by January 2018, once the permit has been granted.

8. Mostar

Mostar is a sanitary landfill that serves 180 000 people across 4 municipalities. Utilizing the IPA 2008 round of funding, Mostar completed its feasibility studies. Under the SWMP-2, with funding from IPA 2010, the landfill undertook the following works: construction of a sanitary disposal cell; a wastewater lagoon; construction of an entry-exit zone; the construction of a recycling facility; and the purchase of equipment and machinery. All works were completed by June 2013.

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9. Wild Dumps

While almost 300 wild dumps were closed during this project, three very large dumps were closed under this project – Bosanska Krupa (15 000sqm), Srebrenik (10 000sqm) and Zenica (70 000sqm). Other Several proposed landfill sites had attempted to utilize the SWMP-2 funds, but for various reasons these were not built:

• Bihac: After completing the process of site selection and a feasibility study to rehabilitate the

landfill and create a sanitary landfill, the investment was not concluded because agreement could

not be reached by the participating municipalities.

• Goradze: The proposed regional landfill was to serve municipalities in both RS and FBH. However,

the RS municipalities withdrew from this arrangement.

• Gornji Vakuf: While all preparatory work including an inter-municipal agreement, a feasibility

study and site selection were completed, agreement could not be reached by the regional entity,

and the loan agreement was never signed. As such, the environmental permitting process did not

commence.

• Zivinice: A late inclusion to the project, Zivinice had compiled feasibility studies using IPA 2008

funds. After experiencing numerous permitting and project documentation and preparation

delays, final approval had not yet been granted by January 2017, leading to Zivinice’s exclusion

from the project.

Project Activity

Region Landfill Number of

Municipalities* Total Population Urban Urban %

RS Prijedor 6 136,747 50,954 37%

RS Banja Luka 8 357,595 180,407 50%

RS Zvornik 9 161,958 47,084 29%

RS Bijeljina 5 151,607 40,390 27%

FBiH Sarajevo 9 413,593 363,999 88%

FBiH Zenica 8 337,868 124,457 37%

FBiH Livno 3 40,442 20,458 51%

FBiH Mostar 4 180,218 83,096 46%

52 1,780,028 910,845 51%

*Prijedor, Zvornik and Livno as proposed