IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA IDA-36721) ON A CREDIT IN THE AMOUNT OF SDR 14.3 MILLION (US$ 18.0 MILLION EQUIVALENT) AND AN

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank Report No: ICR IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA IDA-36721) ON A CREDIT IN THE AMOUNT OF SDR 14.3 MILLION (US$ 18.0 MILLION EQUIVALENT) AND AN ADDITIONAL FINANCING CREDIT IN THE AMOUNT OF SDR 5.3 MILLION (US$ 8.0 MILLION EQUIVALENT) TO THE GOVERNMENT OF BOSNIA AND HERZEGOVINA Sustainable Development Department South East Europe Country Unit Europe and Central Asia Region FOR A SOLID WASTE MANAGEMENT PROJECT DECEMBER 7, 2010

2 CURRENCY EQUIVALENTS (Exchange Rate Effective December 7, 2010) Currency Unit = Currency Unit = BAM (Bosnian Mark) BAM 1.49 = US$1 US$1.65 = SDR 1 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS BiH CAS CSE CSD CPS EA ECA EDSGF EU FBiH FMET FM FMS IBRD Bosnia and Herzegovina Country Assistance Strategy Communal Service Enterprise Communal Services Departments Country Partnership Strategy Environmental Assessment Europe and Central Asia Economic Development Strategy Global Framework European Union Federation of Bosnia and Herzegovina Federal Ministry of Environment and Tourism Financial Management Financial Management System International Bank for Reconstruction and Development IDA MSWM MTR MUCE NIMBY NPV NGO PAD PIT PMR PMU RS SWM SWMP International Development Association Municipal Solid Waste Management Mid-Term Review Ministry of Urbanism, Civil Engineering, and Environment (RS) Not in My Back Yard Net Present Value Non-Governmental Organization Project Appraisal Document Project Implementing Team Project Management Report Project Management Unit Republika Srpska Solid Waste Management Solid Waste Management Project Vice President: Philippe H. Le Houerou Country Director: Jane Armitage Sector Manager: Wael Zakout Project Team Leader: Vesna Francic ICR Team Leader: Salman Anees

3 BOSNIA AND HERZEGOVINA SOLID WASTE MANAGEMENT PROJECT CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners... 3 Annex 1. Project Costs and Financing... 4 Annex 2. Outputs by Component... 6 Annex 3. Economic and Financial Analysis... 7 Annex 4. Bank Lending and Implementation Support/Supervision Processes... 8 Annex 5. Beneficiary Survey Results Annex 6. Stakeholder Workshop Report and Results Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Annex 9. List of Supporting Documents MAP

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5 A. Basic Information Country: Bosnia and Herzegovina Project Name: Solid Waste Management Project Project ID: P L/C/TF Number(s): IDA-36720,IDA ,TF ICR Date: 12/27/2010 ICR Type: Core ICR Lending Instrument: SIL Borrower: Original Total Commitment: Revised Amount: XDR 19.50M Environmental Category: B Implementing Agencies: FBiH Ministry of Environment and Tourism Cofinanciers and Other External Partners: GOVERNMENT OF BOSNIA AND HERZEGOVINA XDR 14.30M Disbursed Amount: XDR 19.50M B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 05/04/2001 Effectiveness: 10/31/ /31/2002 Appraisal: 03/18/2002 Restructuring(s): Approval: 06/20/2002 Mid-term Review: 06/27/ /01/2007 Closing: 02/29/ /30/2010 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Satisfactory Low or Negligible Satisfactory Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory Quality of Supervision: Satisfactory Implementing Agency/Agencies: Highly Satisfactory Overall Bank Performance: Satisfactory Overall Borrower Performance: Satisfactory i

6 C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Performance (if any) Potential Problem Project No at any time (Yes/No): Problem Project at any time (Yes/No): DO rating before Closing/Inactive status: No Satisfactory Quality at Entry (QEA): Quality of Supervision (QSA): None None Rating D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Central government administration 3 3 Solid waste management Theme Code (as % of total Bank financing) Other financial and private sector development Other urban development Pollution management and environmental health State-owned enterprise restructuring and privatization E. Bank Staff Positions At ICR At Approval Vice President: Philippe H. Le Houerou Johannes F. Linn Country Director: Jane Armitage Christiaan J. Poortman Sector Manager: Wael Zakout Motoo Konishi Project Team Leader: Vesna Francic Seema Manghee ICR Team Leader: ICR Primary Author: Salman Anees Salman Anees F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) (1) Increase the quality, availability and financial sustainability of solid-waste services in participating areas; (2) Increase administrative and technical capacity for solid waste management at the local and Entity level; (3) Improve the cost recovery mechanism of the sector to encourage private sector involvement; and (4) Correct environmental problems and reduce health hazards caused by inadequate waste collection and disposal systems. ii

7 Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1 : Multi-municipal waste management districts established by September 2002 Value quantitative or Qualitative) 4 multi municipal established 6 multi municipal districts established 8 multi municipal waste management district established and included in the project Date achieved 06/20/ /01/ /25/2010 Comments (incl. % achievement) Indicator 2 : 4 regional landfill sites operational and 1 transfer station operating by January 2004 Value quantitative or Qualitative) 0 4 regional landfills operational 6 regional landfills operational Date achieved 06/20/ /01/ /25/2010 Comments (incl. % achievement) Indicator 3 : 20% reduction in the number of wild dumpsites Value quantitative or Qualitative) 0 20% reductions of wild dumpsites 15% reduction of wild dumpsites Date achieved 06/20/ /01/ /25/2010 Comments (incl. % achievement) Indicator 4 : Nearly 60% of solid wastes being disposed of in a sanitary landfill or other environmentally sound manner Value quantitative or Qualitative) 0 60% of disposed waste disposed in environmentally sound manner more than 50% of disposed waste in environmentally sound manner Date achieved 06/20/ /01/ /25/2010 Comments (incl. % achievement) iii

8 Indicator 5 : Value quantitative or Qualitative) Strengthening of appropriate institutions to manage solid waste services Underway Establish PITs in regions/utilities PMU and PITs established; 6 utilities generating income Date achieved 06/20/ /01/ /25/2010 Comments (incl. % achievement) Indicator 6 : Business Plans for future development of waste disposal sites prepared by January 2004; approved by May 2004 Value quantitative or Qualitative) Underway 4 Business Plans to be finalized 4 Business Plans for Utilities completed Date achieved 06/20/ /01/ /25/2010 Comments (incl. % achievement) Indicator 7 : Education and public awareness campaigns under implementation six months after project effectiveness Value quantitative or Qualitative) Underway Public Awareness campaigns at local level still ongoing. Public campaign at central level underway Local education & Public Awareness campaign completed in 5 regions; "NIMBY" campaign conducted in Fed in 2008, 2009 and still underway Date achieved 06/20/ /01/ /25/2010 Comments (incl. % achievement) Indicator 8 : Agreed upon program to achieve gradual cost-recovery system and timetable for its implementation Value quantitative or Qualitative) Underway Cost recovery program prepared in 2 regions; implementation started Cost recovery program prepared in 4 regions; separation program started in 5 regions Date achieved 06/20/ /01/ /25/2010 Comments (incl. % achievement) Indicator 9 : Recycling awarded to either foreign or domestic private firms by 2004 Value quantitative or Qualitative) Underway Recycling pilot project in 1 region prepared Recycling facility installed and operational in 4 regions; contract iv

9 between utilities and private companies for recycling paper, aluminum bottles, plastic and iron Date achieved 06/20/ /01/ /25/2010 Comments (incl. % achievement) Indicator 10 : At least 75% of population in project areas paying regularly for services by the end of the project Value quantitative or Qualitative) Underway 75% of population in 2 operational landfills paying fees for services regularly 70% of population in project areas paying regularly for services Date achieved 06/20/ /01/ /25/2010 Comments (incl. % achievement) Indicator 11 : Wild waste dumps closed and monitoring of groundwater being undertaken regularly Value quantitative or Qualitative) Identification of wild dumps underway Identification of all wild dumpsites in project areas; preparation of programs/wild dumpsites for closure in project areas finalized; Environmental Baselines and Monitoring Plans prepared Identification of 80% wild dumpsites in project areas; Date achieved 06/20/ /15/ /25/2010 Only after identification, closure of dumpsites could be undertaken. Only 80% Comments dumpsites were identified because many other sites were not accessible due to (incl. % the presence of dangerous mines left over from the war. 159 dumpsites cleaned achievement) in three regions. (b) Intermediate Outcome Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Indicator 1 : Rehabilitation of four sanitary landfills in Tuzla Value Rehabilitation of four Rehab. of 3 Rehabilitation of 6 v

10 (quantitative or Qualitative) sanitary landfills landfills completed and operational, 1 landfill under rehab. and final design in preparation for 2 project areas by June 2005 regional sanitary landfills completed Date achieved 05/31/ /01/ /25/2010 Comments (incl. % achievement) Indicator 2 : 40 of wild dumpsites closed by November 2003 Value (quantitative or Qualitative) Complete Complete 32 wild dumps cleaned & closed in BL region, 112 Sar. region and 15 in Zenica region; Knezevo dump was sanitary closed; design for closure wild dump Mezdre finished. Date achieved 05/31/ /01/ /25/2010 Comments (incl. % achievement) Indicator 3 : Acquisition and operation of new collection vehicles Value (quantitative or Qualitative) 3 new collection vehicles and 1 water truck operational; equipment for Acquisition and operation improved of new collection vehicles collection supplied in 2 regions; 1 vehicle washing plant installed and fully operational 11 new collection vehicles and 1 water truck operational; 3 roll off tipper supplied, equipment for improved collection supplied in 3 regions; 3 vehicle washing plant completed Date achieved 05/31/ /01/ /25/2010 Comments (incl. % achievement) Indicator 4 : 8 transfer stations operational by December 2003 Value (quantitative or Qualitative) 0 8 transfer stations operational by December 2003 Design for Transfer stations in Bejeljina defined in final design Date achieved 01/31/ /01/ /25/2010 vi

11 Comments (incl. % achievement) Indicator 5 : Value (quantitative or Qualitative) Fewer transfer stations were needed than thought during preparation of the project. But also even in the regions where stations were needed (such as Bijeljina), due to scare funding these could not be constructed within the first phase. Decisions reached: (a) private sector involvement, (b) performance monitoring, (c) cost recovery, (d) institutional structure, (e) legal instruments, (f) regulatory framework, (g) cost accounting, MIS Cost accounting and MIS under preparation Framework law about solid waste management adopted; by-laws and manuals on solid waste management prepared Cost accounting syst. partially prep. & rev. underway; both Entities adopted law solid waste management (SWM); few bylaws & manuals on SWM prep. & in force; SWM strategies prepared and adopted by both Entities Date achieved 06/20/ /01/ /25/2010 Comments (incl. % achievement) Indicator 6 : Communication activities carries out Value (quantitative or Qualitative) Communications activities initiated in Banja Luka, Sarajevo, Tuzla, and Zenica. Communication campaigns completed in 3 regions Public awareness campaigns completed in all regions; NIMBY campaign conducted in Federation during 2008, 2009 and still underway Date achieved 01/31/ /01/ /25/2010 Comments (incl. % achievement) G. Ratings of Project Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (USD millions) 1 08/19/2002 Satisfactory Satisfactory /24/2003 Satisfactory Satisfactory /22/2003 Satisfactory Satisfactory /10/2004 Satisfactory Satisfactory 0.81 vii

12 5 11/30/2004 Satisfactory Satisfactory /27/2005 Satisfactory Satisfactory /21/2006 Satisfactory Satisfactory /26/2007 Satisfactory Satisfactory /26/2007 Satisfactory Satisfactory /28/2008 Satisfactory Satisfactory /19/2009 Satisfactory Satisfactory /07/2009 Satisfactory Satisfactory /16/2010 Satisfactory Satisfactory /30/2010 Satisfactory Satisfactory H. Restructuring (if any) Not Applicable I. Disbursement Profile viii

13 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal Country background. The Dayton Peace Agreement, which ended the war in 1995, gave Bosnia and Herzegovina (BiH) important distinctive features. BiH was constituted as a country with a State Government holding relatively limited powers, and two largely autonomous sub-national Entities (and subsequently the small autonomous Brcko District). The larger of the two Entities, with two thirds of the BiH population, is called the Federation of Bosnia and Herzegovina (the Federation or FBiH). The smaller is called Republika Srpska (RS). The FBiH is subdivided into 10 cantons, each with its own executive, legislative, and judicial branches of Government. Each canton is subdivided into municipalities. The RS is more centralized and is subdivided only into municipalities. Since early 2001 leading up to the time of Appraisal of the Solid Waste Management Project (SWMP), State and Entity governments were working more effectively together than during any time since Dayton. Economic reform did accelerate in some areas, but it was not as comprehensive as expected. In the face of strong ethnic and vested interest resistance, difficult policy decisions were either delayed or proved difficult to implement. Goals of developing a predictable and coherent investment environment countrywide and a self-sustaining economy were, therefore, still a long way from being accomplished and growth continued to slow down. Some objectives were, nevertheless, achieved, including important steps in State building and strengthening institutions and governance. This resulted in significant progress being made in the stabilization and association process with the EU. Sector background. In 2000, solid waste collection services in Bosnia and Herzegovina covered only about 60 percent of the larger municipalities and a much lower share in rural towns. Institutional and enforcement capacity was weak, and equipment for waste collection and disposal was obsolete and poorly maintained. As a result, significant amounts of waste were discarded in unofficial sites such as wild dumps, roadsides, rivers and mines, posing a direct risk to public health and causing serious environmental problems. Main challenges. Before the war, collection of waste was organized purely at the local level. There was only partial separation of waste collection and recycling. Waste from urban locations was transported to local landfills and dumped, although with limited controls. However, the equipment for waste collection and disposal was mostly obsolete and/or poorly maintained. As a result, waste collection and disposal capacities were unable to keep up with waste production. This led to significant quantities of waste being discarded in unofficial sites posing a direct risk to public health. Waste collected by municipalities was often disposed in official dumpsites that were generally open dumps rather than controlled landfills. Runoff and leachate infiltration from dumpsites were potential hazards for the groundwater aquifers in some areas of BiH that provided the main source of water supply. The most serious problems caused by such dumpsites include the deterioration in groundwater quality, the destruction of vegetative cover, and the proliferation of insects and rodents that bore diseases. These serious public health and environmental problems were worsened by weak institutional and enforcement capacity. 1

14 Furthermore, odors and unsightliness discouraged development in the immediate vicinity of these dumps and ended up being harmful to overall economic development. Rationale for Bank involvement. There was a strong rationale for World Bank involvement. The Bank's primary advantage was that it had the stature and reputation in BiH of being capable of preparing and implementing difficult projects that had major associated policy/strategy issues associated with them. The Bank was seen as an honest broker for facilitating the sharing of multi-municipal landfill sites, involving full participation of both Cantons and Municipal officials and continuous dialogue with the various municipalities. Also, Bank involvement raised the stakes for any possible backtracking on commitments. Through Bank involvement, a sound financial management system was to be set up. Accounts were to be audited annually in accordance with international auditing standards. Furthermore, procurement of goods and services in accordance with the Bank's procurement guidelines could minimize the cost of equipment purchase and installation. Project background. In 2002, the Solid Waste Management Project, supported by IDA funding of US$26 million, was launched. This was the first Bank-financed Project implemented by only one Project Management Unit (PMU) for both the Federation (FBiH) and Republika Srspka (RS). Given the significant environmental improvement in participating areas, the Project was expanded through additional resources, and a new Project was approved to support rehabilitation of six-eight new sanitary landfills by the end of Original Project Development Objectives (PDO) and Key Indicators (as approved) The main objectives of the proposed Project were to: (a) cost effectively improve solid waste services in participating priority areas; (b) increase administrative and technical capacity for solid waste management at the local and Entity level; (c) improve cost recovery in the sector and encourage private sector involvement; and (d) correct environmental problems and reduce health hazards caused by inadequate waste collection and disposal systems. Key performance indicators related to: (a) solid waste disposal (establishment of multi-municipal waste management districts, regional landfill sites, and transfer stations; reduction in the number of wild dumpsites); (b) institutional strengthening (strengthening of appropriate institutions to manage solid waste services, preparation of business plans for future development of waste disposal sites, education and public awareness campaigns); (c) cost recovery (establishment of a cost-recovery system and an agreed program for its gradual improvement; billing and collection statistics); and (d) private sector involvement (service contracts, recycling and selected other joint ventures with domestic or foreign private companies). 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification Not applicable. 2

15 1.4 Main Beneficiaries The Project was expected to benefit the population as a whole through improvements in environmentally sustainable and cost-effective solid waste management services. By the end of the Project, more than 800,000 people (later revised to 1.7 million) were to have access to better solid waste management services. They would also enjoy public health benefits from the closure of wild dumps located throughout cities and villages. In rural areas and in smaller districts, the target population included those living in the vicinity of wild dumpsites, particularly women and children who normally were responsible for waste disposal. The population and, in the long run, the tourism industry were expected to benefit from clean and aesthetically pleasing surroundings. Benefits would also accrue through appropriate planning of future development geared to BiH needs and capacity through the phased approach of medium and long-term plans based on appropriate technology, affordability and environmental protection. 1.5 Original Components (as approved) Component A (Waste Management) invested in rehabilitation of existing disposal sites, wild dump closures, collection infrastructure and support equipment, and transfer stations. This component financed civil works and equipment and accounted for 83.8 percent of total Bank financing. Component B (Institutional Strengthening) included preparation of a Medium-Term Business Plan that outlaid a Government strategic plan for the medium-term development of a Solid Waste Management system. This sub-component also involved development of financial management capacity for the system to operate on a commercial basis, including training related to disposal, landfill operations, closure and design of future landfills. The Institutional Strengthening Component also financed a Public Communication Program and Environmental Monitoring. Component C provided Technical Assistance and Engineering Services. This component accounted for 11.1 percent of total Bank financing and supported the preparation of feasibility studies, financial, environmental and social assessments of landfill sites and provides support for bidding procedures for the investments and services provided under Components A and B. Components D and E assisted with Project implementation through a Project Management Unit (PMU) and also covered incremental operating costs. 1.6 Revised Components The Project Components were not revised. 3

16 1.7 Other significant changes As mentioned above, additional financing in an amount of US$8 million equivalent was approved by the Board of Directors on May 31, The proposed additional credit covered a financing gap due to the higher costs entailed in the rehabilitation of landfills and clean-up of wild dumpsites. The Project objectives of the additional financing were the same as for the original Project. The implementation arrangements of the additional financing remained the same as for the original credit. The additional financing was scheduled to be implemented from 2005 to Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Background analysis. During Project preparation, a thorough analysis of the sector issues and Government strategy was undertaken. The analysis also covered institutional arrangements for waste collection and disposal and made a case for clarifying and strengthening these arrangements. These institutional aspects would later on become critical in embarking on an appropriate solid waste management strategy and for designing the SWMP. The analysis also took into account lessons of experience from other parts of the world. It argued persuasively that municipal solid waste management is often a costly and challenging problem for local authorities to deal with. There is low service coverage, especially in low-income neighborhoods. On the management side there were substantial inefficiencies at the same time that there were insufficient resources for these services. All these elements made for a very useful background analysis that formed the basis for a pragmatic project design. Assessment of Project design. The Project design was satisfactory for a number of reasons. It was (i) flexible, enabling different municipalities to benefit when they were ready for participation; (ii) inclusive, creating high level of local ownership; (iii) incremental (instead of a big bang approach of aiming for full EU Landfill Directive compliance), investments mainly focused on partial improvements of landfill operations making them highly manageable for local stakeholders; and (iv) affordable, increase in operational costs and charges were more manageable. During Project preparation, strong background analysis and attention to lessons of experience led to a five-pillar strategy for solid waste management in BiH. The PAD discussed (i) an integrated, comprehensive strategic planning framework to be adopted at the national and local levels, especially for large cities; (ii) better institutional arrangements in the sector; (iii) efficient operational management; (iv) effective financial management; and (v) attention to improving environmental protection. Given BiH s political environment, one could argue that this was an ambitious strategy but there were elements of the strategy, which were necessary because of the structure of the SWM sector. For example, it is uneconomical to provide sanitary landfills for small population centers. 1 Bosnia and Herzegovina Solid Waste Management Project - Additional Financing (P095382). 4

17 Therefore, SWMP focused on agglomerating municipalities that could be served by regional sanitary landfills. To focus on financial sustainability, emphasis was placed on cost recovery mechanisms even though full cost recovery in public service delivery is a challenge in many service sectors. This was a positive step embed the idea of sustainability from the very beginning. Another element that was important revolved around the fragmented governance structure in BiH and its two entities. An innovative design helped the Project deal with this fragmentation by setting up inter-municipal boards to oversee regional landfills. These boards provided municipalities a forum for evolving a shared response to a common problem and for sharing lessons of experience. Another area in need of attention was to provide greater opportunities for public participation in the decision-making process, especially for facility siting. A key problem in SWM is the location of sanitary landfills. Several Bank-supported projects had suffered time delays as a result of the NIMBY (Not-in-my-backyard) problem, which essentially means that the public wants a certain service as long as its operations are located as far away from their homes and businesses. The Project design largely avoided NIMBY problem by focusing on rehabilitation of existing dumpsites and converting them into controlled landfills. Another way to deal with NIMBY is through early public involvement during preparation. According to some stakeholders, more could have been done for public awareness raising at the preparation stage as opposed to implementation stage. But, except for a couple of sites, the NIMBY problem was largely avoided due to the design of the Project. Government commitment. The Government recognized the need to significantly strengthen BiH's capacity to safely manage its solid wastes. This was identified as a priority in its Economic Development Strategy Global Framework (EDSGF). The European Union (EU) funded preparation of a Nationwide Solid Waste Management Strategy in BiH that was completed in August 2000 and recommended a wide range of technical, institutional and financial upgrading measures over the next years. Different levels of Government remained committed to the Project throughout the implementation period. By developing a legal framework during Project implementation, and by facilitating the development of inter-municipal boards, a key institutional requirement, the authorities showed their serious commitment to the objectives of SWMP. Counterpart funding was also made available and, as will be discussed later, authorities in both FBiH and RS agreed to a second Project as a follow-up to SWMP to maintain the momentum of change in this sector. Interviews with different officials at various levels of Government indicate that commitment to SWMP was high and achievements of the Project were well recognized Risks and mitigation measures. Project design identified several risks including (i) lack of will of some municipalities to participate in a multi-municipal landfill with the different Cantons and municipalities; (ii) public s unwillingness to pay for SWM services; (iii) lack of enforcement and continued wild dumping; (iv) limited financial and institutional capacity; (v) financial management capacity of PMU as well as complex governance arrangements. Almost all of these risks were rated as Substantial. Mitigation measures included continued policy dialogue with different levels of Government, penalties for wild dumping, public awareness campaigns and institutional strengthening through training as well as selection of financial management specialists in advance of Project launch. After taking mitigating actions into consideration, the Project was rated as moderate risk. While the mitigation measures were useful, with the benefit 5

18 of hindsight, the SWMP should have been rated a higher risk given the fragmentation of political space in BiH and the need for cooperation across municipalities and cantons and entities. Cost recovery risks were also important and, as seen during Project implementation, continue to pose a challenge to the sustainability of investments. Fortunately, the importance of reforming this sector to the environment and the economy seems to have strengthened the resolve of different stakeholders. The appointment of a single project management unit for investments in both FBiH and RS appears to have helped reduce the key risk of a complicated governance structure. This appears to have contributed to the success of the Project. The ICR rates quality at entry as Satisfactory. 2.2 Implementation Implementation efficiency. While the overall Project design focused on bringing together different municipalities to benefit from economies of scale, this also presented some challenges for implementation. Solid waste management leads to multiple benefits and beneficiaries can relate to these instinctively. However, the NIMBY problem and the need to develop consensus on placement of landfills as well as cost recovery aspects led to protracted discussions in some instances. Some of this was foreseen as part of the Project s risk framework. Not all Project sites faced these challenges and certainly not to the same degree as, for instance, in Tuzla. These challenges reduced implementation efficiency at least in the early years. Having said that, implementation arrangements and cooperation between the team and the clients allowed for close monitoring of the sub-projects and adequate intervention/guidance where needed. In that sense, implementation was smooth, and obstacles such as NIMBY issues addressed adequately preventing those from blocking project implementation. Public awareness was considered an important aspect of dealing with the NIMBY problem. However, discussions with the task team and the PMU and others revealed that public contact was left mostly to the implementation stage. Furthermore, awareness raising appears to have been more effective at the local levels but needed to be complemented at a higher (Entity) level as well. Nevertheless, a key design aspect helped improve implementation efficiency. This relates to flexibility in the design to support more municipalities as they made progress in meeting the criteria for rehabilitating landfills. This had the effect of rebalancing Project implementation by bringing in additional sites into the Project and taking into account lessons learned from the implementation of the original sites. Implementation delays. In general, implementation progress was good. The Project had a fast start in Banja Luka, Bijeljina, Sarajevo and Zenica in terms of identification of sites and setting up inter-municipal boards and associated implementation arrangements. The latter three sites (along with Bihac) were added to the original sites since they were quick to meet eligibility criteria for participating in the Project. These regions could advance faster than initially foreseen and success was achieved in a relatively short period of time. Sarajevo landfill accomplished excellent operational results, meeting high international standards and functioned as a model for other Project regions. Inter-municipal boards functioned well and municipalities cooperated with each other. Disbursement was initially slow, but increased substantially after the MTR. Even so, implementation was delayed in Tuzla and Livno partly due to resistance of the local community. At the time of preparation of the Additional Financing (May 2005), the risk of unwillingness of 6

19 some municipalities to participate cooperatively was rated as negligible. In light of delays in some regions, this was probably optimistic. However, persistence in seeking solutions that were acceptable to all stakeholders and extensive consultation helped resolve the Tuzla landfill issue and all the money was utilized soon thereafter. By the time of the MTR, key Project targets such as creation of six multi municipal districts and preparation of cost recovery programs in two regions had already been met or exceeded. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E design. The indicators and target values for results monitoring were aligned with Project design and used to monitor outputs under the Project components. While the monitoring indicators were supposed to be outcome indicators, they were essentially output indicators. Nevertheless, these indicators reflected progress that was envisaged under the Project. The targets set by the Project were not overly ambitious but were challenging nevertheless given the base from which the SWMP was starting. By the time of the MTR, the Project was well on its way to meeting its targets despite facing challenges in the early part of implementation. M&E implementation. Project monitoring and evaluation (M&E), including preparing progress monitoring reports was carried out regularly. Target values were identified at Board presentation, and progress was updated regularly. As mentioned earlier, due to some early delays and the need for additional resources, some target values had to be changed. M&E utilization. Monitoring reports were used to measure Project progress. A review of ISRs indicates that the task team regularly highlighted issues for consideration by management. This allowed emerging risks to be raised to the level of management and helped the task team seek guidance whenever required. The PMU also had a good grip on implementation progress by monitoring reports received from project implementation teams at the regional level. 2.4 Safeguard and Fiduciary Compliance The Project triggered Bank safeguard policies Environmental Assessment (OP/BP 4.01). A full Environmental Assessment was carried out. Environmental safeguards. Specific Environmental Mitigation Plans (EMPs) were completed for each site in the regions included in the first solid waste management project. Full Environmental Assessments (EAs) were prepared where the investment required rehabilitation of a landfill. Each of the landfill sites had a technical and design study that reviewed issues such as groundwater quality, surface water quality, soil quality and leachate quality. The studies were prepared by qualified international and local environmental specialists. The Project was in compliance with Bank environmental safeguards. Social safeguards. Project sites included were existing landfill sites which were rehabilitated. The participatory approach utilized during Project preparation laid the foundation for direct participation by primary stakeholders in project implementation. The Social Assessment involved direct consultations with households in areas targeted by the Project, heads of industry and local community groups. The institutional strengthening component of the Project worked directly with local media, community groups and regional and local government entities to work 7

20 collaboratively to inform and educate the public on the need to improve the solid waste management service system and to change practices of wild dumping. A communications strategy was designed and detailed the methods for involving these groups in the implementation of the public information and education campaigns. Fiduciary compliance Procurement. The procurement process was handled in a satisfactory manner (including procurement planning, staffing, filing, and actions/decisions). When considered together with the contract administration/physical inspections, the overall procurement rating is Satisfactory. Financial Management and Disbursement. The Project financial management risk was assessed as Substantial. The recruitment of FM specialists early on, helped reduce this risk. Overall financial and disbursement arrangements for Project implementation were Satisfactory. 2.5 Post-completion Operation/Next Phase Countrywide coverage for a sustainable solid waste management system will require substantial funding for investments. The first Solid Waste Management Project (SWMP), including additional financing, invested US$26 million in six regional landfills. The SWMP-2, a repeater operation to scale-up SWMP will invest US$40 million in six to eight more regional landfills, which will bring BiH closer to achieving full sector coverage. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Relevance of PDO. The PDO remains relevant for BiH s development priorities. BiH identified solid waste management capacity as a priority and the Project contributed to the goals outlined in the CPS for , which prioritizes investments to improve infrastructure and service delivery. The Project supports goals under both CPS pillars: under the first pillar, the Project supports BiH to (i) improve key infrastructure and (ii) strengthen regional cooperation to manage public goods; under the second, the Project will support BiH to improve municipal services delivery and strengthen municipal finance. The Project also responds to the EU-financed Solid Waste Management Strategy recommendations and priorities to establish waste management districts through municipal cooperation, and develop regional landfill facilities that serve multiple municipalities. Furthermore, the Project will contribute to the following higher-level objectives: (i) improve public health and quality of life by reducing exposure to pollutants and disease vectors from solid waste; (ii) improve municipal institutional capacity by establishing upto-date technical and financial solutions for SWM; (iii) enhance environmental policy by improving the scope and depth of SWM strategies and facilitating recycling and waste-reduction programs nationwide; and (iv) improve local governance by enhancing cooperation among municipalities. Relevance of design. Regional sanitary landfills are the backbone of an environmentally and financially sustainable solid waste management system. Shared sanitary landfills provide a 8

21 higher level of environmental protection and are more affordable due to economies of scale and joint cost savings particularly important given the considerable number of smaller municipalities that constitute BiH. In addition, emphasis on cost recovery mechanisms at the design stage helped establish some benchmarks for Project implementation. The SWMP exemplifies good cooperation mechanisms: special agreements were crafted to develop shared transfer and disposal facilities. These inter-municipal agreements include joint decision-making and cost-sharing mechanisms to finance and operate regional landfills. Furthermore, site selection was embedded in outreach and consultation processes with local inhabitants and NGOs. This approach was also used for SWMP-2. In addition, a legal framework for solid waste management began to take shape after the Project was conceptualized. Prior to that, the country only had a strategy in place. Design relevance is rated High. Relevance of implementation. Implementation largely focused on the Waste Management component due to its high priority for Government and importance for environmental sustainability. Technical assistance and engineering services provided critical complementary services. Various training workshops were organized during project implementation. These were attended by representatives of utilities, PITs and PMU. Knowledge sharing in the form of joint annual review meetings with all utilities/pits/pmu was held and a community of practice appears to have taken shape for the purpose of sharing implementation experiences. However, in reviewing the record of Project implementation, the ICR team came away with the impression that more could have been done on raising public awareness given the centrality of the NIMBY problem to solid waste management projects. Discussions with the task team, PMU, and other stakeholders revealed that public outreach could have been initiated during project preparation. Also, the focus initially seems to have been on the technical merits of SWMP and it became apparent during implementation that the softer side, involving stakeholder outreach was just as important. Public awareness campaigns were well designed in some regions (Banja Luka, Bijeljina, Sarajevo, and Zenica). But, raising awareness beyond the local levels could have ensured smoother implementation. In addition, Project documentation has been better at capturing activities associated with landfill rehabilitation as opposed to public outreach. Perhaps it is because landfill rehabilitation is more tangible in terms of funds disbursement and ease of measuring outputs, but public outreach is an enabling tool and will remain important for embedding good practices related to waste generation, collection, and disposal. 3.2 Achievement of Project Development Objectives Overall achievement of PDO. The PDOs have been achieved, and some target values have been exceeded. In line with Project objectives, the quality and availability of solid waste services is much improved. As a result of the Project, there is a legal and institutional framework that underpins further development of the sector. As discussed elsewhere, cost recovery remains a problem but at least now a basis for financial sustainability of regional landfills has been established. With greater awareness of the benefits of SWM services, there is recognition of the need to pay for these services. With the closure of wild dumpsites and tighter enforcement, environmental problems have been addressed to a large extent and health hazards have been reduced. Overall PDO achievement is Satisfactory. In terms of specific PDO indicators, the first indicator related to establishment of regional landfills and reduction of wild dumpsites. Six regional landfills were targeted to be operational 9

22 by the end of the Project. This target was achieved. In addition, eight multi-municipal districts were established under the Project and 10 percent of reduction in wild dumpsites was achieved against a target of five percent reduction. The second PDO indicator related to strengthening appropriate institutions to manage solid waste services, development of business plans, and implementation of education and public awareness campaigns. The Project Management Unit and Project Implementation Teams and multimunicipal boards were established. Four business plans for utilities were completed while local education and public awareness campaigns were completed in five regions. The "NIMBY" campaign was conducted in the Federation in and is still underway. The third PDO related to financial sustainability of utilities supported by the Project. Costrecovery programs were prepared in four regions although admittedly financial sustainability of the utilities will be an ongoing concern. Waste separation program was started in five regions and recycling facilities were installed and operational in four regions. The identification and closure of wild dumpsites was the main focus of the fourth indicator. While the target was for identification of all wild dumpsites, eighty percent were identified in the Project areas. In addition, 32 wild dumps were cleaned and closed in the Banja Luka region, 112 in Sarajevo region and 15 in Zenica region. 3.3 Efficiency The analysis of partial-year 2010 summary financial results of four regional landfills indicates that these regional landfill utilities operate in financially sustainable manner, fully recovering their operating costs including depreciation. However, it should be noted that these are early results from a subset of investments. During meetings with counterparts, financial sustainability of the investments was raised as an ongoing concern. As with other public services, SWM utilities will face challenges associated with financial sustainability, at least in the initial years of operation. In addition to the financial performance assessment of regional landfill utilities, cost effectiveness approach was used to evaluate the efficiency of the Project and to compare the outcome with the assessment at appraisal stage. Based on the per capita investments metric, the Project performed better than expected in most regions. Annex 3 describes the financial and economic analysis of the Project investments. 3.4 Justification of Overall Outcome Rating Rating: The ICR rates the Overall Outcome of the Project Satisfactory. Sector-wide improvements, not to mention reforms, in solid waste management are complex and time consuming. To achieve sector improvements, time-lines up to 10 years are not exceptional. In light of this, the SWMP has been very successful in a complex political environment. The Project was relevant for the sustainable development of Bosnia-Herzegovina and it remains so even today. The SWMP-2 has been approved to expand on the activities of SWMP. The design of the Project was sound and pragmatic. Rehabilitation of existing landfills and bringing together multiple municipalities to benefit from economies of scale were important pieces of a sound strategy. 10

23 As discussed in section 3.2, the PDOs have been met and some targets have been exceeded. Project implementation has not been without challenges but perseverance on the part of stakeholders and dedicated support from the task team ensured the success of the Project. A flexible Project design allowed new regions to participate in the Project as soon as they met eligibility criteria. Therefore, on account of a relevant design, achievement of objectives, and overall efficiency of implementation, the ICR rates Project outcome as satisfactory. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development Not applicable (b) Institutional Change / Strengthening The PDO emphasized strengthening institutional capacity, including cost recovery and raising awareness of the importance of solid waste management services in BiH. On all accounts, progress can be deemed satisfactory. The establishment of inter-municipal structures provides an example of how different levels of Government can work together. In the difficult area of creating a culture of paying for SWM services, even though much more needs to be done, a lot of progress has been made and a basis for full cost recovery in the future has been established. Dealing with the NIMBY problem has made municipal and other authorities much more aware of the importance of participatory processes in developing solutions for the delivery of public services. In these respects, the Project has performed satisfactorily. (c) Other Unintended Outcomes and Impacts (positive or negative) Donors have stepped up to bring in further support and further discussions are taking place; the Bank is seen as the leading party in this sector in BiH and the Project resulted in a successor project. The Bank is serving as a catalyst for securing other donor financing for well-coordinated, high-priority and economically and financially justified, investments. While this last advantage did not come to fruition initially, there is increased donor interest in solid waste management services these days. For example, the Swedish Government, through SIDA, is implementing a EUR 10 million project in support of SWMP to assist municipalities in those regions that have constructed regional landfills (initially, in the regions of Zenica and Bijeljina). A SIDA representative confirmed that the agency would not have participated in SWM if the Bank was not already financing this activity. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops The final implementation support and implementation completion mission was conducted from June 7-11, As part of this mission, an implementation completion workshop was organized at which participants shared lessons of experience related to Project implementation and discussed ways to incorporate these lessons to implement the Second Solid Waste Management Project (SWMP-2). 11