Integrated Safeguards Data Sheet (Updated) DEVELOPMENT Authorized to Appraise Date: December 5, 2002 IBRD Amount ($m):

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized THE WORLD BANK GROUP InfoShop Date Prepared/Updated: 01/10/2003 Section I - Basic Information Integrated Safeguards Data Sheet (Updated) A. Basic Project Data Country: RUSSIAN FEDERATION Project ID: P Project: ST. PETERSBURG ECONOMIC Task Team Leader: Richard L. Clifford DEVELOPMENT Authorized to Appraise Date: December 5, 2002 IBRD Amount ($m): Bank Approval April 29, 2003 IDA Amount ($m): Managing Unit: ECCUI Sector: General industry and trade sector (30%); Lending Instrument. Structural Adjustment Loan (SAL) Other social services (30%); Housing finance and Status Lending real estate markets (20%); Sub-national government administration (20%) Theme: Municipal governance and institution building (P); Municipal finance (P); Legal institutions for a market economy (P) I.A.2. Project Objectives: Background: The break-up of the Soviet Union in 1991 and the transition from central planning to market economy in Russia was difficult Continuing infusion of financial resources into unprofitable State enterprises and economic management indiscipline created high rates of inflation and increasingly unsustainable fiscal imbalances. This led to the August 1998 crisis when Russia defaulted on its domestic and foreign debt obligations. Since 1999, however, the macro-economic turnaround has been remarkable. Real GDP increased by about 3 percent in 1999, about 8 percent in 2000, 5 percent in 2001 and is expected to reach about 4 percent in Inflation declined from about 86 percent in 1999 to about 19 percent in 2001 and is expected to drop to about 14 percent in Excessive dependence on natural resource exports leaves the economy highly vulnerable to external chocks and greater diversification of economic activities will be indispensable for sustaining growth in the medium and longer term. Of critical importance will be the expansion of a more broad-based private sector and increase, in particular the role of small and medium enterprises which, at this point, still remains below the levels of other more advanced ECA countries. Achievements and failures of the Federal Governm1ent are echoed in Russia's 89 Regions (Subjects of the Federation). Regional economic growth over the past decade has been uneven giving way to growing inequality in terms of income per capita, investments, and social indicators. Successfully extending structural reform to sub-national level and reinvigorating flagging regional and local economies constitutes a major challenge for the Federal Government which has put in place an impressive program

2 2 of reforms (Medium-Term Program of Social and Economic Development for ) to reduce poverty levels, achieve economic modernization, develop financial intermediation, improve fiscal efficiency, and reduce regional economic disparities. Sustainable growth of the economy will require: (a) developing and implementing policy and regulatory frameworks that foster private sector development as the main engine of economic growth, (b) improving fiscal management in order to allow local authorities to ensure adequate delivery of public services; and (c) improving the efficiency of funding and management of public economic and social infrastructure. A number of regions are striving to improve their fiscal management and increase their attractiveness for domestic and foreign investors. Prominently among them, St Petersburg, Russia's former imperial capital and a paramount center of culture, arts and education, has been a leader in the drive for reform. Efforts to create the basis for the city's development in the new political and economic context were begun by the Government of the City of St. Petersburg as early as 1996 with the preparation of a Strategic Plan outlining the options for the future development of the city. Designating economic diversification as one of its key targets, the Strategic Plan identified support for new businesses, privatization of City-owned state enterprises, improved land use, and tourism development as the main pillars for the future economic growth of the city and highlighted that the exploitation of the unique opportunities provided by its geographical position and the riches of its historical heritage should be a keystone for the success of the development strategy. ProjectDevelopment Objectives: The St. Petersburg Economic Development Loan (SPB-EDL) will support the City Government of St. Petersburg in its efforts to accelerate the implementation of key elements of the Strategic Plan, enhance the city's prospects for sustainable economic growth, and allow it to more fully exploit its position as Russia's "Window to the West" To this end, SPB-EDL will seek to (a) improve the business climate in St. Petersburg, stimulate the expansion of private sector participation in the local economy, and promote the development of land and real estate markets, (b) strengthen the City's fiscal management and ensure the long-term stability of its fiscal revenue base; and (c) enable St. Petersburg to take greater advantage of its unique position as one of Russia's top centers of culture and the arts and provide the basis for developing tourism as a key element of future economic growth. An additional indirect, yet strategically important goal pursued by the Bank through preparing SPB-EDL, is to develop and test a model of Bank operation in support of structural reform at sub-national level that, in the future, could be replicated elsewhere in Russia or other ECA countries. SPB-EDL builds up on the experience of the recently completed St. Petersburg City Center Rehabilitation Project (Ln RU) and complements the assistance provided to Russia by the Bank through the Fiscal Federalism & Regional Fiscal Reform Loan (Ln RU), the Foreign Investment Advisory Services (FIAS) Surveys, and other operations in the areas of business development, land and real estate markets development, and sub-national fiscal management (see Section D.2: Major Related Projects). SPB-EDL is designed as a hybrid loan for the reasons explained below, (see Section B.4 Strategic Choices). The adjustment component of the loan will address the first two of the above objectives while the investment component will support the third objective. I.A.3. Project Description: The project will include three components: Adjustment Component] City's Budget support (US$ million)

3 3 This component wvill provide budget support to the City Government of St. Petersburg. The funds will be on-lent by the Borrower, the Federal Government, to the St. Petersburg City Govemment in local currency against the implementation by the latter of a series of agreed policy reforms. The reforms aim at (a) improving the business climate in St. Petersburg, stimulating the private sector participation in the local economy, and promoting the development of land and real estate markets, and (b) strengthening the City's fiscal management and ensuring the long-term stability of its fiscal revenue base. The component is designed on the basis of two disbursement tranches. The conditions for the release of the first tranche (USD 40 million) will be fulfilled as a condition for Board Presentation and the conditions for the release of the second tranche will be fulfilled at the latest 24 months thereafter. Investment Component 2 (USS million) The component consists of four sub-components: 1. Sub-component (a) Rehabilitation of cultural assets (US$93.30 nillion?ehe sub-component will finance repair and/or rehabilitation works that will help protect historical buildings of eight major cultural institutions from further physical deterioration, increase the exhibition and activities capacity of the institutions, improve the operational safety and efficiency of the facilities for both visitors and personnel, and provide higher safety of artworks on display from physical damages, theft or other hazards. The projects to be financed under the sub-component are the following: * State Hermitage Museum: Urgent repair and rehabilitation works in the East Wing of the General Staff Building. * State Mariinsky Theatre: Rehabilitation works including repair and/or replacement of internal utility networks in the existing building; replacement of stage machinery and rehabilitation of stage area; and upgrading of commercial services areas. * State Russian Museum: Rehabilitation of two inner courtyards in the Mikhailovsky Palace, reconstruction of the Winter Garden in the Marble Palace; and restoration of the St George Hall and two Corps-de-Gardes (guard pavilions) in the Mikhailovsky Castle. * Peter and Paul Fortress Museum: Repairs of drainage and other utility networks; and reinforcement of the St. Peter and Paul Cathedral foundations. * State Shostakovich Philharmonic Academy: Replacement of lighting, air conditioning, and sound systems; and repair of other internal utility networks. * State Rirnski-Korsakov Conservatory: Rehabilitation of the English Church to its previous use as a concert hall and training facility. * Tsarskoye Selo Palace State Museum: Rehabilitation of the Henrnitage Kitchen and Turkish Baths. * Pavlovsk Palace State Museum: Rehabilitation of the Temple of Friendship. 2. Sub-component (b): Cultural Investment Facility (CIF) (USS7.00 million).the sub-component will help replicate the successful experience of the Cultural Fund which was part of the St. Petersburg City Center Rehabilitation Project. It will provide grant funding to eligible cultural institutions in, and in the vicinity of, St. Petersburg for small-scale investments of up to USD 200,000 equivalent that would help the recipients to: (a) increase own-source commercial revenue, (b) improve the accessibility to cultural assets or activities of the public througiver alia, installation of special facilities for the handicapped, development of outreach programs, and upgrading of public

4 4 information systems; and (c) carry out critically needed small investments for the preservation of buildings and assets including security systems, other protective equipment, and emergency restorative emergency repair works. Specific operational arrangements, including eligibility criteria and selection and evaluation procedures for the facility are detailed in a specific Operations Manual. 3. Sub-component (c) Institutional Strengthening (US$1 50 million)the component will provide technical assistance including training, to two major cultural institutions (State Mariinsky Theater and State Russian Museum) with a view to improve the institutions' capacity to (a) carry out financial management incliding budgeting, accounting, and planning in accordance with international standards, and (b) improve marketing and business development The sub-component would also include the provision of small-scale technical assistance for other institutions, including CIF Grant recipients, in response to needs that are likely to arise during project implementation 4. Sub-component (d) Project Implementation (US$7 6 nullhon).the component will finance: (a) the operating costs of the Project Implementation Unit (FISP) for the duration of the project; (b) the completion of design studies required for the implementation of the works for the State Mariinsky Theater and the State Hermitage Museum, and (c) services of technical specialists for specific aspects of project supervision, including technical expertise in rehabilitation of historical buildings. Summary of Costs Component Indicative Costs Bank-financing % of Bank GoRF (US$M) (USSM) Financing Financing (Us$m) 1. City's Budget Support a. Rehabilitation of cultural assets State Mariinsky Theater State Hermitage Museum State Russian Museum St. Peter and Paul Fortress State Philharmonic State Conservatory Tsarskoye Selo Palace Pavlovsk Palace b. Cultural Investment Facility c. Institutional strengthening Project implementation PIU Operations Design and Supervision Other consultant services Total Project Base Costs Physical Contingencies Price Contingencies Front-end fee

5 5 Total Financing Required L.A 4. Project Location: (Geographic location, information about the key environmental and social characteristics of the area and population likely to be affected, and proximity to any protected areas, or sites or critical natural habitats, or any other culturally or socially sensitive areas.) The project is carried out exclusively within the administrative boundaries of the City (Oblast) of St. Petersburg and is not expected to entail any environmental issues of significance. B. Chleck Environmental Classification: U Comments: The project is a hybrid loan combining a structural adjustment component with an investment component. The adjustment component of the project will help improve prospects for new business formation, contribute to more rational and economically efficient land use through improved zoning and increase the availability of land for new developments through the removal of tax concessions and promotion of competitive market mechanisms for land and real estate. As a result, the project can be expected to have, over time, a significant positive environmental effect as it will,inter alia, encourage existing and largely derelict manufacturing plants, warehouses or other out-of-place businesses to move out of the historic city center and give way to gradual environmental clean up and replacement of environmentally detrimental activities by service oriented activities and residential housing. The investment component will exclusively finance the repair and rehabilitation of existing historic buildings and focus on interior restoration and improvement works. Effects on the environment resulting from construction activities may include dust, noise, and other construction-related local and temporary nuisances such as temporary increase of heavy vehicle traffic. To mitigate such adverse environmental impacts contractors will be required to follow environmentally sound construction practices (including handling of asbestos and other hazardous materials) and include environmental safety requirements into the technical specifications and contracts for civil works. Compliance with such instructions will be closely monitored during implementation. Possible environmental issues arising from activities under the Cultural Investment Facility (CIF) will be addressed through appropriate instructions in the FISP Operations Manual to be submitted to the Bank for review and approval before Board Presentation. In accordance with prevailing Federal Government legislation, environmental management in Russia is a shared responsibility of the Federal Government and the Regions. Environmental reviews and environmental impact assessments are carried out by the Ministry of Natural Resources (MNR) and its deconcentrated units in Russia's seven administrative regions4krugs) and are governed by a legal and regulatory framework that can be considered satisfactory according to a Bank review of June In accordance with the Federal regulations, all works financed under the investment component are subject to mandatory review including an Environmental Impact Assessment (which provides for public participation) and a State Environmental Review by MNR staff or if, advisable, MNR appointed independent experts. Compliance with environmental regulations will be monitored and/or enforced by the North-West okrug MNR branch in St. Petersburg in close cooperation with FISP and relevant City agencies. C. Safeguard Policies Triggered Policy Applicability Environmental Assessment (OP/BP/GP 4.01) C Yes * No. TBD

6 6 Natural Habitats (OP/BP/GP 4.04) ^ Yes * No TBD Forestry (OP/GP 4.36) SYes * No TBD Pest Management (OP 4.09) Yes * No TBD Cultural Property (OPN 11.03) Yes * No TBD Indigenous Peoples (OD 4.20) Yes * No TBD Involuntary Resettlement (OP/BP 4.12) S Yes 0 No TBD Safety of Dams (OP/BP 4.37) S Yes *No TBD Projects in International Waterways (OP/BP/GP 7.50) 5 Yes * No TBD Projects in Disputed Areas (OP/BP/GP 7.60)* S Yes * No TBD *By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Section II - Key Safeguard Issues and Their Management D. Summary of Key Safeguard Issues. Please fill in all relevant questions. If information is not available, describe steps to be taken to obtain necessary data. II.D. Ia. Describe any safeguard issues and impacts associated with the proposed project. Identify and describe any potential large scale, significant and/or irreversible impacts. The adjustment component of the project does not trigger any safeguard policy issues. The objective of the investment component of the project is to protect the buildings of eight major cultural institutions in St. Petersburg from further deterioration, increase the exhibition and activities capacity of the institutions, improve the operational safety and efficiency of the facilities for both visitors and personnel; and provide higher safety of artworks on display from physical damages, theft or other hazards The rehabilitation and restoration works include primarily repair and upgrading of buildings and interior utility networks (electricity, water, heating, a/c, etc.) as well as, in the case of the State Mariinsky Theatre, replacement of the staging machinery. The Cultural Fund will finance small-scale investments of up to USD 200,000 equivalent that would help recipient cultural institutions to: (a) increase own-source commercial revenue; (b) improve the accessibility to cultural assets or activities of the public through, inter alia, installation of special facilities for the handicapped, development of outreach programs, and upgrading of public information systems; and (c) carry out critically needed small investments for the preservation of buildings and assets including security systems, other protective equipment, and emergency restorative repair works. Institutional support provided under the project will help selected institutions improve their financial and administrative management with a view to secure the long-term sustainability of their operations and reduced dependency on Federal Government funding for operation and maintenance. The project will not involve any new construction or the demolition of existing buildings. The project will exclusively deal with existing public buildings, will not require land acquisition or result in involuntary resettlement II.D. I b. Describe any potential cumulative impacts due to application of more than one safeguard policy or due to multiple project component. n/a II.D. I c Describe any potential long term impacts due to anticipated future activities in the project area. n/a

7 7 II.D.2 In light of 1, describe the proposed treatment of alternatives (if required) n/a II.D.3. Describe arrangement for the borrower to address safeguard issues n/a II.D.4. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. The project does not target any specific group of stakeholders and its beneficiary is the city's 4 7 million population as a whole. The program of policy reforms included in the adjustment component is the direct outcome of the Strategic Plan which was prepared in extensive discussion with the various stakeholders interested and the population of St. Petersburg at large. None of the reforms proposed has direct environmental implications and only positive effects in the medium-and longer term. Reforms involving management or divestiture of City-owned real estate deal exclusively with commercial premises and have no direct social impact or adverse effects on housing, or conditions of delivery of public services. The works financed under the investment component are carried out under the auspices of the Ministry of Culture of the Russian Federation and the oversight of the Boards of the institutions which, in a number of cases, include or are advised by experts and representatives of the international art scene, public and private international cultural institutions as well as, the case of the State Hermitage Museum for instance, organizations such as UNESCO. Preparation of the component was carried out with the assistance from experts of the French Government, and in particular, management staff of the Chateau de Versailles. International experts with similar qualifications will be hired by the Bank to participate in project supervision. E. Safeguards Classification Category is determined by the highest impact in any policy. Or on basis of cumulative impacts from multiple safeguards. Whenever an individual safeguard policy is triggered the provisions of that policy apply. [ ] SI. - Significant, cumulative and/or irreversible impacts; or significant technical and institutional risks in management of one or more safeguard areas [ ] S2. - One or more safeguard policies are triggered, but effects are limited in their impact and are technically and institutionally manageable [X] S3. -No safeguard issues ] SF. - Financial intermediary projects, social development funds, community driven development or similar projects which require a safeguard framework or programmatic approach to address safeguard issues.

8 8 F. Disclosure Requirements Environmental Assessment/Analysis/Management Plan Expected Actual Date of distributing the Exec. Summary of the EA to the ED (For category A projects) Resettlement Action Plan/Framework Expected Actual Indigenous Peoples Development Plan/Framework: Expected Actual Pest Management Plan. Expected Actual Dam Safety Management Plan. Expected Actual If in-country disclosure of any of the above documents is not expected, please explain why.

9 9 Signed and submitted by Name Date Task Team Leader: Richard L. Clifford 01/08/2003 Project Safeguards Specialists 1: Project Safeguards Specialists 2: Project Safeguards Specialists 3: Approved by: Name Date Regional Safeguards Coordinator: Jane E Holt 01/09/2003 Sector Manager/Director: Sumter Lee Travers 01/08/2003 For a list of World Bank news releases on projects and reports, click here HCH S#IOWCA g