PROJECT INFORMATION DOCUMENT (PID)

CONCEPT STAGE

Report No.: AB893

Project Name / SERBIA MUNICIPAL WATER AND SANITATION PR
Region / EUROPE AND CENTRAL ASIA
Sector / Water supply (50%);Sewerage (30%);Solid waste management (20%)
Project ID / P087968
Borrower(s) / SERBIA AND MONTENEGRO
Implementing Agency / Municipal Infrastructure Agency, under MoF
Environment Category / [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined)
Safeguard Classification / [ ] S1 [ ] S2 [ ] S3 [ ] SF [ ] TBD (to be determined)
Date PID Prepared / April 30, 2004
Estimated Date of Appraisal Authorization / November 15, 2004
Estimated Date of Board Approval / June 21, 2005
  1. Key development issues and rationale for Bank involvement

Since the collapse of the Socialist Federal Republic of Yugoslavia, followed by the civil war, international isolation and economic decline, the Republic of Serbia has seen a rapid deterioration in the availability and quality of water supply and sanitation services, and is experiencing a growing number of environmental problems. Deterioration in service delivery has been a major factor in rising public health problems and non-income related poverty. Serbia’s PRSP, which was prepared in 2003, identifies poverty in Serbia as a multi-dimensional phenomenon with “lack of access to a healthy living environment and natural resources, above all clean water and air as the key elements characterising poverty”.

Although water and sanitation systems were well developed in the FRY with 98.5% of the urban and 72.8% of the rural households connected to piped water supply, and 87.5% of the urban and 22.2% of rural households connected to the piped sewerage system, a decade of limited investments, specifically in maintenance, resulted in widespread water quality problems and interruptions in water supply.[1] The 2001 water quality testing by the Public Health Institute of the Republic of Serbia found that 29% of samples did not satisfy physical, chemical or bacteriological standards. In central Serbia more than 40% of samples were bacteriologically contaminated and did not comply with water quality standards.

Municipalities recording the poorest water quality often correspond to those hosting refugees and IDPs, although it is not known whether this is due to prior problems with the water infrastructure or to increased demand on the system. The rate of water contamination is believed to be significantly higher in the rural areas - home to about half of the Serbian population. No water quality monitoring is conducted in the rural areas to confirm the scale of the problem.

While the large water supply systems of Belgrade, Novi Sad and Nis covering a total population of about two million[2] are still relatively adequate in both quality and quantity, the situation in medium-size cities and rural areas is significantly worse. Most are in critical condition, and requiring urgent rehabilitation with system losses often reaching 30-50%. The European Agency for Reconstruction (EAR) estimated the total municipal infrastructure needs to be about €1.79 billion, with water supply, sewage and solid waste accounting for two thirds of the total municipal infrastructure investment needs. This figure is almost four times the total amount of 2001 local government revenues.

The proposed project will support the Government objective of improving quality, safety and reliability of water supply and sanitation services to the population living in smaller municipalities[3]. The project will improve efficiency and operational management of municipal utilities in charge of providing these services, including their corporatization and separation from other municipal services. The Government is committed to the objectives of the project and requested Bank financing for it.

The proposed project is consistent with the Transition Support Strategy (TSS) for the Federal Republic of Yugoslavia (January, 2004) that emphasizes that reform and quality improvement in the infrastructure sectors will be instrumental in accelerating and maintaining growth in Serbia and Montenegro (SAM). It further states that reform in the water and sanitation sectors will need to focus on improving efficiency of municipal utilities in charge of providing these services, including their corporatization and separation from other municipal services. Water and Sanitation sector priorities in both republics should be directed to recovering from the last decade of neglected maintenance, requiring almost no new investment, with emphasis on improving service quality, safety and reliability.

There are currently no Bank financed water supply, wastewater or solid waste management projects under implementation in Serbia. One project - Serbia Danube River Enterprise Pollution Reduction Project (084604), estimated to cost USD 18.85 million - is under preparation (expected to be approved in May, 2005). The project aims to address waste from agro-industrial enterprises with potential expansion of the project scope to include a related set of wastes, hazardous industrial wastes.

A number of donors are active in the sector, with the main focus of their activities on the three largest cities of Serbia. The European Agency for Reconstruction (EAR) is one of the most active donors in the municipal infrastructure rehabilitation. In 2003 EAR made €7.2 million available for financing of sustainable local infrastructure projects through the Municipal Infrastructure Agency (MIA). EAR is also financing a TA contract to prepare a PPP project for water supply and sanitation in Belgrade. EBRD has committed about €60 million to the city of Belgrade for urban infrastructure including water supply. Smaller loans to additional cities with population over 100,000 (Novi Sad, Kragujevac, Subotica) are signed or in the advanced stage of preparation. The German Government, via KfW, has committed a €10.2 million grant for upgrading of the water supply and sanitation systems in Belgrade, Nis, and Novi Sad and an extension of the program is being considered. USAID through it contractors is financing reconstruction of water supply systems in small towns and rural areas. In southern Serbia, UNDP is implementing municipal improvement programs to help municipalities neglected most by the previous regime rehabilitate schools, public and historic buildings, clinics, roads, water supplies, sewerage systems, sports and recreation facilities and the environmental management of solid and liquid waste.

  1. Proposed objective(s)

The development objective of the proposed operation is to improve safety and reliability of the water supply and sanitation services in selected towns and rural areas. In addition, the project will provide technical assistance to various sector stakeholders such as the Department for Water under the Ministry of Agriculture and Water Resources (DoW), the Statistical Office of Serbia, the Association of Waterworks and Public Health Institute to improve overall sector regulation.

  1. Preliminary description

Component A. Water Utility Services Upgrading

The project will support water supply systems rehabilitation and provide technical assistance to local utilities to improve their management and operation. The Municipal Infrastructure Agency (MIA), proposed as the implementing agency for Component A of the project, will select sub-projects on the basis of criteria agreed between MIA and the Bank. Although still young - established by the Government of Serbia in November 2003 - MIA is the most suitable agency to implement the project as its core mandate is to support and advise municipalities on preparation of economically sound infrastructure projects suitable for financing by IFIs. The European Agency for Reconstruction (EAR) has committed €10.5 million for the financing of the technical assistance to the MIA including running cost of the agency for the first two years of operation and the establishment of a fund (€7.2 million), to provide matching-grant contributions to municipal infrastructure projects. The MIA’s staff consists of ten local experts, supported by a team of six EAR financed experts who will work for a period of 24 months.

During project preparation the team will seek confirmation from the Ministry of Finance regarding its financial support to the MIA when EAR funding ends. This commitment will become a part of the project’s legal agreements. MIA’s financial management and procurement capacity will also be assessed during project preparation. In addition to EAR support, the World Bank financed MWSP will further strengthen the capacity of MIA to assist municipalities and local public utilities in scoping, selection and preparation of investment projects and will provide much needed credit to improve services provision.

Components B and C: Pilot Rural Water Supply and Sanitation and Technical Assistance and Project Management

The project is also proposed to finance a pilot rural water supply project in one or two municipalities to develop a cost-effective model for improvement of water supply services in the rural areas. The model could be replicated on a larger scale in other municipalities as a part of a follow-up rural water supply operation. The project will be complemented by technical assistance and possibly limited equipment financing to the Public Health Institute, particularly its regional laboratories, to provide adequate water testing and develop a methodology to expand monitoring to rural areas. Before sub-project implementation, where appropriate, water quality testing will be carried out to establish a baseline which will allow to quantify improvements in water quality due to the investment. In addition, the project will provide limited technical assistance to the Association of Waterworks for a republic wide benchmarking and monitoring program. The project will provide TA to the Statistical Office of Serbia to add a module on access to safe water supply and sanitation in urban and rural areas to the Household Budget Survey. The DoW will be the implementing agency for Components B and C of the project.

  1. Safeguard policies that might apply

Environmental Assessment (OP/BP 4.01)

Natural Habitats (OP/BP 4.04)

Projects on International Waterways (OP/BP 7.50)

  1. Tentative financing

Source: / ($m.)
BORROWER/RECIPIENT
INTERNATIONAL DEVELOPMENT ASSOCIATION / 20
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT / 20
Total / 40
  1. Contact point

Contact: Andreas Rohde

Title: Sr Sanitary Engineer

Tel: (202) 473-6672

Fax:

Email:

Alfiya Mirzagalyamova

P:\SERBIA\INFRA\MunWater\1LENP\Project Information Document - Concept Stage.doc

May 5, 2004 12:44 PM

[1] 2000 Multiple Indicator Cluster Survey II, UNICEF.

[2] Based on 2002 census the population of Serbia is about 7.5 million, about 56% of the population is urban.

[3] The Law on Self Government (2002) defines municipality as a territorial unit comprising both towns and rural areas that represent one single economic continuum.