Documentof The World Bank FOROFFICIAL USEONLY ReportNo: 39952-BA PROJECTAPPRAISAL DOCUMENT ONA PROPOSED GRANT FROMTHE GLOBAL ENVIRONMENT FACILITY TRUST FUND INTHEAMOUNT OFUS$3.4MILLION TO BOSNIA AND HERZEGOVINA FOR A FORESTAND MOUNTAIN PROTECTEDAREAS PROJECT May 8,2008 SustainableDevelopmentDepartment SouthEast EuropeCountry Management Unit Europeand Central Asia Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective February 8,2008 Currency Unit = Konvertible Marka(KM) KM1=US$0.6803 US$1 =KM 1.4699 FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS BiH Bosnia and Herzegovina CAS Country Assistance Strategy CBD Convention on Biological Diversity CBO Community BasedOrganization CFAA Country Financial Accountability Assessment CPS Country Partnership Strategy CRIGG Conservation and Rural Income Generating Grant EA Environmental Assessment ECSSD Sustainable Development Sector Department,Europe and Central Asia Region, World Bank EMP Environmental ManagementPlan EU EuropeanUnion FBiH Federation of Bosnia and Herzegovina FDCP Forest Development and Conservation Project F M Financial Management FMPAP Forest andMountain ProtectedAreas Projects FMIS Forest Management InformationSystem FMR Financial Management Report FMS Financial Management Specialist FMU Forest Management Unit GEF Global Environmental Facility GIS Geographic InformationSystem HCVF High Conservation Value Forest IBTV Igman-Bjelasnica-Treskavica-Visocica mountain complex ICB International Competitive Bidding IPARD Instrumentfor Pre-Accession Assistance for RuralDevelopment IPA Instrumentof Pre-Accession IUCN The International Unionfor Conservation ofNature JICA Japanese International Cooperation Agency M&E Monitoring and Evaluation MAFW RS Ministry of Agriculture, Forestry and Water Resources MAWF FBiH Ministry of Agriculture, Water Resourcesand Forestry MET FBiHMinistry ofEnvironment and Tourism MoFTER State Ministry of Foreign Trade andEconomic Relations FOR OFFICIAL USEONLY MSPCEE RS Ministry of Spatial Planning, Civil Engineering and Ecology MPPE FBiHMinistry of Physical Planning and Environment MTDS Medium-TermDevelopment Strategy NBC NationalBiodiversity Committee NBSAP NationalBiodiversity Strategy and Action Plan NCB NationalCompetitive Bidding NEAP NationalEnvironmental Action Plan NGO Non-Governmental Organization NP National Park NSCESD National Steering Committee for Environment and Sustainable Development NTFP Non-Timber Forest Product O M Operational Manual PA ProtectedArea PDO Project Development Objective PGC Project Guidance Committee PMU Project Management Unit PMR Project Management Report PRSP Poverty Reduction Strategy Paper RS RepublikaSrpska SA Social Assessment SFI State Forest Inventory SGP Small Grant Program SSCADP Small-Scale Commercial Agricultural Development Project SWMP Solid Waste Management Project TA Technical Assistance TORS Terms of References USAID United States Agency for International Development UNDP UnitedNations Development Program WWF World Wide Fund for Nature Vice President: Shigeo Katsu Country Director: Jane Armitage Sector Manager: John Kellenberg Task Team Leaders: David A. Bontempo and Jessica Mott This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. BOSNIA-HERZEGOVINA FOREST AND MOUNTAINPROTECTED AREAS PROJECT CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE .................................................................. 1 1. Country and sector issues .................................................................................................... 1 2. Rationale for Bank involvement.......................................................................................... 3 3. Higher level objectives to which the project contributes .................................................... 4 B. PROJECT DESCRIPTION .................................................................................................. 5 1. Financing instrument ........................................................................................................... 5 2. Project development objective and key indicators .............................................................. 5 3. Project components .............................................................................................................. 6 4. Lessons learned and reflected inProject design.................................................................. 8 5. Alternatives consideredand reasons for rejection.............................................................. -8 C. IMPLEMENTATION ........................................................................................................... 9 1 . Partnership arrangements(ifapplicable) ............................................................................. 9 2. Institutional and implementation arrangements .................................................................. 9 3. Monitoring and evaluation of outcomeshesults ................................................................ 10 4. Sustainability and Replicability ......................................................................................... 11 5. Critical risks and possible controversial aspects ............................................................... 12 6. Loadcredit conditions and covenants ............................................................................... 13 D. APPRAISAL SUMMARY .................................................................................................. 14 1. Economic and financial analyses....................................................................................... 14 2. Technical ........................................................................................................................... 15 3. Fiduciary ............................................................................................................................ 15 4. Social ................................................................................................................................. 16 5. Environment ...................................................................................................................... 17 6. Safeguard policies.............................................................................................................. 18 7. Policy Exceptions and Readiness ...................................................................................... 18 Annex 1: Country and Sector or ProgramBackground .......................................................... 19 Annex 2: Major RelatedProjectsFinancedby the Bank and/or other Agencies ..................25 Annex 3: Results Frameworkand Monitoring ......................................................................... 26 Annex 4: DetailedProjectDescription ...................................................................................... 30 Annex 5: Project Costs................................................................................................................ 39 Annex 6: ImplementationArrangements .................................................................................. 40 Annex 7: FinancialManagement and DisbursementArrangements ..................................... 43 Annex 8: ProcurementArrangements ....................................................................................... 51 Annex 9: Economic and FinancialAnalysis .............................................................................. 59 Annex 10: Safeguard Policy Issues ............................................................................................ $63 Annex 11:ProjectPreparationand Supervision ...................................................................... 65 Annex 12: Documents in the ProjectFile .................................................................................. 66 Annex 13: Statement of Loans and Credits ............................................................................... 67 Annex 14: Country at a Glance .................................................................................................. 69 Annex 15: IncrementalCost Analysis ........................................................................................ 71 Annex 16: STAP RosterReview ................................................................................................. 77 Map IBRD 36061 BOSNIA AND HERZEGOVINA FOREST AND MOUNTAINPROTECTED AREAS PROJECT PROJECT APPRAISAL DOCUMENT EUROPE AND CENTRAL ASIA ECSSD Date: May 8,2008 Team Leader: Jessica Mott Country Director: Jane Armitage Sectors: Forestry (5O'Xo);Central government Sector ManagerDirector : John Kellenberg administration (50%) Project ID: PO79161 Themes: Landadministration and Environmental Assessment: Not Required management(P);Other environment and Lending Instrument: Technical Assistance natural resources management Loan (P);Environmental policies and institutions (S);Rural non-farm income generation (S);Other public sector governance (S) Global Supplemental ID: PO87094 Team Leader: Jessica Mott LendingInstrument: Specific Investment Loan Sectors: Forestry (50%);Sub-national Focal Area: B-Biodiversity government administration (25%);Central Environmental Assessment: Partial government administration (25%) Assessment Themes: Biodiversity(P);Other environment SupplementFully Blended?: No and natural resourcesmanagement (P);Environmental policies and institutions (S);Participation and civic engagement (S) Project Financing Data [ 3 Loan [ ] Credit [XI Grant [ ] Guarantee [ 3 Other: For Loans/Credits/Others: Total Bank financing (US$m.): US$3.4 million ProDosed terms: Grant BORROWEIURECIPIENT Global Environment Facilitv (GEF) 2.90 0.50 3.40 Local Communities 0.10 0.00 0.10 GLOBAL ENVIRONMENT - Associated 1.so 0.70 2.50 IDA Fund Total: 7.30 1.20 8.50 Borrower: Ministry of Finance and Treasury Sarajevo Bosnia and Herzegovina ResponsibleAgency: FBiH Ministryof Environment and Tourism Bosnia and Herzegovina I RS Ministry of Civil Engineering, Physical Planning, and Ecology Bosnia andHerzegovina Project implementation period: Start November 1,2008 End: October 31,2012 Expected effectiveness date: October 31,2008 Expected closing date: April 30, 2013 Does the project depart from the CAS incontent or other significant respects? Re$ PAD I.C. [ ]Yes [XINO Does the project requireany exceptions from Bank policies? [ ]Yes [X]No Re$ PAD IKG. Have these been approved by Bank management? [ ]Yes [XINO I s approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated"substantial" or "high"? Re$ PAD III.E. [ ]Yes [XINO Does the project meet the Regional criteria for readiness for implementation? Re$ PAD IKG. [ [ No Project development objective Re$ PAD II.C., TechnicalAnnex 3 The project development objective (PDO) is to strengthenthe institutional andtechnical capacity for sustainable PA and natural resourcemanagement, and expand the BiHnetwork of forest and mountain PAS. Global Environment objective Re$ PAD II.C., TechnicalAnnex 3 Becausethe PDO i s consideredboth local and global innature, it i s also is also consideredto be the global environmental objective for purposes of GEF consideration. Project description [one-sentence summary of each component] Re$ PAD II.D., Technical Annex 4 Component 1: Protected Area Development (will support PA managementplans, operations, assessments, and facilities development inexisting and new PAS. Sub-component 1a): PA ManagementPlanning. The project will finance development and implementation of new PA plans for the two existing National Parks, for two existing forest reserves and for the new NPs inUna River and IBTV. Inaddition, the project will undertake new feasibility studies to examine the options for expansion of existing andpossible new protected areas. Sub-component 1b: Ecological and PA Management Assessment. The project will support for the ecological assessments and periodic assessment of PA managementeffectiveness. Sub-component 1c): PA Facilities. The project will support new infrastructure, and limited small-scale building rehabilitation, necessaryfor improvingthe operations of existing PAS,and for establishing the newly createdprotected areas, e.g. trail improvements, new trail creation, signage, resting places, park boundary markings, visitor entry booths, etc. Component 2: Capacity and Support for Biodiversity Conservation will focus on strengthening the institutions responsiblefor planning, establishment, and managementof PAS. Sub-component 2a): Institutional Capacity Development. At the PA-level training and technical assistance will focus on building competencies inkey areas including: ecosystem-based management focusing on adaptive management: integration of ecological, economic and social aspects, and sustainability; businessplanning emphasizing financial sustainability and marketing of PAs as quality destinations; and field-level skills inareas such as patrolling, community engagement, visitor managementand interpretation. , Sub-component2b): Public Awareness Programs. The project will support the development and implementation of an outreachprogram to raise public awareness for biodiversity conservation and PAS. Sub-component 2c): Project Management-andProject Monitoring, Limitedfinancing will be provided for project managementand associatedoperating costs, meetings of the Project Guidance Committee, andproject monitoring. Component 3: Local Initiatives inBiodiversity Conservation will support selected grants for biodiversity conservation efforts by local stakeholders which promote improved naturalresource management and generate economic benefits to local communities involved inprotected areas management. Which safeguardpolicies are triggered, ifany? Re$ PAD I K F., TechnicalAnnex 10 OP 4.01 Environmental Assessment; OP 4.04 Natural Habitats; OP 4.12 Involuntary Resettlement; OP 4.36 Forests; OP 4.04 Natural Habitats. Significant, non-standardconditions, ifany, for: Re$ PAD III.F. Board presentation: None Loadcredit effectiveness: The GEF Grant Agreement betweenthe World Bank and the Recipient, a Project Agreement betweenthe World Bank and an Entity, and a Subsidiary Agreement betweenthe same Entity and the Recipient (as satisfactory to the World Bank) have been executed, and there is evidence that the GEF Grant Agreement, the Project Agreement and the Subsidiary Agreement %reduly authorized or ratified and legally binding on the parties inaccordancewith their terms. Covenants applicable to project implementation: Disbursement Conditions For each Entity, a Project Agreement betweenthe Entityandthe World Bank has been executed, a SubsidiaryAgreement betweenthe Recipientand the same Entity has beenexecuted, and an opinionhas been furnishedto the World Bank statingthat the ProjectAgreement and SubsidiaryAgreementhave beenduly authorizedor ratifiedby the Entity andthe Recipient,as the case maybe, andare legallybindinguponthem inaccordance with their respectiveterms. There will be no withdrawals for paymentsmade prior to the date ofthe Grant Agreement, except for withdrawals for expendituresmade on or after March 15,2008 up to an aggregate amount not to exceed $100,000 equivalent for Categories 1 and 3 ofthe Project. I FinancialManagementand ReportingCovenants The State Ministry of Finance shall appoint an independentauditor by January 31 of each year and provide an audit to the World Bank by June 30 of each year. The Entity PMUs shall prepareand submit to the World Bank quarterly interim financial reportswithin 45 days after the endof each quarter. The Entity PMUs shall prepare and submit to the World Bank semiannualproject progressreports by August 15 and February 15 of each year, and a draft mid-termreport by September 30,2010 inaccordance with guidelinesacceptableby the World Bank. ImplementationCovenants The Recipientshall cause the Entitiesto implementthe project inaccordancewith the provisions ofthe FinancialManagementManual, the Guidelines for Local Initiativesin BiodiversityConservation, the Access RestrictionProcess Framework, and the Environmental ManagementPlan, and shall not amend or waive or permit to be amended or waivedthese except with prior written approval ofthe World Bank. The Recipientshall cause the Entitiesto maintainPMUs with terms of reference and resources satisfactory to the World Bank, and with competent staff inadequate numbers. The RS shall appoint financial management andprocurementstaff for the MCEPPE PMUwithin one monthofprojecteffectivenessto carry out fiduciary servicesfor FMPAP. The Entities shall providedomestic budgetfinancingfor the projectPASandPMUs at levels satisfactoryto the World Bank. No less than one monthafter the effectivedate, the Recipient shall cause the Entitiesto appoint representativesfrom local government,the private sector and non-government organizationsto the Project Guidance Committeeas satisfactoryto the World Bank. The Entity environment ministriesshall designate an M&E focal point within three months ofproject effectivenessto coordinateM&E activitiesacross PASand with other governmentagencies. The Recipientshall apply inaccordance with arrangementsagreed with the World Bank the ProtectedArea ManagementEffectivenessTrackingTool for project-supportedPAS. A. STRATEGIC CONTEXT AND RATIONALE 1. Countryand sector issues 1. Land Use. Bosnia and Herzegovina (BiH), with a landarea of 51,000 km2and an estimatedpopulation of 4.1 million, is endowed with internationally recognized richbiodiversity assets. About 50% of the country i s covered by forests and 25% by pastures. It i s mostly hilly and mountainous, with only 5% of territory classified as plains, 24% as hills, 29% as Karst (irregular limestone terrain) and 42% as mountains. 2. Economic Role of Natural Resources. About 2 million people (54% of BiH's population) live inrural areas, and for them forest and mountain ecosystems serve as an important source of subsistence, employment, energy and recreation. Furthermore, since BiH has a rural population density (43 persons per square km) which i s lower than any of the other Balkan countries, sound management of its "production landscape" values (forest and grassland management) can provide income for local people while also maximizingenvironmental services. 3. BiodiversitySignificance. BiH i s at a geographical cross-road and includes5 types of climate, 3 agro-climatic regions, and multipleprovinces, landscape types, and biotopes. BiH covers three globally significant ecosystems and several smaller-scale globally important sites. The country's richbiodiversity includes over 5,000 confirmed taxa of vascular flora, including 450 of which are endemic to BiHonly. For several taxonomic groups (e.g., lichens, mosses, algae, fungi, and bacteria) comprehensive surveys do not exist, but available data indicate these groups are also highly diverse. BiH's forest resources are among the richest inEurope with a wide variety of coniferous and deciduous species. The country's large blocks of forests maintain ecological integrity, river dynamics, and large carnivore dispersion between Central and South- East Europe. At least thirty-two species of animals and plants found inBiHare on the 2002 IUCNRedList of threatened species. Keystone species include bear, wolf and river otter. Interesting flagship species are bats, of which several are considered invulnerable status. 4. ProtectedArea Coverage. It is estimated that at 19%, BiHhas the highest proportion of threatened plant species of any Europeancountry, and yet less than 1% of its land i s set aside as PAS. Currently only 0.55% of the territory i s formally protected -the lowest level inEurope - comparedto the regional average of 7%. Broad consensus to expand the network ofprotected areas (PAS)exists among stakeholders at all levels inboth Entities. Key ministerial officials, as well as local governments, and numerous civil society organizations, are committed to developing a system of PASwhich would protect key biodiversity and cultural assets, as well as providingnew income opportunities for local residents. However, civil society organizations working on environmental issues are relatively weak. Furthermore, there is little experience with participatory approaches to sustainable landscape management. 5. Post-Conflict Context. The conflict associatedwith the breakup of the former Yugoslavia, between 1992 and 1995 caused heavy damage to natural resources-the direct damage to forests and associated sectors is estimated at US$2 billion. A minimumof 200,000 hectares became contaminated by landmines, resulting inoverexploitation of some rural areas and abandonment of others. Subsequentto the conflict, poverty, inadequate land-useplanning, as well as limitedcapacity of local institutions and lack of awarenessof conservation issues, have contributed to unsustainablelanduse practices and habitat change. Inthis context, the 1 conservation of globally significant natural resources has to take into account economic development considerations. 6. GovernmentStructure. As a result of the DaytonPeace Accords (1995), inaddition to central government authority at the `state'level, Bosnia-Herzegovina (BiH) consists of two Entities - the Federation of Bosnia andHerzegovina (FBiH), and the Republika Srpska (RS), and a separate territory of Brcko District of BiH.The Entitieshave separate administrative and legislative bodies. Inmost areas of natural resources management, the Entities have responsibility for creating and implementing all relevant laws. FBiHdelegates some authority and responsibilities to the cantonal level. 7. Allocation of Responsibilitiesfor ProtectedAreas. Responsibilities for PA planning and muchof their oversight rests with the Entityministriesincharge of environment - the Ministry of Environment and Tourism (MET) inFBiH, and the Ministryof Spatial Planning, Civil Engineering and Ecology (MSPCEE) inRS. Inthe FBiH the Ministry of Physical Planning is responsible for preparing spatial development plans. Four types of PAs are defined:(a) nature protection areas, (b) national parks, (c) natural monuments and (d) landscapeprotection areas. Entityenvironmental ministriesprovide oversight for the first two PA categories (nature protection areas and national parks), with the right to delegate specific responsibilities to other institutions. Management ofthese two types of PAS, however, i s primarily carried out by specialized public enterprises. Incontrast, for natural monuments and landscape protection areas oversight and managementresponsibilities rest with a variety of other institutions (including Cantonal Ministries incharge of Water Management and Forestry; Municipalities; NGOs; and others). Where such PASare located within public forests, public forest enterprises (inthe RS, the enterprise associatedwith Entity Ministriesof Agriculture, Forests, and Water Resources, and inFBIH, enterprises associatedwith cantonal forest offices) are responsible for maintaining conservation status. 8. PA Financing. ExistingPAShave beenunder-fundedand largely self-financed, relying on the generation of revenues from various activities. Historically, the largest portionof funding (between 60-90%) has come from sales associatedwith selective thinning of forests. While existing national parks have progressively reducedthe total volume of forest thinning, inthe absence of significant revenues from non-consumptive sources, this is likely to remain an important revenue source for the mediumterm'. Other revenue sources from forest products include fees for grazing, gathering of non-timber forest products (NTFPs) and hunting (generally less than 10%). National parks do obtain some budget support from government authorities, and the level of funding is likely to increaseinthe future. InRS, it is expectedthat Entity budgets will provide for nearly 100% ofpark operating and investment costs. InFBiH,the Ministry of Finance i s committed to long-term financing o f new PA operationsand investments, but final levels will only be determinedafter formal PASestablishment. The establishment of Una as a national park i s included inthe FBiHbudget for 2008. Tourism i s also an important revenue source (between3-25%) for existing national parks. That said, tourism revenueswill continue to be insufficient to cover all operational expenditures, muchless new investments. World-wide experience demonstrates that PASrequire government budget support to operate. I Inthe RS, new laws are nearly completed which will change the incentivestructure by convertingthe managementbodiesfor nationalparks from public enterprisesto "public institutions". This new status will channel revenue from thinning directlyto the Entity-level (thus restrictingthis as a source of financingPA operations). The status also provides a revisedgovernance structurethat will represent a wider rangeof stakeholder interests. 2 9. GovernmentStrategy and Plans. BiHratifiedthe UnitedNations Convention on Biodiversity Conservation in2002. With support of the UnitedNations Environment Program - Global Environment Facility (UNEP-GEF), Bosnia-Herzegovina i s developing its National Biodiversity Strategy and Action Plan (NBSAP), which includes a national plan for PAS,and is expectedto be completed in2008. A government-sponsoredSub-committee for Biodiversity, through a Working Group composed of technical professionals from government ministries, universities and the private sector has guided the NBSAP preparation. The involvement of NBSAP committee members inthis preparation work has ensuredconsistencybetweenthe proposedproject design and the PA plan. Collaboration betweenthe project and the NBSAP would continue during project implementation, especially through capacity building of Entity ministerial staff and involvement of the Sub-committee for Biodiversity inproject guidance. 10. Selection ofproject Areas, The selection of areas for inclusion inthe Forest and Mountain ProtectedAreas Project (FMPAP) was made through a comprehensive and participatory consultation process and reflects a strong technical consensus on priorities. Four areas are already official PAS. Another two areas, Igman-Bjelasnic-Treskavica-Visocica (IBTV) mountain complex, and the UnaRiver, have completed feasibility studies and are expectedto be legally proclaimed as national parksin2008 and early 2009 respectively. The proposedproject also includesa feasibility study for Prenj-Cvrsnica-Cabulja-Vranan important site inthe Dinaric Alps, which may subsequently be funded under the project. 2. Rationale for Bank involvement 11. WorldBank Involvement in BiH ForestAreas. The Bank has beencontinuously involvedinthe natural resources/environmentsector since 1998. From 1998 to 2003, a Forestry Project, financed by the International Development Association (IDA), the EU, and Italian and Norwegian governments, focused on recovery of the forest sector, but also helpedto improve the protection of forest ecosystems. A follow-up project, the Forest Development and Conservation Project (FDCP) supports implementationof reforms inforest organization and management. It includessupport for landscape approachesto forest planning and managementthat incorporate improved information systems, conservation values and stakeholderengagement. It has four components: (i) acceleratingthe implementation of new legal, institutional and economic frameworks, (ii) development of a Forest Management InformationSystem and a State Forest Inventory (iii) promoting biodiversity and forest conservation (iv) project management. 12. A US$3.74 million equivalent IDA Credit for FDCP approved in2003 and extended with an additional IDA Credit of US$3.35 million equivalent in 2007 until late 2010, i s financing the first, second and fourth components. An US$780,000 equivalent Italian Grant (2003-2007) for FDCP financed the third (biodiversity) component, includingmost of the preparation studies for the Forest and MountainProtectedAreas Project (FMPAP), as well as other inputs for the NBSAP. The FMPAP preparation studies, which are listed inAnnex 12, included generic frameworks (for environmental managementplans, social assessments including participation plans, feasibility studies, and PA managementplans) which can be applied to any proposedPA investments, as well as site analysis specific to FMPAP. Other biodiversity studies supported 3 under FDCP which were not a specific part of FMPAP preparation (e.g., status of specific species, impacts of hunting on resource use) are also relevant to FMPAP. 13. Other RelevantBank and DonorActivities. The World Bank/GEF-supported Neretva and Trebisnjinica Management Project, will complement activities inforest and mountain ecosystems. Inaddition, the World Bank has wide regional experience inGEF biodiversity projects and forestry operations, includingthe Croatian Karst Ecosystem Conservation Project, which includes similar andnearby landscapes,Other donors active inforest development and biodiversity conservation include the UnitedState Agency for International Development (USAID) the UnitedNationDevelopment Program (UNDP), Japanese International Development Agency (JICA), the EU, the World Wildlife Fund(WWF), and the International Union for Conservation ofNature (IUCN). Through its lead role inthe forestry sector, the Bank has and will continue to mobilize donor support for biodiversity conservation inBiH.On the broader rural agenda, the local initiatives grants under the project will build technical skills for activities eligible for EU funds under the Instrument for Pre-accessionAssistance for Rural Development (IPARD) program, and thus complement the IDA-financedAgriculture and Rural Development Project. 3. Higher level objectivesto which the projectcontributes 14. Recipient'sObjectives. The proposedproject will support Government efforts to address threats to biodiversity, promote ecosystem management, and expandthe PA system to a level commensurate with local needs and regional averages. The Project will directly support implementation of the proposedNationalBiodiversity Strategy and Action Plan (NBSAP) describedabove. Project activities also support the Government's MediumTerm Development Strategy by: (a) creating conditions for sustainable and balancedeconomic development and promoting poverty alleviation through improved use ofPAs for local livelihoods and tourism;, and (b) supporting the acceleration of EUintegration through support to the Government in meeting the EUnature and biodiversity policy (Natura 2000) requirements.Preparationand implementation of community-based initiatives will also buildtechnical skills for activities eligible for funding by EUaccessioninstruments. 15. Bank Country PartnershipStrategy. The proposedproject will directly address the 2008-2011 Country Partnership Strategy (CPS) objective to "improve the environment for private-sector led growth and convergence to Europe" with support for expandedbusiness opportunities and strengthenedregional cooperation to manage public goods. The CPS specifically mentions FMPAP as one of the "projects on environmental protection, both to improve governance and transparency and to support tourism". The project is included as one of the CPS deliverables. 16. Relevanceto GlobalEnvironmentFacility Priorities.The project is fully consistent with the provisions of the GEF Operational Strategy, and specifically with the Operational Program (OP) for Forest Ecosystems (OP3) with additional relevance to the OP for Mountain Ecosystems(OP4) and linkages to the program for Conservation And SustainableUse of Biological Diversity important to Agriculture (OP13). Within the biodiversity focal area the project primarily supports the first strategic objective: Catalyzing Sustainability of Protected Area Systems. 4 B. PROJECT DESCRIPTION 1. Financinginstrument 17. The project will be financed by a US$3.4 million Global Environment Facility (GEF) grant. 2. Projectdevelopment objectiveand key indicators 18. ProgramContext. The GEF-financed Project is part of an integrated responseto requests of the Government of Bosnia and Herzegovina for assistance with improved natural resources management. 19. Link to IDA-financedProject. Although administratively separate, the Forest Development and Conservation Project (FDCP) and the GEF-financed Forest and Mountain ProtectedAreas Project (FMPAP) are integrated at the conceptual level. The FMPAP will build on the work of the FDCP. Beyond the direct work on the FDCP biodiversity component which was financed by the Italian Grant and has beenmentioned above, the FMPAP also leverages many of the technical outputs from the IDA-financedFDCP activities: For example, the ongoing state forest inventory (SFI) will provide critical baseline data for PASincludingland use and managementplans and trends inforest status. The Forest Management InformationSystem (FMIS) being developedwill provide the longer-term capabilityfor monitoring andplanning forest resources within and around PAS. FMPAP will also benefit from the increasedofficial international endorsement of the National Standards for Forest Certification, and the associated training intheir application which is being supported by the IDA portion of FDCP. The toolkit on High Conservation Value Forests (HCVFs), which was developed as part of the National Standards will be particularly relevant -- pilot testing of this toolkit has already informed the feasibility study for the proposedUnaRiver PA, by assistingwith zoning recommendations. In addition, the FDCP work on strategic forest planning, expansion of revenue options, and capacity building intransparent and effective communications will contribute to improved PA management. For this reason, a portionof the IDA financing under the FDCP i s considered direct parallel cofinancing for this Project. 20. The ProjectDevelopmentObjective.The project development objective (PDO) is to strengthenthe institutional and technical capacity for sustainablePA and natural resource management, and expand the BiHnetwork of forest and mountain PAS. Because the PDO is consideredboth local and global innature, it is also consideredto be the global environmental objectivefor purposesof GEF consideration. The project focuses on improving the management effectiveness of four existing PAS,bringingtwo additional sites under protected status, assessing feasibility for another site andpromoting sustainable natural resource management and biodiversity conservation activities inor around PAS. 21. Outcomes. Indicators for outcomes associatedwith this objective include: Area under formal protection (of various types of PA managementcategories, mostly multipleuse) increasesfrom approximately 0.6% to 3.0% (i.e., an addition of approximately 120,000 ha); Key threats to biodiversity at each PA (as measuredthrough a composite indicator) decrease or remainunchanged; 5 Portionofrecurrent managementcosts financedby at least 20% from sustainabletourism (includingentrance anduse payments), non-timberharvestinganddonations, as well as at least 15% from governmentbudget. ImprovedPA managementeffectivenessas assessedinthe ProtectedAreas Management Effectiveness(PAME) TrackingTool2 Publicsupport for PASmaintainedat a minimumof 80% of respondentsas assessedthrough public opinionsurveys. 3. Projectcomponents 22. TotalCosts. The FMPAPcosts total US$6.00 millionover four years, includinga GEF grant of US $3.40 million, contributionsfrom Entity governmentsof US$2.51million (US$1.255 millionfrom FBiHandUS$1.255 million from RS), beneficiarycontributions(fromthe communityinitiativescomponent)of US$0.09 million. Inaddition, the additionalfinancing phase of the IDA Project(FDCP), which is considered"associated" with FMPAP, provides US$2.5 millioninparallelfinancing, althoughthese expendituresare administeredseparately from FMPAP. The leveragedfinancingfrom FDCP comprisesUS$1.7 million for forest inventory; US$0.5 million for FMIS; andUS$0.3 millionfor strategic forestry planning, planningfor alternativerevenuesource generation,certification, andcommunicationskills. 23. Component 1: ProtectedArea Development(total US $3.66 million, ofwhich US$2.00 million GEF financed). This componentwill supportPA managementplans, operations, assessments, and facilities developmentinexistingand newPAS. 24. Sub-component 1a): PA ManagementPlanning. The projectwill finance development andimplementationof newPA plans for the two existingNational Parks(NPs) Sutjeskaand Kozara, for the existingJanj and Lom Forestreservesand for the newNPs inUna River and IBTV. Inaddition,the projectwill undertakenew feasibility studiesto examine the optionsfor expansionof existingandpossiblenewprotectedareas, includinga newPA inandaroundthe karsticmountainranges of Prenj-Cvrsnica-Cabulja-Vran. The projectwill involvestakeholders to developandimplement differentmodelsof PA expansionand management(e.g., PA zoning, joint managementof adjacent areas, etc.). It will also address the policy developmentand implementationregardingsources andproportionsofPA financing. These efforts will helpthe PASto at leastmeet, andpreferablyexceedthe resulttargets on expansionandfinancing. 25. Sub-component 1b): EcologicalandPA ManagementAssessment. The projectwill establisha MonitoringandEvaluation(M&E) systemfor boththe PASand the project. This will includesupport for the ecologicalassessments to be usedas inputsto the PA management planninganddecision-makingas well as for subsequent monitoringof biodiversitystatus includingtracking of key habitatsand species. It will also includeperiodic assessment of PA managementeffectiveness, basedon applicationofthe GEF-mandatedProtectedAreas ManagementEffectiveness(PAME) TrackingTool. 26. Sub-component IC): Facilities.The projectwill support new infrastructure,and PA limitedsmall-scalebuildingrehabilitation,necessaryfor improvingthe operations of existing PAS,andfor establishingthe newly createdprotectedareas. The infrastructure is generally "soft", e.g., trail improvements,new trail creation, signage, restingplaces, park boundary 2 World Bank / World Wildlife FundAlliance for Forest Conservation and Sustainable Use: ReDortingProgress in ProtectedAreas - A Site Level Management EffectivenessTracking Tool, 2003 6 markings, visitor entry booths, etc. Inaddition, the project will finance goods for park operations. It is expectedthat these investmentswill improve the products and services offered by PAS,and increasethe captureof keyrevenues suchas entry fees. 27. Component2: Capacity and Supportfor BiodiversityConservation(total US$1.84 million, of which US$0.99 million is GEF-financed). This component will focus on strengtheningthe institutions responsiblefor planning, establishment, and managementof PAS. 28. Sub-component2a): Institutional Capacity Development. At the PA-level, training and technical assistance will focus on building competencies inkey areas including: ecosystem-based management focusing on adaptive management, integration of ecological, economic and social aspects, and sustainability; businessplanning emphasizing financial sustainability and marketing of PASas quality destinations; and field-level skills inareas such as patrolling, community engagement, visitor managementand interpretation. Giventhe critical roles of the forest and tourism sectors the training will also be targeted towards professionals inthese sectors. At Entity level, the project will finance capacity building for the environmental ministriesand other concerned agencies incharge of protected area management, so that these institutions are able to provide enhanced leadership as they prepare for EUconvergence and strengthen regional cooperation. This component will also support case studies on selectedPA management issues. 29. Sub-component2b): Public Awareness Programs. The project will support the development and implementation of an outreach program to raise public awareness for biodiversity conservation and PAS. 30. Sub-component2c): Proiect Managementand Proiect Monitoring. Limited financing will be provided for project managementand associated operating costs, meetings of the Project Guidance Committee, and project monitoring. 31. Component3: Local Initiativesin BiodiversityConservation(total US $0.50 million, of which US $0.41 million is GEF-financed). The Project will support biodiversity conservation efforts by local stakeholders which promote improved natural resource managementand generate economic benefits to local communities involved inprotected areas management. To be eligible, subprojects must be able to demonstratethat they will mitigate the significant threats to global biodiversity or contribute to monitoring of suchbiodiversity, and include arrangements to assess their impacts. I t is expectedthat eligible subprojectswill fall under three categories: (i) PA compatible income-generation, e.g., ecotourism activities (home-based accommodation, guide training, trail development), sustainableNTFP extraction, agri-environmental enterprises, environmental certification assistance for ecotourism and agriculture; (ii) habitat and landscape conservation, e.g., site and landscape restoration, participatory pasture management; and (iii) sustainable environmental management, e.g., waste management schemes, alternative energy promotion. To ensure sustainability, the project will provide technical assistance to facilitate the design and screeningof subproject proposals, and to helpmonitor their implementation. Beneficiaries will be requiredto contribute at least 20% of the overall sub-project budget. Suitable initiatives to be developed into subprojects will be identified and selected through public consultations involving local stakeholders, taking into account opportunities to address restrictions resulting from PA management. Eligible sub-projects can range invalue from $20,000 to $100,000. At least one grant will be awarded per project PA, and the total value of grants is estimated at US$360,000. 7 4. Lessons learned and reflected in Project design 32. From the experience o f comparable projects in Central and Eastern Europe and elsewhere, the following lessons have beenlearned: Projects should have broad support inthe government, civil society, and local communities where the protected areas are proposed, or to be expanded; Early involvement o f stakeholders inproject preparationthrough a participatory planning process, including local communities and influential decision makers, i s essential to ensure ownership and successful project implementation; Resource users should be involved inthe design and development o f the management system to ensure the sustainable use o fthe resource concerned, and o f the control measures which needto be developed and applied; Effective public awareness campaigns should be built into the P A planning and management processes inorder to ensure that all stakeholders are well informed and can provide support; Management strategies for PAS,buffer zones, biological corridors, etc. should establish a link betweenthe conservation objectives and tangible benefitsfrom sustainable natural resource use; and PA projects should maintain close co-operation with other types o fprojects and initiatives working inthe same broad technical / geographical areas. 33. Project preparation and designhas incorporated these lessons through: (i)addressing the links between sustainable natural resource use, natural resource management and socio- economic issues; (ii)buildingregional, Entity and local capacity for conservation management; and (iii)ensuring a participatory and transparent approach to project preparation and implementation. 5. Alternatives considered and reasons for rejection 34. Four alternatives were considered and rejected during the development o f the project concept: Focus theproject mainly on the PA expansion. This approach was rejected as improving management capacity was seen as critical to ensure sustainability in existing protected areas. Work only in one Entity. This proposal was rejected because a main goal o f the project i s country-wide capacity enhancement and representative ecosystem coverage, as well as promotion o f synergies among P A management authorities. Focus theproject only on direct PA management and not include buffer zone activities. This option was rejected because global good practice has shown that support o f local people i s critical to sustainability. Implementation through FDCP Project Implementation Units and Entityforestry ministries. Although these agencies played a major role inproject preparation, this option was rejected because inBiHenvironmental ministrieshave the lead responsibilities for national parks, and therefore their leadership inproject implementation will strengthenthe sustainability o f institutional development impacts. 8 C. IMPLEMENTATION 1. Partnershiparrangements 35. DonorProjects. As notedabove, FMPAP is integratedwith FDCP at the conceptual level. The recentlycompletedItalian grant ofFDCP supportedthe direct preparationofFMPAP as well as a number of other relevantstudies and training, while the ongoing IDA financingi s supportingthe state forest inventory, ForestManagementInformationSystem, and other initiativeswhich are consideredpart ofFMPAPco-financing. To further ensure consistencyand collaboration,one Bank task team will supervisebothFDCPand FMPAP. FMPAPwill also continueto collaboratewith the other donor projects listedinAnnex 2. Inparticular, it will continuethe existingdonor partnershipsestablishedduringFDCP implementationwith (i) USAID's Cluster CompetitivenessActivity (to be completedinJune 2008, but with likely follow-up activities) and (ii)UNDP's new "Forestry for EmploymentProject inthe Srebrenica Region". FMPAPcomplementsthe GEF-supported"Neretva and TrebisjnicaManagement Project", providingupstreamimpactsbenefitingthis transboundaryinitiative. 36. GovernmentAgencies. The project designtakes into accountexistingallocationof governmentresponsibilities,which assignthe Entity environmentalministriesleadroles. However, the implementationarrangementsalso provide for linkages with other agencies at various levels o f governmentwhich have a key stake, includingthe Ministries ofAgriculture, Water Managementand Forestry (MAWMF)in bothEntities, Ministry of ForeignTrade and Economic Relations(MFTER) as GEF FocalPoint, as well as cantonal and municipal institutions. At the local level, importantworking relations have been establishedbetweenon- the-groundpersonnelmanagingprotectedareas and forest enterprises, to help avoidpotential conflicts on landuse rights and access to natural resources. 37. Non-governmentorganizationsand the privatesector. Civil society andprivate sector participationinthe country's PA systemwill help ensure its long-termviability. The project designprovides opportunitiesto buildand strengthenpartnershipswith NGOs ina range ofPA management activities includingcommunity mobilization, awareness raising, livelihood developmentand environmentalmanagement. With the continuedgrowth oftourism inthe country, the project will also support private sector partnershipswith a focus on creatingdemand for sustainabletourism. 2. Institutionaland implementationarrangements 38. Timing. ProjectEffectiveness is expectedby September 30,2008, and the Mid-Term Review is scheduledfor October 2010. The projectis expectedto be completedby October31, 2012, with a closingdate for the GEF grant ofApril 30,2013. 39. MinisterialResponsibilities. BiH, representedby the Ministry of Financeand Treasury, would be the recipient ofthe GEF grant and would transfer the proceedsto the FBiH and RS Governmentsby openingtwo special accounts. The Sector for Project Implementationwithin the FBiHMET and the Sector for Project Coordinationand Developmentwithin the RS MSPCEE(inorder to simplify terminology,bothare calledProjectManagementUnits (PMUs) hereafter inthis document) have specializedteams who will undertakecore implementation functions includingoversight, procurement, financial management, annual planning, supervision, monitoringofrepayments, reportingandevaluation. Where appropriate(for example inthe Janj and Lom ForestReserves inRS) implementationwill be closely coordinatedwith the relevant 9 Entity MinistriesofAgriculture, Water ManagementandForestry(MAWMF). The MET and MSPCEEwould also leadthe process ofprotectedarea declaration, establishment and expansion. A ProjectGuidanceCommitteecomprisingthe existing Sub-committeefor Biodiversityalong with the GEF FocalPoint from MFTER, PMUManagers, and representatives from local government, private sector and non-governmentorganizationswill provide project and policy guidance and a forum for exchangingexperience. 40. PMU Capacity. The MET PMU is a well-established unit, already staffedby governmentemployeeswith longexperienceimplementingBank projectsand funded under the FBiH domestic budget. It has appointeda new financial management specialist (FMS) to work on FMPAP, and with trainingby the PMU's experiencedFMS who is responsiblefor the ongoing Bank-financedSolid Waste ManagementProject, this PMUwill be fully capable to undertakeall necessary functions. The MSPCEEhas establisheda PMU office with RS domesticbudgetand appointeda ProjectManagerto headthis unit This PMUplansto appoint . an financial management andprocurement staff shortly. The RS PMU has signedmemoranda of understanding(MOU) with local financial management and localprocurementspecialistswho already have experiencewith a Bank-financedproject. These experiencedspecialistswill (a) establishthe financial management and procurementsystems inthe MSPCEEPMU (b) provide financial management and procurement services and hands-ontraining to PMU staff duringthe first three months after projecteffectiveness, and (c) provideadvice on a retainerbasis to PMU staff for at least three months. 41. Site Specific ManagementResponsibilities. Inthe RS, the two existingNationalParks (Kozara and Sutjeska) are under the authority of MSPCEE. For each PA a NP Authority, currently operatingas a public enterprise, manages day-to-day operations. EachPark has Government-appointedSteeringand Supervisory Boards. ForestReserves, such as Janj and Lom, are generallyunderthe supervisionofForestEnterprisesthat report to their respectiveMAWMF. NationalParks inFBiH will be under the authority of MET and are expectedto operate as public institutions. 3. Monitoring and evaluation of outcomeshesults 42. Most ofthe monitoringand evaluation(M&E) will be inthe form of activitiesunder the Ecologicaland PA ManagementAssessment Subcomponent,with the exceptionofmore narrowlyfocusedprojectmonitoringwhich will be handledunderthe Project Management Subcomponent. This overall M&E system will provideparametersto support policy formulation and planningfor boththe existingand new protectedareas, andto monitor their ecologicalstatus thereafter. M&Ewill makeuse of existingdata sources (suchas the NationalBiodiversity Strategy and Action Plan) supplementedby data collectionwithin the project and special survey and assessment updates, plus case studies to be undertakenby contractedspecialists.PA managers will also adapt the ProtectedAreas ManagementEffectiveness(PAME) TrackingTool to assess PA managementprogress. The M&E system will take into account informationfrom the SFIand FMIS beingdevelopedunderFDCPon key forests, forest status and other attributes. Project monitoringand evaluationwill be guidedby the ResultsFrameworkgiveninAnnex 3. Project actions, expenditures andprogresstowards identifiedobjectives will be monitoredby the implementingagencies and reportedina semi-annualprogressreport to members ofthe Project GuidanceCommittee and other concernedofficials so that appropriateaction can be taken. Technical assistance will be providedto more fully establishthe entire M&E framework and train managers inassociatedprinciplesand methodology. EachEntity environmentministrywill 10 appoint a M&E focal point to coordinate M&E activities across PASand with other government agencies (including counterparts working on the SFI and FMIS). The total project costs for all forms of M&E is estimatedat US$600,000, of which US$340,000 is financedby GEF. As mentioned earlier, parallel IDA financing under FDCP for the SFI and FMISprovides additional M&E support. Relevant subcomponent descriptions inAnnex 4 provide further details on M&E. 4. Sustainability and Replicability 43. FinancialSustainability. The project is designedto buildfinancial sustainability and diminishthe reliance on revenuefrom forest thinning. As noted above, under a new legal definition inthe RS, (with PASnow establishedas "public institutions") PASwill be able to access additional government budget revenues, inparticular for protection functions and capital improvements, improvingtheir financial sustainability inthe near and long-term. The Project will also assist PA authorities inthe development of managementplansthat will include the most appropriate and feasible options for diversified revenue generation given the conservation objectives of PAS. As part of EUpre-accessioncapacity building, the EC will complete a preliminary assessment (including an investment and action plan) covering biodiversity and nature protection inJuly 2008, which FMPAP will take into account. Not all financing options will be appropriate inall places. For example, the Janj and Lom forest preserves will rely largely on government budget support. As strict preserves, options such as entry fees or other tourist fees are not available. On the other hand, bothof the proposed new NationalParks (Una River and the IBTV) offer outstanding tourism opportunities, and are infact already widely visited, particularly IBTV. It i s reasonable to assume that demand for services inthese parks will be sufficient to provide critical financial contributions to their long-term operations. 44. Institutionaland social sustainability. Institutional sustainability will be addressed by training and increasedhands-onexperience inPA management, project management, and associatedpolicy analysis. The project is makinguse of existing administrative and organizational structures. Social sustainability will be achievedby including relevant stakeholders indeveloping a country-wide approachtowards the expansion of the network of protected areas, by incorporating community perspectivesand needs into PA management,by building awareness of the benefits of mainstreaming biodiversity, and by building experience in participatory approachesto sustainablenatural resource management. 45. Environmentalsustainability. Environmental sustainability will be addressedby the introduction of environmentally sound PA management plans anddetailedmonitoring, and by applying the Bank's environmental safeguards. 46. Replicationthrough successful models. FMPAP will establisha numberof models that can be replicated outside the scope ofthe project. Implementation under the environmental ministries andthe linkage to FDCP will also facilitate and reinforce replication, as will continued collaboration with and support of the NBSAP. The implementation of improved policies for domestic budget financing of PASwill help to fund replication, and where desirable, additional donor financing will be sought. Models for replication include: Standards and precedents for improved PA management inexisting PASwill be applicable to other existing PASwhich are not includedinthe project as well as new PAS(both under FMPAP and for other future efforts). 11 Criteria and processes associated with the establishment o f new PAS,especially those related to site selection, PA management plans and consultation with local stakeholders should help guide establishment o f additional future PAS. Public communications campaign, and related marketing o f BiH's protected areas should not only establish capacity within the country related to PAS,but also be relevant for other sectors with tourism potential, and develop international linkages that will facilitate ongoing learning and commercial alliances across countries. Local initiatives inconservation under component 3, will serve as a model for accessing EU pre-accession assistance instruments such as Financial Instrument for the Environment (LIFE)-Nature and Instrumentfor Pre-Accession Assistance for Rural Development (IPARD), and Entity-basedFunds for Environmental Protection (Eco-Funds) for similar activities inthe country. 47. ReplicationthroughDisseminationand Learning. Replicability will also be addressed by the project's emphasis on disseminationand learning. Public consultation associated withPA management planning and implementationwill build communication channels. Project support for M&E will not only identify lessons learned, but also cultivate a learning culture within the agencies responsible for P A management, so that they adjust their operations to take into account these lessons, consistent with modern "ecosystem management approaches" (Le., adaptation, integration, precaution (avoidance o f negative impacts) and sustainability). The institutional capacity development subcomponent will also support exchange o f experiences across PASand build awareness o f good practices inother countries (through study tours to neighboring countries, participation in international conferences, and more robust access to the Internet). The public awareness program will also promote dissemination and interactive learning. Approximately one-third o f the direct project costs o f subcomponents 2a and 2b (US$0.4million o f a total o f US$1.2million) will contribute to replication. 5. Critical risks and possiblecontroversialaspects Risk Risk Mitigation Measure Risk Rating with Mitigation To project outcome Insufficientgovernment commitment Projectdesign is grounded in government environmental M to adopt and implement requiredPA policiesand strategies, and addresses priorities set forth in regulations as well as providethe the MDTSas well as the NEAP. Counterpart funding necessary budget allocation levels agreed with Entity governments. ProjectTA for managementplans will stress value o ftransparency and public disclosureo fPA budgetsand government commitments. Pre-selected PASdo not materialize Project legal agreement specifies benchmarksfor M due to delays in legislativeprocesses legislativeproposalson new PAS.Alternativeprotected and/or other obstacles. area feasibility study (Prenj) is funded, and budget can be reallocatedto that site in the event that one of the other areas takes longer to be established Inadequate local commitment to PA Projectincludes local incentivesto support sustainable M managementthat includes specific managementpractices.Outreachcampaigns will increase ecosystem-based tools and awareness of PA values. New PA institutional approaches arrangementsprovideopportunities for local participation. 12 Mitigation Influential stakeholdersat the Entity Projectpreparationused participatoryapproaches to M and cantonal levels resist the achieve broad stakeholder agreementand political buy-in; establishmentof protectedareas and establishment of new PASand expansion of existing sites adoption of key reforms in will also incorporateparticipatory approaches, especially management o f sites through use of new tools (ParticipationPlan, Access RestrictionProcessFramework, and Operational Sourcebook)developed during preparation To outcome results Inadequatecapacity to implement Project design includestraining and technical assistance in M activities and implementingagencies initial years. Strengthenedand growing PA system will may be unableto attract and retain provideopportunities for career development and qualifiedstaff. recognitionof PA managementdiscipline. ImprovedPA financing will provide improvedincentives for good staffing. Inadequatecapacity and corruptionin Control and transparency measureswill address M financial management and corruptionrisk. For capacity, where required, PMUs will procurement acquire additionalfiduciary staff and providethem with trainingand advice by experienced specialists. Overall Risk Rating M 13 The EntityPMUs shall prepare and submit to the World Bank quarterly interimfinancial reports within45 days after the end o f each quarter, and maintain a satisfactory financial management system throughout the project life. The Entity PMUs shall prepare and submit to the World Bank semiannual project progress reports by August 15 and February 15 o f each year, and a draft mid-termreport by September30,2010 inaccordance with guidelines acceptable by the World Bank. 52. Implementation Covenants The Recipient shall cause the Entitiesto implementthe project inaccordance with the provisions o fthe Financial Management Manual, the Guidelines for Local Initiatives in Biodiversity Conservation, the Access Restriction Process Framework, and the Environmental Management Plan, and shall not amend or waive or permit to be amended or waived these except with prior written approval o f the World Bank. The Recipient shall causethe Entitiesto maintain PMUs with terms ofreference and resources satisfactory to the World Bank, and with competent staff in adequate numbers. The RS shall appoint financial management and procurement staff for the MSPCEE PMU within one month o fproject effectiveness to carry out fiduciary services for FMPAP. The Entities shall provide domestic budgetfinancing for the project PASand PMUs at levels satisfactory to the World Bank. No less than one month after the effective date, the Recipient shall cause the Entitiesto appoint representatives from local government, the private sector and non-government organizations to the Project Guidance Committee as satisfactory to the World Bank. The Entityenvironment ministriesshall designate a M&E focal point within three months of project effectiveness to coordinate M&E activities across PASand with other government agencies. The Recipient shall apply inaccordance with arrangements agreed with the World Bank the Protected Area Management Effectiveness Tracking Tool for project-supportedPAS. D. APPRAISAL SUMMARY 1. Economic and financial analyses 53. Economic. The project will primarily produce local, national, and global environmental benefits whose value cannot be readily quantified. A formal quantified economic analysis is therefore not provided -- this section evaluates benefits inqualitative terms and, consistent with GEF requirements,summarizes the estimated incremental costs. Through the expansion of protected areas covered and stakeholder capacity enhancement, the project will generate significant mutual economic and environmental benefits by: (i) generating opportunities for job creation from better utilization o f non-timber values o f these forests, including tourism and recreation, collection o f berries, mushrooms and herbs, and sustainable commercial game management; (ii) increasingPA coverage and public expenditurestoward levels more consistent with neighboring countries and therebybeginningto address EUaccession requirements,(iii) securing conservation o f biodiversity ininternationally important critical forest habitats including high conservation value forests; and (iv) conservation and improved management o f globally significant endemic biodiversity and landscape values o f sensitive ecosystems. The incremental costs are for those activities that achieve country and regional benefits by (i) supporting protected areas planning; (ii) enhancing P A management and buildingpublic awareness o f biodiversity conservation and associated international standards; and (iii) increased 14 national capacityto manage the protectedareas' natural resources sustainabilityand conserve their globally important biodiversity.GEF assistance will also helpto mainstreambiodiversity conservationinlandscapeswhere the primaryemphasisis on economic uses. 54. Fiscal.Dueto government budget constraints, the proposedbiodiversity conservation activities couldnot be implementedwithout GEF support. Nevertheless,gross public expenditureson PASare expectedto increase, especiallyinthe post project period. These will be very small proportions ofthe Entities' respectivetotal public expenditures,and will not placean unduefiscal burdenon the Entities. It is also expectedthat, particularly inthe newPAS,positive social and economic benefitsrealizedthrough new employmentopportunitieswill also help increase tax revenues. 2. Technical 55. Staffworking inPA managementhave good skills inrelateddisciplines suchas forestry, economicsand natural sciences, but have hadlittle or no experiencewith appliedapproaches suchas ecosystem-basedmanagement. SutjeskaNPhas an integratedmanagementplan(2004- 2012) which serves as a goodmodel.However, eventhis planneeds updatingto incorporate decreaseddependence on forestry and other consumptiveuses, newrevenuestreams and improvedenvironmentalstandards intourism. Tourism is growinginthe PAS,and while some PAShavehiredtourism specialists, generallythere is limitedcapacity to planand manage for sustainabletourism, and ecotourism inparticular.Languagebarriers limit access to new ideas, as does a primary emphasis on resource extractionstrategies. Some forestry enterprises are, however, diversifying their skill set inanticipationof increasedPA managementopportunities. Additionally, under the FDCP, efforts to build spatialanalysis andplanning skills inthe forestry sector have started.The projectwill provide technical and training assistance to prepareand updatePA management plans to address issues of adaptive management,diversifiedrevenue streams, stakeholderengagement,and sustainability. The projectwill support businessplanning for PASand implementingsustainabletourism inthe larger PAS.With the decreased emphasis on forestry, improvedtourism operationsand revenueswill be critical to the financial sustainabilityofthe existingand proposedNPs. PA staffwill benefit from targetedassistance to improvePA operations, includingmonitoring, habitat and species conservationand visitor management. Assistancewill also be providedto mainstreambiodiversity conservationamong forestry and tourismprofessionals. The capacity for improvedPA managementandpolicy development will also benefit from regional study tours to establishedPA systems. The project will assist PA staffto implement andadapt a widely usedtracking tool, PAME, to assess their management effectiveness. Initial field testing ofPAME will beginby May 2008. 3. Fiduciary 56. Financialmanagement. The financial managementfunctions of the projectwill be handledby MET inthe FBiH and MSPCEEinthe RS, which will be responsiblefor the flow of funds, accounting,budgeting,reporting, and auditing.The FMarrangements ofFBiHPMUhave beenreviewedperiodically as part ofthe on-goingSolidWaste ManagementProject(SWMP) supervisionsand found satisfactory. The MET recently appointedan additional financial management specialist (FMS) to work on FMPAP. This individualwill require some training, which will be providedby the experiencedFMS for SWMP. Inthe RS, because financial managementcapacity is not yet establishedinthe MSPCEEPMU, the PMU has signeda MOU with a specialist experiencedwith Bank-financedprojectsto establish, initially operate, and 15 develop MSPCEE P M U capacity infinancial management. This specialist will also helpthe P M U to adapt an FMoperational manual from an existing project to the FMPAP design. With these steps the FM arrangements meet the minimum WB requirements. 57. Procurement. Responsibility for carrying out procurement will rest withthe PMU within MET and MSPCEE. As noted above, inFBiHthe MET unit has long experience with Bank procurement and is fully capable o fundertakingBank procurement. Inthe RS, an experienced local procurement specialist will initially carry out procurement for FMPAP and develop MSPCEE P M U capacity inprocurement. Procurement will be applied based on the threshold by Procurement Method as determinedfor BiH. Both the FBiH and RS have submitted updated procurement plans acceptable to IDA, taking into account the latest cost estimates and project timeframe, covering the initial 18 months o f project implementation. The procurement and consultant selection process plans can be updated every six months, and should reflect the actual need for implementation o f project activities and improvement ininstitutional capacity. Updated procurement plans for each calendar year should be submitted to the Bank no later than January 30 o f the respective year. 58. CorruptionRisk. According to the recent BEEPSreport and also inthe Transparency International (TI) report, the corruption inboth Entities (FBiHand RS) remains a serious and widespread problem, and the corruption risk i s considered substantial. Adequate mitigation measures are incorporated inthe project, and Bank staff will closely monitor performance during implementation. These mitigation actions can be summarized as follows: (a) the project has established a tight internal control framework (see annex 7);(b) the size o f procurement packages and the frequency o f the Bank's prior review will be determined in a way that it allows an appropriate level o f control while attempting to avoid unnecessary reviews which could cause delays; (c) enhanced disclosure and transparency o f project-related information, including through a project website; and (d) appropriate complaints handling mechanism. All complaints from bidders, observers, or other parties should be promptly forwarded to the Government and the Bank for consideration and follow-up action. 4. Social 59. SocialAssessment. The six PASfor which a social assessment has beenconducted (the Prenj site has not yet beenassessed) vary significantly interms o f population- from about 1,500 to 101,000. The primary sources o f income for these populations are pensions, remittances and salaries. Many households are engaged in agriculture and livestock production, but derive relatively little income from commercial sales o f produce. The population around the Lom FR works primarily inthe forestry sector. The Social Assessment (SA) determinedthat, ingeneral, the majority ofpeople living directly adjacent to the six proposed areas and depending on these areas for their livelihoods, support the concept o f biodiversity conservation through the protection o f land and the objective to change management practices, expand the area under protection, and promote tourism. Local stakeholders living inor around the proposed areas anticipate that they would benefit from an improvementsinthe quality o f natural resources, due to more sustainable natural resource management, including increased control over illegal resource extraction. Benefits are also anticipated from tourism-related income and employment opportunities. Inaddition, respondents expect that activities to expand the protected area network would actively promote the revival o f local communities, through improved infrastructure (roads, water, etc.), eco-tourism, and better opportunities for marketing agricultural and non-timber forest products. Less than 5% o f those surveyed expressedopposition to changes 16 inPA managementandestablishment.Their concerns focused on additional or new restrictions on hunting, fishing, forestry, non-timber forest product collection and agricultural production. Findings on the views about possible restrictions show that the majority were insupport of controlling construction, and considered that restrictions on natural resource use would not have significant economic impact. Additional assessments have, however, also shown that local communities needmore information about the process and impacts of establishing national parks and that this will have to be actively remediedinorder to prevent potential conflicts. 60. StakeholderParticipation. As part of project preparation, substantialefforts have been made to engage stakeholdersat all levels. The project has the full support of high-level policy- makersinthe relevant ministriesand PA authorities, inbothEntities;the areas proposedfor inclusion were identifiedthrough extensive meetings ofthe Working Group. To ensure effective stakeholder input inproject design and future implementation, numerouspublic consultations were heldinthe Spring and Summer of 2005, inconjunction with formal meetings of the Working Group. These consultations were critical inthe Working Group's decision-making, and the broad public support for the Project, as discerned from the Social Assessment, is a positive sign for the future success of the PAS. Additional consultations were held in2006 specifically to explore mechanisms and activities to foster local support and mitigate any negative impacts of PA management. With its social development objective of engagingwith local communities and individuals inimprovingprotection and sustainable use of biodiversity, the project supports participatory planning for protected areas and management approachesthat incorporate multiple- use which can address the interests and expectations of affected stakeholders. 61. Access RestrictionProcess Framework. To mitigate any potential impacts of the project, a Stakeholder ImpactAnalysis, a Participation Plan, and a Process Framework (PF), have beenprepared. The Process Framework3was discussedinpublic meetings inSarajevo on June 6,2007, and inBanja Luka on June 13,2007. Followingthe public meetings, the PF was endorsedby the respective ministries inbothEntities. Within the Project, Component 3 is designedto help mitigate the potential impact of project activities that could result ininvoluntary restriction of access to resources and livelihood for inhabitants of some of the areas covered by the project, as well as to create alternative income generation opportunities (as noted above and detailedinAnnexes 4 and 10). Funding of local sub-projects will provide direct incentives for stakeholders to engage innew practices for sustainable natural resourcemanagement, which will aid biodiversity conservation. 5. Environment 62. EnvironmentalImpacts. The project is classified as Category Bywhose potential adverse environmental impacts are few and site specific. The project i s expectedto have an overall positive environmental impact by conserving biodiversity and improvingnatural resource use. 63. EnvironmentalManagementPlan. Issues covered inthe environmental management planare: (i) the small scale construction, and/or renovatiodrehabilitationof protected area 3The Projecttriggers the Bank's SafeguardPolicy on Involuntary Resettlement(OP 4.12). Although no actual resettlement is foreseen, there is the possibilitythat local communities might be subject to some restrictionson their access to traditional use of resources inthe PAS. To mitigatethese potentialrestrictions, a Process Framework has been prepared. The Framework describesthe methodology by which government and PA authoritiescan work together with local communities to ensure that their livelihoodsare not negativelyimpactedby any such restrictions. 17 infrastructure (including administrative buildings, checkpoints, trails andtourism infrastructure with minor direct impacts on the environment; (ii) the increase inrecreational use ofthe proposedPASunder the project will result inan increaseinnoise and disturbance to wildlife and could make the collection of waste necessary; and (iii) close links with the FDCP which will positively influence the managementof forest resources inthe Balkans, and provide recommendationsto better integrate biodiversity conservation into forest managementplanning as well as landscape level prioritizationfor protected andproduction areas. The EMP was subjected to numerous informal public discussions prior to preparation of the final draft. The final draft, incorporating all comments, was formally disclosed inpublic meetings inSarajevo on June 7,2007, and Banja Luka, on June 13,2007. 6. Safeguard policies Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [XI 11 Natural Habitats (OP/BP 4.04) [X 1 [I Pest Management(OP 4.09) [I [XI Cultural Property (OPN 11.03, being revised as OP 4.11) [I [XI Involuntary Resettlement(OP/BP 4.12) [XI [I Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I * [XI Forests (OP/BP 4.36) [XI [I Safety of Dams (OP/BP 4.37) [I [XI Projects inDisputedAreas (OP/BP/GP 7.60)* [I [XI Projects on International Waterways (OP/BP/GP 7.50) [I [XI 64. Environmental Assessment is triggered as explained above inparagraphs 62-63. Consistentwith OP 4.12, the Involuntary ResettlementPolicy is triggered, as explained in paragraph61, footnote 3. Consistent with OP 4.36, the project aims to harnessthe potential of forest ecosystemsto reduce poverty ina sustainable way integrate forest conservation effectively into sustainable development andprotect vital local and global environmental services and values of forests. Consistent with OP 4.04, the project will help to conserve natural habitats, and ensure that specific project activities avoid habitat degradation. 7. Policy Exceptions and Readiness 65. The proposedproject does not require any exception from Bank policies. * By supporting theproposedproject, the Bank does not intend to prejudice thefinal determination of theparties' claims on the disputed areas 18 Annex 1: Country and Sector or ProgramBackground BOSNIA-HERZEGOVINA: FOREST AND MOUNTAIN PROTECTED AREAS PROJECT 1. Biodiversityin Bosnia and Herzegovina4 Landscapesand ecosystems. BiH anchors muchof the biological diversity and broader natural resources of the Balkans. Located atop the continental divide at the headwaters of the Danube, BiHoccupies apivotal role inthe environmental healthofthe entire region. The four main biogeographical regions inBiHandtheir approximate area inhectares(ha) are as follows: (a) mountains and river valleys (1.28 million ha); (b) lowlands inthe Pannonian region (2.25 million ha); (c) Mediterranean region (0.5 million ha); and (d) karstic region (1.OS million ha). Considering their geographical, geological, climatic, and historical differences, these regions naturally display significant horizontal andvertical ecosystemdifferences. BiHis thus distinguished by very diverse ecosystems, distributedfrom sea level near the Adriatic to the alpine mountain peak of Mt. Maglic at 2,386 meters. The Dinaric Alps traverse the country from its western border with Croatia to the southeast creating two major watersheds, the Black Sea (75.7% of the territory) and the Adriatic Sea (24.3%). Over halfthe country i s higher than 700 m above sea level. Whilst many of the landscapeshave beenmodified, and insome instances degradedby anthropogenic actions, inmany instanceslarge portions of the natural ecosystems remaininpristinenatural or semi-natural forms. It is worth notingthat all major watersheds and biogeographical regions inthe country are sharedwith its neighbors; thus the natural resources and biodiversity conservation challenges of BiHare transboundary not only innaturebut also in importance. Forests. Almost halfthe country (47%) of 51,000 km2is covered with forests, distributed throughout the central portions of the country. However, more than halfthe forest is classified as low forest or shrub land. Government ownership of forest land i s 81.3% whilst 18.7% i s in private hands. Most of the low forests are inthe lower oak region. The low forest and shrub land i s also more prevalent inthe karstic and sub-Mediterraneanregions and whilst its production value i s low, it is important for biodiversity since it shelters a wide range of endemic species. Ecologicalprocesses. BiHis important for ecological processes: karstic processes are extensive and amongthe best examples worldwide; blocks of forests, large enough to maintainecological integrity; river dynamics; large carnivore dispersion betweenCentral and South-East Europe. Among the important ecological functions i s C02 sequestration by forests and the presence of keystone species (e.g., bear) which support distinct species assemblages. Flora. BiHhas a very rich inflora; it has an estimated3,572 plant species, subspecies, and varieties; some 3,000 species of algae; and 3,000 to 5,000 species of fungi and lichens. Considering the number o f species and the relatively small land area, BiHi s amongthe five richest countries inEurope interms of species density and diversity. The country has a significant number of endemic plant species, an estimated 500. On average, 74 percent of fungi species from the International Union for the Conservation ofNature (IUCN) Red List for Europe can be found in BiH forest ecosystems. The broad ecosystemdiversity inthe country suggests that a large number of fungi may well be endangered, particularly species from the sub-alpine 4 Mucho fthe informationin this section comes from the Bosnia-Herzegovina:Biodiversity Assessment, USAID, 2003. 19 and alpine beltsthat are very sensitiveto any disturbance. A certainnumberofpotentially endangeredfungi species are collectedas wild growingspecies. FlorainBiH has yet to be fully inventoried.BiHhas significantpercentages of endangeredplants (19 percent) comparedwith other Europeancountries. The country's forest resourcesare amongthe richest inEuropewith a wide variety of coniferous and deciduousspecies, correspondingto the different eco- geographicalregionsand an exceptionallyhigh level of intra-speciesgenetic biodiversity.The country also housesvarious centers where new subspecies originate and areas where relict species can still be found. Additionally, the country contains a great diversity of landraces, in particularhorticulturalproductsand h i t trees (e.g., cherry and walnut). Fauna. Inthe central andthe southernparts of BiHand the northernand northeastern Herzegovinaarea, dense stands o f coniferous and broad-leafedforests, meadows, pastures, and mountainturf are habitat for a richdiversity of fauna. Numerousspecies originatinginthe Alps, central, south, and southeasternEurope, and Eurasiaare found inthese areas, including such rare endemic animals as the spalax and snow vole, as well as chamois, brownbear, and an endemic race of marten. Importantand rare bird species include grouse, vultures, andUralowls. Alpine salamander and viper are two other important species. Muchless is knownabout fauna than flora: inventorieshave beenconductedonly for some groups and are not comprehensive (uniquely for Europe,BiHdoes not yet have official RedLists). Thirty-two species ofanimals and plants found inBiH are on the 2002 IUCNRedList ofthreatenedspecies (62 including extinct species). The ichthyofaunaof BiHrepresent a uniqueEuropeanbiologicalresource in terms of bothtotal richness andpresence ofnumerousinterestingendemic forms. Regional Significance. At the regional scale, BiH covers three globally significant ecosystems identifiedby WWF's Global200 programand adoptedby the Biodiversity Strategyfor the Bank's ECA Region:(i)the European-MediterraneanMontane Mixed Forests; (ii) MediterraneanForests, Woodlands and Scrubs; as well as (iii) BalkanRiversand Streams. These also includethe MediterraneanSea and the Karst ecosystem.At a smaller scale, BiHhosts globally important sites identifiedunder different programs:Ramsar sites (e.g., Hutovo Blato which i s also an important birdarea); and relativelyundisturbed(`virgin') forests like PeruCica(a UNESCOsite), Janj and Lom. Natural Resources Utifization. About 2 millionpeople(58% of BiH's population) live inrural areas, and for them forest and mountainecosystems are an important (and sometimes the only) source of subsistence,employment, energy and recreation. They are also a source of non-timber forest products (NTFP) includingmushrooms, berriesand herbs. Hunting,well organizedinthe past, has providedadditionalrevenues, while BiH's forest and mountainlandscapes have, and can again, providesubstantialjob opportunitiesfor localpeople from tourism. Forestand mountainecosystems also have importantwatershedprotectionvalues for muchof the middle and lower Danube. 2. Challengesin forest and mountainecosystem conservation Post-conflict issues. The overarchingchallengeto BiH's biodiversityis to balance economic development of a post-conflictcountry with conservationof globally significantnatural resources. The war, between 1992 and 1995, as well as subsequent unregulateddevelopment, have resultedinheavydamage at all levels (accordingto current estimates,direct war damage to 20 forests and associated sectors amounts to approx. US $2 billion). Efforts to pushincome growth included subsidiesthat discounted natural resource assets: low prices for industrial water and energy that encouraged waste; below-cost logs to wood manufacturers discouraged sustainable management; and low prices for agricultural land that favored conversion to commercial and residential use. Inaddition it i s estimated that a minimumo f 200,000 hectares o f rural production areas (agriculture, forests, etc.) are still contaminated by landmines. Economic conditions. Accelerated economic development, including that o f the forest and wood processing industry, inthe absence o f a strong national and local level capacity to protect natural resources could damage BiH'sability to preserve its biodiversity inthe long term. Poverty and a generally depressed economy as well as landmines have ledto overexploitation o f natural resources insome areas, and to abandonment o f semi-natural landscapes and loss o f associated conservation values inothers. Institutional and other issues. Additionally, inprotecting forest and mountainous ecosystems the government faces the following challenges: (i)complex governance structures and competing interests for forest and mountain resources; (ii) insufficient capacity within institutions incharge o f biodiversity protection at state, Entity and local levels; (iii) lack o f collaboration between various institutions to sufficiently incorporate biodiversity conservation into traditional forestry activities as well as physical planning; (iv) lack o f awareness regarding biodiversity conservation; and (v) a tradition o f limited public participation in decision-making processes. 3. Legal framework for biodiversity conservation Environmental Protection. The government has established an environmental legal framework to align with relevant EuropeanUnion (EU) directives and international conventions. There i s a Framework Law on Environmental Protectionat the state level, plus laws at the Entity level on: (a) the protection o f water, air, as well as nature; and (b) the management o f solid waste. The Entity-levelLaws on the Protection o fNature stipulate the revitalization, protection, preservation and sustainable development o f landscapes, ecosystems, plants, animals as well as environmental service functions. Entities also regulate protection o f forest biodiversity by applicable Laws on Forests, as well as by laws on huntingand fishing. The FBiHand RS Constitutions specify that forests and forestland are public goods which enjoy the special care and protection o f the Entities.A National Environment Action Plan (NEAP) was completed in2002, but as with the overall laws regarding nature protection and related concerns, has had limitedimpact to date due to a lack o f financial resources, and technical and human capacity. ProtectedArea Responsibilities. At the state-level, the Ministryo f Foreign Trade and Economic Relations (MFTER), i s responsible for definition o f policies, implementationo f environmental protection programs related to treaties and coordination betweendifferent sectors. MFTER also serves as the GEF focal point for BiH.. Four primary types o f PAS are defined which loosely correspond to IUCN categories I,11, I11and V respectively: (a) nature protection areas; (b) national parks; (c) natural monuments; and (d) landscape protection areas. InFBiH, MET i s able to propose the declaration o f the first two types o f PA, while proposals and declaration o f the latter are the responsibility o f the cantons. InRS, MSPCEE oversees proposals for the declaration o f all types o f PAS. Entity environmental ministriesprovide oversight o f nature protection areas and national parks, with the right to delegate responsibilities to other institutions. Generally, management for natural monuments and landscape protection units i s 21 PA Types Number Nature Protection Areadstrict Nature Preserve 3 National Parks 2 Managed Nature Preserves 2 Special Preserves 9 -2 geological, 1 ornithological, 5 botanical Landscape Protection AreasNatural Landscape Preserve 9 Natural Monuments 91 - 3 geologic, 65 geomorphologic, 1 paleontologic, 21 individual trees, 1 tree group The NEAP Thematic Annex on Biodiversity and Protection ofNatural and Cultural Heritage suggests a total of approximately 1520% of BiH's territory to be placed into some level of protected status. This is an ambitious goal, but perhapsa more realistic one inthe medium-term i s the regional average o f 7% coverageto which this project will make a significant contribution. Governance issues and recent initiatives in theforestry sector. Governance challenges inthe environment sector include; complex institutional arrangements; weak enforcement, planning 22 and management practices; and limitedpublic participation. The resultingrisks include corruption (considered substantial for the country), opportunities to impede reform and lengthy, and often delayed, legislative processes. Inaddition to internal project management measures to mitigate corruption risks, the project will also draw upon experience inthe forestry sector, especially through World Bank supported initiatives, to address relevant governance issues inP A development. Inpartnership with other international agencies, FDCP has been particularly successful inaddressing problems with timber pricing, public enterprise financial management, and public perceptions o f illegal logging. Communications and transparency initiatives comprising public opinion surveys, public workshops and Entity-based outreach plans helped correct misconceptions about the extent and impact o f illegal logging. The project has also shown that adoption o f certificatiordgreenlabel incentives can create strong incentives to improve forest management practices on both public and private lands. 4. Civil Society and the Private Sector Civil society and NGOs, Untilthe 1990s, the NGO sector was not well developed nor financially stable, and NGOs did not have a significant voice inBiH. By February 2002, the Regional Environmental Center (REC) estimated there were more than 150 environment-related NGOs operating inBiHcompared to 20just after the war. A 2006 REC survey indicates a general growth inthe activities o f environmental NGOs, but a relatively highturnover. As such this is typical ofa young sector o fcivil society, and a still nascent force innature protection in BiH. Most NGOshave tendedto focus on environmental education, public awareness andwaste management. The project Social Assessment identified a variety o f civil society groups with interests innature protection at the project sites. These include traditional village-based institutions, recreational and sports associations and service-oriented NGOs. Project design includes opportunities to buildrelationships and networks with these and other organizations in PA management and biodiversity conservation. Private sectorparticipation. As noted earlier, the post-conflict economic policies did not provide economic or regulatory incentives for the private sector, particularly forestry and agriculture, to address environmental performance. However, since about 2000 there have been initiatives inthese sectors to address governance, competitiveness and sustainable resource management. As increasingnumbers o f agriculture and forest enterprises are stimulated and the legal and economic frameworks are reformed, there are opportunities to harness the power o f the private sector to foster sustainable stewardship o f land. The broad private supply chain initiatives that now use auditable standards o f environmental, health and safety, and social performance in the food and wood products industriesare seen as effective tools to promote incorporation of conservation and biodiversity values. The tourism sector has yet to receive a similar level o f investment, although there have beeninitiatives to improve its competitiveness (e.g., USAID Cluster Competitiveness) but mainstreaming conservation values has had a low priority. Tourism inBiHi s rebounding; tourist numbers in2007 reached record levels with the country's natural and cultural heritage cited as the primary attraction. The country i s well positionedto capitalize on growing market segments based on these tourism assets which include PAS. The project will support improvements inthe environmental performance of tourism and forestry through P A management planning, training and local initiatives inbiodiversity conservationthat will also include opportunities to address small-scale agriculture. It also expected that 23 partnershipswill be developedwith private sector tourism enterprises focusing on creating demand for sustainabletourism products inPAS. 5. EUaccession requirements for nature protectionand biodiversity Nature Conservation Directives. EUnature conservation policy i s based on two mainpieces of legislation, the Birds Directive (1979) and the Habitats Directive (1992). The latter legislation i s directed at ensuring biodiversity through the conservation of natural habitats and species of wild fauna and flora. The cornerstone of the Directive i s the requirement of the creation of Natura 2000, a network of PAS known as Special Areas of Conservation including Special Protected Areas designatedunder the Birds Directive. Basedon the experience of new Member States, alignment and the degree of implementation of EUlegislation inthe field of biodiversity and nature protection have proven to be a major stumbling block with regards to readinessfor accession. Expansionof the country's PA network through this project, and thus preparation for Natura 2000 representsa major accessioncommitment. EU-supported activities. Inboth Entities,the EUcontinues to support efforts to harmonize legislation for environmental protection, Direct EUassistance innature protection and biodiversity has not beensubstantial with some Community Assistance for Reconstruction Development and Stabilization (CARDS) and Financial Instrumentfor the Environment (LIFE) programs supported to date. However, preparation of an Instrumentof Pre-Accession Nature and Biodiversity Program and Action Plan for BiHis due to be completed by July 2008. This planwill outline investment options for further Instrument for Pre-Accession (IPA) financing in nature protection and biodiversity. 24 Annex 2: Major RelatedProjectsFinancedby the Bank and/or other Agencies BOSNIA-HERZEGOVINA: FOREST AND MOUNTAINPROTECTED AREAS PROJECT Sector Issue Project Latest Suuervision (PSR) Ratings (Bank fin'ancedp jects only) IDA-financed Implementation Development Progress(IP) Objective(DO) Forestry Forest Developmentand ConservationProject S S Agriculture Small-ScaleCommercial Agricultural Development S S Project Agriculture and RuralDevelopment S S GEF financed Neretvaand Trebisnjica ManagementProject Legalagreements negotiated. Other develoument agencies USAID LAMP (Linking Agricultural Marketsto Producers) ongoing USAID Cluster CompetitivenessActivity (Wood & Tourism) ongoing UNEP (GEF) Support for the NationalBiodiversity Strategy ongoing UNDP Regeneration of the Forestry and Wood-Processing ongoing Cluster in the SrebrenicaRegion UNDP MainstreamingKarst PeatlandsConservation into Key ongoing Economic Concerns UNDP MainstreamingEnvironmentalGovernance: Linking ongoing Local and NationalAction in BiH UNDP Support for BuildingNationalCapacity in Sustainable ongoing EnvironmentalManagement UNDP Financial Sustainabilityof PA system planned JICA EcotourismDevelopment ongoing WWF/IUCN Dinaric Arc Eco-Regional Initiative planned EU Rural EconomicDevelopment on-going EU Assessment of Preparationof IPA in Areas ofNature, on-going Biodiversity and ClimateChange SIDA Supporting EnvironmentalCivil Society Organizations ongoing in South East Europe (SECTOR) SIDA Program for Supporting Local Initiativesin South East ongoing Europe 25 Annex 3: Results Frameworkand Monitoring BOSNIA-HERZEGOVINA: FOREST AND MOUNTAINPROTECTED AREAS PROJECT Results Framework PDO Outcome Indicators Use of Outcome Information To strengthenthe institutionaland Increase in area under formal Verify expansionof PA network technical capacity for sustainable protection(using all IUCN protectedarea and natural resource categories) managementand expandthe BiH networko f forest and mountain protectedareas. Key threats to biodiversity for each Assess effectiveness of PA as measured through a composite interventions, and adjust based on This PDO is also the global indicatordecrease or remain findings environmental objective, since it is unchanged. both local and global in nature. Increase in portionof recurrent Encouragemore appropriatemix of management costs covered by PA revenueand/or determine sustainabletourism (including revisions in PA financing strategies entranceand use payments) and non- timber harvesting, donationsand by government budget ImprovedPA management Assess PA management effectiveness as assessedby tracking effectiveness and/or adjust project tool interventions based on experience with implementation Public support for PASmaintained Verify that participationand awareness activitiesmaintainthe public support neededto ensure sustainabilityand manage conflict. 26 Intermediate Results Results Indicatorsfor Each Use of ResultsMonitoring One per Component Subcomponent Component One: ExistingPA operations and Proposalon legal establishmentof 2 YO1 and YO2 evaluateprogress in facilities improved, new PAS new PASsubmitted for decisions and establishment of new PAS;re-evaluate (IBTV and Una River) feasibility study for one PA completed site selection ifformal declaration is established with initial not achieved investments implemented, and Number of PASwith management Verify that new approachesand tools feasibility of Prenj-Cvrsnica- plans implementedthat include can be and have been appropriately Cabulja-VranPA assessed ecosystem-basedmanagement adaptedto the local context. approaches and tools M&E System, includingtracking o f Verify that relevant M&E system is key habitats and species and the establishedand used, and key PAME tracking tool establishedand parametersare monitored used for decision making Facilitiesdeveloped in accordance Verify that plans are realistic and with PA managementplans obtain required resources Component Two: Planning,management, Number of participants completing YO2 revise training program and communicationand leadership trainingprograms and positive methodology and make necessary skillsof institutionsresponsiblefor participantfeedback adjustments biodiversityconservation and sustainable land use increased Number of public awareness initiatives YO2 number may flag problems in for biodiversityconservation design and implementation, revise activitiesifneeded. Project management timely and well Delays and/or coordinationproblems coordinated may flag shortcomings in capacity and/or high-levelsupport that needto be addressed Component Three: Sustainableinitiativesthat Number o feligible subprojectgrants YO1 and YO2 numbers and sub-project contributeto mitigating awarded and satisfactorily design may indicateproblems in significantthreats to global implemented, with impacts on threat consultation and training activitiesor biodiversityor to monitoring mitigation or ecologicalmonitoring sub-project preparation guidelinesthat such biodiversityare assessed. needto be addressed. implemented,with impacts assessed. 27 1 e :ee CI e : i E 0 0 82 2 * I 3 E 2 2 0 E 0 (r 0 z I 3 N 3 3 3 3 d d N 3 3 Annex 4: DetailedProjectDescription BOSNIA-HERZEGOVINA: FOREST AND MOUNTAINPROTECTED AREAS PROJECT The project will helpdevelop newoperational approachesfor biodiversity conservation and sustainable landmanagementinsix priority sites. The Project will strengthen institutional and technical capacity and foster public support at all government levels to conserve biodiversity in critical forest and mountain ecosystems Component 1: ProtectedArea Development(total US $3.66 million, of which US $2.00 million i s GEF; also an additional US$2.20 parallel IDA financing under FDCP) Summary. This component supports improvement of four existing PAS(inRS, Sutjeskaand Kozara NationalParks, and Janj and Lom ForestPreserves), establishment and operationalization oftwo critical newPAS,(inFBiH, new national parks inIBTV andthe Una River), and assessment of the feasibility of aproposedPA covering Prenj-Cvrsnica-Cabulja-Vran inFBiH. Ifat the time of the Mid-TermReview, progressinestablishing the newPASis not proceeding as planned, the inclusion of the Prenj site can be consideredas a substitute basedon the findings of the FeasibilityStudy. Sub-component 1a): PA Management Planning. Overview. The project will finance development and implementation of managementplans emphasizing ecosystem-basedapproaches and businessplanning for PAS. The aim is to restore and maintain the healthof ecosystems while supporting economies and communities. Planning and managing unitswill be definedby ecological boundaries, andmanagement strategieswill: a) integrate ecological, economic, and social factors, and b) focus on adaptive management and sustainability. The project will emphasize methods to improve and increase stakeholder engagement by the multiple government agencies involved, as well as local communities and civil society. Managementplanning will address policy development and implementation regarding sources andproportions of PA financing. While recognizing the importance of increased government support, the project will also strengthenand highlight the value of mechanisms that allow PASto retain anduse a portion ofthe revenue stream from the generation of income, e.g., entrance fees. Building on the experience of FDCP, the importance of transparency and public disclosure on PA operations will also be stressed as a tool for improved management. Preparation of managementplans will begin inYear 1 for the two existing NationalParks (NPs) Sutjeska and Kozara, as well as for the Janj and Lom Forest reserves, and the UnaRiverNP. Preparation of a managementpianfor a new NP inIBTV will likely begin near the end of Project Year 1. At the same time the project will undertake feasibility studies for potential expansion of the existing PAS,and the proposedPA at the Prenj site. IDA-financed support for the State Forest Inventory and the Forest ManagementInformation System will also provide valuable inputs for PA managementplanning. New Approaches in Existing PAS.The project will support the preparation of newmanagement plans, and where appropriate revisions to existing plans. All PASwill assess the potential for expansionand work with all stakeholders concerned to identify suitable models o f PA enlargement (zoning, joint management of adjacent areas, etc.). 30 SutjeskaNP -The current management plan (2003-2012) will be extendedand revised to better reflect ecosystem-basedapproaches, changes and opportunities inrevenue streams and PA governance, and sustainable tourism development. Kozara NP -A new PA management plan with a clear focus on nature conservation, new arrangementsfor PA governancesand sustainability will be preparedto replace the current forestry and hunting managementplans that are being followed. Janj and Lom FRs - Management planning improvements include cadastral surveys and opportunities for scientific researchand limited tourism development. Statusoflvew PAS. Approximately an additional 120,000 ha (including existing PA expansion) are to enter formal PA status. Under the IUCN system, new PASwill contain areas managedas national parks (category II), protected landscapes(V) and strict nature reserves (I). The Government-funded Feasibility Study for the Una River (2005) confirms the ecological and landscape uniqueness of the area, and the very strong public demandfor formal protection. Public support was also confirmed inthe social assessment undertakenduring project preparation. Legislation governing the PA is currently inthe Parliament and is expected to be approved by mid-2008, and enter into force by Autumn 2008. IBTV, which was the site of the 1984 Winter Olympics, has tremendous potential as a demonstration of PA managementwith strong ecological, cultural and recreational values. A new Feasibility Study for the site was completed inMay 2007. Although there is broad consensus for establishing this area as a national park, attention needs to be paidto building good working relationships betweenlocal stakeholders and PA authorities. Draft legislation for this site has beenprepared, and will be presentedto Parliament by end-2008. Project funds have beenallocated for public consultation anddissemination activities to facilitate the process. 0 The Prenj-Cvrsnica-Cabulja-Vranarea is included as a new PA basedon the site's biodiversity value, tourism potential and contribution to strengthening the country's PA network. Already highlighted inthe Dinaric Arc Ecoregion conservation initiative (WWF) for its ecosystemvalues, the site also offers considerable potential for mine-safe tourism development unlikeportions of IBTV. There is broad government and private sector support for establishing the site as a PA. Sub-component 1b): Ecological and PA ManagementAssessment. Overview. Technical assistancewill be provided to improve the monitoring system for key issues such as wildlife, habitats and visitors (existing and potential). The system would then be implementedon a sustainable basis as part of regular PA operations by PA staff, with additional technical assistance to the extent required. A focal point for M&E will be identifiedineach Entity environment ministryto co-ordinate activities across PASand with other ministries. 0 For all areas the project will support baseline ecological surveys to assess biodiversity and resourceuse (timber harvesting, livestock carrying capacity, hunting, NTFP collection) and put inplace abiodiversity monitoringsystem at site, Entity and State level. The project will also support the adaptation and use of the "Protected Areas Management Effectiveness (PAME) Tracking Tool". This tool, developed by the World Bank/WWF Alliance for Forest Conservation and Sustainable Use and now mandatedby GEF*,will assist inthe tracking andmonitoringof managementeffectivenessinindividual PAS,and aggregate 8World Bank/ World Wildlife Fund Alliance for ForestConservationand SustainableUse, Reporting Progress in ProtectedAreas - A Site Level Management Effectiveness' Tracking Tool, 2003 31 key data for the country. Preliminary site specific adaptations o fthe PAME tool for the 4 existing PASwill be tested and refined during Year 1. Progress inmanagement effectiveness would be measured through annual PA scorecards. Relevant findings from the State Forest Inventory and the Forest Management Information Systemwhich is financed by IDA under the FDCP will also be taken into account under this subcomponent. This subcomponent will also be the major source o ftechnical information to be compiled in the semi-annual project progress reports andthe mid-termreviewreport. Monitoring procedures will be devised, principally, as a PA management tool but they will also record the progress ofproject activities by providing key data for the results framework. The information compiled under this subcomponent will assist inthe process of decisionmaking by providing the parameters to support policy formulation and planning for both the existing and new protectedareas. This will facilitate better selection, planning and management o f areas for future protection. The feedback will be givento management and all involved ministries. Increased accountability should help foster public support for sustainable land use management approaches inhighconservation value forest and mountain ecosystems. Sub-component 1c): P A Facilities. Overview. _Theproject will also finance new infrastructure and limited small-scale building rehabilitation, necessary for improving the operations o f existing PAS,and for capitalizing the newly created protected areas. Infrastructure investmentswill be undertaken inaccordance with revisedand new management plans. Infrastructure is generally "soft", e.g., trail improvements, newtrail creation, signage, restingplaces, park boundary markings, visitor entry posts. In addition, the project will finance some limited goods for park operations. These small-scale facilities investmentswill improve the products and services offered by PAS,and enable management to increase the capture o f key revenuessuch as entry fees. Component2: Capacitv and Support for BiodiversitvConservation(total US $1.84 million, o f which US $0.99 million i s GEF) Summary. This component will focus on strengtheninginstitutions responsible for planning, establishment, and management o f PAs to ensure the sustainability o f the expanded P A network, through: (i)training and technical assistance for environmental capacity-building at the PA, Entity and State levels; (ii); awareness programs; and (iii) public Project management. Sub-component 2a): Institutional Capacity Development. Overview. The project will finance capacity building, learning and skill development inorder to strengthen the institutions responsible for PA management throughout BiH. While some capacity exists (especially inthe existing PAS),technical management skills needto be enhanced and built up for these and new management authorities as they are formed. This subcomponent will also benefit from IDA-financed support under FDCP for capacity buildingrelatedto National Standards for Forest Certification, the HighConservation Value Forests toolkit, strategic forest planning, and expansion o f revenueoptions. Training impacts are expected in terms of positive participant feedback, improved knowledge and attitudes about biodiversity, P A management and objectives, and increased and better practice o f P A management approaches and tools. The periodic reviews o fPA management effectiveness will further capture information about knowledge, attitudes and practice, and pull in information captured through self-assessment exercises and visitor feedback. 32 Existing and Proposed PAS.Training and technical assistancewill focus on key areas including: Ecosystem-based management and building skills intools such as adaptive management, conservation and restoration site selection, stakeholder engagement and communication, and forest and pasture management, ecotourism development; Businessplanning covering issues such as marketing, financial management and sustainability and including strategies to increase customer appeal through eco-labeling or certification, improve capture from existing revenue sources (e.g., tourism operations, resource user fees) and diversify revenue streams and increase abilities to access external sources such as EU assistance; Fieldskills, especially for staff such as rangers intopics including patrolling and enforcement, community engagement, conflict management, communications, visitor management and interpretation. Giventhe critical role of the forest sector inBiH, an important aspect ofthe training will be with forest professionals, to give them new skills to incorporate biodiversity into forest management both inside PAS(including buffer zones) and outside inthe broader production landscape. Similarly, with the increased emphasis on tourism development throughout the country and PAS inparticular, assistanceneeds to focus developing and supporting tourism that is better able to meetenvironmental standards while beingeconomically profitable. Entity and State. The project will finance capacity buildingfor the Ministries incharge o f PA management and land use planning (MET inFBiH; MSPCEE inRS) as well as the National Biodiversity Committee, so that they are capable o f providing leadership for biodiversity conservation and EU convergence. This will include assistance with: (i)operationalizing parts o f the NBSAP includingthe policy, legal and financial aspects of establishing an effective system o f biodiversity protection; and (ii)strengtheningcross-border initiatives to conserve high conservation value ecosystems inthe Balkans, through targeted exchanges with neighboring P A authorities. This will complement capacity buildingbeing supported with IDA financing under FDCP to implementthe National Standards for Forest Certification and the HighConservation Value Forests toolkit. It will also involve close coordination with IDA-financed efforts under FDCP to build capacity relatedto the alternative forest revenues including the use o f forest areas for tourism as well as non-timber forest products and hunting, inorder to maximize both learning and regional approaches affecting areas that include boththe FMPAP PASand other forest areas. EUAccession. Additional support would be aimed at buildingthe institutional capacity to deepenthe understanding for the use o f different EUfunding programs and instrumentsto finance biodiversity and nature protection (including the Natura 2000 network) once BiHwill become eligible to take advantage o f these funds. This support i s particularly timely given the current EU"Assessment o f Programme Preparation inAreas o f Nature, Biodiversity and Climate Change" which forms part o f the EU's assistance strategy for preparation o f the future Instrumento f Pre-Accession. The study is due to be completedby July 2008. As noted by the EU, experience to date shows that alignment with EUlegislationon biodiversity and nature protectionhas been a substantial stumblingblock for accession. Studies. This component will also support case studies on selected P A management issues, e.g., grazing impacts and strategies, sustainable tourism development. Sub-component 2b): Public Awareness Programs. Overview. The project will support the implementation o f an outreach program to raise public awareness and support for biodiversity conservation and the PA network. Inaddition to 33 providing technical assistance inpublic outreach at the PA and entity level, the project will support public awareness initiatives with activities such as development o f promotional materials, establishing andor improving P A websites, environmental education, media advertising and public consultations on PA operations and management. Where relevant, it will build on the IDA-financed FDCP efforts to strengthen communication skills and transparency. Sub-component 2c): Proiect Management. Overview. This sub-component contains limited financing for project management and operating costs, including coordination and administrative staff, procurement, disbursement and financial management, and monitoring and evaluation activities at the Entity level. Support i s also provided for Project Guidance Committee meetings. For further details, see Annexes 6, 7, and 8. ComDonent 3: LocalInitiativesin BiodiversityConservation(total US $0.50 million, of which US $0.41 million is GEF) Summay. The project will support conservation efforts by local stakeholders inand around PAS which generate global biodiversity conservation benefitsand improve economic returnsto local communities involved inprotected areas management. As such these initiatives will be expected to enhance the objectives and activities o f FMPAP through contributing positively to mitigating and/or reducing significant threats to the biodiversity o f the P A and to the monitoring o f biodiversity resources. .Underlyingconcepts o f this component include: a) the generation o f economic and other incentives for stakeholders to adopt or change land use practices that have an adverse impact on globally significant biodiversity inor adjacent to PAS; and b) improving relationships betweenlocal stakeholders and PA authorities at a time when a significant expansion o f the PA network i s underway. Threats to PAS. Although there are differences inthe types and extent o f threats at the project sites, all PASexperience varying levels o f unregulated, and to some extent illegal, resource extraction (e.g., of timber, fuel wood, non-timber forest products, grazing), unregulated tourism development and poor management o f waste. Additionally, some sites are losing landscape values as cultivation and grazing practices change or cease. Others are facing threats from land- minesand mineral extraction -- threats that are clearly difficult for local communities to address under this component. EligibleActivities. Giventhat it will not be possible to address all threats, it i s expected that eligibleactivities that contribute to biodiversity conservation will fall underthree broad categories suitable for local stakeholders to design and manage: i.PAcompatibleincome-generation,e.g., ecotourismactivities, sustainableNTFPextraction, agri-environmental enterprises, environmental certification'; ii.habitatandlandscapeconservation, e.g.,siteandlandscaperestoration,participatory pasture management; and iii.sustainableenvironmentalmanagement,e.g.,wastemanagementschemes,alternative energypromotion. Proponents will not have to confine themselves to working within one category. Proponents will also be encouraged where possible to look for synergies with Local Environmental Action Plans 9 Certification of state forest enterprise operations is being supported under FDCP and would not be eligible for GEF financing. However, the subproject grants might include, for example support for certification efforts that improve market access for small scale enterprisesinvolved in sustainableNTFP harvestingor ex-situ production of threatened species. 34 (LEAP) that have beenprepared for several municipalities. Proposals for biodiversity conservation-related activities inthe six project sites would be eligible for support, except for activities which are adequately supported by other environmental and social grant programs. Eligible applicants. Eligible applicants would include the following: a) non-governmental sector - non-government organizations, village councils, traditional associations, trade associations, community-basedorganizations and groups; b)private sector -companies and businesses; and c) government sector - authorities such as municipalities or smaller, local schools. Applications from consortia o f organizations and individuals across sectors, and partnerships will be encouraged. Sub-projectgrants and duration. The respective PMUs will oversee sub-project administration and evaluation. The grants can range in size from US$20,000 to US$lOO,OOO. The maximum amount will only be given to sub-projects with a highlikelihood o f having major positive impact on significant biodiversity resources inthe PASand the participants. At least one grant will be awarded per project supported PA. It is anticipatedthat between6-10 proposals will be funded in total. The total value o f grants will not exceed US$360,000, with each entity able to award up to US$180,000. The minimum duration for an initiative will be six months and the maximum 24 months. It i s anticipated that agreements will be signedfor all grants by the end o f year 2.. Beneficiary Contribution. Co-financing by beneficiaries will be requiredbecause it demonstrates real interest from the grant recipient and a stronger stake insub-projects success. Beneficiaries may co-finance inkind and/or incash, with the amount o f co-financing requiredto be no less than 20% o fthe total value o fthe sub-project, i.e., beneficiaries must provide a contribution that i s 25% o f the value o f the grant beingrequested". Sub-projectDesign and Review. A contracted organization will facilitate public consultations involving PA management staff, P M U and local stakeholders including affected populations. Participants inthe consultations will identify and agree on key biodiversity and PA resources, threats to biodiversity, and priorities in biodiversity conservation to be addressed. Participants will be familiarized with and agree on criteria for eligible activities and recipients, and based on the PA and biodiversity discussions and inaccordance with the Access RestrictionProcess Framework mutually agree on sub-projects to be prepared, collaborations and partnerships and procedures for specific activities and their phasing for particular PAS. To help ensure sustainability, the contracted facilitating organization will, inaddition to facilitating the above process, a) hold training sessions for proponents on proposal preparation; b) facilitate the review o f sub-project proposals; and c) assist inmonitoring and evaluation o f sub-projects as agreed with the PMUs.Through this participatory process, PA authorities will be able to engage with stakeholders and foster innovative and site-specific responses. Evaluation of Proposals. Each P M Uworking with working with the PA staff and the contracted TA, would review sub-project proposals based on agreed criteria. Proposals may undergo detailed expert technical reviewand revisions requested from proponents as needed. The recommendations o f the reviewteam (including the expert technical review) would be compiled and presented to the respective P M U Managers for approval for funding, and submittedto the World Bank for no-objection. loIn-kind contributionsmay includethe value to the sub-project o fthe use of land, operatingcosts o f premises, equipment, supplyof materials, and wages of participants. 35 Proposal Requirements. Successfulproposals will be able to demonstrate: Relevance of the sub-project to the FMPAP objectives, PA plans and priorities; Beneficial impacts on significant biodiversity resources and status and rural livelihoods; Effectiveness with realistic activities designedto achieve the desiredobjectives; Efficiency of resourceuse, and beneficiary contribution of at least 25% of grant funds; Sustainability of results and potential for replication. "Guidelines for Implementing Local Initiatives for Biodiversity Conservation" have been preparedand agreed. Capacity-building aspects. The experience gained by participants would be useful for accessing additional funding at a later stage whether from international sources such as the EUor internally through the Entity-based Eco-Funds. Grant-awarding schemes are a common EUpractice, e.g., as Financial Instrument for the Environment (LIFE)-Nature or the Special Action Program for Instrument for Pre-AccessionAssistance for RuralDevelopment (IPARD, which include support for "agri-environmental" activities whichpromote agricultural production practices which are compatible with environmental protection and landscape conservation. ProjectArea Description Populations at theproject sites. The sites targeted under this project vary significantly interms of the surrounding population. Taking account the entire population of the municipalities located partly within or aroundthe PAS,the most populated site is IBTV with 101,000 inhabitants, followed by Kozara with 94,000, Una River watershedwith 61,000, Sutjeskawith 41,500, Janj FR with 12,500 and Lom with 1,500. The population within the Prenj complex is estimatedat less than 25,000 (the latter figure will be verified inthe Feasibility Study). Socio-economicconditionsat theproject sites. The social assessment identifiedthe following as the principal sources of income for the majority of households inthe vicinity of the PAS: pensions, monthly salaries fromjobs not relatedto use of natural resourcesinthe PAS,disabled persons'benefits, and remittances from relatives. Agricultural production is primarily for subsistence purposes, andvery little i s sold commercially. The population o fKozara i s the most dependent on agricultural produce Residents inthe Kozara, Sutjeska, Lom and Janj areas are engagedinmodest levels of livestock production to meet householdneeds and for income- generation. Dairy production occurs inall the project areas, with reliance on sales of milk and cheese for income more common inthe IBTV, Kozara, Janj and Lom areas. Similarly, picking of mushrooms, herbs and non-timber forest products for householdconsumption is a widespread practice in all the areas, and more common near Janj, Lom and Sutjeska. Inall of the areas, such products are rarely sold for income-generation. Most residentsof the six PASclaimed that they use wood only for their own heating and cooking requirements. There are some earnings based on sales of firewood inthe 1gman.Bjelasnica-Treskavica and Sutjeska areas. Illegal logging is believed to be performed by both local residents of the PASand non-residents". Few individuals reportedly perform primary timber processing for a living. Most of the employed Lom area residents work inthe forestry sector. " Based on feedback from forest inspections, there has been a decrease in illegal logging during the recent years. This particularly refers to illegal logging by non-residents. BiH has adopted an Action Plan for Elimination of Illegal Logging (at the level of both BiH Entities). 36 s 0 rc 0 2 J 3 3 2 N ru 0 00 m Annex 5: Project Costs B0SNIA-HERZEGOVINA: FOREST AND MOUNTAINPROTECTED AREAS PROJECT (US$million) Components RS FBIH Total RS FBIH Bene- Total Parallel IDA GEF GEF GEF Gov" Gov" ficiaries Direct financing Project under FDCP costs Protected Area Development PA Management 0.24 0.37 0.61 0.20 0.30 0.00 1.11 0.70" Planning Ecologicaland PA 0.11 0.10 0.21 0.10 0.15 0.00 0.46 1.5020 Management. Assessment PA Facilities 0.55 0.42 0.97 0.48 0.34 0.00 1 .so 0.00 subtotal - - 1.80 0.90 0.86 0.75 0.75 o.00 - 2.20 3.30 Capacity & Support for Biodiversity Conservation Institutional Capacity 0.20 0.22 0.42 0.09 0.09 0.00 0.60 0.252` Development Public Awareness 0.10 0.14 0.25 0.15 0.15 0.00 0.56 0.0522 Programs Project Management 0.1423 0.0924 0.23 0.14 0.14 0.00 0.50 0.00 & Project Monitoring Subtotal - - 0.89 0.44 0.44 0.38 0.38 o.00 - - 1.65 0.30 Local Initiatives Grants 0.19 - 0.19 a.41 o.00 o.00 0.08 - - 0.45 0.00 Price and Physical 0.17 0.17 0.34 0.13 0.13 0.01 0.60 0.00 Contingencies (loo/,) TOTAL - - 3.40 1.70 1.70 1.26 1.26 0.09 - - 6.00 2.50 l6 Numbers may not add up precisely due to rounding. " Allocationofgovernmentbudgetacrosssubcomponentisnotionalonly,sincethiswilldependonPAallocation of staff time and other budgetedresourcesfor project-relatedactivities. Allocation of government budget across subcomponent is notional only, since this will dependon PA allocation o f stafftime and other budgetedresourcesfor project-relatedactivities. Portionof State Forest Inventoryand Forest ManagementInformationSystem. 20 Portionof State Forest Inventoryand Forest ManagementInformationSystem. 21 Strengtheningcapacity in strategic planning,alternative forest revenues, and certification support. 22 Strengthening capacity in communications and transparency. 23 Includes US$9,000 in base costs at State-level ProjectGuidanceCommittee meetings chaired by MFTER. 24 Includes US$9,000 in base costs at State-level ProjectGuidanceCommittee meetingschaired by MFTER. 39 Annex 6: ImplementationArrangements BOSNIA-HERZEGOVINA: FOREST AND MOUNTAIN PROTECTED AREAS PROJECT 1. Overview. As notedearlier, BiH representedby the Ministry of Financeand Treasury would be the recipientof GEF grants and would transfer funds to the FBiH and RS Governments.To ensure close collaborationwith all relevantgovernmentaldecision-makers,includingEntity, cantonal, and state-levelinstitutions, a ProjectGuidanceCommitteewill be established. The MET and MSPCEEwould leadthe processofprotectedarea declarationand expansion. PMUs within MET and MSPCEEwill undertakecore implementationfunctions includingoversight, procurement,financial management,annualplanning, supervision, monitoringofrepayments, reportingand evaluation.Eachproject componentwill includecontractedtechnical assistance to implement activities. Subprojectgrants will be awardedand disbursedunder the Component 3 - Local InitiativesComponent. PA authoritieswill oversee field-level implementationand coordinationofproject activities, and undertakea limited amount ofprocurement. Where appropriate(for example inthe Janj and LomForestReserves inthe RS) implementationwill be closely coordinatedwith MAWMFs inbothentities. The implementingministries may form entity-levelsteeringgroups ifconsiderednecessary, but their functions should complement those of the ProjectGuidance Committeeand supportthe ministerialProjectManagementUnits. 2. Project Guidance Committee - This comprisesthe Sub-committeefor Biodiversity (establishedin2002 througha decisionofthe SteeringCommitteefor Environmentally SustainableDevelopmentof BiH), GEF BiH FocalPoint from MFTER, Entity PMUManagers and from each Entity one representativeeach from localgovernment,the private sector and non- government organizations(NGO). The Project Guidance Committeewill: (a) provide overall project guidanceand review project progress; (b) support and guide policy or legal/regulatory aspects neededto facilitate successful project implementation; and (c) serve as a forum for strengtheningthe environment sector throughexperience-sharingandnetworkingamongkey players. The responsibleEntity line ministries (MET and MSPCEE) will appoint the local government, private sector andNGO representatives(three from each Entity with a total of six representatives). Semi-annualmeetingswill be heldwith at least one meetingper year to coincidewith a World Bank Projectsupervisionmission. 3. Project Management Units. Inthe FBiH, it has beenagreed that the existing Sector for ProjectImplementationinMET will serve as the primary implementationunit.Inthe RS, a similar Sector for Project Coordinationand Developmentis beingestablishedinthe MSPCEE and likewisewill oversee implementation.Eachunit will oversee day-to-day financial, administrative andtechnicalmanagementofproject activities. For the purposesofthis document, bothare beingreferredto as ProjectManagementUnits (PMUs). PMU Staffing: Inthe FBiHthe Departmentcomprises a full-time manager, two financial management officers, two procurementstaff, an accountant andtwo additional office staff. For the purposesof FMPAP, a dedicatedFMspecialist has beenhiredand additionaltranslation supportwill be mobilized. Inthe RS, the unit has a managerinplace and needs to assigntwo staff members for financial managementand procurementduties. The unit will retain consultants for at least the initial six monthsto strengthenfinancial managementand procurementcapacities, 40 and will hire translation support as needed. The MET and MSPCEE will each appoint staff person as their respective M&E focal point, and they may also be included as part o f the P M U staff. Each PMU can hire additional technical assistance as neededand inconsultation with the Bank team to strengthenimplementation capacities. P M U Responsibilities: Each unit will be based intheir respective capitals, and responsibilities will comprise: e Preparation o f annual work plans, budgets, implementation schedules for each component consistent with detailed project designs and guidelines, including review and disbursemento f grants under Component 3 : Local Initiatives inBiodiversity Conservation; e Monitoringo f project activities and results and preparation o f financial monitoring and project progress reports, updating manuals and guidelines inconsultation with the Bank team, and providing comments on policy and other implementation issues; e Coordination o f M&E activities across PASand with other government agencies, including the unitswithin the entity Ministriesof Agriculture, Water Resources, and Forestrywhich is responsible for the State Forest Inventory and the Forest Management Information Unit, and the state focal point on national standards for forest certification (assuming that the M&E focal point i s part o f the P M U - ifnot then this will be handled at the ministerial level, with administrative support o f the PMU). e Preparation o f tender documentationand procurement o f project technical assistance, training and facilities for PASand as needed for PMUs inclose consultation with the Bank team. This may require arranging for unifiedtenders across entities ifefficiencies can be obtained; e Provision o f institutional support to the P A management authorities and units with emphasis on project management including finance and administration, procurement, monitoring and evaluation; e Providing basic information and guidance to all project stakeholders and exchange information on experiences with similar programs, nationally and internationally, and with relevant donors; e Communicating about the project to the public and the media, and key stakeholders; e Facilitation o f inter-ministerial coordination, and inthe RS ensure close cooperation with MAWMFregarding project implementation inthe Forest Reserves; e Providing support for Bank supervision missions and liaison with Bank staff; e Participation inthe Project Guidance Committee; and e Functioning as paymaster for the project. 4. ProtectedArea Management Units. It has been agreed that for each existing PA (four in total) the current staff will assume responsibilities associated with project implementation. However, additional technical assistance may be procured ifneeded inconsultation with the PMU. Inthe case o f the Forest Reserves, P A management will report to the P M U inthe MSPCEE on project-relatedtasks, and as requiredby MAWMF to that ministry on these and other functions. UntilP A authorities are established inFBiH,the Federation's P M U will fulfill the following responsibilities as per project design and appropriate for each site. Specific responsibilities comprise: e Preparationo f annual work plans and budgetsfor review and approval by their respective PMU; e Supporting and overseeing field-level implementation o f project activities, e.g., preparation o f management plans, facilities development, training courses, public consultations, etc.; 41 Monitoring o f project activities and results and preparation o f financial monitoring and project progress reports; Working closely with contracted technical assistance inproject component implementation; Communication and liaison with local stakeholders about project activities and results; Procurement o f equipment, labor and other items in consultation with P M U and as agreed in annual work plans and budget; 5 . Cooperation with Other Ministries. The inclusion o f Forest Reserves and forest areas of biodiversity importance inthe project requiresthat the Entity line ministriesmaintain operational-level cooperation and liaison with MAWMFs. It has beenagreed that the Entity PMUs will hold regular meetingswith MAWMF representatives, and share all progress and financial reports on a timely basis. Both Entity Line ministriesare considering inestablishing entity level steering or supervisory committees which would include representation from the forestry sector. 42 Annex 7: FinancialManagementand DisbursementArrangements BOSNIA-HERZEGOVINA: FOREST AND MOUNTAIN PROTECTED AREAS PROJECT Country Issues A report providingan updateon the assessment of the country's public financial management (FM) was preparedin2006. Although BiHhas made good progress inestablishingmodern public FM institutions and systems since the war ended in 1995, systemic and structural weaknesses inpublic sector budgeting, accounting, reporting, and auditing remaina challenge. The Treasury accountingsystem nowprovidesreliableinformation; systems are inplaceto record, report, andtrack receiptand use of funds; and there is independentaudit ofthe budget executionreports. However, weak compliancewith the existinginternal control rules and proceduresis further compoundedby the absence of a moderninternal audit system thus weakening the internal control framework. Moreover, current public procurementpracticesare weak and fail to comply with the Public ProcurementLaw. The use of country FMsystems in BiHshouldbeginwith a pilot Project subject to a separate Project fiduciary assessment after progresshas beenmade insettingup an effective internalaudit function at the levelofthe State and the two Entities. Currentlyavailable resources inthe FBiHMET andRS MSPCEEdo not permit to use country systems for FM for this Project. Risk analysis Risk assessment. The overall FMrisk for the project is substantialbefore mitigationmeasures, and with adequate mitigation measures agreed, the FMresidualrisk is ratedmoderate.Table below summarizesthe FMassessment and risk ratings of this project: ~. Risk Risk Risk MitigationMeasures Risk after Rating mitigation Inherent Risk Country level. Perceived corruption in S Corruption risk will be mitigated by instituting M the country is high. Compliance on additional procedures and strengthening system internal controls is weak. Internal audit o f internalcontrols. The internal controls to be is not yet developed. Capacity of State applied in practice are described in Financial Audit Institution is still low. Efficient Manuals. Quarterly IFRs will be submitted to and effective procurement practices are the Bank. Risk imposed by low capacity o f lacking and appropriate complaints SA1 will be mitigated by using private auditors mechanisms missing. acceptableto theBank fbr the project audit. Entity level. Weak financial S IIThe risk will be mitigated by instituting M Management structures in the two additional key controls 6 be applied during ministries that will implement the implementation of the project by dedicated project. Large infrastructure project staff, FM capacity building. Any investmentsproneto corruption. changes to the PMU's staff structure will be agreed with the Bank. Project level. Complexity of the project M IIThe FBiH PMU has previous experience in M is modest. implementingBank funded projects: Inthe RS, experienced specialists will provide support until the MSPCEEPMU has sufficientcapacity. Overall Inherent Risk 8 M 43 Risk Risk RiskMitigationMeasures Risk after Rating mitigation s Control Risk 1. Budgeting and Planning. M No additionalmitigation measures needed. M Capacity for budgeting and planning is adequate, and there is substantial experience inthis respect. 2. Accounting. M No additional mitigation measures needed. Current M accounting systems will continue being used in the FBiH PMU, while an experienced specialist will establish the system, carry out the FM initially, and develop FM capacity of the new MSPCEE PMU in the RS. 3. Internalcontrols S FM manuals already in use for ongoing Bank-financed M projects include detailed description o f internal control procedures. In the FBiH this manual was adapted to FMPAP prior to negotiations. In the RS, an experienced specialist will adapt an existingmanualto FMPAP. . 4. Funds flow M No additionalmitigation measures needed. M 5. Financialreporting S Financial reporting will be based on the current systems M used in accordance with project-specificformats agreed at negotiations. Existing software will be adjusted to accommodate these formats, in the FBiH, by the PMU, and in the RS, by the experienced specialist. The RS specialist will also establishthe fill reportingsystem. 6. Auditing. M No additional mitigation measures needed. A private M audit company acceptable to the Bank will perform audit o f the project basedon existingaudit arrangements. 7. Staffing In FBIH, PMU staff experienced with SWMP will train M and advise new staff in Bank procedures. In RS, an experienced specialist will establish the system, carry out the FM initially, and develop FM capacity of the new MSPCEEPMU. Overall Control Risk M Overall FM Risk M Strengths. Previousexperiencewith Bank fundedprojects inthe FBiHPMUrepresentsthe principalstrengths ofthe ProjectFMarrangements. Weaknesses.InFBiHMET, the principalweakness is that FMspecialist inthe PMUhas no previousexperience inworking with Bank financedprojects andinRS MSPCEEthe PMUis not yet appropriately staffed. This is mitigated(a) inFBiHthroughthe involvement of experienced FMspecialist for SolidWaste ManagementProject (SWMP) who will providetraining and advice to the newFMPAPFMspecialist,and (b) inthe RS throughengagementpart-timeFM consultant under a short-termconsultancycontract who wouldtrain the FMspecialistinthe RS PMU. Action Plan. Several detailswere discussedduring negotiationsand have beenreflectedinthe minutesor attachmentsto the minutes: These include: Formatsfor the InterimUnauditedFinancialReports (IFRs). Draftformats were finalized and confirmedduring negotiations. 44 No. Action Responsible Proposed target date 1. In the RS, the experienced specialist specified in the MOU Specialist June 16, 2008 shall submit the initial update of the FM operational specified in manual. MOU 2. In the RS, the World Bank shall complete its review o f the World Bank June 22, 2008 draft FM operational manual and the specialist shall Specialist June 30,2008 respond ifnecessarywith a revisedsubmission. specified in MOU 3. Inthe FBiH and the RS, the PMUswill submit a draft final PMUs August 31,2008 contractfor the FM software FMImplementationArrangements. Implementing agencies. The project i s to be implementedunderthe overallresponsibilityof the FBiHMET andthe RS MSPCEE. A PMUhas beenestablishedinthe FBiHMET, including procurementandFMaspects, ofthe whole project. A Project Managerfor the RS PMUhas been nominatedinthe RS MSPCEE,with further team membersto be appointed. The PMUs will have overall responsibilitiesfor implementation,includingprocurementandFMactions. Planning and Budgeting. The PMUs inthe two Entity-levelministrieswill prepareannual plansbasedon detailedprocurementplans. Care shouldbetakenthat variances of actualversus budgetedfigures are monitoredon a regularbasis, appropriatelyanalyzedandcorrectiveactions taken. The two PMUs (inthe case ofthe RS, with the assistanceofthe contractedexperienced PMU) will preparebudgetsfor all Project components for each Entity. Accounting Policies and Procedures. Project accounting, on cash basis, will be maintained separately within the PMUs. Accountingproceduresare set out indetail ina FMManualfor the 45 FBiHPMUs for the current SWMP. The FMManual covers: (a) the FMsystemproposed under the project, with special emphasis on accounting and auditing policies, standards and internal controls; (b) the role o f the FM systems inproject management and implementation; (c) the accounting arrangements required for project management, the format for and content o f project financial reporting; (d) the auditing arrangements that will be usedduringproject implementation; and (e) budgetingand planning. This manual i s to be further developed and amended to cater for the FMPAP, before Board presentation date. The FMmanual for RS P M U will be based on the existing manual usedby the experienced specialist, which will be adjusted to accommodate the FMPAP design. Staffing. The FBiHP M U consists o f a Head o f P M U (Assistant Minister), Senior Procurement Officer, Procurement Officer, and two Financial Managers. It i s planned that one junior accountant and an additional procurement officer joins the team shortly. This staffing level i s satisfactory for the implementation o f the project. The existing SWMP FMS will train the FMPSP FMS. The RS PMUhas Manager who is a member o f MSPCEE's regular staff. InRS, an experienced specialist will establish the system, carry out the FM initially, and develop FM capacity o f the new MSPCEE PMU. FMManual. Project specific controls and procedures relating to FMwill be described inthe FMManuals prepared for the project ineachEntity.Key internal controls to be applied include appropriate authorizations, control checks, segregation o f duties, reconciliations and documenting transactions. The Manuals will set out the FMand internal control policies and procedures and are intendedto guide staff and minimize the risk o f errors and omissions, as well as delays inrecording and reporting. These written standards will also clarify responsibilities, including level o f authority, clear control over assets, cash, and bank accounts, and it ensures timely and accurate financial reporting. The procurement function for the project will be centralized inthe two ministriesproject units, and the project procurement specialists will initiate the procurement process. Internal Controls. The controls for the project are expected to follow the following procedures: The institutionreceives an invoice andverify it interms o f quality and quantity o fthe goodshervices received versus invoiced. The invoice i s then forwarded to the project units where it is registeredas received andforwarded to the Project Director. The invoice is immediately givento the project accountant who registers the invoice ina simple log file with name o f supplier, amount, and date o fpayment. He/she checks the invoice, the calculation o fthe invoice, and finds the appropriate budget from which the amount will be charged (contract number, item number and program (component)). The accounting code needs to be written on the invoice by the accountant. After puttinghisherinitials the invoice is givento the project procurement staff. The procurement staffchecks the invoice against the relevant contract number, ifnecessary attaches a copy o f the relevant paragraph on which the invoice i s based from the contract and signs. All relevant documentation shall be attached to the invoice enabling the relevant coordinator to immediately evidence that the necessary checks have been performed. The invoice i s finally received again by the project accountant. The receipt o f the approved invoice i s registeredinthe registry mentioned above ensuringthat payment can be made as per the payment terms. Payment order and the invoice with all designated approvals and signatories (described inthe FMl Manual) are submittedto the commercial bank where the Designated Account i s opened for payment or incase o f Direct Payment the application form for such payment method i s submitted to the Bank. After applying the eligible percentages the request for payment o f the counterpart contribution with all designated approvals and signatories (described 46 inthe FMManual) is processedfor payment. Bank Statements are receivedweekly bythe project units.Based on the Bank Statements the project accountants will record executed payments and perform due reconciliation o f the bank and grant balances. The project units will prepare interim un-audited financial reports listedabove quarterly inthe agreed format and submit the reports to the Bank. The project's financial records will be reconciled with the World Bank's Disbursement Summary statement on a monthly basis by the Financial Management. The Financial Manager will reconcile on a monthly basis the balance on Special Account per the project's accounting records with statements received from the bank at which the Special Account i s held. Proceduresfor Local Initiatives Grants. With respect to the local initiatives grants, the procedures will be described in Guidelines on the Local Initiatives Grants were agreed at negotiations, with details on FM aspects specified inthe FM Operational Manuals. The Guidelinescontain key internal controls and procedures that needto be inplace before small grant funds can be disbursedincluding: a clear description o f eligibility criteria for beneficiaries; a clear description o f eligibility criteria for sub-projects; procedures and processes o f monitoring and evaluation o f the grants, including reporting; and the procurement processes for the grants. Procedures for disbursement, accounting, documentation and financial reporting will be specified inthe FMOperationalManual; Internal Audit. The project unitshave no internal audit function and none is considered necessary. The activities will be subject to an external audit by the Supreme Audit Institution o f the two entities. Reportingand Monitoring FMReporting and Monitoring Arrangements. The PMUs will maintain financial records for the Project and will ensure appropriate accounting for the funds provided. The PMUs will prepare on a cash basis and submit quarterly InterimUn-audited Financial Statements (IFRs) ina form agreed with the Bank, due within 45 days o f the end o f each quarter. The PMUs will also prepare annual project financial statements, in a form acceptable to the Bank, and these will be audited by an external audit firm acceptable to the Bank. The IFRswill include: Project Sources and Uses o f Funds Statement, Project Balance Sheet, Statement o f Expenditures (SoE) and Payments made duringreporting period against contracts subject to the World Bank prior review. FMReporting andMonitoring Capacity. The current FBiHPMUinMETin-charge for the implementation o f the SWMP submits InterimUn-audited Financial Statements on a quarterly basis. The reports continue to be submittedon time and are acceptable to the Bank. The same arrangements will be retained for the new project. However the format o f IFRshas beenrevised inorder to reflect the newsources and uses offunds for the newproject. The reporting will be done inUSD. The P M U has purchased and has implementedthe software that was developed by e-Line d.o.0. Sarajevo. It is used for the current SWMP. The accounting software system uses MS SQLdatabase. It consists ofthe following modules: financial, procurement andreporting. The financial modules include 4 sub-modules: Payments, Reports, Other Categories, and Reports by Other Categories. The payments are enteredinto the systembased on disbursement categories. The reporting sub-modules allow the PMU to print detailed reports andthe financial statements. The procurement module enables the PMU to enter all necessary information on procurement matters. The financial software has adequate security levels. The system meets the Bank's reporting requirements, although the P M U intendsto purchase an additional license so that it can make a separate trial balance for the FMPAP. The system updates neededfor the new 47 project will be completedby project inception. Inthe RS, the software usedby the experienced FMspecialist who is subject to the MOU will be adaptedto the FMPAP. It will includemodules on financial, procurementand reporting. The financial moduleswill include4 sub-modules: Payments,Reports, Other Categories, and Reportsby Other Categories. The paymentswill be enteredinto the system basedon disbursement categories. The reporting sub-moduleswill allow the PMUto print detailedreportsandthe financial statements. The procurementmodulewill enablethe PMUto enter all necessary informationon procurementmatters. The financial software will have adequate security levels. The system will also meetthe Bank's reporting requirements. ExternalAudit Audit Arrangements. The PMUswill be responsiblefor ensuringthat project financial statements,designatedaccounts, and Statement of Expenditures(SOEs) are auditedby an independentauditor, acceptableto the Bank, inaccordancewith standardson auditingthat are acceptableto the Bank. The annual project audit will be carriedout inaccordancewith the Guidelinesfor Auditing under WorldBankfinancedprojects (June 2003). The audit report shall be ina format inaccordancewith the International Standards on Auditing promulgatedby the International Federationof Accountants (IFAC). The auditedproject financial statementswill be sent to the Bank within six (6) monthsof the end of the Government's fiscal year. The audit expenses will be financed from the GEF grant source of funds. Audit Capacity. There are government-wideaudit arrangementscoveringall Bank financed projectsinBosniaand Herzegovina(with the exceptionofrevenue earningentities). The State Ministry ofFinance and Treasury (MoFT) has recentlyreneweda one-year contract for the audit of fiscal year 2007 with Price Waterhouse Coopers, Macedoniafor the audits of World Bank financed projects. The FMPAP will be includedon the list ofprojectsauditedunder the master audit agreement with Price Waterhouse Coopers, Macedonia. There is optionof contract extensionup to two additionalyears subject to successfulaudit performance. The audited financial statements of the current SWMP implementedby the FBiHMET for the FY 2006 have beenreceivedby due date. The auditors' opinionon the financial statementswas unqualified. The management letter containedminor recommendationsrelatingto accountingissues. The audit ofthe newprojectwill be includedinthe current arrangementsofthe MoFT. FundsFlow and DisbursementArrangements Retroactive Financing. Retroactivefinancingfor expenditures made no earlier than March 15, 2008 will not exceed US$lOO,OOO. Timeframe. It i s expectedthat the proceedsof the GEF Grant will be disbursedover a periodo f four years, plus an additional ten monthswhich includessix months betweenproject completion and closingas well as four monthsfor the completionof accounts and the submissionof withdrawal applications. As there is no standard disbursementprofile for Bosniaand Herzegovina,the disbursement forecast is based on the Bank'sexperiencewith financing similar projectsinother ECA countries, and other projects inBosniaand Herzegovina. The Grant closing date is estimatedto be April 30, 2013. DisbursementArrangements. Disbursementsfrom the GEF grant will follow the transaction- basedmethod, i.e., the traditionalBank proceduresincludingreimbursementswith full documentation, Statementsof Expenditure (SOE), direct payments and specialcommitments. Disbursementsfrom the Grant proceedswould be administeredby the PMUs.The PMUs are 48 responsiblefor retaining supportingdocumentationfor SOEs andmakingthem availableto supervisionmissions, as well as to the auditors. The draft CFAA for BiHrecommendedthat report-baseddisbursements(previouslyknownas PMR-baseddisbursements) shouldnot be introducedinthe BiHportfolio at this stage becauseof significant risksrelatingto (i) project FM weaknesses andlack of capacity inPMUs; (ii) the shaky bankingsystem; and (iii) the unstable political situationand general governanceproblemspresentlyaffecting BosniaandHerzegovina. Designated Accounts. The state Ministry of Financeand Treasury will open a two designated accountsfor eachEntityfor GEF funds ina bank acceptableto the WorldBank. The designated accountswill be denominatedinUSD. The Government contributionwill be paidinto separate local bank accountsfor each Entity. Disbursement Allocations. The Grant amount of US$3.4 millionfunded by GEF will be allocatedto the FBiH andRS as indicatedinthe tables below. These tables set forth the Categoriesof itemsto be financed out ofthe proceeds ofthe Grant, the allocationofthe amounts of the Grant to each Category andthe Percentage of expendituresfor items so to be financed in eachCategory. Allocationfor FBiH Activities: Category Amount O hof Expenditures to be (in USD) Financed Eligible goods, works, US%1,520,000 100% consultant services, training and operating costs Local Initiatives Grants us$180,000 100% Total US$1,700,000 Allocationfor RS Activities: Category Amount YOof Expenditures to be (in USD) Financed Eligible goods, works, US%1,520,000 100% consultant services, training and operating costs Local Initiatives Grants us%180,000 100% Total US%1,700,000 Expenditures Eligiblefor GEF Financing. Eligibleexpenditureswill includeall works, goods, consultants, training, local initiative grants, andoperatingcosts inaccordancewith the project cost estimates, the agreedprocurementplan, andthe annualbudgets,which are made in accordance with Bank guidelinesandproject-specific guidelinesspecifiedinthe legal agreements. SupervisionPlan Duringproject implementation, the Bank will supervisethe project's FMarrangementsintwo mainways: (a) reviewthe project's quarterly IFRs as well as the project's annual audited financial statementsand auditor's managementletter andremedialactions recommendedinthe auditor's Management Letters;and (b)performon-site supervisions, reviewthe project's FMand disbursementarrangementsto ensure compliancewith the Bank'sminimumrequirements. Supervisionswill be performedbythe Bank accreditedFM Specialist. The strengtheningof 49 fiduciary capacity inthe two PMUswill be closely monitored. Supervisionswill be performed by the Bank accreditedFMSpecialist. FMLegalCovenants FM Covenants Appoint an independentauditor by January 31 o feach year and providean audit to IState MOF the Bank by June 30 of eachyear. Prepareand submit to the Bank quarterly interim financialreports within 45 days IEntity PMUs after the end of each quarter. The RS shall appoint financial management and procurement staff for the MSPCEE Entity PMUs I PMUwithin one monthof projecteffectivenessio carry out fiduciary functions for the project. Implementthe project in accordancewith the provisionsofthe Financial Entity Governments ManagementManual, ProcurementManualand Guidelines for Local Initiatives in includingPMUs Biodiversity Conservation. Providecounterpartfunds as required for financingtheir share of projectcosts on a Entity Governments timely basis, and will deposit these funds into the Project Accounts for withdrawal as requiredfor project implementation Maintain acceptable FM arrangementsthroughout the project life. Entity PMUs 50 Annex 8: ProcurementArrangements BOSNIA-HERZEGOVINA: FOREST AND MOUNTAINPROTECTED AREAS PROJECT A. General Procurementfor the proposedproject would be carriedout inaccordancewith the World Bank's "Guidelines:Procurementunder IBRDLoans and IDA Credits"datedMay 2004, Revised October 2006; and "Guidelines:Selectionand Employmentof Consultants by World Bank Borrowers" datedMay 2004, RevisedOctober2006 and the provisionsstipulatedinthe Legal Agreement. The various items under different expenditurecategoriesare describedingeneral below. For each contract to be financedby the Loan, the different procurementmethodsor consultant selectionmethods, the needfor pre-qualification,estimatedcosts, prior review requirements,and time frame are agreedbetweenthe Recipient andthe Bank inthe Procurement Plan.The ProcurementPlanwill be updatedat least annually or as requiredto reflectthe actual project implementationneeds and improvements ininstitutionalcapacity. A GeneralProcurementNotice (GPN) will bepublishedinthe Development Business announcinggoods, consultingservices to be procured,and invitinginterestedeligible suppliers and consultants to express interest andto request any complementaryinformationfrom the Recipient. Specific ProcurementNotices (SPN) will be publishedinthe on-line edition of the Development Businessfor all ICB contracts, and inthe printededition at the option ofthe Recipient.For goods to be procuredthroughICB, individualbiddingopportunitieswould also be advertisedina major local newspaperon the same (or within 5) day(s) of the on-line publication. The local advertisementswill be inthe Englishlanguageand, at the optionof the Recipient,will also be inthe local language.For consultants' contracts above US$lOO,OOO, SPNRequest for Expressionof Interestwill be advertisedinon-line editionof the DevelopmentBusinessand inat least one major national newspaperof wide circulation (inthe local and Englishlanguages). Civil servants are eligible be hiredas individualconsultants or as membersof a team with financing underthe Loanprovidedthey are on leaveof absence without pay and they have not beenworking for any of the BeneficiaryAgencies immediatelyprior to taking leave of absence. Procurementof Goods: Goods procuredunderthis projectwould mainly be Information Technology, comprisingoff-the-shelf hardwareand software as well as the designand developmentofnew systems. Inadditionto the mainIT equipment various peripheralswould be procured. Other goods may includefurniture, small equipment (including office equipment), communicationequipment, vehicles, training and printingmaterial.All Goodsto be procured through ICB will be procuredusingthe Bank's StandardBiddingDocuments(SBD. All goods will be grouped, to the extent possible, to encourage competitivebidding. The following methods of procurementwould be followed: (0 International CompetitiveBidding (ICB). Computer equipmentand softwareunder all Components of the Project for contracts above US$lOO,OOO equivalentper contractwill be procuredusingICB. (io Shopping (SH) procedurewill be used for readily availableoff-the-shelfgoods, training and publicity materialsand for all smallvolumes of computers, software andperipherals underthe project. All items would have standardspecifications,estimatedto cost less US$lOO,OOO equivalentper contract. 51 (iii) Direct Contracting. Where certain goods are available only from a particular supplier or incases where compatibility with existing equipmentso requires goods may beprocured underDirect Contracting (Single Source) have obtained prior approval from the Bank (in accordance with a paragraph. 3.6 of the Procurement Guidelines). Procurement of Works:Works procured underthis project would include: marking PA boundaries, trail improvement, and construction and rehabilitation of small buildings inthe PAS. These works will be small and scattered so they cannot be grouped into larger bidding packages. All contractsestimatedto cost less than US$lOO,OOO equivalent each may be procured using Shopping, and those estimated at less than US$500,000.00 equivalent per contract may be . procured using NCB procedures25and biddingdocuments for procurement of works satisfactory to the Bank. Force Account will be usedon case-by-casewith the Bank's prior agreement. Procurement of non-consultingservices: Non-consulting technical services, suchas Survey and mapping, digitizing and other, should the need arise during project implementation; will be procured following the above spelledarrangementsfor Procurement of Works. Selection of Consultants: Consulting services from firms and individuals requiredfor the project will includetechnical assistance to participating Entitiesand institutions, development of communication activities, IT / IMstrategy, studies,project management, QA & QC, Public awareness campaign, improving legal framework, TA for reduction of administrative barriers and regulatory impact assessment, etc. Short lists of consultants for services estimatedto cost less than $100,000 equivalent per contract may be composed entirely of national consultants inaccordance with the provisions of paragraph 2.7 of the Consultant Guidelines and with the prior agreement of the Bank. The following procurement procedures will be usedfor selection of consultant services: (0 Quality and CostBased Selection (QCBS) procedures, as describedinSection 11, paragraphs2.1 to 2.3 1of the Consultant Guidelineswill be usedifnecessary for assignment under all Components of the Project; (io Least Cost Selection (LCS) procedurewould be usedfor selection of an auditor to carry out audit of the Financial Statements of the Project. The shortlist should comprise only firms selected from the Bank list of eligible firms; (ii0 Selection under a Fixed Budget (FBS) may be used for assignmentsrelated to Public Relations (PR). Inaccordance with paragraph3.5 of the Consultants Guidelines the RFP shall indicate the maximum available budget and a firm will be selected that offers the best quality technical proposal withinthat available budget. 25 NCB will be subject to the following conditions:a point system of evaluationwill not be used; domestic preferencewill not be applied; internationalbidderswill not be excludedfrom bidding; No bids will be rejected at the bid opening. All bids submitted on or before the deadline for submission o f bids will be opened and readout at a public bid opening; local bidders shall demonstrate availability o f obtainingsecurities and reasonableaccess to credit; bid evaluation criteria shall be pre-disclosedto bidders; and technical specificationsshall be clearly written. These conditionsshall be discussed at the negotiations and made part of the FinancingAgreement. 52 (iv) Selection Based on Consultants' Qualifications (CQ) will be usedfor contracting firms for certain assignments under all components o f the project for which the value of the assignments i s estimated to cost less than US$lOO,OOO equivalent per contract. (v) Individual Consultants (IC'. Many specialized activities where specific skills are needed for short period o f time at scattered intervals and which would not be practicalto package with the assignments for consulting firms described above, would be best served through the recruitment o f individual consultants (both foreign and national) to assist incapacity building and institutional strengthening within all components o f the project and to assist the P M U invarious tasks. Selection o f individual consultants will be carried out inaccordance with SectionV o fthe Consultant Guidelines. Individuals will be selected based on their qualifications for the assignment by comparing the CVs obtained inresponse to an advertisement inthe national press or DevelopmentBusiness. (vi) Sole Source (SS'. Consultants may be hiredunder sole source contracts with the prior approval o f the Bank inaccordance with paragraphs 3.9 to 3.13 o f the Consultants Guidelinesand following the agreed Procurement Plan. Training Activities. Training i s an integral element o f the project's capacity building objective. The Loanwill finance training programs, including training workshops, study tours and local trainings. Such training programs might be included in larger TA contracts with firms to reduce administrative burdenon the Recipient side. The PMUs would be responsible for administration o f a small number o f local workshops (including project launch, midterm and completion workshops) and limited number o f study tours for the beneficiary Agencies. Expenditures related to such training activities include: (a) for local training and workshops -per diems of participants to cover transportation, lodging and subsistence; minor organizational expenses (stationery, handouts, training materials, coffee breaks); (b) for international study tours - international travel and visa costs, per diems (lodging and subsistence) and course-related expenses (fixed tuition or participation fee). The Recipient would be expected to prepare and agree a training planwith the Bank every six months. This Plan will define the agreed procedures that will be usedfor procurement o f various training services. The estimated budget, list o f participants and draft agenda for each training event will be subject to Bank prior review, however, this may be done through the Annual Plan. Expenditure items for training activities, including study tours, would be reportedunder SOEs. The status o fthe training plan would be included as part o fthe quarterly progress reports, and would be updated and/or modified as may be mutually agreed betweenthe coordination units and the Bank. Local Initiatives Grants Program: The project includes selected, appraised and approved in accordance with the agreed Guidelines on the Local Initiatives Grants up to an amount not exceeding the equivalent o f US$lOO,OOO for each grant. Procurement under the Local Initiatives Grants Program would be procured by the grant beneficiaries in accordance to the Manual for Conducting Very Small-Value Procurement Under World Bank / IDA Small Grants, Loans and Credits, May 2004. Operating Costs: Operating costs generated by project implementation, including the day-to-day operating cost for office maintenance, supplies and consumables, and incremental costs o f 53 operatingandmaintainingthe equipment providedunderthe project, other sundry items, office rentalandutilities,recurrentcost ofthe implementingagency directlyrelatedto project implementation,wouldbe financedby the project andwould be procuredusingthe implementing agency's administrativeprocedureswhichwere reviewedandfound acceptable to the Bank. Recurrent cost: Also other recurrent cost resultingfrom the implementationof some project activities, not directly relatedto the operating cost of the project implementationagency, would be financed underthe project usingthe implementingagency's administrativeprocedureswhich were reviewedandfound acceptable to the Bank. B. Assessment of the agency's capacityto implementprocurement An assessment ofthe capacity ofthe implementingagencies to implementprocurementactions for the project has beencarriedout by NikolaKerleta, ProcurementSpecialist. The Project ManagementUnits(PMUs) within the Ministry ofEnvironmentand Tourism (MET) inthe Federationof BiHandMinistryof SpatialPlanning, Civil EngineeringandEcology (MSPCEE) inRepublikaSrpskawill beresponsiblefor procurement. The assessment coveredthe organizationalstructure for implementingthe project andthe interactionbetweenthe project's staff responsiblefor procurementandthe Ministry's project andother staff. The projectwill be implementedand procurementactivitieswill be carried out by specialized teams, the Sector for Project Implementationestablishedwithinthe Ministry of Environment and Tourism (MET) inthe Federationof BiHand inthe Sector for Project Coordinationand Developmentofthe Ministryof SpatialPlanningCivil EngineeringandEcology (MSPCEE)in RepublikaSrpska.This offices are genericallyreferredto as Project ManagementUnits (PMUs). The core staffinthe PMUs will comprise, but not limitedto: Projectmanager, Financial specialist, andProcurementspecialistwho will be responsiblefor all fiduciary arrangements relatedto the project. The PMUs are supportedby other employeesofthe Ministriesin preparationof differenttechnical specifications. The Ministries are well staffedwith professionals from different areas (engineersfor bio-diversity, forestry, civil engineers, urban planningspecialist,etc.). Staffingof the Procurement Functionin the FBiHMET. The PMUofMET has a recordo f goodknowledgeof World Bank procurementrules, proceduresandbiddingdocumentsfrom the previousand on-going Bank projectsand is fully capableto undertake all necessary functions. The procurementfunctioninthe METPMUis staffedby Senior ProcurementOfficer assisted with ProcurementOfficer andbothare full time employeesofthe Ministry.Procurement officers poses sufficientprofessionalexperiencerelevant to procurement underthe World Bank procurementprocedures. Staffingof the Procurement Functionin the PMUof the RS MSPCEE. The PMUof MSPCEE is inplace and has gainedexperiencethroughmanagingother internationalprojects, but does not haveprevious knowledgeof World Bank procurementrules, proceduresand biddingdocuments.The procurementfunction inthe PMUofthe Ministryof SpatialPlanning, Civil EngineeringandEcology(MSPCEE) inRepublikaSrpskahas not beenstaffed yet. In additionto the risk of delays inprocurement,the followingare some other potentialriskthat may result inprocurement delays: 54 1) the Ministrymightnot be ableto assignedqualifiedandexperiencedemployeeas procurementstaff ofthe PMUinatimely manner.The followingmeasuresare envisagedto mitigatethese risks: a) The PMU of the RS MSPCEEhas a MOUwith a procurementspecialist, as consultant, with suitable educationalbackgroundandexperienceininternational procurement, familiar with the WB procurementproceduresandguidelines. b) The consultantwill be engagedunderterms of referenceacceptableto the WorldBank. c) The RS MSPCEEshall appoint a procurementstaff personinthe PMUno later thanone monthafter project effectiveness. 2) Usually, tender committees26also delayprocurementas their membersdo not have any procurementtraining. The followingmeasuresare envisagedto mitigatethese risks: a) Providingbasicprocurementtrainingto the member of the committees, and b) by requiringthat the Ministries/ PMUs providethe Bank with the qualificationand experienceoftender committeemembersand seek its approval.Furthermore,tender committeememberscouldbe requiredto signa certificate that they would withdraw themselves from any procurementaction shouldthey determineany conflict of interest. Duringsupervisionmission,the conductof procurementunder the projectwould bereviewedin light ofthe potentialprocurementrisks, andrecommendationsmade ifnecessary,to improvethe procurementprocess. Support and ControlAspects. The PMUs are subjectto audit by independentsexternal auditors. The public auditingpracticesinthe country are yet to be strengthened. RecordKeeping. The procurementstaffofthe PMUs will have responsibilityfor maintaining procurementrecords. However, a procurementfiling andcontrol systemhas to be organizedso as to addressthe project needs. All documents on procurementwill be maintainedinthe Ministrieswhichwill have a loggingsystem. The durationofmaintenanceofthe documentation inthe Ministrieswill be at least three years. After completionofthis period, all documentsare to be sent to the Governmentarchives. The PMUs will maintaina computerizedprocurement database. Risk Analysis / Country Procurement Environment. Public procurementinthe countryi s regulatedby a harmonizedLawon PublicProcurement(LPP) enactedin September2004. The law applies to all administrativeauthorities ofBH, Entities,BrckoDistrict, Cantons, municipal bodies, public organizations, andpublic enterprises. An implementingregulationcame into force inJanuary 2005. A newPublic ProcurementAgency has beenestablished. However, significant capacitybuildingis still requiredinthe lineministriesandinthe Public Procurement Agency to enhance the Governmentcapacityto conductprocurement.Inaddition, a procurement reviewbodyhas yet to be set upto adjudicatedisputes. Inlate 2006 Bank staff conducteda CountryProcurementAssessmentReviewscanningthe legislativeframework, procurement practices,institutional capacity andthe risks for corruption. The assessment found that the risk was moderatefor conductingpublicprocurementinBosniaandHerzegovina. The report issued 26These risks apply to bothMinistries(the Ministry of Spatial PlanningCivil Engineeringand Ecology in RepublikaSrpska andthe Ministry of Environmentand Tourism inthe Federationof BiH 55 a series of recommendations designedto strengthenthe public procurement environment/capacity inthe including legislative`reform, improving procurement procedures and practices, institutional reform, and capacity building. Implementingagency risk assessment. Based on the assessment o fthe capacity ofthe PMUs to carry out and manage procurement and in line with the CPAR the Bank determines that the overall risk for procurement is High. It i s recommendedthat the procurement thresholds for procurement o f goods, works and consultancy contracts are set inaccordance with the latest ECA regional thresholds. The reviewthresholds for the project will be determinedafter the procurement plan i s prepared prior to GEF TF negotiations. Inaddition to the prior review supervision to be carried out from Bank, it i s recommendedone supervision mission per year visit the field to carry out post review o fprocurement actions. The procurement staff inthe PMUs would properly collect and maintain the procurement documentation. Also, a further issue exists as to reflect the cross-sectoral integrated concept project, concerning management and coordination betweenthe Ministrieso f Agriculture, Water Management and Forestry (MAWMF) inboth Entities, Ministry o f Foreign Trade and Economic Relations (MFTER), Cantonal and Municipal institutions, Tourism Trade Associations, Protected Areas Association, related NGOs, and academics. Inorder to ensure successful implementationit is essential that the DSIs take on a proactive rather than reactive role. Action plan for buildingagency's capacity. Inorder to build-inand maintain strong procurement management capacity inthe Ministries the Bank recommends the following actions: 0 Inorder to get better understanding ofthe Bank's newprocurement and consultant guidelines, as well as the new biddingand proposal documents, the relevant staff involved inthe procurement management process to attend appropriate trainings organized by relevant institution (e.g.: I L O inTurin), or by the Bank within the country and/or region. The Bank will carry out a brieftraining session on procurement duringthe project launch workshop, as well as will provide the PMUs with a full set o f the most recent guidelines, bidding, proposal and evaluation documents on C D and paper. The MSPCEE PMUwill contract a local procurement specialist to provide the procurement services during the initial three months after project effectiveness in close collaboration with the P M U staff so as to buildthe capacity o f these staff to take over the procurement functions, and to provide advice on a retainer basis to the staff for an additional three months after the transfer o f fiduciary operations to the P M U staff, with extension if requestedby the PMU. C. ProcurementPlan The Recipient developeda procurement plan for project implementationwhich provides the basis for the procurement methods. This plan has been agreed and i s available at the PMUs . It will also be available inthe project databaseand inthe Bank's external website. The 27Main recommendationsare: (i)the Public ProcurementAgency should issue secondary regulationto guide some specific procurement; (ii)procurement of consultancyservices of intellectualnature should be addressed separately inthe Law; and (iii)the standardbiddingdocuments need revision. 56 Procurement Plan will be updated inagreement with the Project Team, as a minimum, annually or as required to reflect the actual project implementationneeds and improvements in institutional capacity. D. Frequencyof Procurement Supervision Inaddition to the prior reviewsupervision to be carried out from Bank offices, the capacity assessment o f the ImplementingAgency has recommendedonce every six months supervision missions to visit the field to carry out post review o f procurement actions, and will include informal training. E. Detailsof the ProcurementArrangementsInvolvingInternationalCompetition 1. Goods, Works, and Non ConsultingServices (a) List o f contract packages to be procured following ICB and direct contracting: (b) ICB contracts for Goods estimated to cost above $100,000 and Works/Technical services estimated to cost above $500,000 per contract and all direct contracting will be subject to prior reviewby the Bank, as well as the first two Shoppingprocedures. 2. ConsultingServices (a) Consultancy services estimated to cost above $100,000 per contract and single source selection o f consultants (firms) for assignments estimated to cost above $100,000 will be subject to prior review by the Bank, as well as the first two contract o f each type below that threshold (c) Short lists composed entirely o f national consultants: Short lists o f consultants for services estimated to cost less than $100,000 equivalent per contract may be composed entirely of national consultants inaccordance with the provisions of paragraph 2.7 o f the Consultant Guidelines. PROCUREMENT PLAN I.GENERAL 1. Agreed Date of the procurementPlan Original: April 9, 2008 Revision 1: April 18, 2008. 2. Dateof GeneralProcurementNotice:estimated June 2008 11. Goods and Works and non consultingservices. 1. Prior Review Threshold:Procurement Decisions subject to Prior Reviewby Bank as stated inAppendix 1 to the Guidelinesfor Procurement. 57 * all Contracts subject tojustification 2. Pre-qualification.Biddersshall be pre-qualifiedinaccordancewith the provisionsof paragraphs2.9 and2.10 ofthe Guidelines(No pre-qualificationis envisaged) 3. Any Other SpecialProcurementArrangements:None 111. Selection of Consultants 1. Prior ReviewThreshold: Selection Decisionssubjectto Prior Reviewby Bank as statedin Appendix 1to the GuidelinesSelection andEmploymentof Consultants: Selection Method Prior Review Comments - Threshold 1. CompetitiveMethods (Firms) QCBS > $100,000 All subject to prior review 2. CompetitiveMethods (Firms) LCS Any amount First contract subject to prior review 3. CompetitiveMethods (Firms) CQ > $50,000 All subject to prior review 4. CompetitiveMethods (Firms) CQ <$50,000 First 2 contracts subject to prior review 5. Individual Consultants (IC) > $50,000 All subject to prior review 6. Individual Consultants(IC) < $50,000 First 2 contracts subject to prior review 7. I Single Source (Firms and Individuals)* ]Allsubject to prior review * all Ivalues Contracts subject tojustification 2. Short list comprisingentirely of nationalconsultants:Short list of consultants for services,estimatedto cost less than $100,000 equivalentper contract, may compriseentirely of national consultantsinaccordancewith the provisionsof paragraph2.7 of the Consultant Guidelines. 3. Any Other SpecialSelection Arrangements:None 4. ConsultancyAssignments with Selection Methodsand Time Schedule: See below IV. Other 1. Ex-PostReview:All other contracts belowBank's prior reviewthresholdare subject to Bank's selectiveex-postreview. Periodic ex-postreviewby Bank will be undertakenduring regular supervisionmissions.Procurementdocuments, suchas biddingdocuments, bids, bid evaluationreportsandcorrespondencerelatedto bids andcontractswill be kept readily availablefor Bank's ex-postreviewduringsupervisionmissionsor at any other points in time. 58 Annex 9: Economic and FinancialAnalysis BOSNIA-HERZEGOVINA: FOREST AND MOUNTAINPROTECTED AREAS PROJECT Economic. Since technical grants do not require a detailed economic analysis, this section only estimates incremental costs and evaluates environmental benefits inqualitative terms. Project design assumes environmental and economic benefits arise through physical investment, development o f new strategies, capacity building and training. The project will assist PA authorities (and where needed, forest enterprise authorities) to increase their management efficiency, develop new ways o f sustainably fundingtheir operations, capitalize important physical investment, and improve the conservation aspects o f harvest management. The project will also support activities to assist communities inand around PASindeveloping sustainable and alternative revenue generation. Through the expansion o f protected areas covered and stakeholder capacity enhancement activities, the project will generate significant mutual economic and environmental benefits by: (i)creatingtheopportunityforgeneratingjobsfrombetterutilizationofnon-timbervaluesof these forests, particularly from tourism and recreation, including non-timber forest product collection, sustainable commercial game management; (ii) securing conservation o f biodiversity ininternationally important critical forest habitats includingHCVFs; and (iii) conservation and improved management o f globally significant endemic biodiversity and landscape values o f critical ecosystems. The incremental costs are for those activities that achieve country and regional benefits by (i) supporting protected areas planning; (ii) establishing P A management and buildingpublic awareness o f biodiversity Conservation and IUCN categories inthe region; and (iii) increased national capacity to manage protected area natural resources sustainably and conserve their globally important biodiversity. GEF assistance will helpto mainstream biodiversity conservation in landscapes where the primary emphasis i s on economic uses, with the result that all IUCN categories will be emphasized inthe project. Finally, the project will support activities to stimulate local enterprise and generate new revenue sources compatible with PA management. The result will be improved sustainable revenue generation for populations living inand around PASthrough better utilization o f the area innon- consumptive ways such as tourism, and increased efficiency o f extractive practices such as NTFP collection. Therefore, the social and economic impact o f project activities i s expected to be positive including the generation o f employment inrural areas. ParallelForestSector EconomicFramework:This project focuses on the process of PA development inforest and mountain ecosystems. BiHhas great potential for forestry and the government o f BiHhas taken some steps to this end. As part o f recent reform processes o f varying degrees inthe different parts o f the country, economic and administrative control hnctions have beenseparated inthe parallel forestry sectors, a step towards more transparency inforest management. Consolidationofthe current achievements through implementation ofthe newlegal frameworks has also begununder the FCDP. Entitieshave also developed action plans to help reduce illegal activities. Implementation o f this action plan i s helping the forest enterprises to capture a more correct level o f revenue from timber harvesting, than they are able to at present. 59 This project also looks at the tourism potential o f forests. The project will investintourism and recreation related infrastructure such as ticket booths, gates, and visitor centers as well as ina local and Entitypublic relations program. These investmentsshould result in increased capture o f tourism fees, increased sales o f tourism and recreation-related products and services, plus increased visitation to project and other PAS. Another aspect o f the project looks at safety concerns. Minesare a reality left over from the wars, and some remote areas, as well as areas near human activity in especially the Igman mountain complex still contain minefields. While this potential danger has some effect on the utilization o f these areas for tourism activities, overall this i s not a significant concern. Demining efforts are ongoing, with clear "Do Not Enter" areas (marked inredtape with "skull and crossbones"), inboth remote locations and sites close to close to current/potential future, recreation areas. The project does not propose to directly support any demining. Nevertheless, project support for new management plans will take direct account o f deminingactivities. Assumingthe forests inprotected areas become safer through trail management, the net benefit o f investmentsfor alternative tourist utilization has significant potential. Recently conducted studies analyzed the potential economic benefits o ftourism. An assessment o f opportunities for tourism found that the natural and cultural landscapes inBiHprovide mediumto highpotential as a tourism destination. The areas with the highestpotential among the project sites are Sutjeska N P and Igman-Bjelasnica-Treskavica-Visocica. It i s expected that the feasibility study for Prenj-Cvrsnica-Cabulja will highlightthe strong potential for mine-safe tourism development inthe westernportion o fthe proposed site. Although air access to BiHis improving, many European tourists come by car, along routes near the protected areas. There are hundreds of thousands o f tourists visiting the Adriatic coast for their vacations annually. However, the tourism season i s short and confined primarily to the summer months. Naturally the season could be extended to include skiing inwinter for mountain areas such as the proposed P A Igman- Bjelasnica-Treskavica-Visocica near Sarajevo. Financial. Due to government budget constraints, the proposedbiodiversity conservation activities could not be implementedwithout GEF support. Nevertheless, while project protected areas will strive to generate a greater contribution to their annual budgetfrom non-consumptive P A activities, such as tourism and recreation, and less from logging and similar activities, inthe long term, experience from other parts o f the world show that self-financing for PAScannot always be expected, nor i s it possible. As a result, and assuming the Government's commitment to increase the area under formal protection and secure sustainable management, future Entity budgetprovisions needto be made which will impact the financial plans at different levels. The project recognizes that inthe current climate government authorities face significant challenges in financing a PA network that i s able to meet fully a range o f conservation and other objectives. However, steps are beingtaken and opportunities exist that improve the prospects for a growing and strong P A system inthe country. At present, the policy framework for government support from and revenue sharing between Entity governments and protected areas is underrevision. The PAShave argued persuasively for greater budget support from the central authorities, and it appears that this will be given partly through changes intheir institutional arrangements. By converting to or establishing PASas public institutions, and not enterprises (at presentNPs operate as public enterprises), PASwill be eligible for greater levels o f government budgetsupport. Such arrangements not only improve the financial projections for PAS,but also better reflect their function and importance as national assets. Increased government allocations for operating costs will reduce the dependence on 60 revenues from forestry operations, while at the same time the new governance structures will improve accountability and representation. Current annual budgets for these sites, and new managementplans will reflect the changes ininstitutional and associated financial provisions. As public institutions, it is anticipatedthat inthe RS the NationalParks will be financed from the Entity budget. However, not all NP revenues are expected to be depositedinto the Entity Treasury. Some revenues, e.g., some taxes, entrance fees, will be retained by the NP authority for direct investment. The inclusion of sucha provisionwill be critical for PA financial sustainability. As part of PA managementplanning and Entity-levelpolicy discussions, the project will strengthen and highlight the value of these and similar mechanismsthat allow PASto manage a portion of the revenue stream from generation of income to investment. The rebounding of tourist inflows to the country after a decline inthe 1990scaused by the war provides an opportunity to generate revenuesfrom tourists and for BiHto capitalize on growing market segments interestedinnatural and culturalheritage. The increasing importance of ecotourism has been analyzedby a JICA project "Sustainable Development through Eco- Tourism inBosnia andHerzegovina". In2004 JICA interviewed tourists insouthernBiHand 23.9% mentioned that their motive for visiting BiHwas ecotourism; inthe northern area with less cultural heritage it has been even 52.5%. BiHhas considerableexperience in attracting significant numbersof tourists to its protected areas, but has generally derived limitedrevenues from entryher fees. As tourism, and especially ecotourism, becomes more popular inBiH, the existing andproposedprotected areas have a good potential to cover a significant portion of their annual operations and maintenance costs from tourism revenues inthe long term when the project has been completed. The project is designed to address concerns of financial sustainability of the protected areas includingtwo current NationalParks by enhancing their managementand alternative revenue streams suchas tourism, and developing a financing strategy for the PA system that includes positioning the system to access external financing sources, especially from the EU. To support protected area development and financial sustainability, the project would help finance investments inbasic, but "soft" PA long-term infrastructure (establishment and maintenanceof marked, safe hikingtrails, visitor shelters and information centers) and development of related services (training of protected area staff to provide interpretation services to visitors, informational materials for visitors) to promote tourism in the priority protected areas, as determinedby feasibility studies and local participation. The project will fund promotionand marketing activities to encourage andthus increase visitation, especially inkey market segments focusing on the assets of particular PASand linking these where appropriate with other attractions and tourist circuits. The project would benefit local communities by providing opportunities for obtaining new income from increasedvisitor use of the protected areas (e.g., through sale of food, room services, handicrafts, and employment as park rangers or wildlife guides). The project will also support initiatives that generate income from tourism through improved environmental and social practices, enabling providers to supply a growing customer base willing to pay a premium for good and services that meet certain standards. Financial projections assume completion of protected area infrastructure and the capacity to manage the protected areas and revenue from protected area visitors. Currently, infrastructure is missing and staff lacks the skills and other resourcesneededto ensure that visitor use of the protected areas occurs ina sustainable manner and is consistent with the protected areas' biodiversity conservation objectives. The project would buildthis capacity through TA, training 61 and monitoring programs. Duringthe project period, visitor use, and therefore revenues are projected to increase modestly, as the skills to ensure environmental sustainability o ftourism are developed. A financing strategy will include a standardized visitor and user fee structure for individual NPs and associated protected areas. It i s anticipated that at project completion, on average 20% o f recurrent management costs for the project sites will come from tourism and related revenues. Additional financial benefitsare expected from increased tax revenues generated by tourism activities and more broadly from the watersheds (and ecosystems) that the PASprotect. Project expenditures on the integrated components will generate global, BiH and local benefits with non-recoverable incremental costs. The GEF project aims to generate strategies for long term sustainability. Finally, the project does not include any budget to purchase private land. Inthe light ofthe severe fiscal difficulties that the BiHGovernment is experiencing, this financial contribution would be crucial inensuringlong term conservation o f biodiversity inthe protected areas. Fiscal Impact: Owing to the financial constraints faced by the Government, every effort has beenmade to minimize the fiscal impact o fthis project on the national budget. Evenso, it will be important to establish clear expectations for long-term reliable government financing necessary for an effective PA system. This i s critical as BiHmoves towards meeting requirementsfor full EUmembership, and beingable to capitalize on opportunities for much neededfinancial and technical assistance. Inthis regard, and with its contributions inthe following areas: a) improving financial and technical management o f PASand potential Natura 2000 sites (many are expected to be within PAS); b) buildingpublic awareness and understanding o f improved PA management standards and policies; and c) prioritization and verification o f Natura 2000 sites, the project will enable government authorities and other stakeholders to be better equippedto access EUassistance inpreparation for accession. For example, by mid 2008, the EU expects to have completed an IPA Nature and Biodiversity Action Plan including an investment plan for future IPA finance. Additional opportunities lie in Instrumentfor Pre-Accession Assistance for Rural Development (IPARD) for activities that promote agri-environmental activities. Beyond access to assistance, the tourism potential o f PAs will be greatly enhanced when they are able to actively market their natural assets as part o fthe Natura 2000 network, since for Europeantourists this acts as an important indicator of quality and experience. The Government total contribution is estimated at US $2.5 million or about 42% of project financing, and would come mainly inthe form o f providing office space, services like cadastre surveys and salaries, among others for certainPA personnel, such as rangers, as well as the staffing and operation o f the PMUs. It i s expected that the long-term fiscal impact o f the project is likely to be positive through enhanced capacities to access an increased and diversified revenue sources. The project's support to existing and would-be local enterprises insetting up and expanding environmentally friendly businesses intourism services, farming and crafts production and other entrepreneurial activity, will help expand the Government's tax base. 62 Annex 10: SafeguardPolicyIssues BOSNIA-HERZEGOVINA: FOREST AND MOUNTAINPROTECTED AREAS PROJECT The project i s classified as Category B.The project will have overall positive environmental impact by conserving biodiversity and improving natural resource use. The project would improve managementpractices invulnerable ecosystems and reduceunsustainable use of natural resources inthose areas. Positive impacts are expected from the expanded system of protected areas, which would includeadditional recreation areas, provide employment opportunities from watershed protection and maintain gene pools for forests products harvested andusedby the local population (berries, mushrooms, snails, etc.). SafeguardPolicies Triggeredby the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [XI [ I Natural Habitats (OP/BP 4.04) [XI [I Pest Management (OP 4.09) [ I [XI Cultural Property (OPN 11.03, being revised as OP 4.11) [ I [XI Involuntary Resettlement(OP/BP 4.12) [XI [ I Indigenous Peoples (OD 4.20, being revised as OP 4.10) [ I [XI Forests (OP/BP 4.36) [XI [ I Safety of Dams (OP/BP 4.37) E[Il [XI Projects inDisputedAreas (OP/BP/GP 7.60)* [XI Projects on International Waterways (OP/BP/GP 7.50) [ I [XI EnvironmentalAssessment (EA). With the B classification the project requiredthe undertaking of a EA andthe preparation of an Environmental Management Plan (EMP). The EMP was subject to numerous informal public discussions prior to preparation ofthe final draft. The final draft, incorporating all comments, was formally disclosed at public meetings in Sarajevo on June 7,2007 and inBanja Luka, on June 13,2007. The EA concludes that the overall environmental impact of the project is expected to be positive. Negative impactswill be outweighed by the positive impactsassociated with the project goal of sustainable management of PAs and natural resources. It should also be noted that project has close links with the FDCP which will positively influence forest resource management inthe Balkans, andprovide recommendationsto mainstreambiodiversity conservation into forest managementplanning as well as landscape levelprioritization for protected andproduction areas. Possiblenegative impacts are primarily associated with: i)renovatiodconstructionofsmall-scaleprotectedareafacilitiessuchasvisitorcenters, offices, check posts, park entry booths, watch towers, trail repair and enhancement, etc. ii)increaseinrecreationaluseoftheexistingandproposedPASresultinginadditional levels of noise and disturbanceto wildlife and waste. * By supporting theproposedproject, the Bank does not intend to prejudice thefinal determination of theparties' claims on the disputed areas 63 The EMP, appropriate for existingand future PAS,outlines mitigation measures for the above impacts, provides monitoring guidelines for assessing associated impacts and capacity building activities for impact monitoring and assessment. The EMP also provides a set o f "Environmentally Sound Clauses for Contractors" to be usedby construction contractors to address possible negative environmental impacts. An environmental screening process i s also included for the types o f activities likely to be implemented under the Local Initiatives for Biodiversity Conservation. The semi-annual Project Progress Reports will include data on site inspection o f environmental compliance. Involuntary Resettlement. An Access RestrictionProcess Framework was developed duringproject preparationto guide the mitigation o f potential negative impacts on livelihoods o f populations residentnear the PAS. The Framework was disclosed inearly June 2007, inboth Sarajevo and Banja Luka, and has the endorsement o f the relevant Entity ministries.Consultations were held inthe communities during the development of the Process Framework, The establishment o f newprotected areas and improved management o f existing PASwill need to involve local communities inbroad and sustained participatory processes. Thorough participation i s critical because, it i s likely that there will be some restrictions o f access to natural resources as a result o f PA formation. Where access restrictions are an issue, the Framework will be usedto mitigate the impact of these restrictions on livelihoods. . The Framework, appropriate for all existing and future PAS,describes the participatory processes by which project components were prepared and will be implemented. Critical elements inthe Framework include: a) social assessmentsto gauge potential impacts and guide P A establishment as well as mitigation strategies; b) public consultations and mechanisms for representation inP A management; c) communications and outreach strategies to mobilize public support; d) stakeholder participation in identifying and implementingeligible mitigation measures and livelihood strategies; e) local representation, roles and responsibilities inPA monitoring; and e) conflict resolution mechanisms. The Framework also describes the arrangements for implementing and monitoring the process. It should be noted that the Social Assessment undertaken for the project indicates broad support for P A establishment, inboth IBTV and Una River. The vast majority of respondents/participantsemphasized the opportunities that the PAScould create, vs. the potential threats. Forests. The project will (ina positive way) contribute to the improvement of livelihood of stakeholders dependingupon or interact with forests. Specifically, and consistent with OP 4.36, the project aims to harness the potential o f forest ecosystems to reduce poverty ina sustainable way integrate forest conservation effectively into sustainable development and protect vital local and global environmental services and values of forests. Natural Habitats. Consistent with OP 4.04, the project will help to conserve natural habitats, and ensure that specific project activities avoid habitat degradation. 64 Annex 11:ProjectPreparationand Supervision BOSNIA-HERZEGOVINA: FOREST AND MOUNTAINPROTECTED AREAS PROJECT Planned Actual PCNreview 03/02/2004 03/02/2004 InitialPID to PIC 03/26/2004 InitialISDS to PIC 03/26/2004 Appraisal 0612512007 0612SI2007 Negotiations 04/09/2008 04/09/2008 Board Approval 05/29/2008 Planneddate of effectiveness 1013112008 Planneddate of mid-termreview 10115/2010 Plannedcompletiondate 10131/2012 Plannedclosingdate 04/30/20 13 Key institutions responsible for preparation o fthe project: 0 Ministry of ForeignTrade and Economic Relations, BiH (GEF FocalPoint) 0 Ministry of Agriculture, Forestry, and Water Resources, FBiH 0 Ministry of Agriculture, Water Management, and Forestry, RS o PIUs in bothEntitiesfor FDCP, responsiblefor managingvarious preparationstudies 0 Ministry of Environmentand Tourism, FBiH 0 Ministry of Spatial Planning, Civil Engineeringand Ecology, RS Bank staff and consultants who worked on the project included: Name Title Unit Jessica Mott Task Team Leader ECSSD David Bontempo Operations Analyst & former Task Team Leader ECSSD ChristianPeter former Task Team Leader AFTS2 Mirjana Karahasanovic Operations Analyst ECSSD NanditaJain NaturalResourceManagementConsultant Samra Bajramovic ProgramAssistant ECCBA Nikola Kerleta ProcurementAnalyst ECSPS Lamija Hadzagic FinancialManagement Specialist ECSPS LeighHammill Senior ProgramAssistant ECSSD Marjory-AnneBromhead former Sector Manager ECSSD Danielle Malek Lead Counsel LEGEC Agi Kiss Lead Ecologist ECSSD John Fraser Stewart Sr. NaturalResourceManagement Specialist ECSSD Serena Arduino Consultant Martin Mautner Markhof Consultant John Kellenberg Sector Manager ECSSD Tijen Arin EnvironmentalEconomist ECSSD HiwoteTadesse Senior Program Assistant ECSSD IBank funds expended to date on projectpreparation: 1. BBFAO: US$10,587 1. Remainingcosts to approval: US $30,000 I 2. BBGEF: US$453,000 I EstimatedApproval and Supervisioncosts: 2. Estimatedannualsupervision cost: US $90,000 3. Trust funds: US$175,000 65 Annex 12: Documents in the ProjectFile B0SNIA-HERZEGOVINA: FOREST AND MOUNTAIN PROTECTED AREAS PROJECT 1 ) BiHNational EnvironmentalAction Plan, March2003 2) IgmanFeasibility Study, 2001 3) Una River Feasibility Study, 2005 4) SutjeskaNational Park ManagementPlan, 2004 5) "Study about Influenceofthe Forestryon Biologically Sensitive Areas in B&H' ,June 2001 6) Key ProjectDocuments 0 SocialAssessment, 2006, Process Framework, 2007, ParticipationPlan, 2007, and Operational Sourcebook.2007 0 UpdatedAccess RestrictionFramework, 2008 0 Final EnvironmentalAssessment/Framework EnvironmentalManagementPlan, 2007 FMPAP: DetailedProjectSite Descriptions, 2008 0 Guidelinesfor Implementingthe Local Initiatives Grant Program, 2008 7) Studiescompleted under ItalianTrust Fundfor the FDCP A. Federation of Bosniaand Herzegovina 0 Development of Feasibility Study for NP Igman-Bjelasnica-Treskavica-Visocica 0 Development of EnvironmentalManagementPlan Frameworkand TestingEMP Through Targeted EAs associated with ProposedFMPAP 0 Study on Game Management in Special Hunting Districts of BiH 0 Revitalizationand Setup of Habitat for Chamois in BiH 0 Reviewof Current Biodiversity in TrstionicaVirgin Forest 0 Reviewo fCurrent Biodiversity in PljesevicaVirgin Forest 0 Biodiversity Endemic Development Centers in Herzegovinaarea as Contributionto the Targets 2010 0 Evaluationof Biodiversity Statusof Ecosystemsof Karst Fields in FBiH as Contributionto the Thematic Programs of CBD in Line with Targets 2010 B. RepublikaSrpska 0 EndangeredGame Species in BiH 0 Possibility for Establishment of Klekovaca-Lom 0 Justificationfor Development of Ecotourismin BiH 0 Study on Identification of High Conservation Value Forests(HCVF) in Bosniaand Herzegovina, 2007 0 Developmentof EnvironmentalManagementPlan Frameworkand TestingEMP ThroughTargeted EAs associatedwith ProposedFMPAP Social Assessment of FMPAP 8) Other Relevant ReferenceMaterials 0 USAID, Bosniaand Herzegovina:Biodiversity Assessment, 2003 0 World Bank, Journey to a Cleaner Future:Investingin People and Institutionsthat make EnvironmentalLaws Work, 2007 0 Bosnia-Herzegovina:Annex 1 on the State of the Environment,2002, www.rec.org/l2.151.doc 0 World Bank, Biodiversity Strategy for the Europe and CentralAsia Region, (2003) 0 Habitats Directive Working Group-BiH, Elaborationof Methodologyand Action Planfor EU Biodiversity ProtectionStandards Scientific Coordination, Final Draft (2007) 0 Investment Opportunitiesfor SustainableTourism Businesses in BiH, Background Study, 2007, preparedfor ForeignTrade Chamber of BiH 0 World BanWWorld Wildlife FundAlliance for Forest Conservationand SustainableUse: Reporting progress in ProtectedAreas -A Site Level Management EffectivenessTrackingTool, 2003 0 RegionalEnvironmentalCentre, NGO Directory of South Eastern Europe, 2006 66 Annex 13: Statementof Loansand Credits BOSNIA-HERZEGOVINA: FOREST AND MOUNTAINPROTECTED AREAS PROJECT Difference between expectedand actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd PI00792 2008 ROAD INFRASTRUCTURE AND 0.00 25.00 0.00 0.00 0.00 25.97 0.00 0.00 SAFETY PROJECT PI01213 2007 AGR./RURAL DEVELOPMENT 0.00 21.00 0.00 0.00 0.00 21.95 1.53 0.00 PI00415 2007 AVIAN FLU BA- 0.00 5.00 0.00 0.00 0.00 5.22 1.60 0.30 PO96200 2006 LAND REGISTRATION 0.00 15.00 0.00 0.00 0.00 15.34 -0.18 0.00 PO90666 2006 ECSEE APL3-BiH 0.00 36.00 0.00 0.00 0.00 38.55 5.10 0.00 PO88663 2005 HLT SEC ENHANC 0.00 17.00 0.00 0.00 0.00 11.63 8.17 4.63 PO83353 2005 URB INFRA & SERV DEL 0.00 20.00 0.00 0.00 0.00 18.01 2.62 0.00 PO79226 2005 EDUC RESTRUCTURNG 0.00 10.00 0.00 0.00 0.00 9.62 6.40 1.71 PO84596 2004 EMPLYMT2 0.00 12.00 0.00 0.00 0.00 3.05 1.01 -1.92 PO79161 2003 FORESTDEVTKNSRV TA 0.00 3.75 0.00 0.00 0.00 3.92 -0.19 -0.33 PO55434 2003 SM SC COM AGRIC 0.00 12.00 0.00 0.00 0.00 2.54 -2.59 0.00 PO57950 2002 SOLID WASTE MGMT 0.00 18.00 0.00 0.00 0.00 17.71 5.40 0.93 PO70995 2001 COMM DEVT 0.00 15.00 0.00 0.00 0.04 4.64 -2.78 -1.93 PO58521 2001 ELEC PWR 3 RECN 0.00 35.00 0.00 0.00 0.00 4.91 0.34 0.00 Total: 0.00 244.75 0.00 0.00 0.04 183.06 26.43 3.39 BOSNIA AND HERZEGOVINA STATEMENTOF IFC's Held and DisbursedPortfolio InMillionsofUSDollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 1999 Bosnalijek 0.00 1.84 0.00 0.00 0.00 I.84 0.00 0.00 2001 Bosnalijek 0.00 0.00 0.54 0.00 0.00 0.00 0.54 0.00 2005 Bosnalijek 9.22 0.00 0.00 0.00 7.94 0.00 0.00 0.00 1985 Energoinvest 9.93 0.00 0.00 0.00 9.93 0.00 0.00 0.00 1997 EnterpriseFund 0.00 1.48 0.00 0.00 0.00 0.95 0.00 0.00 2002 FCL 11.05 0.00 0.00 2.03 11.05 0.00 0.00 2.03 2004 HVB CPB 11.24 10.97 0.00 0.00 11.24 8.95 0.00 0.00 2005 HVB CPB 0.00 3.82 0.00 0.00 0.00 3.82 0.00 0.00 2006 MI-BOSPO 2.55 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2006 Nova Banka 12.75 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2002 Procredit Bosnia 2.87 0.00 0.00 0.00 2.87 0.00 0.00 0.00 Raiffeisen-BOS 19.12 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2002 Raiffeisen-BOS 14.41 0.00 0.00 0.00 14.41 0.00 0.00 0.00 67 Committed Disbursed IFC IFC 2005 Raiffeisen-BOS 14.02 0.00 0.00 0.00 14.02 0.00 0.00 0.00 1998 SEF Akova 0.20 0.00 0.00 0.00 0.20 0.00 0.00 0.00 1999 SEF Lijanovici 0.90 0.00 0.00 0.00 0.90 0.00 0.00 0.00 1977 TKA Cazin 4.34 0.00 0.00 0.00 4.34 0.00 0.00 0.00 Wood Konjuh 1.75 0.00 0.00 0.00 1.43 0.00 0.00 0.00 Total portfolio: 114.35 18.11 0.54 2.03 78.33 15.56 0.54 2.03 Approvals PendingCommitment FY Approval Company Loan Equity Quasi Partic. 2002 Lukavac 0.01 0.00 0.00 0.00 2006 MI-BOSPO 0.00 0.00 0.00 0.00 2006 EKI Bosnia 0.00 0.00 0.00 0.00 2006 Nova Banka 0.00 0.01 0.00 0.00 Total pending commitment: 0.01 0.01 0.00 0.00 68 Annex 14: Country at a Glance BOSNIA-HERZEGOVINA: FOREST AND MOUNTAIN PROTECTED AREAS PROJECT Boonla Europe 6 Lower- POVERTY and SOCIAL and Central mlddle- Herzegovina Asia Income Development diamo nd' 2006 Population, mid-year (millions) 3.9 460 2,276 GNIpercapita(Atlas method, US$) 3,230 4,796 2,037 Lifeexpectancy GNI(Atlas method, US$ billions) 12.6 2,206 4,635 T Average annual growth, 2000-05 Population(Sy 0.3 0.0 0 9 Laborforce (%) 0.8 0.5 14 GNI Gross per primary Most recent estlmate (latest year avaliabie, 2000-06) capita nrollment P0verty (%0f populafion belownational po verlyline) 20 Urbanpopulation (%of totalpopulation) 46 64 47 Lifeexpectancyat birth (pars) 74 69 71 Infant mortality (per IOOOiive births) t3 28 31 Childmalnvtrition (%ofchildren undar5) 4 5 0 A C C ~ S Sto improvedwatersource Access to an improved water source (%ofpopulation) 97 92 81 Literacy(%ofpopulation age E+) 97 97 89 Gross primaryenrollment (%ofschool-agepopulation) 0 2 m -Bosnia andHerzegovina ~ a 1 e 0 3 m Lover-middle-income group Female 00 t14 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1986 1996 2006 2000 Economic ratlos' GDP (US$ biliions) .. 2.8 0.8 123 Gross capitalformation1GDP 412 22.0 6 2 Exportsof goods andServiceslGDP .... 23.6 313 384 Trade Gross domestic SavingsiGDP .. -8.1 -7.6 -15 2 Gross nationalSavingsIGDP .. 12.2 3.2 5 0 Currentaccount balanceiGDP .. -290 -8.8 -112 Interestpayments1GDP 11 Domestic ' Capital TotaldebtiGDP 517 savings formation Total debt serviceiexports 5.0 Present valueofdebtiGDP 45.6 Present valueof debtiexports 92.6 Indebtedness 1986.96 1996-06 2006 2006 2006-M (averageannualgrodh) GDP 7.6 5.0 6.0 5.7 -Bosnia andHerzegovina GDP percapita .... 6.2 5.1 6.0 4.9 - Lover-middle-income orow Exportsof goods and services .. 9.2 6.2 t3.7 112 STRUCTURE o f the ECONOMY 1986 1996 2006 2006 (%of GDP) Growth o f capital and GDP (Oh) Agriculture 252 0 5 0 4 40T Industry 313 25 1 24 7 Manufactunng 0 9 n 3 129 Services 43 5 64 4 64 9 Householdfinalconsumption expenditure 913 913 Generalgov't final Consumptionexpenditure 26 3 23 9 Imports of goods andservices 83 9 70 8 69 8 2005 2006 (averageannualgm dh) Growth of exports and imports (Oh) Agncuiture 6 8 19 T lndustly 6 8 53 Manufactunng 40 7 0 84 services 4 9 6 5 20 Householdfinalconsumption expenditure 0 1 -0 1 0 Generalgov't final consumption expenditure 7 7 -2 4 .20 Gross capitalformation -17 8 1 -219 Imports of goods andservices 4 6 7 9 -06 ~~ ~~~ Note 2006data are preliminaryestimates This tablewas producedfrom the Development Economics LDB database 'Thediamonds showfourkeyindicators inthecountry(in bold)comparedwithits income-group average lfdata aremissing thediamondwll be incomplete 69 1g96 (US$ millions) Export and Import level5 (US$ mill.) Total eports (fob) 336 2462 3539 H)ooo Commoddy 1 320 389 Commodity2 602 891 7500 Manufactures 1490 2 8 9 Total imports @if) 2077 7690 8567 5000 Food 1260 1248 Fuel and energy 2500 Capitalgoods 1839 1679 0 Elport pnce index(2000=W0) 00 01 02 03 04 05 OB Import pnce index(2000=WO) .Exports mlmporta Terms of trade (2000=WO) BALANCE of PAYMENTS 1986 1996 2006 2006 (US$ millions) Current account balance to GDP (Oh) E p O r t S O f goods and SeNlCeS 658 3,367 4,709 0 Imports of goods and SeNICBS 2,337 7,626 8,555 Resourcebalance -1679 -4,258 -3,846 5 Net income -222 430 485 .10 Net current transfers 1094 1804 1986 .15 Current account balance -807 -2,025 -1375 Financing items (net) 1050 2,470 2.86 -20 Changes innet resews -243 -445 -8n -25 Memo: Reserves includinggold (US$ millior 1s) 2,548 3,671 Conversionrate (DEC local/US$) 15 16 16 EXTERNAL DEBT and RESOURCE FLOWS 1986 1996 Z O O 6 Z O O 6 (US$ millions) Total debt outstanding anddisbursed 5,564 IBRD 589 481 466 & . A n , IDA O9 921 963 Totaldebt service 267 IBRD 205 41 47 IDA 0 7 n Cornposhtionof net resource flows Official grants 291 Official creditors 96 Pnvatecreditors 262 Foreigndirect investment (net inflows) 299 Portfolio equity (net inflows) World Bank program Commitments 27 A-IBRD E - BiUad Disbursements m0 56 Pnncipalrepayments 25 24 - Net flows 85 32 -1 Interest payments 8 0 25 31 Net transfers -95 7 -31 Note This tablewas producedfrom the Development Economics LDB database 8/28/07 70 Annex 15: IncrementalCost Analysis BOSNIA-HERZEGOVINA: FOREST AND MOUNTAINPROTECTED AREAS PROJECT 1.Overview The Project Development Objective is to strengthenthe institutional and technical capacity for sustainable protected area and natural resource management and expand the BiHnetwork o f forest and mountain protectedareas. The project globalenvironmentalobjectiveis to conserve globally significant biodiversity in critical forests and mountain ecosystems o f BiH. The GEF Alternative will: (i) support PASvia fundamental planning assistance and financing infrastructure for the establishment o f newPAS;(ii) promote and increase public awareness o f biodiversity conservation; and (iii) strengthenthe capacity to conserve and manage biodiversity at local, national and trans-boundary levels and establish regional cooperation for forest and mountain ecosystem conservation. This will include establishing ecologically effective PAS, integrating biodiversity conservation into forestry and other activities inand around PAS, improving monitoring o f threatened flora and fauna, and effect their recovery, and building public awareness o f BiH's biodiversity. The GEF Alternative intendsto achieve these outputs at a total incremental cost o f US $6 million, to be financed by the GEF (US $3.4 million), and co-financing from government (US $2.5 million), and leveraged co-financing from grant recipients (US $0.1 million). Inaddition, the Project will leverage outputs from the FDCP (total incrementalvalue o fUS $2.5 million). Therefore, the proposed GEF Alternative should be viewed as complementary to ongoing activities throughout BiH. 2. ProjectContext BiH's biodiversity is currently insufficiently protectedand under-valued. At presentthere are more than 20 PAScovering only about 0.55% o f the territory. The categories o f these PASrange from BirdReserves to Strict Nature Reserves with two National Parks (NPs) inRS (Kozara and Sutjeska). The National Environmental Action Plan (NEAP) recognizes the importance o f biodiversity, natural and cultural heritage, the threats and the need for expansion the area for conservation and protection. The ratification o f the Convention o f Biological Diversity i s one step inthis direction, and has facilitated access to GEF grant funds. A National Biodiversity Strategy and Action i s to be completed by April 2008. TheNEAP identifiesthe sustainable development of forest areas together with the improvement o f environmental management and the protection of biological landscape diversity as priorities, which are inline with the new project. BiH's forest resources are amongst the richest inEurope interms oftheir extent andvariety relativeto the size ofthe country. Covering almost 50% of the land area, forests are one of Bosnia's mainnatural resources. This compares with 24% for pasture land, much o f it close to forest areas, and only 10%for arable land. About 80% of forest 71 and other wooded land is government-owned. The remainder is owned by a large number of individual private owners that will not be within the scope of this project In2002, a newlegal framework was adoptedfor the RS that includesLawonthe Protectionof Nature. It stipulatesthe revitalization, protection, preservation and sustainable development of landscapes, unitsof nature, plants, animals and their habitats as well as other components of naturethat are part ofthe environment. A similar law is currently underreviewto be passedin the Federation.Also the protection of forest biodiversity is regulated by the applicable Law on Forests, as well as by the Hunting and Fishing Laws. The RS Constitution and the Law on Forestsstipulate that forests and forestland are a public good which enjoys the special care and protection of the government. The challenge is to manage existing and proposedPASeffectively, create new and or expandthe system of PAS,to develop participatory approachesto PA management, and to incorporate biodiversity conservation into the production landscape. 3. Baseline Scenario The primary objective of the forest organization and managementreform currently underway in BiHwith IDA support is to increase revenuesfrom forest resources, improve forest management, and enhance developmental benefits through participatory approaches inforest landuse planning. Regardlessof the Government's commitment to biodiversity conservation, without the establishment of an extendednetwork of PASof sufficient size, biodiversity-rich natural ecosystems would not be sufficiently protected from the major transition-related threats that are anticipated over the short and mediumterm. Efforts would likely continue to focus on limited investment inthe existing NPs, and on small PASwhich, while helpful and valid intheir own right, would be of questionableviability interms of establishing larger national coverageof protected landscapes. Government would be unable to commit sufficient budget to establish new PASand strengthenthe managementof existing National Parks, and existing Government agencies andNGO groups concerned with conservation would remain weak, ineffective, uncoordinated, and isolated. Inthe absence of this project, expectedimpacts (resulting from changing landuse, including forestry and tourism) would result inloss of biodiversity, and ecological corridors necessary to maintain viability of populations and ecosystems may be irreversibly disrupted. As a consequenceo f the current course of action, regardedas the Baseline Scenario, BiH's diverse and abundant forest biodiversity will likely continue to suffer from unsustainabletimber and fuel wood harvesting and associated disturbance; inappropriate tourism: unmanagedhunting; and all resulting inhabitat loss and fragmentation. The project will, therefore, lead the way to establishing more PASinBiHand improvingthe integrity of the PA network. costs The cost of the Baseline Scenario is approximately US $1 million, which is the average annual total budget contribution from central and local authorities for all PASinBosnia-Herzegovina at present. Although institutional changes are underway inthe RS that would increase government budget allocations to PAS,the impact will only reducethe pressure to cover critical expenses 72 such as salaries by 510%. Overall, budgets will remain insufficient for proper managementof existing parks. Ifcomparableformulas are usedto determine budget support for new parks, it is clear that they will be significantly under-funded. One particularly important cost of the baseline i s that in the absence of sufficient budget, existing PASare somewhat reliant on forest, enterprise, and to a lesser extent hunting, revenuesto fund their operations. At present 50% to 90% of NP revenuesderive from forestry operations. This leaves PA management in a position of relatively less bargaining power regarding the extent of harvesting operations. Moreover under suchfinancing arrangementsand management strategies, it is difficult for PA authorities to break the cycle of dependence on consumptive uses to fundtheir operations and invest in protection. Benefits. Underthe Baseline Scenario, the main observable benefitwould be to forest enterprises, particularly the Sarajevo Sume. However, with the establishmentof a PA inthe IBTV, this forest enterprise could see some of its harvesting potential restricted. That said, the enterprise management i s preparing itselffor this eventuality, and strongly supports a PA. Certain activities being undertakenthrough the FDCP will also contribute to improved management inthe PA system, particularly from implementation of the participation plan. Ongoing activities to identify and manage High Conservation Value Forests would continue, but without the opportunity to significantly increase either the area of HCVF under proper protection, or undertake neededtraining to manage whatever areas are identified. Inaddition, the FDCP activities to fully implementthe forest inventory, and establish the FMIS, would continue, but without the motivation to fully integrate these results into PA operations. Under the Baseline Scenario, activities supportedby international donors inthe tourism sector will continue for a limitedperiod. While some of these activities are conducted inand around PAS,they do not incorporate an explicit environmental or biodiversity conservation objective. A more recent conservation initiative, the WWF/IUCN Dinaric Arc Eco-regional Initiative includes Bosnia as yet the level of funding and potential co-financing opportunities cannot be specified. 4. Global Environmental Objective and GEF Alternative BiHratifiedthe Convention onBiological Diversity in2002. A National Biodiversity Strategy/ Action Plan (NBSAP) i s to be completed by April 2008. This strategy identifies the project regions as centers of biodiversity, andthe project activities as the highest priority for improving the protection ofthe threatenedforest ecosystems. The Forest Sector Strategy, preparedas an input for the NEAP, identifies the needto develop interdisciplinary forest planning, including through the integration of biodiversity conservation. The Global Environmental Objective of this Project is to conserve globally significant biodiversity incritical forests and mountain ecosystems of BiH. The Project will support in-situ conservation and sustainable use by strengthening and expanding PASinBiH. The Project is consistent with the objectives of the GEF Operational Program Number 3 Forest Ecosystems and Operational Program Number 4 MountainEcosystems. 73 Proiect Scope: The total cost of the GEF alternative i s estimatedat US $6.0 million: (i)ProtectedArea Development: US $3.7 million (ii)Capacity and Support for Biodiversity Conservation: US $1.8 million (iii) InitiativesinBiodiversityConservation:US$0.5million Local Inaddition, FDCP provides financing ofparallel, complementary activities: US $2.5 million Benefits: The GEF Alternative would buildon the Baseline Scenarioandmake possible activities and programs that would not be undertakenunderthe scenario. This would include strengthening capacity at the field and national levels for planning and managing land-use for conservation and sustainable use of biodiversity; establishing effective inter-sectoral participatory planning and sustainable managementof natural ecosystems and associated landscapesat selected project sites andthus protecting key forest and mountain ecosystems; supporting participatory approachesto sustainable naturalresources conservation inkey protected areas; supporting environmental education and awareness programs; developing mechanismsto reduce non-sustainable resource use; and promoting responsible nature-basedtourism development. The GEF Alternative would provide the means (above and beyond the Baseline Scenario) for expanding the existing Nature Reserves and National Parks and drafting and implementing of management plans. Management plans will focus on : i)conservation of the biodiversity of the ecosystems within the project region through protection and management; ii)improved monitoring and appliedresearch on biodiversity and effectivenessof conservation efforts; iii) establishment of infrastructure for improved biodiversity protection and development of responsible nature-basedtourism inthe region; (iv) preparing and supporting PA administration and management; (v) strengtheningpublic education and awareness; (vi) improving the integration of biodiversity conservation and agricultural activities, especially land-uses such as pasture management, outside of the proposedParks; and (vii) improved coordination inthe protection of biodiversity with neighboring countries. The Project's utilization of the FDCP outputs will also generate significant benefits to the PA system. The forest inventory work, and the FMIS, will be of crucial importance increating new managementplans, and achieving better managementof the forest resources inand around the PAS,thereby contributing to sustainability of both forests and PAS. The project will significantly buildand strengthen the institutional bodies responsible for planning and managing protected areas on a national level. It will ensure the development, co- ordination and sound working relations betweenthe two Entity Governments, inorder to create a viable and balanced PA network throughout the country. Improved institutional capacity will also enable the country to use and access different EUfunding programs and instrumentsto finance biodiversity andnature protection, thereby increasing the sustainability of the PA system. The national beneficiaries receiving assistance will be the MET inthe FBiH, the MSPCEE inthe RS, and at a regional level, the individual protected area managementorganizations andthe regional/cantonal forest enterprises. Inaddition, through investments inthe Forest Reserves in 74 Janj and Lom, assistance will be provided indirectly to the RS MAWMF. Through the project, national appreciation o f the biological and landscape diversity o f BiHwill be increased and improved opportunities for environmental and conservation education will be gained. The project will also buildmechanisms and capacity to assist local stakeholders, community members,local authorities andNGOs to participate inthe preparation and implementationof conservation management plans. Rural communities will benefit from the inclusion o f natural resource management and local economic development into the protected area management framework. Other benefitswill result from the stimulation o f sustainable and compatible economic development activities such as ecotourism within and adjacent to the protected areas. Additional assistance to local stakeholders will be provided through funding local initiatives to help ensure that rural development inand around PASis compatible with the objectives ofPAS, and sustainable development as a whole. The Project will provide targeted assistance to potential recipients to helpensure that proposals meet the Project's focus on conservation. . Global Benefits: Implementation o f the GEF Alternative would provide the means for establishing effective PAS and integrating biodiversity conservation objectives into regional and local development activities. Global benefits would include the recovery o f forest habitats and protection o f endemic threatened flora and fauna and their recovery. Benefits generated from the project would also include the promotion o f local and regional cooperation inbiodiversity conservation. The global benefitso fthe project include the sustainable conservationand management o f some o f the last remaining areas o f pristine and relatively undisturbedmountaidforest landscapes in Europe, the expansion o f the countries' protected area which will increase the area o f Illyric Mountain Deciduous Forest and extend the protected areas along the Dinaric Alps which stretch from Mount Olympus National Park in Greece inthe south, to Triglav National Park in Slovenia inthe north. The project will establish trans-boundary links with PASandrelevant institutions inCroatia and Montenegro, thereby expanding the network o f ecological corridors beyond BiH's borders. Through the collaborative process involved, BiHwill benefit from conservation initiatives undertaken inthese adjacent countries. Establishment o fthe protected areas will also ensure the protection o f sites o f international cultural and archaeological significance. 5. Incremental Costs The difference betweenthe cost o f the Baseline Scenario US $1 million and the cost o fthe GEF Alternative US $6.0 million, US $5.0 million represents the incremental cost o f achieving sustainable global and local environmental benefits. O f this amount, the Government o f BiHhas committed to financing US $2.5 million. US $0.1 million i s leveraged as parallel financing from grant recipients, and US $ 3.4 million i s confirmed from GEF. Inaddition, the Project leverages US$2.5 millionfrom the IDA-financed FDCP. 75 Incremental Cost Matrix BASELINE ALTERNATIVE INCREMENT Benefits II Component 1: Limited, or no, further At least 120,000 new hectares 120,000 hectaresof new PAS Protected Area development of the PA brought into protectedstatus, (comprising approx. 3% of BiH Development system in the short-medium of which approx. 50,000 will territory, in line with government term (3-5 years) be IUCN categories Iand VI, strategy to work towards a 7-10% and the remaining will be coverage within 10 years, in line with mostly Category I1National EU norms) Park, and Category V Protected Landscape cost $0.7 mil $4.4 mil $3.7 mil CaDacity and Limited technical skill S U D D Ofor~ ~ development, particularly in Biodiversity the adoption of new in all relevant sectors and mountain protectedareas Conservation management techniques, levels management and appropriate zoning both in forest and PA and other practices adopted and applied in management plans $0.3 mil $2.1 mil 1.8 mil Local Initiatives Limited or no opportunities in Biodiversity to incentivize behavioral for local collaborative incentives demonstrate to local Conservation change for local inhabitants initiatives inhabitants hou,protecting in and aroundPAS biodiversity can be positively linked 0 Total US$ 1.0 million US$ 7.0 million US$ 6.0 million Global Government continues An integratedconservationand Endemic biodiversity of global Environmental limited status quo and both forest management strategy significance will be protected in the Benefit ability and quality of PAs will be designed and forest landscapesof BiH decreases. Forest implementedthat will draw Management and Regional attention to biodiversity Development Plans would conservationneeds and not take into account opportunities. Without GEF biological diversity under funding the critical biodiversity threat conservationefforts would drastically constrainedas the BiHgovernmentis forced to act in favor of short term horizon rather than long term sustainability. Domestic Minimal alternative income Benefit opportunities conservationinto forest resources, improved forest management strategy will management, and sustainable preserve sustainable use developmentalbenefits through options for economically participatory approaches in forest important endemic forest land use planning. species and enable access to new sources of income, such as eco-tourism. US$ 1.0 million US$3.6 million I US$2.6 million 76 Annex 16: STAP Roster Review BOSNIA-HERZEGOVINA: FOREST AND MOUNTAINPROTECTED AREAS PROJECT Review of ProjectAppraisalDocument for a Forestand Mountain ProtectedAreas Project in Bosnia and Herzegovina STAP Reviewer:Jeffrey A. McNeely, Chief Scientist, IUCN 1. Scientificand technicalsoundness of the project Generally speaking, this project i s scientifically and technically sound. But Idid find some issues that were inadequately considered. The major issues are discussed inthe following paragraphs. Lack of a systems plan While the areas that have beenselected for attention underthe project all sound very important, and probably are the most appropriate sites for the project, it still would seem to have been useful to include inthe project the preparation o f a protected areas systems plan for Bosnia and Herzegovina. A protected areas system plan i s the designo f a total reserve system covering the fullrange o fecosystems and communities found inBosnia andHerzegovina. The systems plan should identify the range o f purposes o f protected areas and help to balance the different objectives. It should also identify the relationships among the components o f the protected areas system, including betweenindividual areas, betweenprotected areas and other land uses, and betweendifferent sectors and levels o fthe various stakeholders inBosnia and Herzegovina. It should help demonstrate important linkages with other aspects o f economic development, and show how various stakeholders can interact and cooperate to support effective and sustainable management o f protected areas. A protected areas systems plan can help establish priorities for a workable national system o f protected areas. It would provide the framework within which the various areas proposed for attention under the GEF project would relate to the larger picture. A national protected areas system plan can also be an invaluable tool for communicating with decision makers, the private sector, and the various other interest groups invarious parts o f the country. The process o f preparing a systemsplan will also offer an opportunity for buildinga stronger constituency to support protected areas. Much o f the necessary work has already been done inpreparing the project appraisal document, so preparing the national systems plan should not be a terribly time consuming and expense process. A useful tool for guiding such a document i s Davey, Adrian G. 1998. NationalSystem Planningfor ProtectedAreas. IUCN, Gland, Switzerland. This document i s available on the internet at www.iucn.ora/themes/wcpa/publications.Hard copies are available directly from IUCN's World Commission on Protected Areas. (WCPA). Response: Bosnia-Herzegovina (hereinafter in the responses, Bosnia) is in theprocess of preparing a national protected area systemsplan. At the time theproject was originally proposed, it was expected that suchplan would have been already well-advanced, as this was to be done through the WorldBank-funded Forest Development and Conservation Project (FDCP), as a cornerstone aspect of the development of the National Biodiversity Strategy (NBS). However, a decision was taken in 2004 by the government to utilize instead UNEPJinancing NBS. Unfortunately, for a variety of reasons, this has taken a very long time to be started. Even 77 so, the areasproposedfor inclusion in theproject were derived by a high-level, inter-ministerial, and inter-Entity, Working Group. In its deliberations, the Working Group took account of numerous existingproposals for afuture PA network. The UNEP-funded work is now underway, and is expected that the national PA systemplan will be completed by mid-2007. Although this will too late to alter the existingproposals, the team believes that the areasproposedfor inclusion in theproject represent a strong technical consensuson the highest priority areasfor immediateprotection. The team isfurther highly confident that all areasproposed will bepart of anyfuture national plan. Here it should be noted thatfour of the six areas are already protected; one of the remaining two (Una River) has a completed Feasibility Study,paid by the Bosnian government, and the last, the Igman mountain complex, has a Feasibility Study underway. Action. TheProject Brief will morefully reflect the ongoing work through UNEPfunding, to develop an integrated national PA systemplan, and make more explicit ways in which the project will support thatplan. Small Grants The small grants component o fthe project is excellent, and an essential element inthe success o f the overall project. But Iwas a little surprisedthat the project document didnot evenmention the concept o fpayments for ecosystem services. The MillenniumEcosystem Assessment has strongly supported the concept o f ecosystem services, inother words, the benefits that nature provides to people. A full discussion o f ecosystem services i s available inthe reports of the MillenniumEcosystem Assessment, but they cover provisioning services, which are the goods produced or provided by ecosystems; regulating services, such as regulation o f pollinators, climate, nutrients, and extreme natural events; cultural services, the non-material benefits from ecosystems, including recreational, educational and inspirational; and supporting services, such as primary production, carbon sequestration, soil formation and so forth. The approach taken by the MA impliesthat ecosystem services have value to people, which inturnimpliesthat these ecosystem services have an economic value that can be internalized ineconomic policy and the market system. Some o f these services are relatively easy to quantify, though inthe past they have beenconsidered as public goods and hence have suffered from market imperfections. But the value ofcarbon sequestration inforests, for example, is substantial, and at a global scale, some US$11.3 billion worth o f carbon credits were traded on the international market in2005. The economic value o fwater catchments have also beendemonstrated. It would seem to be useful to explore the various options for payments for ecosystem services provided by protected areas, as a means o f providing long-term financial security to the protected areas. Inthose that support production o f forest products, including non-timber forest products, eco-labeling would both enhance the value and the credibility o f their sustainable harvesting. The World Bank i s deeply involved inthe process o fbuildingmarkets for ecosystem services, and actively promotes environmental fiscal reform (see, for example, World Bank. 2005. EnvironmentalFiscal Reform: What should be done and how to achieve it. IBRD, Washington D.C.). The project is also seekingto reach out to the private sector, and inmany parts o fthe world, the private sector i s an active player inthe market for ecosystem services, including cultural services such as natural beauty. The private sector can use ecosystem services to create direct financial income; ensure that the firm receives necessary supplies of natural resources; captures the demand for the service from clients (for example, tourists); may enable it to compensate for any 78 negative impacts on biodiversity on a voluntary basis; improve its public image; and simply act inan ecologically responsible manner that requiresit to investinecosystem services. A global information service on developments innew ecosystem service-based markets is available at www.ecosystemmarketdace.com. A service where providers and beneficiaries o f ecosystem services can work together to capture the benefits associated with ecosystem services i s available at w. katoombagroup.org. None o f this i s meant to replace the Small Grants Facility component o f the project, which remains well conceived. But sustainability for the existing and planned new protected areas may well depend on developing new streams o f revenue, and payments for ecosystem services should at least receive an appropriate degree o f attention inthe project. Response. Theteam wishes to emphasize that the Project does intend to support paymentsfor environmental/ecosystemservices (PES) as an important element of longer-termfinancial sustainability mechanisms. However, it has been suggestedthat PES be de-emphasized, because theproject has a limited lifetime, it will take some time to develop this relatively complex mechanism, and in any case, suchpayments will likely not make a large contribution to PA revenue streams until the longer-term. Nevertheless, (PES), will be developed, aspart of both the Small Grants Program (SGP), and in terms of newfunding sourcesfor PAS. Action. Preparation/AppraisaI activities will continue to refine the SGP, and willfocus renewed attention on early development of mechanismsfor testingpaymentfor environmental services. Updatefrom Appraisal. At appraisal, inresponse to reviewer and recipient feedback, the "small grants program" was changed into a smaller "local initiatives program" which will be limitedto just a few subprojects (at least one perproject PA). While PES is one ofthe subproject options, it will not necessarily be selected. However PES will still be considered inthe context o f P A management planning and the evolution o f P A financing. IUCNCategories The project document mentions inseveral places that the full range of IUCNprotected area categories will be used. This sounds like a good idea, but Ido not think that this strategy should be applied too strictly. Ina country where so many people are occupying the rural areas, it may be extremelydifficult to establish a Category Iprotected area, and given the economic situation inthe country, Category V areas may be muchmore appropriate. Perhaps a few o fthe core zones which are providing critical habitat to threatened species could receive strict protection, but as a zoning measure rather than a category for the entireprotectedarea. The project emphasizes the importance o fmultiple-usemanagement o fprotectedareas, but the IUCN category system has variable uses that are permissible. Multiple-usemanagement i s more likely under Categories IV, V andVI. Response. Theabove approach, especially the idea of zoning, is exactly what isforeseen. The only areas which are now plannedfor strictprotection are the two smallforest preserves, which already exist in this status. The other areas are clear multiple use areas which willfall, as noted, most likely under Categories Il?V and VI. Action. New managementplans, taking into account Feasibility Studies,Environmental Assessments, and Social Assessments, will create the specijk distinctive zones within any given PA. 79 2. Identification of the globalenvironmentalbenefitsand/or drawbacks of the project Bosnia and Herzegovina i s a sparsely-populated keystone inthe Balkans, and thereby plays an important role inproviding global environmental benefits, including providing habitats for endemic species o f plants. Its karst ecosystems are substantial, and significant at a global scale. The fact that so little ofthe landscape is yet included as legally-established protected areas indicates that Bosnia and Herzegovina i s a prime candidate for expanding its protected area system ina way that can contribute to conserving the globally important biodiversity o fthe Balkan region. Some o f the proposed protected areas are outstanding on a global scale, such as the Tara Canyon, which may be the most spectacular canyon in Europe, and the Perucica Forest, which may be one o f the least-disturbed forests inthe Balkans, ifnot all o f Europe. Response. The team appreciates the above comment,particularly in that it reflects the client's strong belief in the opportunities presented by Bosnia's signiJjcant natural assets. 3. Project'scontext within GEF goals, operationalstrategies, programmepriorities,GEF Councilguidance and the provisionsof the relevantConventions This project is particularly relevant to the Convention on Biological Diversity, and specifically its efforts to implementArticles 8(a) and 8(b) on Protected Areas. Decision VII/28 on protected areas provides guidance on protected areas, and the programme o f work on protected areas inthe Annex provides additional guidance that i s well reflected by the project. Numerous CBD COP decisions on forest biological diversity also relate, including Decisions 11/9, 111/12, IV/7, V/4, V1/22, and VII/l. This project as designedwill be entirely consistent with the guidance provided by the COP. COP Decision VII/27, on mountain biological diversity contains a programme o f work on mountain biodiversity, which covers protection, sustainable use o f mountain resources, and institutional elements that are all relevant to this project. Additional elements on information sharing may needto be incorporated inthe project design. Response/Action. The team appreciates this confirmation of theproject's conformity with key international provisions on biodiversity. Continuingpreparation efforts, particularly aspart of the ongoing Social Assessment,will ensure that additional methods of information sharing are reflected inproject design. 4. Regionalcontext As part o fthe former Yugoslavia, Bosnia and Herzegovina is surrounded by other countries with whom they do not always have cordial relationships. While it certainly seems sensible to have regional cooperation inprotected areas, and especially trans-boundary protected areas, such regional cooperation i s far from simple under the current conditions. That said, a more optimistic perspective i s that protected areas could provide a means o f promoting trans-boundary cooperation on shared ecosystems or on wide-ranging species, such as wolves and brown bears. The karst ecosystems shared betweenCroatia and Bosnia-Herzegovinawould also seem to be prime targets for enhancing regional cooperation. Training o f staff for protected areas may also be more effective ifseveral o f the GEF projects inthe region combine their efforts, including sharing o f curriculum materials. On transboundary protected areas, the project might wish to consider another IUCN publication: Sandwith, Trevor, et al. 2003. Transboundary Protected 80 Areas for Peace and Cooperation. IUCN, Gland, Switzerland. This volume is available on the internet at the same site mentioned above. RewonsdAction. The team agrees with the above view of thepotential difficultiesin establishing transboundary activities. Wefurther agree that the trainingprograms should be designed to enable experiencefrom other Balkan PASto be brought into Bosnia; this strategy will be incorporated in thefirst year design of the trainingprogram. It should be noted that particularly in SutjeskaNational Park, there is ongoing cooperation with the Durmitor National Park in Montenegro; theproject design explicitly seeks to strengthen this cooperation, especially in terms of better coordination of recreation activities between the twoparks. 5. Replicabilityof the project Virtually all countries inthe world now have protectedareas, though Bosnia and Herzegovina have one o f the weakest national systems. But the proposed project will build institutional capacity, staff competence, and new approaches to protected areas. Using the new approaches and institutional frameworks and building on the expanded technical competence o f staff, it may well be expected that additional protected areas will be established. As accession to the EU becomes more likely, EU funding may lead to expanded support for protected areas. However, giventhe point made above about a national systems plan, replicability would seem to be most likely ifthere is a solid framework on how to proceed with any additional protected areas. Some o f the alternative sites mentioned inthe project document might be considered for such replication. An essential element o f any such replicability will be ensuringthat appropriate staff are engaged, put inplace, and givenreal career opportunities within the protectedareas o fthe country. Replicability will also depend on building a constructive and positive relationship with other sectors, especially tourism and forestry. It will also be useful to learn lessons from other European countries who have faced similar challenges. Croatia i s relatively advanced in its protected areas, with an outstanding karst ecosystem that has beenrecognized on the World Heritage List, namely Plitvice National Park. Plitvice i s able to recover virtually all o f its runningcosts through various forms o frevenue generation. Ifthe GovernmentofBosniaandHerzegovinaprovidesthe necessary policy support to enable the protected areasto retain a reasonable share ofthe value ofthe ecosystem services they provide, then replication may be far more likely. ResRonse/Action. As noted above, the national PA systemplan is underway. Certainly, the central government authorities, as well as local administrations and non-governmental organizations, are increasingly aware of newfunding sources (e.g., the EU). Staff in existing parks are already quite well-trainedfor their speciJicroles; the challenge will be to bring their knowledge to a higher level. This isparticularly true in cases where theforest enterprises will need to take an active role in PA management (in the smallforest reserves of Janj and Lom, and in Kozara National Park, especially). In addition, theproject will undertake a signipcant effort in training new stafffor new areas. Even in this case, however, it should be noted thatproject implementation/PA management teams are already beingformed -and trainedfrom government resources -for new skills. It is absolutely clear that neighboring countries' experiences will need to be leveraged, and the team especially appreciates the suggestions to look more closely at Croatia's experience. This 81 has been done to some extent, butfurther collaboration/information sharing with the Croatian experts will bepursued prior to Appraisal. At this time, thepolicyframework for revenue sharing between Entity governments andprotected areas is under revision. The PAShave arguedpersuasively for greater budget supportfrom the central authorities, and it appears that this will be given. By project Appraisal, thefinal formulas for revenue sharing in the PASshould be completed. This willpartly be based on recommendationsfrom an ongoing international consultancyfocused onproviding optionsfor financial sustainability for the overall PA system. Project design and indicators will be modiJied based on thefinal policy agreements. 6. Sustainability of the project Most of the comments made above can be applied to the issue of sustainability of the project. The Small GrantsFacility, avery important element ofthe project, is unlikely to be sustainable without project funding. But ifthe small grants are usedto develop commercially viable ways of managing the benefitsfrom ecosystem services provided by the protected areas, then sustainability is far more likely. An additional element inthe project to examine the economic benefits of the multiple ecosystem services provided by the proposedprotected areas would be a significant contributor to the sustainability of the project. The fact that other donors are also active inBosnia and Herzegovina, includingthe Government of Italy, USAID, and JICA, indicate that further possibilities for support of protected areas may also be possible, and this project may helpto improve the design of subsequent projects. Response. To-date,project design hasfocused on the modalitiesfor executing the SGP, with lessfocus on longer-term sustainability. However, the Bank team, and the client, agree with the above comment that the SGP will have a difJiculttime being sustainable without project funding. It is expected that experiencegainedfrom theproject will enable Bosnia to leverage additional sources ofjnance for similar grant-making activities in thefuture. This might befrom bilateral sources. Importantly, such grants are regularfeatures of a number of EUpre-accession instruments which will become available to the country during theproject implementation period. Action. Remainingpreparation willplace greater focus on the long-term sustainability of the Small Grant Program. Additionally, thefinancial sustainability consultancy noted above is expected to make recommendations on this topic. 7. Linkages to other focal areas One of the most obvious links of the project is to climate change, which is both a challenge to protected areas (because the climatic conditions may influence the distribution of the species that the protected areas are establishedto conserve) andan importantjustification for protected areas (because they may offer opportunities for enabling ecosystems to adapt to changing climatic conditions). As discussed above, many of the forested areas may be important interms of carbon sequestration. It i s possible that some of the habitat restoration issues may benefitfrom the Clean Development Mechanism under the Kyoto Protocol. The threat to endemic plant species, particularly inthe mountain areas, will requireparticular attention as climates change. Interms of international waters, some ofthe rivers inBosnia andHerzegovina do flow into neighboring countries, and the protected areas may help ensure that the quality of water is at an acceptable level. But it must be recognized that this is a minor link. 82 Interms of landdegradation, the biggest problem is with landmines,which still are aproblem in several hundredthousandhectares andprovide a significant threat to developing such areas for the conservation ofbiodiversity. Onthe other hand, they also hamper other forms of development, and may serve as de facto reserves. But landmines are also a significant source of pollution as they degrade, so efforts at de-mining should continue and expand. The project addresses all four of the strategic priorities of the GEF operational strategy on biodiversity. The project i s directly addressing protected areas (SP1); the work that it is doing to mainstream forests and agriculture into the new protected areas address SP2 on mainstreaming biodiversity; the project includes a significant element of capacity building (SP3), and the project will seek to develop best practices for protected areas (SP4). The project will also address OP2 on coastal, marine, andfreshwater ecosystems, though in Bosnia and Herzegovina the coastal and marine component is miniscule, while the freshwater ecosystems are very important. The project also addresses OP3 on forest ecosystems and OP4 on mountain ecosystems. Interms of OP13 on conservation and sustainable use of biological diversity important to agriculture, the project document contains relatively little discussion of non-timber forest products. But medicinal plants and edible fungi are likely to be significant components inmany of the proposednew protectedareas. This might require some further attention. ResaonsdAction. The team is infull agreement with these comments. Withparticular reference to climate change and carbon sequestration, this is something which might be able to be developed in thefuture, depending on what kinds of habitat restoration ultimately occurs in a given PA. However, our present understanding is that carbon sinksprojects are not highly favored, even under the Clean Development Mechanism. TheBosnian government is aware of some opportunities to leverage carbonfunding, and our ongoing dialogue will continue to engage on thispoint. It is certainly the case that landmines remain an important challenge. We note that overall, the only park with any significant remaining landmine issues is the Igman mountain complex outside Sarajevo. Demining efforts are ongoing there, with clear "Do Not Enter" areas (marked in red tape with "skull and crossbones"), some of which are in remote locations, and some of which are in locations close to current/potentialfuture, recreation areas. Theproject does not propose to directly support any demining. Nevertheless,project supportfor new managementplans will take direct account of demining activities. Non-timber forest products (NTFPs) are an important source of livelihood enhancementfor some of thepopulation, including both those living inhear PAS,and locally-based tourist visitors. At present, the two existing national parks (Sutjeska and Kozara) have well-established proceduresfor collection of NTFPs. As theproject willprimarily strengthen their management capacity, andprovide some much-need asset capitalization, no conflicts areforeseen about this topic. In the new parks,feasibility studiesprovide evidence of some utilization of NTFPs, but they do not suggest that this is a barrier topark establishment, nor do they indicate any serious conflicts. By project Effectiveness, a Process Framework tool will beput inplace, to mitigate effects of any potential restrictions which might arise in any PA. 8. Linkages to other programmes and action plans at regional or sub-regional levels Bosnia and Herzegovina forms part of the Pan-EuropeanBiological and Landscape Diversity Strategy (PEBLDS), and has the potential to expand its participation inthis important 83 programme. SignificantEuropeanUnionfunding supportsthis effort, and a PEBLDSmeeting was heldat the end o fFebruary2006 inCroatia, whichwas attendedby colleaguesfrom Bosnia and Herzegovina. Along withNatura 2000, suchpan-Europeanefforts can offer considerable support to this project. Response. Bosnian experts in multiplefields related toforestry and biodiversity are active in a number of fora, including those above. This has expanded the authorities' understanding of other programs, and is expected to continue. Further, theproject will indeedprovide supportfor initial identijkation of sitesfor inclusion in Natura 2000. This will be clariJied in the Project Brief 9. Other beneficialor possible environmentaldamagingeffects The concern about landmineshas alreadybeenmentioned. A potentialconflict with the wood- processingindustrycouldbe addressed throughseekingappropriatecertification, suchas the ForestStewardshipCouncil(www.fsc.org). Another issue that will require some attentioni s the relationship betweenthe various ministries and levelof government, includingbetweenthe Entities. The governance complexitywill provide some management challenges that will needto be addressed. The fact that the project will be executedby the MinistriesofAgriculture, Forestry and Water Management,without the Ministry of Environment,may complicaterelationships. Some attention will also needto be givento the balancebetweenpatrolling and enforcementon one hand, while building understandingand support from local peopleon the other hand. At least some ofthese protectedareas have considerablepotentialfor winter tourism, as evidencedby the 1984 Winter Olympics heldinSarajevo. The possibility of over-development will needto be considered, especially iflargeareas of forest are cleared inorder to make more ski runs. The distributionof endemic species will needto be particularlyconsidered. The project documentsays nothingabout invasivealien species, but this is a problemfor protectedareas throughoutthe world, and certainly shouldbe consideredas one ofthe important management issues, especiallygiventhe importanceofthe endemic Balkanflora. Response. Theproject design has tried to be sensitive to the competing claims between conservation andforest utilization, in some of the areas. It is indeed the case that in the existing national parks, an important revenue source isfees from timber extraction. Thisprocess is long- standing, and in theseparks, there is very good coordination betweenpark management and forest enterprises, and this is expectedto continue. In theparks proposedfor establishment, the final management arrangements are still being determined. It is likely that in both Una and the Igman mountain complex, timber harvesting will continue toplay an important role. That said, theforest enterprises are supportive ofpark establishment, as it is not expected that they will "lose" signijkant assets in theprocess. TheBank, through the FDCP, is very heavily engaged in overall governance improvements in theforest sector, including harvesting and woodprocessing. These improvements will have numerouspositive implicationsfor the management efficiency of the PAS. The complexity of the implementation arrangements is due to the reality of the complex administrative structure in the country. However, we note that the ministries of agriculture will not be the primary implementation authority; this will rest with the Entity ministries of 84 environment andphysical planning. The ministries of agriculture currently contain theproject implementation unitsfor ongoingprojects, andpreparation has utilized their expertise. During implementation, evenprocurement andfinancial management isplanned to be organized in dedicated `>project implementation teamshits '' in the ministries of environment. Importantly, most of the day-to-day operations will be undertaken at the PA level, which is most appropriate. Action. TheProject Brief will be revised to make these arrangements more clear. Thepoint on winter tourism andpotential overdevelopment of the Igman complex is important. However, no "large clearing)'isforeseen, even taking into account current development of the high-density tourist areas. Bosnia's environmental regulations, assisted by the Environmental Management Plan Framework being developedat present, will help to guide new construction so as to minimize environmental disruption (including endemics). Even so, we would emphasize again the multiple-use nature of theseparks, and the reality that especiallyfor Igman, the country sees increasing tourism there as an important potential driverfor economic growth in the area. Updatefrom Appraisal. Bv the time of the appraisal, the main responsibility for project implementation was assigned to the Entity environmental ministries, and includes specific arrangements for coordination with the Entitv Ministries of Agriculture, Forestry and Water Management. 10. Capacity building aspects The project clearly intends to include a significant element o f capacity building, but this has not yet beenfleshed out to much detail. Inaddition to appropriate training for all categories o f protected area staff, it might also be worth considering to incorporate conservation elements in the school curriculum at all level. It would also be helpfulto support appropriate elements inthe non-governmental sector, including youth groups; these are often the strongest supporters o f protected areas and their capacity i s well worth considering. Response. It is indeed correct that the capacity building is not yet well-defined. Thefull trainingprogramfor thefirst year will be designed by project Appraisal. Subsequent needs will be determined on a yearly basis. The team very much welcomes the suggestion on inclusion of NGOs andyouth groups; the Bank is actively engagedwithyouth groups in the Balkans, and ongoingpreparation will make a more concerted effort to collaborate with those efforts. 11.Innovativenessof the project The innovativeness o fthe project comes from its location ina country that is emerging from a war between 1992 and 1995;has a very small amount o f its territory inthe protected area system; and is seekingto use protected areas as a foundation for its further economic development. The fact that many Europeantourists drive to the Balkans for vacations may offer some innovations for linking protectedareas to Europeantourism. The fact that protected areas are runby "National Park Enterprises" may offer creative opportunities for developing new fundingmechanisms, especially ifthese are linked to payments for ecosystem services. The Small Grants Facility will also offer multiple opportunities for innovation, and it i s important to ensure that the allocation o f these small grants does not become overly bureaucratic. Response. The team appreciates this understanding of the signijkant tourism potential in Bosnia. As noted before, paymentfor ecosystemservices will be exploredfurther, and will be 85 included as one of the SGP themes. Present design of the SGP is intended to be reasonably straightforward, and efforts will be made to ensure that the specijk operational modalities are not overly bureaucratic. CONCLUSION This project is anextremely important one for Bosnia andHerzegovina, offering it an opportunity to join other European countries with an appropriate system of protected areas. The sites that have beenidentified are likely to be the most important ones, but a comprehensive system plan for the country would be helpful inshowing how the various protected areas relate to each other. Interms of the sustainability of the protected areas system, the concept of payment for ecosystem services is well worth considering and would offer the project a new dimension of innovation. Suchan approachmay be especially relevant inestablishing a new system when many options are still open. 86 Map Section IBRD 36061 BOSNIA AND HERZEGOVINA FOREST AND MOUNTAIN PROTECTED AREAS PROJECT PROPOSED: FEASIBILITY STUDY MAIN ROADS SELECTED TOWNS NATIONAL PARKS DAYTON AGREEMENT LINES NATIONAL CAPITAL EXISTING: INTERNATIONAL BOUNDARIES MAIN RIVERS FOREST RESERVES NATIONAL PARKS To Zagreb 16°E 17°E To Bjelovar 18°E 19°E To Osijek CROATIA To Una Karlovac Bosanska Gradiska Bosanska Gradiska Bosanski Brod Bosanski Brod Bosanska Novi Bosanska Novi (Srp. Gradiska) (Srp. Gradiska) Sava (Srp.Brod) (Srp.Brod) (Novi Grad) (Novi Grad) To Belgrade 45°N CazinCazin Derventa DeDerventrventa 45°N PrijedorPrijedor Kozara NP Vbras Bosna Sava BosanskaBosanska BrckoBrcko BihacBihac“ Krupa Krupa Banja Banja Sanski Most Sanski Most Luka Luka Una NP BijeljinaBijeljina To Belgrade To GracanicaGracanica Drina Sveti Rok Una Sana REPUBLIKA SRPSKA REPUBLIKA SRPSKA BosanskiBosanski KotorKotor VaroVaros Varos PetrovacPetrovac TesliTeslic“ Teslic SERBIA Kljuc Kljuc MaglajMaglaj TuzlTuzla Tuzla CROATIA Lom FR To Medak Drvarvar Drvar Krivaja Spreca To Valjevo JajceJajce Janj FR TravniTravnik Travnik To Obrovac Zenica Zenica KladanjKladanj Vrbas VareVares Vares Vlasenica Vlasenica Bosna SrebrenicaSrebrenica BugojnoBugojno 44°N VisokVisoko Visoko REPUBLIKAREPUBLIKA FEDERATION OF FEDERATION OF 44°N SRPSKASRPSKA Drina BOSNIA AND HERZEGOVINA BOSNIA AND HERZEGOVINA To Kraljevo To SARAJEVOSARAJEVO Zadar LivnoLivno Igman-Bjelasnica-Treskavica-Visocica PalePale ^ VisegraVisegrad Visegrad Jablanicko Prenj-Cvrsnica-Cabulja-Vran jezero JablanicaJablanica GorazdeGorazde KonjicKonjic Neretva Lim To Sjenica FocaFoca (Srbinje)(Srbinje) Sutjeska NP Mostar Mostar GackoGacko Tara REPUBLIKA StolacStolac Piva SRPSKA 43°N 43°N BilecaBileca “ MONTENEGRO TrebinjTrebinje Trebinje To Podgorica 0 10 20 30 40 50 Kilometers To Shkodėr Adriatic Sea 0 10 20 30 Miles This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information ALBANIA shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 16°E 17°E 18°E 19°E APRIL 2008