Page 1 INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No.: AC1108 Date ISDS Prepared/Updated: December 1, 2004 I. BASIC INFORMATION A. Basic Project Data Country: Romania Project ID: P088252 Project Name: MUNICIPAL SERVICES PROJECT Task Team Leader: Sudipto Sarkar Estimated Appraisal Date: June 2005 Estimated Board Date: December 2005 Managing Unit: ECSIE Lending Instrument: Specific Investment Loan Sector: General water, sanitation and flood protection sector (100%) Theme: Other urban development (P) Safeguard Policies Specialists in the task team: Ruxandra Floroiu Loan/Credit amount ($m.): IBRD $ 100 mln. Other financing amounts by source: 25 ($m) B. Project Objectives [from section 2 of PCN] The objective of the project will be to a) strengthen the institutional and financial framework for the water/wastewater ; and b) provide budgetary support for critical public expenditure that will result in an improvement in service provision. C. Project Description [from section 3 of PCN] The Ministry of Public Finance (MoPF) is expected to be the Borrower under this project. For the municipal sector, the funds will be transferred from the MoPF to the utilities and regional operators. To ensure financial discipline, proper cost recovery covenants, including the possibility of intercepting transfers in case of defaults, should be in place. A proposed financing plan for a Bank loan of US$ 100 million is presented below. The non-Bank contribution will correspond to expenditures financed by the municipalities and central agencies, including taxes. The project proposes to have the following two components: Page 2 Financing Category Cost (US$ mln.) Bank (US$ mln.) Non-Bank (US$ mln.) Investments 112.5 90 22.5 Technical Assistance 12.5 10 2.5 Total 125 100 25 Component 1: Investments The project will support public expenditures (central and local) in the water/wastewater and possibly the solid waste sectors. These expenditures will be for: a) Romanian co-financing required for EU grants. Proposed Bank’s financing will mainly be for Cohesion funds - starting in 2007 and co-financing eligible ISPA projects where financing is not fully secured; and b) non-EU related viable projects that require public assistance. This Bank financing can support public expenditures starting in 2005. A key feature of the project will be that disbursements will be output based . This will help bring the focus on results rather than process and it will allow the Romanian Government to utilize Bank resources to co-finance with the EU grants. The disbursements will be made against bid prices once the outputs are confirmed through independent technical and financial audits. A loan advance may also be provided to finance the completion of works. A proposed list of performance benchmarks to measure outputs areincreased number of house connections for water; increased number of house connections for sewerage; volume of wastewater treated; number of meters installed; length of pipes replaced etc For the output based approach to work effectively, it is important to have a multi-year program prepared upfront with the Government which will include institutional development, a public investment program with a financing plan and clear measurable outputs. Also, the program will have to be developed with full consultation with the EU and other International Financial Institutions (IFIs), taking into account Romania’s obligations towards the EU and the various sources of financing. During preparation, the fiscal impact of the project will be examined carefully, given that the Bank loan funds will be included in the budget as a financing source of public expenditure. Country procedures should be used as much as possible and the application of the Bank’s fiduciary and safeguard policies will have to take into account that Romanian procedures on these topics are converging with or are in compliance with EU directives. Page 3 · Procurement : The possibility of using EU and Romanian procedures will be explored. Preliminary review indicates that for procedures that follow EU requirements, there will be no ex-ante control by the Bank. During preparation, the Romanian procurement procedures will be reviewed to determine their applicability under the project; · Financial Management: The financial management system used in MoPF to transfer resources to the municipalities and central agencies will be reviewed; and · Environment/Social: As part of project preparation, the Romanian laws and practices will be examined to determine their equivalency with EU and Bank policies and procedures. To the extent possible, Romanian procedures will be used . Component 2: Technical Assistance To facilitate the implementation of the project and to address the Government’s need to establish an institutional framework, the project will: · support the development of an Infrastructure Development Facility (IDF) in the Ministry of Public Finance (MoPF). The IDF will not duplicate the ongoing related activities in the MoPF and the sector ministries related to EU financing and sector development. Working with the sector ministries, the IDF will: a) help to prioritize investments and establish financing mechanisms for the water/wastewater and possibly the solid waste sectors. The IDF will draw on the on-going work of an inter-ministerial group that is looking at various financing options at the sub-sovereign level; b) identify regulatory needs and promote legislation on PPP; and c) manage the flow of funds under the project for the public expenditure; · support the strengthening of the water/wastewater regulator which was created in 2002. The regulator has limited staff in relation to the task of effectively regulating the activities of 600 operators providing water/wastewater services. Technical assistance will be provided for the development of legislation on quality of service and guidelines on tariffs which have to increase to finance the required investments; and · support the sector ministries and agencies, as needed, to develop investment priorities. This Technical Assistance is needed for Romania to prepare for the use of the Cohesion Funds. D. Project location (if known) The project locations are not known and will be identified during preparation. E. Borrower’s Institutional Capacity for Safeguard Policies [from PCN] Based on the Bank’s experience in Romania, the risks of inadequate institutional capacity to implement applicable safeguard policies seem low. Under this project and to the extent possible, Romanian or EU procedures will be followed. Page 4 II. SAFEGUARD POLICIES THAT MIGHT APPLY Applicable? Safeguard Policy If Applicable, How Might It Apply? [x] Environmental Assessment ( OP / BP 4.01) Environment chapter of Operational Manual containing framework for environmental screening and procedures for meeting due diligence for expected categories of sub- projects. Also, the PAD will include an “equivalency analysis” (as per Table A.1 in Annex A of the October 2004 draft Board paper on country systems and as amended in final expected February 2005) that will compare World Bank, Romanian and EU procedures specifically for the range in operations expected to be financed. This analysis will expand on any available broader EU/World Bank analysis planned to be carried out by ECSSD, but will be more specific to Romanian laws applicable to the planned investments. [ TBD] Natural Habitats ( OP / BP 4.04) Uncertain at this time; it will be considered in subproject’s EAs. [ ] Pest Management ( OP 4.09 ) Not expected to involve any pesticide management issues [X] Involuntary Resettlement ( OP / BP 4.12) A Policy Framework or Land Acquisition Plan will be available as a condition for the Project appraisal. [ ] Indigenous Peoples ( OD 4.20 ) [ ] Forests ( OP / BP 4.36) [TBD] Safety of Dams ( OP / BP 4.37) Uncertain at this time; it will be reconsidered if water resources infrastructures are likely to be included in the project. [ X] Cultural Property (draft OP 4.11 - OPN 11.03 ) Approach to this will be described in the Environmental Chapter of the Operation Manual. [ ] Projects in Disputed Areas ( OP / BP / GP 7.60) * [x ] Projects on International Waterways ( OP / BP / GP 7.50) Subprojects will be developed in the Danube River Basin and other watersheds; we will follow changes in OP as it may require notification * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 5 Environmental Assessment Category: [ ] A [ ] B [ ] C [ x] FI with likely A and B subprojects [ ] TBD (to be determined) III. SAFEGUARD PREPARATION PLAN A. Target date for the Quality Enhancement Review (QER), at which time the PAD-stage ISDS would be prepared. The QER is scheduled in May, 2005. A formal follow-up Safeguards Consultation meeting is expected in March, 2005. B. For simple projects that will not require a QER, the target date for preparing the PAD-stage ISDS C. Time frame for launching and completing the safeguard-related studies that may be needed. The specific studies and their timing 1 should be specified in the PAD-stage ISDS. Conditions before Appraisal are as follows: · Environment chapter of Operational Manual containing framework for environmental screening and procedures for meeting due diligence for expected categories of sub- projects; · A policy framework appropriate to OP 4.12; · A separate “equivalency analysis” conforming to Table A.1 of Annex A of the Board paper on country systems (draft of October 2004; as amended in final expected February 2005); · At least one public and stake holders consultation will take place before appraisal. IV. APPROVALS Signed and submitted by: Task Team Leader: Sudipto Sarkar 12/03/2004 Approved by: Regional Safeguards Coordinator: Ronald Hoffer 12/03/04 Comments Sector Manager: Lee Travers 12/03/2004 Comments 1 Reminder: The Bank's Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in-country, at publicly accessible locations and in a form and language that are accessible to potentially affected persons.