Hungary-Lake Balaton Environment Project Lake Balaton Program H-1357 Budapest, Pf. 2 Hungary
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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Project Name Region Sector Project ID Implementing Agency Country Contact Report No. PIC2038 Hungary-Lake Balaton Environment Project Europe and Central Asia Environment HUPE39753 Office of the Prime Minister Lake Balaton Program H-1357 Budapest, Pf. 2 Hungary Mr. Gyula Somlai Principal Program Officer Telephone: Fax: Date Initial PID Prepared February 1995 Date This PID Prepared April 1997 Project Appraisal Date October 1997 Projected Board Date December 1997 Background Lake Balaton is the largest fresh water body in Central Europe, and the most precious water body of Hungary. Considered a major element of regional and national natural heritage, Lake Balaton is also Hungary's most important domestic and international recreational area, and contributes about half the total national income from tourism. An estimated million tourists visit the area each year, most of them during the two and a half month peak summer tourist season. The permanent population of the lake catchment of 6,000 km2 is about 400,000 in over 300 communities, of which approximately 120,000 live near the lake. The surface area of the lake is about 600 km2, and the average depth is only slightly over three meters. Water throughflow is very slow, with an average water residence time of about two years for the entire lake, making it vulnerable to pollution. Over the last century, the water quality of the lake has seriously deteriorated due to a man-made reduction in the water level of the lake, population growth in the watershed, and expanding agricultural, industrial and tourism activities. By 1994, an extreme algal bloom in the entire lake was observed. The blue and green algae invasion has endangered the biodiversity of the lake, and resulted in a drastic deterioration of the biological water quality, which is already bordering on OECD lower threshold limits for safe bathing. The result is a major and imminent threat to tourism demand. A pollution map prepared by the Ministry of Environment and Regional Policy has revealed that some of Hungary's most serious environmental problems are in the western area of the Lake Balaton region. The Zala River, flowing from the west, drains about half of
2 the total Lake Balaton catchment area. It carries heavy pollution from both communal and agricultural sources into the Keszthely Bay, the smallest basin of the lake, which represents four percent of the total volume. Therefore the relative pollution load of Keszthely Bay is the highest, and the environmental and economic impacts the most significant. This has led the Hungarian authorities to select this area, together with the Zala River basin, as the priority area for environmental management measures and investment in environmental protection. Project Objectives The Government of Hungary (GOH), acting through the Office of the Lake Balaton Commissioner of the Prime Minister's Office, is coordinating preparation of the Lake Balaton Environment Project. The objective of the proposed Project is to support the long-term environmentally sustainable development of Lake Balaton and its catchment area, through a series of complementary measures for planning and management, selected priority investments and institutional strengthening. It is anticipated that the total cost of the proposed Project would be approximately US$ 50 million and that the implementation period would be four years. Project preparation to date has included support from EU (Phare), Finland, the Netherlands, Norway and Switzerland. Preparation is proceeding well and it is planned that the proposed Project would be submitted for approval by the Government and World Bank during the second half of The GOH plans that the proposed Project would also serve as a catalyst for developing a second and more comprehensive project to support implementation of the Lake Balaton Strategic Environment Action Program. Project Description. The proposed Project would focus on development of a Lake Balaton Commission and Secretariat, preparation of a Lake Balaton Strategic Environmental Action Program and support for a Western Area Management Program for the Keszthely Bay portion of the Lake and the Zala River Basin. Development of the Lake Balaton Commission and Secretariat would permit establishment of an effective institutional structure for field-based management of this critical resource, with broad based participation of the concerned parties. The Action Program is needed to provide a framework for a long-term series of preventive and curative interventions for management of the Lake and its catchment area. The Western Area Management Program would support a series of priority actions that take into account the importance of the area for protecting the ecological balance of the Lake. The proposed Project has three complementary components: (a) Component A. Lake Balaton Planning and Management. This component would include three activities: (i) Establishment of the Lake Balaton Commission and Secretariat--to provide an operational management structure for the lake and its catchment area; - 2 -
3 (ii) Preparation of a Lake Balaton Strategic Environmental Action Program--to provide a long-term framework for management and investment activities to support conservation of Lake Balaton; and (iii) Management Oriented Monitoring Program--to develop and implement a cost-effective monitoring program to support management of Lake Balaton and its catchment area; (b) Component B Western Area Management Program - Kis- Balaton Protection System. This component would support the completion of civil works, including the construction of a system of dikes and gates to regulate the flow of water through the Lower Kis-Balaton, in order to support both water quality management and nature protection objectives. The Lower Kis-Balaton would be used as a managed nutrient trap to reduce the loading of the western portion of Lake Balaton, while complementary measures, included in Component C, would be used to reduce the point and non-point source load being carried by the Zala River. This component would also include measures for conservation of key wildlife habitat located in the Kis-Balaton area and for nature interpretation and visitor access. The activities to be supported under this component are the subject of an environmental assessment which is currently under preparation; (c) Western Area Management Program - Complementary Environmental Management Activities. This component would focus on preventive and curative measures to reduce the pollution load of the Zala River and Keszthely Bay. The measures supported under the proposed Project could be field tested in these areas and then undertaken at other sites in the Lake Balaton region. Project supported activities would include: (i) Water Quality Management in the Zala River Basin-- measures to control both point and non-point source pollution through management and investment activities; (ii) On-Shore Management of Keszthely Bay--preparation of a feasibility study for improved water and wastewater management in the Keszthely area and a shoreline management plan to direct development and reduce adverse impacts to sensitive habitats; and (iii) Management of the Internal Load of Keszthely Bay--pilot activities to evaluate the technical, economic and environmental feasibility of reducing the internal load of nutrient rich sediment from the Keszthely Bay; and (d) Second Phase Project. It is anticipated that a second phase project would be developed by the Government of Hungary to implement the findings and recommendations of the Action Program. The second phase project would be expected to include further support for management - 3 -
4 programs, investment activities, institutional strengthening, and provide for broad based public participation in environmental management activities. Project Cost and Financing The estimated cost of the proposed Project would be US $ 50.0 million. It is anticipated that the World Bank loan would finance approximately percent of the total project cost, including the costs of goods and civil works, and 100 percent of the foreign exchange costs (estimated at percent of the total cost). Given the national importance of the proposed Project and the diversity of parties responsible for its implementation, the World Bank loan would be taken by the Ministry of Finance on behalf of the GOH and then funds would be provided directly to the implementing agencies. The World Bank would assist the GOH in securing donor grant funding to support project preparation and selected elements of the proposed Project. The financing plan for the proposed Project would be finalized during the Project Appraisal. A "Donor Briefing" was held in February 1997 in conjunction with the Fourth Joint Session of the Project Preparation Committee Meeting and further consultations with EU (Phare) and bilateral donors are anticipated to occur as part of the Project preparation process. Project Implementation The proposed Project would be implemented over a four year period as the first phase of a long-term environmental management program for the Lake Balaton and its catchment area, which would be defined through preparation of the Lake Balaton Strategic Environmental Action Program. The Project would be under the coordination and supervision of the Office of the Lake Balaton Commissioner of the Prime Minister's Office. The Ministry of Environment and Regional Policy (MERP) and the Ministry of Transport, Communications and Water Management (MTCWM) would serve as the major implementing agencies. The proposed Project is being prepared by a Steering Committee which is chaired by the Lake Balaton Commissioner and includes the participation of MERP, MTCWM, Ministry of Agriculture (MOA), Ministry of Finance (MOF) and National Bank of Hungary (NBH). Day-to-day management of the proposed Project would be undertaken by the Principal Program Officer for the Balaton Program in the Office of the Prime Minister, who has been formally assigned this responsibility. It is planned that the proposed Project would support the development of a field based Secretariat for the Office of the Lake Balaton Commissioner, to serve as the Project Implementation Unit. Institutional strengthening would be provided for Project management, procurement and disbursement. Secretariat personnel would also be trained in the use of participatory approaches to support the sustained political commitment, at the national and local levels, required for implementation of the long-term Program and this initial Project. Coordination with local communities is being facilitated through the Balaton Regional Commission, which is - 4 -
5 chaired by the Lake Balaton Commissioner and has broad based representation from the communities in the greater Project area. This training would allow for an expansion of the current activities of the Lake Balaton Commissioner involving national and local nongovernmental organizations and the media. It is anticipated that a participatory process would be used for preparation of the Lake Balaton Strategic Environmental Action Program and that local nongovernmental organizations would play a role in implementation of the proposed Project. Lessons from Previous Bank Involvement The lessons from previous involvement of the World Bank in environmental management projects in Central and Eastern Europe and elsewhere are being incorporated into the design of the proposed Project. The project design is also being influenced by important lessons from other countries concerning watershed management and water quality improvement projects. The approach adopted for lake management reflects the recommendations provided in the recent World Bank publication, "Integrated Lake and Reservoir Management: World Bank Approach and Experience." The successful implementation of this type of project is labor intensive and requires careful planning during the Project preparation phase. Experience from previous Projects in other countries in the region has demonstrated the importance of having a significant level of World Bank implementation support provided from Resident Missions. The development of effective procurement and disbursement skills within the implementing organization(s) is critical for the efficient and timely achievement of Project objectives. The participation of a procurement specialist directly in the project design and implementation process, when combined with formal training of personnel, has had good results in other projects. It is anticipated that the proposed Project could also serve as a demonstration project for similar initiatives for integrated management of lakes and/or wetland areas in other countries. Rational for Bank Funding The Office of the Prime Minister has requested the support of the World Bank in order to benefit from its experience in: (a) the design, finance and implementation of environmental management projects in Central and Eastern Europe; (b) assistance in development of complementary national and local level institutions to support effective decentralization of environmental management; and (c) capacity in assisting with resource mobilization from intentional and domestic sources. At the project level, this experience includes the GEF Lake Ohrid Conservation Project in Albania and FYR Macedonia, Haapsalu and Matsalu Bays Environment Project in Estonia, Liepaja Environment Project in Latvia, Klaipeda Environment Project in Lithuania, Environmental Management Project in Poland and the Lake Sevan Action Plan in Armenia. These projects and activities all support management and investment activities concerning the use of an integrated approach to the management of - 5 -
6 rivers, lakes, coastal lagoons and other types of wetland ecosystems. It is anticipated that the World Bank would play an important catalytic role by supporting the Office of the Lake Balaton Commissioner to effectively bring together several ministries, authorities, and municipalities on the implementation side, and a number of bilateral and multilateral donors on the financing side. Issues and Actions The most important issues related to the design and implementation of the proposed Project include: (a) strengthening the Project management and planning capacity of the Office of the Lake Balaton Commissioner; (b) resolution of the revised design, commissioning process and operating procedures of the Lower Kis-Balaton Protection System (LKBPS) by the GOH and World Bank; (c) completion of the environmental assessment for proposed Project supported activities in the LKBPS, including a public consultation process; and (d) development of an effective means of coordination between a recently approved Japanese supported study of Lake Balaton and the activities under the proposed Project. The World Bank is working with the Office of the Lake Balaton Commissioner to review their interim staffing and consultant needs to undertake Project related tasks. With regard to the LKBPS, the GOH is now reviewing the findings and recommendations of a special interdisciplinary panel of experts working under the leadership of Professors Somlyody and Herodek which has conducted an extensive re-evaluation of the design, commissioning and operation of this system. Following review by the GOH, this study will be reviewed by the World Bank and is expected to provide critical information for detailed definition of this proposed component and for completion of the environmental assessment. An issue which is currently under review is how the activities under the complementary Japan International Cooperation Agency (JICA) activity, entitled "The Study on Environmental Improvement of Lake Balaton" will be coordinated with the proposed Project. In order to address this issue, discussions have been initiated by the Office of the Lake Balaton Commissioner with representatives of the Government of Japan and the World Bank. Environmental Aspects Implementation of the proposed Project would have positive environmental impacts through: (a) establishment of an administrative structure and institutional capacity for integrated management of Lake Balaton and its catchment area; (b) reduced pollution from both point and non-point sources of Lake Balaton and the Zala River watershed; (c) measures for nature conservation; and (d) development of a long-term Environmental Action Program for Lake Balaton. Given that the proposed Project would include support for infrastructure investments required for the construction of the Lower Kis-Balaton Protection System, the proposed Project has been placed in environmental screening category "A," consistent with the provisions of World Bank Operational Directive, 4.01, - 6 -
7 "Environmental Assessment." The environmental assessment is being prepared by an interdisciplinary team of international and local specialists which will review the proposed action and potential alternatives, including the "No Action" alternative. The environmental assessment will build upon the findings and recommendations of the Environmental Management Plan for the LKBPS prepared in The environmental assessment will include preparation of an environmental mitigation and monitoring plan and recommendations for institutional strengthening. Consistent with the procedures of the World Bank, preparation of the EA will include a series of broad based consultations to be conducted in Budapest and in the Lake Balaton region. These consultations will involve representatives of national and local government, academic and applied research institutes, potentially affected parties and nongovernmental organizations. All Project supported feasibility studies for water and wastewater improvements and the proposed small-scale pilot dredging activities would include the preparation of environmental reviews (Category "B") as an element of their preparation. Prior to proceeding with full scale dredging activities in a future phase of the Program-- should the pilot studies demonstrate this is technically, financially and environmentally feasible--a full environmental assessment would be prepared as an integral element of the planning process. The findings of the Environmental Management Plan and site visits conducted to date indicate that the proposed Project is not anticipated to result in involuntary resettlement; however, this issue would be reviewed in the environmental assessment and all other project related environmental studies. The site of the LKBPS has been the subject of a cultural heritage sites survey by Hungarian specialists which identified a limited number of sites of local significance; these are the being further examined through excavations. Implementation of the proposed Project would include the use of "Archaeological Chance Find Procedures" in case unknown buried sites are found during the course of construction activities. Project Benefits Benefits of Project supported planning and management activities would include: (a) development of an integrated approach for the management of Lake Balaton and its catchment area; (b) establishment of an effective institutional structure operating at the national and local level to support management of Lake Balaton; (c) development of a Lake Balaton Strategic Environmental Action Program to provide a framework for the protection and conservation of Lake Balaton; and (d) establishment of an operationally oriented monitoring system. Benefits of Project supported investment activities would include: (a) improved water quality through the reduction of external and - 7 -
8 internal pollution loads of Lake Balaton, through model interventions in the Zala River basin and at Keszthely Bay; (b) beneficial impacts on public health and ecological balance through improved water quality in the Zala River and the western portion of Lake Balaton; (c) economic and financial benefits attributable to the maintenance of tourism values associated with the western portion of Lake Balaton; and (d) establishment of expanded facilities for visitor access to areas of wildlife habitat. The proposed Project would also support the decentralization of environmental management activities by establishing a partnership between national and local authorities for management of Lake Balaton. Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington, D.C Telephone No.: (202) Fax No.: (202) Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. Processed by the Public Information Center week ending May 2,
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