How To Improve The Environment In Serbia

ENVIRONMENTAL INFRASTRUCTURE SUPPORT PROGRAMME (EISP) SIDA MEMSP IMG Programme Proposal July 2011 July 2013 (estimated, depending on approval date) Contents 1. Summary... 2 2. Background... 3 3. Strategic and Legal Framework... 5 4. Inception Phase Activities... 7 5. Risk Management... 13 6. Project Description... 14 7. Objectives and Activities... 17 8. Timeline... 20 9. Budget... 20 10. Serbian Government Contribution... 22 11. Project Management... 23 12. General Management Structure... 25 13. Procurement procedures... 25 14. Cross Cutting Issues... 27 Annex A: Programme Log Frame... 30 Annex B: Baseline (Draft)... 36 Annex C: Description of IT and Transport Support... 39 Annex D: Timeline... 44 Annex E: Draft ToR of Senior IPA Expert... 46 Annex F: EU DIS implications for SIDA EISP... 48 Page 1 of 52

1. Summary The overall goal of the Serbian Environmental Strategies is to improve the standard of environmental protection in Serbia and further the country s progress towards European integration. That remains the overall objective of this programme. The major challenge facing the Department of Project Management (DPM) within the Ministry of the Environment, Mining and Spatial Planning (MEMSP), and the Serbian Government as a whole, is to have a pipeline of project proposals of sufficient maturity and quality that will achieve this goal. With EU accession approaching and other forms of international assistance decreasing action to address this challenge has become urgent. The DPM, with IMG support, have researched the value and feasibility of developing a pipeline during the Inception Period of this Sida project. In summary: Value: The value of an effective pipeline can quantified at over 40m per year, an estimate based on the average EU IPA grants alone starting at 26m per year (2012-2013 period) in this sector. For each grant further funds are leveraged from other sources. These grants are expected to rise from the time that Serbia obtains EU DIS accreditation until full accession. At the point of accession (2019 estimated) the structural funds in this sector are likely to be over 300m. Experience from Croatia, Romania, Bulgaria 1 and Turkey suggests that without developed project pipelines 10s of millions of grants are likely to be delayed and a significant proportion lost altogether. Feasibility: To be effective a pipeline needs to have a continuous feed of proposals in one end and funding available at the other end. Considering the timescales involved in environmental infrastructure projects it needs to plan to be useful for 5, 10 or even 20 years. That is the main difference between a pipeline and a list. The challenges are therefore both institutional and technical. Institutionally, the DPM has been clearly identified as the responsible Serbian government body for programming and technical implementation of EU IPA funds in this sector. Their responsibility to coordinate programming for major projects will then increase again once the accession negotiation process starts. In such a developing 1 Source: Interviews with National Environmental Approximation Strategy (EAS) team and Draft of their strategy, 20 th March 2011. Page 2 of 52

institutional picture the real value of having a structured prioritisation system linked to environmental best practice and to nationally approved strategy is clear. Technically, a solid basis for a pipeline exists in the form of the SLAP database managed by the Standing Conference of Towns and Municipalities (SCTM). It consists of a database accessible via the Web with trained users in each municipality. In its present form it does not meet the needs of the DPM but our team have had excellent cooperation from the SCTM and all the indications are that developing SLAP in line with this proposal s objectives is viable. This proposal recommends an environmental infrastructure support programme composed of capacity building, facilitation and direct investment in environmental infrastructure. The focus of the capacity building will be on the Department of Project Management; the facilitation, infrastructure investment will be directed to support their activities. The final recipients will be the municipalities as owners of the infrastructure. 2. Background There is an urgent need for waste management infrastructure projects in Serbia as highlighted in the National Programme for Environmental Protection (NPEP): ''The environmental infrastructure in Serbia is substantially underdeveloped and it leads to excessive pollution of air, water and soil. The major gaps exist in municipal and hazardous waste disposal and treatment, municipal and industrial wastewater treatment, and air pollution abatement technologies in the industry and energy sectors''. (NPEP, Chapter 8:Improvement of environmental infrastructure). Key infrastructure improvements necessary to address the NPEP policy objectives in the short-term 2010 2014 are: - To extend sewerage systems to cover 65% of population by 2019; - To provide waste water treatment in agglomerations with organized sewerage system that have significant impact on the receiving waters especially on sensitive areas 2 ; 2 Priority is given to agglomerations with more than 100,000 inhabitants, except for agglomerations that discharge wastewaters directly into large watercourses (the Danube, the Sava), where WWTP will be finished after 2016 and cities in sensitive zones (proximity to water supply sources). Page 3 of 52

- To upgrade or renew operation of the existing municipal waste water treatment plants; - To extend municipal waste collection to cover 75% of population by 2014; - To establish national capacity for treatment of hazardous waste; - To establish regional centres for waste management according to technical and operational requirements of the Landfill Directive 99/31/EC and relevant national legislation; - To increase recovery and recycling of packaging waste (glass, paper, cardboard, metal, plastic) to 25% of their volume. Specifically, for the waste sector, it states: The low level of waste management is one of the biggest challenges in the field of environmental protection in the Republic of Serbia, and these challenges are result of existing society s attitude toward waste. (NPEP, Chapter 5. Waste) The three most highly ranked objectives are: Developed regional and local waste management plans Increased number of people covered by the system of waste collection to 75% Construction of regional waste management centres in each region based on technical and operational requirements of the Landfill Directive 99/31/EC and the corresponding domestic legislation Source: http://www.ekoplan.gov.rs/srl/download-875/uploadcentar/dokumenti/razno/npzzs.pdf The response from the Serbian Government and International Community has been a combination of new legislation, national and sector specific strategy Waste management strategy (2010-2019), project funding and technical support. Significant funds have been made available for environmental infrastructure projects and related municipal development projects from both national and international sources. The problem is that there is a lack of technical capability and capacity to absorb these funds. For example the Serbian Environmental Protection Fund (SEPF), funded by local taxes, says in its most recently available report (2009) that out of 26m available it was unable to spend a significant amount on MESP priorities. It observes that, among other influences: Page 4 of 52

These issues are a result of the lack of capacity of the local authorities to prepare and implement projects in the field of environmental protection. Source: www.sepf.gov.rs/dokumenti/aktivnosti/godisnjiizvestaj/izvestaj2009.zip Collating the information about status of extensive documentation required for largescale infrastructure projects while opening communications with potential donors appears to be beyond the capacity of the existing local or national administrations. There is also an increasing need to prepare for the EU accession process that will require further legislation and the ability to absorb effectively further funding (through IPA III component) in line with Operational programme Economic Development (OPED) which covers environmental protection field through priority axes Environment. The aim of this priority axis is to improve the state of the environment in Serbia with direct investment in waste management (including remediation of ''hot spots''), waste water treatment and improving air quality. DPM within MEMSP is a part of Operating Structure (OS) that is established at the national level to manage IPA Component III under DIS (Decentralised Implementation System) after accreditations. As a Body Responsible for the measure - Waste management, DPM (MEMSP) has an urgent requirement to prepare, implement and monitor infrastructure project in accordance with DG Regio requirements in order to enable absorption of further funds from IPA 3rd component (see Annex F).. A further description and analysis of the role of the DPM can be found in the Institutional and Stakeholder Analysis, in Section 4, below. 3. Strategic and Legal Framework The national framework for policy on environment consists of the following main strategy documents: The objective of the National Sustainable Development Strategy of the Republic of Serbia is to establish a balance between the three key factors of sustainable development: sustainable economic growth, economic and technological progress and sustainable social development, based on social balance, environmental protection accompanied with reasonable use of natural resources, embracing them in one whole supported by an adequate institutional framework and covering both the short-term (2009-2011) and longer term (2009-2017) objectives. The National Programme for Environmental Protection (2010-2019) lays down a set of objectives for Government policy between 2010-2019 at three levels: short-term (2010-2014); continuous (over the whole period of the National Programme); and mediumterm (applying to the 2015-2019 period only). The NPEP covers all aspects of Page 5 of 52

environmental policy and planning, financing and economic instruments, institutional capacity-building, education, legislation, monitoring and enforcement, and policy in the areas of water quality, waste management, chemicals and risk management, air quality & climate change, protection of nature, biodiversity and forests, fisheries, soil protection, noise, radiation, industry, energy, agriculture, forestry and hunting. Within the NPEP one of the highest priority sub-sectors is the management of waste representing 25% of total expenditure. According to the same source, NPEP, water management (waste water treatment and water supply) sub sector representing 21% of total expenditure. The Waste Management Strategy (2010-2019) is the basic document that provides conditions for rational and sustainable waste management at level of Republic of Serbia, and establishes fundamental principles. The strategy proposes to establish 12 regional waste management centres in Serbia by the end of 2013 and defines 26 waste management regions. Strategy also proposes to remediate existing dumps, which represent the greatest risk to the environment and environmental "hot spots" of historical hazardous waste pollution and to establish a hazardous waste management system. (Source: www.srbija.gov.rs/extfile/sr/130352/strategija_upravljanja_otpadom0246_lat.zip ) The National Programme for Integration with the European Union (NPI) from 2008 foresees accelerating harmonization of laws and standards with the EU acquis; implementation of the adopted laws, in particular in the area of environmental impact; commencement of the Kyoto Protocol implementation; strengthening administrative capacities of bodies in charge of planning, licensing, controlling, monitoring and project management; strengthening local level capacities and ensure operational coordination between local and central levels. Also the continuation of the further development of waste management plans and beginning the construction of hazardous waste recycling and safe disposal facilities has been foreseen in the short-term. Other relevant strategic documents include: National Strategy for the inclusion of Serbia in the Clean Development Mechanism under the Kyoto Protocol; First National Communication; Strategy on Biodiversity; Biomass Action Plan for the period 2010-2012; Serbian Spatial Plan until 2021; the Action Plan for National Sustainable Development Strategy; the National Cleaner Production Strategy; the Strategy for Sustainable Use of Natural Resources and Goods (currently under preparation)and Environmental Approximation Strategy(currently draft, to be adopted by the end of 2011). In summary: environmental protection and, particularly, waste, wastewater management and remediation have been made a high priority by the Serbian Government. It is Page 6 of 52

essential both for the Serbian environment and also the nation s wish to progress towards European Union accession. 4. Inception Phase Activities Between January and June 2011 the project team undertook: research of a project pipeline, development of a prioritisation manual and a series of trainings for the DPM. The progress report was presented at the Project Steering Committee meeting on 19 th May 2011 in IMG, Belgrade. The methodology used for the programme design was to collate available best practice examples of project pipelines, conduct semi-structured one-on-one interviews with as many of the stakeholders as possible, develop a solution, workshop the solution with representatives of the stakeholders and then refine the design. This proposal is one of the outputs of the Inception Phase as is the project prioritisation manual and training programme presented at the Project Steering Committee. Copies of the progress report and manual can be forwarded upon request. 4.1. Organisational and Institutional Analysis To analyse the organisational situation, as it relates to DPM, it is necessary to look at the dominant factor: EU accession requirements. The overall strategy of the Serbian Government in the Environmental Sector is meet EU approximation standards in order to progress with EU accession. The accession process requires the government to obtain EU Decentralised Implementation System (DIS) accreditation in order to be able to use EU funds. The DIS specifies a particular operating structure with roles allocated to particular departments. The MEMSP has overall responsibility for Priority Axis 2, Environment, and the nominated department to lead on delivering this part of the Operational Programme is the DPM 3.The DIS specifies that the department s role, among other things includes: Ensuring projects are prepared for the measure in accordance with the Operations Identification Sheet (OIS) or Major Project Application (MPA) using inputs from the proposed End Recipient as appropriate... 3 EU DIS Operating Structure, as related to the Serbian Government, is outlined in the OP for Economic Development 2012-2013. Page 7 of 52

Following up any requirements from the EC for revisions in OIS and MPA The responsibilities of the DPM, as described in the Systematization Act Number 110-2052/2010 and signed by Government on 18/03/2010, also include identification, preparation, management and reporting on environmental project proposals for funding by the other donors in this field as well. From an institutional point of view this represents progress in the process of decentralisation of responsibility for EU funds. The Central Financing and Contracting Unit (CFCU) takes over from the role of the EC Delegation in terms of implementation as the contracting authority responsible for the tendering and procurement procedure of IPA funds. DPM is responsible to the CFCU for the technical implementation of the projects as it relates to the IPA funds, mainly managing the format, standards and specialist knowledge required in order to meet the donors requirements. The technical implementation is one of the roles that consultancy of EU funded projects, like MISP (Municipal Infrastructure Support Programme) have been fulfilling and is now being decentralised to the national institutions. The Serbian Government will have more responsibility for planning and prioritising projects, hence the need for this Sida programme. The DPM must be able to act as a link between the CFCU and the local administrations/public utilities which will be the final owners of the facilities. The CFCU Page 8 of 52

needs the DPM to provide the environmental sector expertise to prepare the technical documentation and the local owners need the DPM to access the IPA funds (as well as other national level funding, like potential EIB loans). More detail on the role of the DPM and the EU DIS Process can be found at Annex F to this document. 4.2 Stakeholder Analysis The stakeholders can be broadly divided into municipalities (including PUCs) and regional agencies, associations of municipalities (SCTM),, ministries (predominantly MEMSP and Water Directorate) and other government bodies (SEIO, EP Fund), international donors and international funding institutions and private sector operators. The municipalities are legally responsible for providing the public services to the citizens in the municipal solid waste and wastewater sectors. This is being mostly done by Public Utility Companies (PUCs) except, in 4 regional waste centres, outsourced to private operators. One of the big development issues to be resolved is the reform of PUCs but is unlikely to be addressed, particularly in the water sector, in the near future. The municipalities vary considerably in their capacity and capability to develop project proposals as well as having the political will to see the process through. A good example of municipal project management is the Vrbas Veliki Backi Canal project. The Vrbas project team participated in the EISP workshop on 5 th May 2011 and their advice to other municipalities, a good model for any project, included: The project requires a strong political mandate from all political parties; A project team needs to be created and funded early in the process; Be prepared for a long project; Establish a good relationship with national institutions as they are necessary for technical expertise. As the main stakeholders in environmental infrastructure the municipalities have a range of needs from central government. They include: technical expertise, advice on legislation, information about available funds, guidance on tendering procedures, permits and approvals and, under some forms of financing, direct project management. According to the SCTM (source: SLAP working group, 6 th May 2011), one of the biggest obstacles preventing municipalities from developing project proposals is a lack of confidence that they will ever get funding. Page 9 of 52

What will DPM and the pipeline do to help them? Communications is the major added value. Once the DPM has the information on each municipality s proposal it will be in a position to provide the necessary support. The MEMSP (as a whole), Serbian Environmental Protection Fund (SEPF) and the Ministry of Agriculture, Trade, Forestry and Water Resources (Water Directorate)have a need for more information about the state of environmental infrastructure projects across Serbia. This information is needed to feed into policy work, high level inter-governmental meetings and planning. There is no shared IT memory capability within the MEMSP, let alone across government and information flows slowly and intermittently. The Water Directorate is responsible for water management in Serbia. MEMSP is responsible for water protection and waste water emissions. Since 2009, SEPF initiated significant funding in wastewater treatment projects from polluter-pays taxes. At the same time, under the EU DIS structure, the MEMSP will have overall responsibility for the Priority Axis Environment. Therefore the prioritisation criteria prepared during the Inception Period has included wastewater and contacts have been made with the water directorate and EP Fund, but further cooperation will be needed in the future. What will DPM and the pipeline do to help them? Just by collating and structuring information, holding it in an accessible manner on the SLAP system and on a shared drive, the DPM will be able to contribute to environmental implementation much more effectively both within the MEMSP and other government institutions. The important activity will be ensuring the DPM participates in forums where it can contribute and that will require MEMSP leadership support. International donors and international funding institutions (IFIs) have a range of their own objectives and priorities but the requirement for mature, high quality project proposals was almost universally common to them during the EISP research. Those institutions which have the capacity in Serbia to go into the field to identify projects, like EC, EBRD, KFW, were generally in a better position than those who do not, like EIB. The result, as previously discussed, is often that the project identification reflects the internal requirements of the institutions more than the Serbian environmental priorities. In particular, the EC, through different EU funded projects has supported the development of the SLAP Information System, a database of public municipal investment projects. This SLAP is managed by Standing Conference of Towns and Municipalities (SCTM) and will assist to identification, assessment and selection of projects. Currently the SCTM, with the SLAP Working Group composed of line ministries and other relevant government institutions, are working to analyse the Page 10 of 52

requirements of national users and to upgrade the SLAP system to better reflect the needs of all relevant stakeholders. The EISP inception phase work means the MEMSP is leading that upgrade. What will DPM and the pipeline do to help them? It will provide a set of Serbian national priorities to focus resources on. It is likely that there will be some conflict in the future between Serbian national priorities and the internal priorities of international programmes. This is, of course, normal in international development as national governments take more responsibility for strategy. To address this potential conflict this programme will develop the capacity and capability of the DPM to convince donors and financial institutions that the Serbian prioritisation system is credible. Private sector operators are a growing part of the solid waste sector. They presently manage 4 of the regional waste centres and are likely to participate in more although the necessary laws on Public Private Partnerships (PPP) are still in development. There are some international financing institutions, like IFC and USAID, which strongly favour the PPP route. The focus of DPM s work is the EU IPA funds which exclude direct support to private sector organisations. At the same time, IPA grants will leverage further funding, some of which is likely to be suitable for PPP. What will DPM and the pipeline do to help them? Directly: not much. Indirectly: the DPM will be working with different types of financing institutions and will need to build a pool of knowledge about the issues surrounding PPP. 4.3 Related programmes and potential synergies There are a number of programmes and institutions working in the environmental and municipal infrastructure sector in Serbia. At first sight it looks crowded but with further investigation taking into account the scale of the challenge the field is actually quite barren: In the solid waste sector, based on the Waste Management Strategy, there are 26 solid waste regions identified. Of these, 4 have been resolved through the private sector, 3 have construction or start-up on-going but the rest have yet to find full funding. There are potentially over 120 municipalities that require wastewater treatment but even a major organisation like KFW is presently working in only 6 municipalities. In remediation there are potentially thousands of projects required (source: Austrian Hazardous Waste Twinning Project), 22 hotspots identified but still there is not a clear procedure how to start working on remediation projects. Page 11 of 52

The main programmes working alongside the EISP will be the SCTM (through EC Exchange Programme), SLAP team, Municipal Infrastructure Support Programme (MISP),) and the EC s Project Preparation Facilities (PPF II, III, IV). During the Inception Phase the DPM/IMG team met with them frequently and this has already started showing tangible benefits for example, facilitation of on-site meetings (all PPFteams and relevant local stakeholders) and provision of the definitions for SCTM database update. Many of the existing projects in this sector are focused on technical assistance or capacity building with municipalities (MISP, Exchange, Progress, MEGA USAid and KfW). There are real synergies to be exploited here working with policy and strategy projects on one side and municipal support projects on the other. The Standing Conference of Towns and Municipalities (SCTM) manage the SLAP database. Their cooperation is essential if SLAP is to be used as the technical basis of the pipeline. Their full support has been secured as well as working with them on the technical upgrade that might reduce the requirement for Sida funds. The Municipal Infrastructure Support Project (MISP) originally built the SLAP database and continues to provide direct support to SCTM. MISP is looking to update SLAP s capabilities to function as a project selection tool across all relevant ministries (ministries responsible for the sectors covered by SLAP). With the ability to focus on a particular ministry and sub-sector, as well as the criteria being developed by the end user themselves (DPM) the Sida EISP will develop the model for sector environment. It can be also used for the other sectors and ministries as example and to share experience and good practice. Project Preparation Facilities (PPF I, II, III and IV) are projects funded by EU IPA I component to among other tasks, they aim to develop project documentation. The EISP team have tested the benefits of close cooperation with PPF III on the Subotica field trip and field trip to Kraljevo with PPF IV. The result, according to the PPF team leader, is that since the trip progress on the project proposal has significantly improved. This is a good example of the facilitation role that the EISP can play in the future. Twinning Project Hazardous Waste Management, with Austrian partner, funded by IPA 2008, aims at strengthening institutional capacities. One of the project components is focused on the hot-spots remediation, and Remediation is one of the sub-sector which the DPM has a responsibility to address and is covered under this proposal. EISP will closely cooperate and coordinate with Twinning project team activities, and also has included this team in the municipal workshop on 5 th May and will need to draw on their expertise over the next 24 months. Support in the process of accreditation of EU Decentralised Implementation System (DIS) is provided through technical assistance project financed by IPA Page 12 of 52

2007/2008 and requires that the government institutions specified in the operating structures participate in trainings and undertake certain roles. While this is likely to generate a significant workload for the DPM team the activities undertaken by the EISP are able to directly contribute to the accreditation of the department. For example, the EISP study trip to meet the Croatian Ministry of the Environment will add credit to the DPM s record as it represents regional cooperation. In conclusion, although there are a lot of stakeholders in this sector it is because the sector is so large. The risks of overlap are small because the DPM is the body responsible for EU IPA Priority Axis 2, Environment. Extensive cooperation is required with municipalities, SCTM, consultancies, other government ministries, donors and IFIs. To start with the DPM needs, on behalf of the Serbian Government and in support of the other stakeholders, a more structured approach to the overall management of the environmental infrastructure project pipeline. 5. Risk Management The most significant risk to the success of this programme is major change to the political environment in Serbia. The national elections are potentially going to take place in early 2012 and recent reshuffling within the government has caused disruption already. On the other hand there appears to be no suggestion that a new government from any of the main political strands is going to make major changes from the present environmental policy aimed at EU approximation. The core of this proposal is to build institutional capacity of the body specifically designated to implement Serbian Government environmental policy. The DPM is specifically identified under the EU DIS operating structure, so even a change in institutional structure is likely to leave the DPM s responsibilities intact In terms of risk mitigation this proposal is specifically designed as a programme rather than a project. Within the programme structure the activities will be based on 6-month work plans and individual projects that will have shorter-term, narrowly defined objectives. In this way not only can the programme focus on the goal and adapt accordingly if there is a change in environment but also ensure that Sida investments in institutional support and environmental infrastructure are relevant and tightly controlled. The proposal timeline, 24 months, is also likely to straddle a likely election giving the programme time to adapt to any changes from a new government. This risk would be categorised as high impact, low probability. Institutional risk: A major reorganisation within government, without a change of policy which, that removes or significantly changes the role of the DPM. This is unlikely to happen in the foreseeable future because the EU DIS structures have been codified in Page 13 of 52

the Operational Programme for Economic Development (OPED). Although the OPED is still in draft format, the operating structures are unlikely to change. There is little that this programme can do to mitigate for the risk. This risk would be categorised as high impact, low probability. The main risk of all capacity building programmes is that staff leaves during or after the programme. Where a team is relatively small and specialised like the DPM this would potential have a significant impact. On the other hand, in the DPM s case there has effectively been no turnover of staff, except one promotion, in the last 2 years. This record is not a guarantee of future retention but suggests that the team is fundamentally stable and well led. In order to mitigate this programme will be printing tools like the project prioritisation manual as well as establishing a digital institutional memory. Training records and workload planning should also be included and they will be required under DIS as well. Unexpectedly high staff turnover can be categorised as medium probability, medium impact. Financial risk is mainly likely in terms of currency fluctuation. The Euro has been unstable recently and the RSD has been strengthening. This programme cannot operate any sort of currency speculation or hedging policy but, in mitigation, will do contracting wherever possible in Euros and maintain a contingency. This risk is high probability and medium impact. Operational risk, in particular to the direct infrastructure support element, is possible in case that it proves difficult to identify projects where the programme can invest this component s funds in the time available. It is well known that identifying good projects in Serbia is difficult. In mitigation, when identifying projects there will be significant consideration given to limiting the project objectives to the time available. The programme has also anticipated that the infrastructure element will require additional time to be completed. Where infrastructure projects are being sent to Sida for noobjection decision, the risk of overrunning the time limit will be explained in the proposal. This is categorised as a low impact, medium probability risk. 6. Project Description This programme consists of three components Capacity Building, Facilitation and Direct Environmental Infrastructure Investment. The purpose of the capacity building component is to develop the DPM into a team capable of overseeing the programming and implementing of a minimum of 40m a year and then be ready for the absorption of EU structural funds. Much of this work will be related to structuring the department s work with the numerous consultancies, local administrations and international funding institutions operating in this sector. It will involve directing trainings for the department and provide inputs for municipal trainings where necessary. Page 14 of 52

A particular feature of this capacity building will be the use of on-the-job training. Rather than continually taking department members away from their work for trainings this proposal suggests introducing expertise to work with (note: not in place of) DPM staff to address their management and technical challenges. For example, a waste management expert, working alongside DPM staff would help to structure the department s approach to processing landfill documentation. One of the key issues for Environmental Infrastructure in Serbia is the development of the role of the DPM in relation to their mandate, the requirements of the DIS process and the municipal responsibilities. The pipeline is a strategic tool and this programme would benefit from integrating senior level expertise from a country that has already been through the process of environmental investment planning. This would give strategic direction to the project pipeline development in the context of environmental approximation. It is proposed to hire a short-term expert who will provide these inputs over the period of the project as well as acting in a facilitation role to link the DPM s work with the EU negotiations preparation and helping the ministry get first-hand experience from other countries. A draft ToR for this expertise is at Annex E Facilitation is a key capability when dealing with institutional obstacles. It is often something that an external advisor can make possible using their position to bring together key individuals, introducing new players or providing resources. The extent of the success of facilitation during the Inception Phase demonstrated how effective the DPM could be when provided with Sida s assistance to meet with project proposal participants on site (e.g.: Halovo visit 9/2/11) or reach out to potential new partners (e.g.: Croatia visit 1/4/11). The Direct Environment Infrastructure Investment component will focus on providing targeted investment, funded by Sida, to unblock project proposal bottlenecks and fill the project pipeline. It will account for the majority of the Sida Environmental Infrastructure Support Programme (EISP) funding. The blockages appear to be primarily institutional, technical or financial in nature but the first priority for funding will be those instances that enable integrated, comprehensive solutions. For example, a good feasibility study will cover all aspects to ensure the project has not only an effective technical design but the institutional and financial thinking to make it possible. Another useful example might be contracting an expert to work on defining what the DPM will promote as a good feasibility study nationwide. Where the programme team propose investments that are less obviously horizontally integrated (e.g.: a specific piece of technical design) then the project proposal must contain sufficient examination of the whole project and justification as to why the investment will both make a significant difference and not be at risk of becoming isolated and ineffective. Page 15 of 52

The first 6 months of this programme will concentrate on building the pipeline structure to enable the existing proposals are analysed and unblocking solutions to be devised. Then, the types of actions anticipated under this component would be as follows: Institutional: The most common blockage identified so far is that the individual municipalities have difficulty either forming or managing inter municipal agreements that are a basic requirement of major environmental infrastructure. Serbia does not have nationally established regional structures but both the National Waste Management Strategy and, in all likelihood, a new wastewater strategy requires cooperation between two or more municipalities. While the DPM cannot get involved on a political level it will have the experience of seeing how regional agreements have functioned elsewhere (within Serbia and potentially on a study trip). Under this programme, the DPM could propose a project that brings in legal and institutional expertise to support the municipalities in creating a regional body; it could also include direct support like helping to set up a PIU (NB: As long as there was a sustainability plan from the municipalities.). For example, using the contacts gained during the Inception Phase it would already be possible to identify some people from the Vrbas or Subotica project teams who could share their experience. Technical: The municipal/regional project owners are responsible for providing all the basic project documentation until the project is identified as a national priority and direct support is provided by a Project Preparation Facility (PPF). Producing the basic project documentation for major projects is a complicated and expensive process. The DPM will use the pipeline information and field visits to identify where technical assistance will move potential priority project along the process. In these cases Sida support, in combination with SEPF or other donors, could be applied. Specific examples of technical documents might include spatial plans, detailed regulation plans, feasibility studies, EIAs, designs or tender dossiers.(see chapter 9 for budget estimation) Financial: Sometimes, as with any major project, there is a shortfall of direct funding often due to a revision in the plans following a technical review. This programme proposes to use Sida support in such cases where a relatively small investment can leverage further funds or enable a much larger project. (see chapter 9 for budget estimation) The unblocking projects will be identified and developed by the DPM Working Groups (Solid waste, wastewater and remediation) in partnership with the local PIUs (where they exist) or directly with the municipalities / regional agencies where they do not. The EISP PIU will be responsible for managing these requests and submitting them to Sida for a no objection approval. If no objection is received the projects will be implemented by the working group and the local authorities. IMG will hold the funds and administer Page 16 of 52

the management and accounting in line with the existing Sida tender procedures, Serbian procurement laws and IMG control measures. A representation of the responsibilities is shown below: 7. Objectives and Activities The programme s overall objective is that the DPM has the capability and tools to oversee the programming and implementation of at least 40m of environment infrastructure projects each year of accreditation and be ready for EU structural funds on accession. Objective 1: The DPM has developed the project pipeline and prioritisation process of sufficient maturity and quality to start to absorb available funds from January 2012; Activities: Identification of infrastructure project proposals and analysis of existing technical and planning documents. This will involve a compilation of all existing documentation, site visits, developing contact lists of all relevant individuals and institutions. The upgraded SLAP database will be the basic tool to collate documentation and track progress of the proposals; Page 17 of 52

Develop new criteria for prioritization of remediation project proposals, clarify procedures and technical documentation needed specifically for those projects (EU and national); Start filling the pipeline (for sub-sectors waste, waste water and remediation)based on the previous activities under Objective 1; Identify the gaps where proposals have not been submitted, based on strategies and EU negotiations, and support the relevant authorities to initiate the proposal process; Prioritise these proposals based on the criteria and methodology developed during the Inception Phase, identify blockages, plan solutions and focus resources on the priorities; Prepare plans to support prioritised/selected proposal through the programming, funding and implementation process agreed for financing by MESP and SIDA with the assistance of IMG. Objective 2: The further development of the pipeline in order to improve direct investments in environmental infrastructure in Serbia, to ensure a continues stream of proposals by May 2013; Engage technical expertise to prepare technical documentation (both for major and minor projects), including tender documentation for selected priority environmental infrastructure Selection of mature priority projects and facilitation of their construction (in accordance with appropriate budget available from EISP); Objective 3: The DPM has the capability to be a full partner of the international and national funding institutions in the planning and preparation of project proposals. Compilation of the pipeline information into a format applicable to international funding institutions; Undertake further research so that DPM is in a position to ensure that Serbia s projects meet EU approximation standards and are in line with international environmental best practice; Page 18 of 52

Build working relationships with the other institutions involved in each proposal in anticipation of a minimum of a 3-year proposal cycle. This activity will involve facilitating meetings, field trips, workshops and presentations; Communicate the benefits of the prioritisation system and work with the leadership the institutions and bodies responsible for other bi-lateral, multi-lateral and national (Eko Fund) funding to integrate this structured approach as the basis for environmental infrastructure selection. Objective 4: The staff of the DPM is able to effectively plan, direct and control the use of consultancies and other technical assistance in the project management process: Project management trainings specific to the DPM role are likely to include but not limited to: Quality management, monitoring and evaluation systems, risk management, the management of experts, and multi-annual investment planning(specific topics will be identified in detail after the DIS trainings are provided, by the end of 2011); Environmental management trainings environmental best practice, trainings specific to technical documentation preparation, environmental infrastructure economics (note: this goes beyond CBA). Specific topics will be identified in detail after the DIS trainings are provided, by the end of 2011; Provide expertise for mentoring of DPM staff related to their daily work mostly for quality assessment and revision of submitted technical documentation for infrastructure projects; Development of quality standards / templates for key project documentation where problems have been identified. E.g.: Feasibility studies and standardising of different types of ToRs; Training of key individuals in negotiation and facilitation to unblock proposals including modules like conflict resolution and presentation skills. Objective 5: Technical upgrade of DPM capability and SLAP system by November 2011; Work with SCTM to make the changes to the SLAP questionnaire and the database structure in line with the approved project prioritisation manual prepared during the Inception Phase; Page 19 of 52

Update DPM IT infrastructure in line with pipeline requirements and project management role. This will include items like a shared memory drive to develop institutional memory, software and hardware to manage projects; Provide technical means for monitoring role and on-site visits to project from the pipeline (transport for field visits); Extensively trial the technical upgrade, refine and then introduce into DPM project selection procedures. A programme Logistical Framework (Log Frame), describing the programme indicators, sources of verification and assumptions can be found at Annex A. To support progress monitoring it is proposed to develop a baseline, within 3 months of the proposal approval, to provide a basis for the indicators. A draft of the baseline categories and values can be found at Annex B. 8. Timeline This proposal describes how a programme structure, using the inputs outlined above, would achieve the DPM s capacity building objectives over a period of 24 months. The time period is based on the time required for an effective programme of institutional change. The time period encompasses the introduction of the IPA accreditation period and the likely political disruption in the next 18 months. The direct investment in environmental infrastructure component is likely to take more than the 24 months to complete as it will January 2012 before the DPM is in a position to start identifying specific projects. Therefore it is proposed that this component has additional time-e.g. another 6 months, until end December 2013, effectively another building season, to be completed. The risk of overrunning the time limit is explored in the Risk section below. For more detail on the timeline and activities please see the Gantt chart at Annex D. The original document can be forwarded but it is, by necessity, in MS Project format. 9. Budget The proposed programme budge is 2,556,113 in line with the original Inception Phase proposal. The full budget is attached to this proposal. The indicative breakdown of the spending will be as follows: Page 20 of 52

Capacity building Sida contribution will be used to enable the DPM to develop in both capacity and capability. The institutional support will be mainly soft inputs like technical assistance, mentoring, organisation of specific targeted workshops/trainings, study trips but also include limited hard inputs where there are obstacles to the programme like office IT and transport (see Annex C for detail). Management of the Environmental Infrastructure Projects is part of the capacity building programme. In terms of the timeline this component will continue consistently throughout the duration of the project. Resources required: Technical experts (on-the-job training), short-term subject matter experts (e.g.: solid waste, waste water, remediation), trainers, one vehicle donated to DPM, IT expertise and equipment. Estimates include: 1 car & IT for DPM 45,000. Study trips 4 at 10,000 each, and participation in international conferences: 4 at 3000 each. Experts, including trainers, 98,000 total, training logistics 4500. Municipal training workshops: 4 at 5000 each.. Total: 306,000. Direct Environmental Infrastructure Investment - This is the direct support to Serbian environmental infrastructure both to unlock major projects and also to develop the DPM s capacity. The Sida contribution will consist of technical assistance and construction works. The majority of the spending for this element will be between January 2012 and December 2012. In order to estimate the costs we have used technical documentation for a regional sanitary landfill: Prefeasibility studies including preliminary design cost between 50,000 and 300,000, feasibility studies and detailed designs up to 500,000 and tender documentation between 15,000 and 50,000 (source: Project Preparation Facility, EU). A minor physical infrastructure project would be a transfer station for a mid-sized municipality (using Valjevo and Obrenovac as examples), to include all site elements but not purchase of the land would cost approximately 600,000. It is important to note that this programme s main objective is to enable the DPM to develop and manage a substantial pipeline of project proposals to an overall value of hundreds of millions of euros. The projects within this programme need to be identified to specifically make greater investment from other sources possible and are not trying to directly address the Serbian national funding gap. Resources required: Project managers from IMG and DPM, technical assistance in the form of short-term subject matter experts (e.g.: solid waste, water waste, remediation), construction and administration. Total: 1,380,000. Page 21 of 52

Facilitation This line will enable workshops, meetings and consultations to take place which are beyond the reach of the DPM budget and resources. Most of the input will be in the form of logistics support, contacts and institutional expertise. The spending will be consistent over the programme period. Resources required: Senior level engagement in both IMG and MEMSP, transport, event and visibility costs. Estimates include: field visits and meetings 50,000, 5 planned conferences 50,000. Total: 100,000. Cross-programme costs, including Programme Management and Administration Institutional expert/programme manager, programme coordinator and administrative support are resources required across all programme components. Also, managing the programme will be distinct from managing the individual projects. The former has a focus on the overall objective of institutional support and quality control over financial spending while each of the latter projects will have shorter-term objectives. Therefore this line covers the IMG administration costs. The spending will be consistent over the programme period with minor peaks when auditing costs are incurred. Resources required: Programme manager, coordinator, administrator, 419,450. Also it includes running costs, bank costs, office space, transport and auditing. Total: 651,250. For further details see detailed budget breakdown attached to this document. 10. Serbian Government Contribution The Serbian Environmental Protection Fund (SEPF) has confirmed its willingness to contribute co-financing to projects identified by the DPM in the Project Pipeline and funded by Sida In addition, as in the Inception Period MEMSP will contribute to the programme by inkind contribution, work of the DPM staff, providing meeting and conference space, maintenance and fuel for transport. The Assistant Minister for European Integration, International Cooperation and Project Management will be writing letter to support this proposal and describe the MEMSP contribution in greater detail. Page 22 of 52

11. Project Management Documentation: The project will be governed by the following four main documents: The approved Programme Proposal; Protocol on Implementation signed between Sida and the MEMSP, regulating responsibilities and conditions will clearly state the objectives of the project. Protocol on Implementation signed between Sida and IMG, regulating all financial and reporting procedures in addition to IMG s role and responsibilities. Protocol on Implementation signed between MEMSP and IMG, regulating roles and responsibilities and defines the project implementation methodology and plan. Responsibilities IMG shall be responsible to the Donor for complete financial management of the project, transparent procurement procedures, and control of consultants and contractors activities, reporting and coordination of tasks. IMG shall appoint one person who shall be responsible for project coordination and for all the contractual agreements and obligations with the advisors and consultants. Project Governance A Programme Implementation Unit (PIU), consisting of the Head of DPM, one of its staff members, IMG s Programme Manager and the Programme Coordinator will implement the project. The Programme Implementation Unit (PIU) will have regularly meetings (biweekly), where the results are analysed and the activities of partners in following period will be coordinated. The PIU shall also organize annual meetings with all other project stakeholders to enable performance monitoring and annual progress evaluation. The PIU shall approve the ToRs, tender dossiers and other documents that will be drafted by DPM with assistance of the programme and IMG. A Programme Steering Committee (PSC) will be responsible for the overall quality of programme implementation and provide strategic direction. The Committee will ensure Page 23 of 52

that the project outputs and goals are met in a timely fashion, offer guidance and advise on programme activities and approved annual progress report. The Committee will meet on an ad hoc basis and, at a minimum, every six months. Members of the PSC will be the representatives of IMG and MEMSP with Sida holding Observer status. The MEMSP will provide the committee chairman and IMG the committee Secretary A programme advisory committee will be formed of representatives of the wider stakeholder groups and convened annually. The role of the advisory committee will be to advise on how the needs of the stakeholders can be addressed through this programme. Likely stakeholder groups include: donors (national and international), IFIs, local self-governments, government ministries and civil society organisations. The EISP will convene this committee either together or in smaller groups. Reporting Based on the regular PIU meetings, IMG will produce narrative reports outlining progress against a set annual programme work plan. The Head of DPM will be responsible for approving the narrative reports. The first review of the programme will take place six months after the activities start. The following two reports will be the responsibility of IMG, and submitted to Sida: 1. Annual Narrative and Financial Report including a Work Plan and the Financial Commitment Report for the Operational Costs no later than July 2012. The Financial Commitment Report for the Operational Costs shall include the financial statement for the operational costs and shall focus on commitments. 2. Final Financial and Narrative Report shall be submitted to Sida no later than six months after the completion of the project. The Narrative Report shall provide comprehensive information about project implementation, primarily the capacity building activities procured through or implemented by IMG. It will include an assessment of the project. The Final Financial report shall be based on the statement of accounts and will cover revenue and expenditure as compared to budget for the entire operation including all sources of financing. Both Financial Reports shall be audited by a Chartered Accountant in accordance with internationally accepted audit standards. The accountant shall be external and independent of the IMG. IMG shall report to the Development Programme Section of the Embassy of Sweden in Belgrade. Reporting language is English, reports should be provided electronically, in Microsoft Word. Hard copies will be provided upon request from Sida. Page 24 of 52

12. General Management Structure The following gives an outline of the programme governance structure. In line with the DPM s responsibilities there will be a working group to cover each of their sub-sectors (solid waste, wastewater and remediation) and one for the overall capacity-building activities. 13. Procurement procedures Procurement will follow the Sida procedures as previously agreed between Sida and IMG. The only exception will be where procurement is part of the capacity-building activities and overseen by IMG. In this way, the tendering and contracting of the Page 25 of 52

infrastructure construction phase (Component III) will be performed in accordance with EU regulation (PRAG). Tendering and contracting shall be managed by the Committee consisting of DPM and IMG staff appointed by PIU. IMG will be the contracting authority and shall effect payments directly to the account of the selected contractor, based on the written request of MEMSP and supported with documents required by contract. Supervision of construction works will be performed by the consultant selected by the Committee. IMG and DPM will have site visit on regular basis and will monitor and control the works. Procurement of consultancy services will be based on the Terms of Reference (TOR) approved by PIU. The consultants will be contracted by IMG, and paid according to contractual agreements. For non-individual consultants (consulting agency), IMG will not be responsible for any taxes or fees related to social security or health insurance. IMG will ensure the transparent procurement of any equipment where agreed in the project proposal and specified by the PIU. A Committee, consisting of DPM and IMG will carry out the tender procedure in accordance with SPG. IMG will act as the contracting authority. Equipment, services and works shall be free from all taxes and duties. IMG shall give the donors, and the donor s auditors, access to its accounts, on the spot and/or in the headquarters and, if necessary, to those of its partners or subcontractors so that accounts relating to operation financed by the donor may be audited. Sida shall transfer the funds to IMG s account in line with the Agreement to be signed between IMG and Sida. Tax Issue: Goods, services and works financed from Sida projects and programmes should be exempted from tax and custom fee, based on MoU between the Government of the Kingdom of Sweden and the government of the Republic of Serbia signed 16.11.2001. Once when the agreements and protocol between Sida, IMG and the MEMSP are signed, the Ministry or SEIO should submit all these documents to the Tax office and register the Programme specifying IMG as the Implementer and therefore somebody who issues tax exemption certificate that are verified by the Tax office. The threshold value of the goods, services and works for which the exemption is issued on other Sida project (Gender Equality) is set on 400, and I suggest that we keep this level. Page 26 of 52

14. Cross Cutting Issues 14.1. Equal Opportunities Based on the fundamental principles of promoting equality and combating discrimination, participation in the project will be guaranteed on the basis of equal access regardless of sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation. Equal participation of men and woman during the implementation of the project will be assured. Infrastructure in the environemtnal field will involve a series of specific actions to improve environmental performance and reduce pollution, which will help to improve the well-being of residents in selected project areas. Better environmental protection is broadly gender blind, as men and women both benefit from using the new environmental infrastructure. However, there is evidence that women tend to be disproportionately affected by unemployment and poverty, and hence may gain more benefit from actions designed to generate employment opportunities and improve quality of life. As part of the Inception Phase the support of an equal opportunities expert has been contracted to advise the department and programme team on mainstreaming equal opportunities principles, particularly gender issues, in the planning of the DPM s work. 14.2. Vulnerable Groups Considering this project will deal with environmental issues targeting a general improvement of project management and environmental infrastructure, its outcomes will be beneficial to all citizens especially national minority and underprivileged social groups, having in mind that these groups frequently live in areas where solving environmental problems is one of the top priorities. Informal recycling of materials from waste represents an important survival strategy for many vulnerable groups, particularly the Roma who have a longstanding history with it. Adults and children can be commonly seen rummaging through communal waste bins and dumps, without protection, and so they are exposed to many health hazards. This scavenging is large scale and occurring throughout Serbia, so much so that the formal municipal waste services would note the added burden of waste if activities ceased. These waste collectors are perceived as marginal to mainstream economy and society and in many cases, they are subject to exploitation by middlemen. Page 27 of 52

In particular, the SWIFT projects, SWIFT I ongoing, II and III in the future will deal directly with the social, economic and legislative issues affecting the Roma. With the increasing development of the recycling sector and the involvement of the SWIFT cooperatives this group will be playing a larger part in environmental infrastructure. 14.3. Anticorruption In the Protocol on Implementation the MEMSP and IMG will agree to co-operate on preventing corruption within and through the project and undertake to take rapid legal measures to stop, investigate and charge any party suspected on good grounds of corruption or other wilful misuse of resources. 14.4. Environmental Impact of Project Consideration will be taken as to the impact of the activities involved of this programme and its sub-projects. That will include avoiding unnecessary air travel and office waste. 14.4. Sustainability The results of this programme are focused on the development of institutional capacity and capability within the DPM as well as the creation of a project pipeline. Therefore the potential for the sustainability of the programme s work can be assessed against the stability of the institution, the staff within it and the tools (pipeline) that the Sida investment has enabled: The direct programme partner, the DPM, is an existing ministry department funded from the central government budget. As an institution it is therefore theoretically sustainable. The turnover of the department has been that only one member of staff has left over the last year and that was on promotion suggesting that investment in staff development has a good chance of being sustainable. The project pipeline technical platform is managed by the SCTM with funds from the Exchange Project and MISP. Their funding is secure until at least 2013 with the EC Delegation presently exploring proposals to extend this to 2015. The project prioritisation manual developed during the Inception Phase will be technically integrated into the project pipeline and its basis will be produced in Page 28 of 52

hard and electronic copy. The processes that structure how the pipeline and the manual are used are designed to be sustainable when there is staff turnover. The infrastructure being supplied to the DPM in terms of IT and transport will be supported by policies and maintenance plans. It is important to establish how the DPM will be properly resourced once the IT and vehicle lifecycles comes to an end (Estimated 3-5 years for computers, source: IMG IT planning policy) and the vehicle lifecycle ends (estimated for 6 years for pubic vehicles). Page 29 of 52

Annex A: Programme Log Frame Indicators Sources of verification Important assumptions Overall objective Improvement in the quality of life for Serbian citizens through approximation to EU environmental standards. N/A N/A N/A Overall Programme Objective Department for Project Management DPM has the capability and tools to oversee the programming and implementation of at least 40m of environmental infrastructure projects each year of accreditation and be ready for EU structural funds on accession. Serbia is funding more environmental infrastructure projects each year using national and international funds. Number of project approved for financing by national and international funds Total sum of budgets for approved projects 1. MEMSP reports 2. DPM reports. 3. Comparison against baseline. MEMSP support to DPM Page 30 of 52

increased Specific Objectives. Objective 1: The DPM has developed the project pipeline and prioritisation process of sufficient maturity and quality to start to absorb available funds from January 2012; The number of projects identified in the SLAP system has increased against the baseline from May 2011). Criteria for prioritization of remediation projects developed The number of different municipalities using the SLAP system has increased. Plan to support prioritised/selected projects prepared The projects put forward by DPM for funding use the upgraded SLAP as a basis for their information management. The justification for choosing projects for SLAP report compared to baseline Project reports MEMSP reports Commitment of different municipalities using the SLAP system SCTM has been able to upgrade SLAP in line with MEMSP requirements as requested June 2011. Page 31 of 52

funding uses the prioritisation system as a reference. Objective 2: The further development of the pipeline in order to improve direct investments in environmental infrastructure in Serbia, to ensure a continues stream of proposals by May 2013; Objective 3: The DPM has the capability to be a full partner of the international and national funding institutions in the planning and preparation of project proposals. The increase in the number, maturity and municipal diversity has continued after 2012; Number of identified projects for funding continues to increase; Technical documentation and tenders documents for selected projects prepared Number of projects selected for direct investment in infrastructure by SIDA More funding decisions are made in consultation with the DPM; The number of projects funded which are DPM priorities increased ; SLAP report against baseline; MEMSP report MEMSP progress report; Participation records. SCTM has identified longer term funding for SLAP maintenance and support Municipal commitment - Commitment of relevant stakeholders Objectives of International and national funding institutions in line with MEMSP strategic objectives Page 32 of 52

Number of projects submitted for financing; The participation of DPM in international donor conferences; Objective 4: The staff of the DPM is able to effectively plan, direct and control the use of consultancies and other technical assistance in the project management process: The DPM has a greater level of satisfaction in the use of consultancies based on the levels of cooperation and quality of output. Number of trainings Interviews of DPM staff. Baseline required. Training evaluation lists Project reports This assumes that the DPM will have direct partnership with consultancies involved in environmental infrastructure Continuity of participants in trainings Number of quality standards / templates for key project documentation prepared (FS, deferent types of ToRs) Good level of cooperation Objective 5: Technical upgrade of DPM capability and SLAP system by November 2011; Additional hardware installed and functional quipment for transport handed over to DPM est software installed and 6-month progress report to include field activities; E Monitoring of IT upgrades; T SCTM has been able to upgrade SLAP in line with MEMSP requirements as requested June 2011. Page 33 of 52

operational in SLAP system in line with DPM requests. SLAP progress report. Activities Capacity Building Facilitation Technical Assistance Direct Support to Environmental Infrastructure N/A N/A N/A Page 34 of 52

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Draft V6 Annex B: Baseline (Draft) The following categories and values are indicative of the baseline proposed for this proposal. The project pipeline is naturally well-suited to using a baseline because many of the indicators can be quantified. Baseline categories based upon the components of the pipeline as described in the proposal: Project Information Technical Platform Institution People Project Information: On SLAP: Out of the 26 Solid Waste Management Regional Centres projects, defined according to the Solid Waste Management Strategy, there are 10 projects are on the SLAP system. Of those projects 1 is in construction phase, 4 are at the level of feasibility study and 2 more at the level of general design and pre-feasibility study. 3 of the remaining regional centre projects are at the level of concept paper. In terms of Wastewater, having in mind that there are more than 480 towns and villages in Serbia with >2000 inhabitants for which EU Wastewater Framework Directive foresees waste water treatments plants, there are potentially more than 450 projects necessary of which there are 27 on SLAP. Of those on the system 10 are at the level of feasibility study and 6 more at the level of general design and pre-feasibility study. The 13 remaining waste water treatment projects are at the level of concept paper. There more than 30 smaller wastewater projects that cover construction and reconstruction of sewerage networks that could be also merged to provide integrated projects as best practice would suggest. Out of the 22 hotspots for Remediation referred to in the Waste Management Strategy, there is only one proposal on SLAP, which has not moved beyond the concept note. Other locations: Page 36 of 52

Draft V6 The DPM does not have an overview of the progress on all regional waste centers; The MEMSP does not hold project information for Environmental Infrastructure Projects in Serbia in a single place accessible to those who require it in DPM. Technical Baseline The SLAP system is unable to provide the data for the DPM prioritisation process; The DPM has no technical capability to hold and share institutional memory (shared drive), operate in the field (laptops), back-up power or project management software. The DPM has no access to transport to make field visits. Institutional Baseline Project Prioritisation there is no structured, specific system within Priority Axis 2 to prioritise projects; SLAP has been used by XXXX municipalities to submit proposals; 1 donor or financial institution, from those interviewed January/February 2011, says they use SLAP as a source of project information; The DPM had made 2 field visits up until January 2011 and 4 visits since then; The DPM has been involved in the development of two major project proposals (Halovo and Kalenić Regional Landfills) by January 2011. People (Human Resources) Baseline The DPM staff do not have DIS accreditation at this point; The DPM has not had any project management training specific to environmental infrastructure. Page 37 of 52

Draft V6 The DPM did not have chance to visit and exchange experience on environmental infrastructure projects with any accession country, and during Inception Phase with 2 (Croatia and Turkey) The DPM staff (3 of the DPM staff) visited and exchanged experience on environmental infrastructure projects with 2 EU member state in the period 2007-2011 During interview the DPM staff gave the following responses when asked about their training. The DPM holds no policy on the training requirements for the municipalities involved in major infrastructure projects. Page 38 of 52

Draft V6 Annex C: Description of IT and Transport Support Knowing that many development organisations have had concerns about providing vehicles and IT equipment in the past, the support to the DPM for these items have been laid out like a mini-project to try to ensure that the EISP approaches this in a systematic and well-considered manner: 1. Project Title: Providing necessary equipment for DPM Summary: For the Department of Project Management (DPM) to fulfill their role within the government and to participate in the Environmental Infrastructure Support Programme (EISP) the department needs support with their transport (cars) and their IT capacity (hardware and software). 2. Objectives Overall Objective: To provide DPM with infrastructure to enable fulfilling their tasks in identification, programming and project implementation. Specific Objectives: Provide mobility to DPM staff to easily access sites and cooperate with local self-governments and other stakeholders as well to enable regular monitoring of on-going projects; Provide necessary hardware to carry project preparation information system pipeline 3. Background and Justification Transport: During the project identification phase as well during project implementation it is important for DPM to be in permanent contact with the municipalities and other stakeholders and to visit construction site on a regular basis. Therefore mobility of the DPM staff is of the vital interest for the successful project preparation and implementation. Today DPM shares limited numbers of MEMSP s cars with other departments. The cars are often booked for the weeks in front so there is no room for immediate respond to on short notice situation. Since number of infrastructure project that DPM was implemented was not significant in the previous times, the situation has not been dramatic, but with increase of project number, this issue need to be addressed. Page 39 of 52

Draft V6 IT: One of the key objectives of the Sida Environmental Infrastructure Programme will be introduction of Project pipeline the expert information system that should assist the DPM in decision-making and project preparation activities. It is foreseen that the crucial technical and planning documentation should be kept in the digital form on file server and be available to DPM staff. The information infrastructure (servers, desktop and portable stations, communication equipment) should be capable to keep, back up and process project data. The present status is: Name 1. Ljiljana Veljković Model of computer HP Compaq DC 7700 2. Biljana Jezdić Dell Optiplex GX 520 3. Olja Laušević HP Compaq 6005 Pro SFF PC Processor Intel(R) Core(TM)2 CPU 4300@ 1.80 GHz Intel(R) Celeron(R) CPU 2.66 GHz Pentium(R) Dual- Core CPU E5500@2.80 GHz 4. Sava Sladić Optiplex GX 270 Pentium (R) 4 CPU 2 2.40 GHz 5. Dragana Lap Top HP AMD Turion(tm) II Mehandžić Probook 6555b P520 Dual-Core Processor 2.30 GHz 6. Vladica Božić HP Compaq 6005 Pro SFF PC 7. Tanja Petrović Lap Top HP Compaq 6710 B Pentium(R) Dual- Core CPU E5500@2.80 GHz Intel(R) Core(TM)2 Duo CPU T7100 @1.80GHz Memory (RAM) Date of produc t 999 MB 2007. 504 MB 2007. 2.00 GB 2011. 512 MB 2005. 4.00 GB (2.74 GB usable) 2011. 2.00 GB 2011. 2039 MB 2007. It is proposed to buy computers to replace existing machines 4 years or older (2007) because they are either already malfunctioning or unlikely to cope with the software upgrade. Laptops will be used both because of the need to frequently make field trips and also because the power to the ministry building often fails. Page 40 of 52

Draft V6 Beyond the ordinary Office package, MS Project Software is required because this department has the responsibility of managing multiple projects. Developing their skills in using this package will be included in the capacity building training element. 4. Legal Framework The Law on means owned by the Republic regulates maintaining and handling of transportation and IT equipment. The Law foresees that these kinds of good must be provided on transparent tender. Therefore, procurement based on Sida procurement guide should be appropriate to fulfil requirements from the Law. According to Serbian legislation once when are taken over the vehicles would officially belong to the Directorate for State property or to the Ministry. Nevertheless vehicles would be officially appointed to the head of the DPM and head of Programming Unit. This decision should be stressed in the taking over agreement. 5. Related programmes and other donor activities There are no other programmes and donor activities related to capacity building of the DPM, particularly to their mobility. 6. Project Description Approach This is a hardware component an overall institutional-support project that will strengthen capacity of DPM to prepare and manage infrastructure projects. It has to be done in the early stage of EISP Component II. Transport: IMG will in cooperation with DPM draft vehicle specification and tender documentation in accordance with Sida and IMG procurement procedure. IMG recommend 2 sedan diesel vehicles up to 2000 mm3 to be provided with standard equipment. One car would be immediate be taken over by DPM, while the other one would be used by IMG during EISP implementation and given to DPM at the end of the programme. Car maintenance and fuel will be covered by MEMSP in accordance with Ministry s regulation, from the moment of car taking over. The car provided to DPM will be used only for DPM needs. IMG will take a care of the assigned car during the programme implementation. Page 41 of 52

Draft V6 IT: Precise specification of IT equipment will be drafted by IMG and DPM. Once when IT expert define required performances, IMG in cooperation with DPM will draft tender dossier and implement standard Sida and IMG tender procedure. At this moment IMG estimates: 6 lap tops including the following software: Laptop with MS Windows 7 pro 700-900 MS Office pro 370 MS Project 800 (3 copies, head of unit for programming, implementation and head of department.) Adobe Acrobat 450 Autocad viewer 450 (3 copies) Upgrade existing computers/software in the case a conflict with the SLAP changes appears. 1000. 1 A3 colour laser printer 1800-2200 1 File Server Computer 700-1500 1 Backup Storage 600 1 Projector 650 1 Projector screen 250 6 USB flash drive memory 32 GB capacity 40 1 UPS capacity 3 kva 5 kva 1000-2000 Provided IT equipment will be installed and set up by the MEMSP IT support team and maintained in accordance with already established maintenance policy. Project Outputs The project should deliver the following outputs: Two sedan cars provided for the EISP implementation and DPM needs DPM get mobility to quickly respond to emerged issues during infrastructure project implementation and ability to frequently contact municipalities IT equipment that would enable DPM to use SLAP database in the most efficient way and to manage the infrastructure projects Procurement procedures All procurement will follow the procedures outline in the Programme Proposal. As this is procurement under the programme it will be subject to the SPG (Sida Procurement Guidelines), and IMG standard procurement regulation. These funds will not be subject to Serbian Public Procurements regulation as the source of Page 42 of 52

Draft V6 financing is not from the Republic s budget. Nevertheless in order to train staff of DPM in tender procedure their members will participate in evaluation committee. Timeline As indicated in the Programme proposal the procurement activities are foreseen to start immediately upon commencement of Component 2. Until September 2011 DPM will have all logistic preconditions for operations in the country. 7. Budget The cost of 2 vehicles is estimated at 40,000 total (in the case it is including VAT & Tax). The cost of IT equipment is estimated at up to 25,000. 8. Sustainability and Risk Assessment The IT equipment will be maintained by existing experienced IT unit inside the MEMSP that is responsible for overall communication and information system in the Ministry. Once provided the equipment will be property of the Ministry, but it will be specifically allocated to DPM for their needs. This should be regulated in the agreement between Sida and the MEMSP. The vehicles would be also become property of the Ministry, but will be assigned to Head of DPM as well to head of Programming unit. The vehicles will be used by other DPM members but only for the field trips approved by superior officer. Vehicle users will follow already established internal car usage and maintenance procedure. Page 43 of 52

Draft V6 Annex D: Timeline Page 44 of 52

Draft V6 Page 45 of 52

Annex E: Draft ToR of Senior IPA Expert Terms of Reference for short-term Senior IPA Expert 1. Function Description: This role will be within the Environmental Infrastructure Support Programme (EISP). It will consist of 40 days of consultancy work, over 24 months, primarily in Belgrade but with possible travel within Serbia and study trip(s) within the European Area. 2. Immediate Supervisor(s): Programme Manager Substitute: As announced 3. Subordinates: No Yes 4. Project: IMG code: SW15 5. Country: Serbia 6. Duty Station: Belgrade 7. Basic Function and Scope of Responsibilities The Senior IPA Expert role s primary role is to provide strategic advice and assistance to the Department for Project Management (DPM), Ministry for Environment, Mining and Spatial Planning and the IMG team implementing the EISP. The main activities and outputs will include, but not be limited to, the following: A. Support to the DPM in the development of its role in the EU DIS process. In particular this will require reviewing Serbia s progress in the accreditation process, the steps the MEMSP have taken and the roles of the central and local authorities. A short report (not more than 3 pages) is required no later than the 1 month after the first period of consultancy outlining the main recommendations for the programme planning process. B. Advising the Capacity Building component of the EISP in line with the strategic objectives in part A. The advisor would particularly address the issue of multi-annual environmental investment planning, strategic aspects in the pre- and post- accession process. As part of this a presentation of member state experiences and dissemination of best practice in environmental investment planning to all Serbian stakeholders is required. C. Facilitation of DPM involvement in regional initiatives like RENA as well as assisting with the planning of study visits in line with the EISP proposal. Networking with at least one member state administration and relevant EC officials in Brussels. D. Providing advice on developing project proposals for the Direct Environmental Infrastructure component ( Component III ) on request. E. 40 days of consultancy have been envisaged at a rate of 10 days every 6 months to coincide with the assessment of the previous activity period and planning for the following stage. These days should be agreed in advance in cooperation with the programme PIU. Where possible effort should be made to coordinate visits with other work the consultant is doing in Serbia for the greatest possible efficiency. A limited number of return international flights will be included in the budget. F. Producing a concluding report for inclusion in the Final Programme Report covering the consultant s activities, analysis and recommendations over the activity period no later than 31 May 2013. Page 46 of 52

9. Minimum Required formal Education High School Diploma or GED Vocational School or some college courses Associate s Degree, Trade or Technical School Bachelor s Degree Master s Degree Doctoral Degree Any of the above educational requirements may be substituted for longer term, relevant and confirmed prior professional experience. 10. Required prior experience, training, specific skills The most important qualification for this role is to have direct experience of IPA or similar EU pre-accession assistance processes, as a government official, in a country facing similar challenges to Serbia. Additionally, the following are necessary: - Strong consultancy skills including the ability to relate to the client (the DPM), assess, analyse and deliver concise reports on time; - Experience and understanding of Serbian and Regional Environmental Infrastructure issues; - Contacts with related programmes including RENA and the MEMSP EU Negotiations project. - Excellent spoken and written English language with appropriate IT skills in the MS Office Package. Serbian language skills an advantage. 11. Authority - N/A 12. Supervisory Responsibility Level 5: Level 4: Level 3: Level 2: Level 1: No supervisory responsibility Provides guidance, leadership, or training to other employees (no direct supervision) Directly responsible for supervising, clerical, or office administrative personnel Directly responsible for supervising, professional, or technical employees Directly responsible for supervising supervisory/managerial employees. Including Exempt Authority. 14. Contractual conditions As stipulated in the service contract; the employee shall adhere to all IMG policies, regulations and values applicable for IMG. The consultant will receive a limited number of return flights from their place of residence and office space and facilities will be provided by IMG when in Belgrade on this contract. The consultant is expected to cover their other costs from their daily rate. Page 47 of 52

Annex F: EU DIS implications for SIDA EISP Through IPA Framework Regulation (Council Regulation (EC) No 1085/2006 of 17 July 2006) an instrument for pre-accession assistance is established. IPA Implementing Regulation (IPA IR) (Commission Regulation (EC) No 718/2007 of 12 June 2007), implementing the IPA Framework Regulation, detailing applicable management and control provisions. Framework Agreement between the Government of the Republic of Serbia and the Commission of the European Comunities on the rules for co-operation concerning EC-financial assistance to the Republic of Serbia in the framework of the implementation of the assistance under the Instrument for Pre-accession Assistance was signed on 29 November 2007 and ratified by the Republic of Serbia on 26 December 2007. By this moment, as potential candidate country, Republic of Serbia absorbs financial means from IPA I and IPA II component, which is implemented under centralized management system. IPA III component is a source for financing infrastructure and provide assistance for candidate countries, after the Commission Decision that confirms decentralised management system (DIS). Before absorption of IPA III component starts through implementation of the multi-annual Operational Programme (OP), Operating Structure must demonstrate that management and control systems are in place in line with the IPA IR. (DIS accreditation rules are provided in the articles 11 to 17 within IPA IR) So, when Serbia becomes candidate country, IPA must move to decentralised management of EU funds (DIS), with ex ante controls by EC Delegation. That is prerequisite for implementing this IPA component. Article 28 of the IPA IR sets out the functions and responsibilities of the Operating Structure, as being a body or a collection of bodies within the administration of the beneficiary country, which is responsible for managing and implementing the programme or programmes concerned in accordance with the principle of sound financial management. A full explanation of EU DIS can be found in the presentation by GTZ, Operating Structures under IPA III & IV, attached to this document. It is also described in the Needs of the Republic of Serbia for International Assistance 2011-2013 (NAD) and in the draft Operational Programme Economic Development OPED which presents multi-annual programming document for absorption of IPA 3.component for the period 2012-2013. The following section will describe in more detail what that will mean for the Department for Project Management, MEMSP, which is a part of Operating Structure and will be involved in the DIS accreditation process. There is presently no fixed date when Serbia will gain EU DIS accreditation. Operating structures has been established in parallel with preparation of programming framework: SCF - Strategic Coherence Page 48 of 52

Framework and OP ED. Accreditation package to be sent to the EC is in the preparation: written procedures and inter-institutional agreements ( Implementing Agreements and Operating Agreements which will ensured appropriate segregation of duties between and within the bodies Operating structures). Also, trainings relating to the implementation of IPA components III for relevant staff are taking place. If accreditation is not achieved this year then it will become more likely next year as all main political groups now support EU accession as a national priority. The organisation of the Operating Structure for implementation of OPED is represented by the following diagram, which shows responsibilities for OP, Priority Axes, Measures, and CFCU. (see detailed organization in the presentation by GTZ, Operating Structures under IPA III & IV ). As Project Management Unit (PMU) established within line ministry (MEMSP) as the DPM, has been directed to prepare for programming and implementation under the decentralised operating structure in accordance with responsibilities defined by article 28 of IPA IR. The EISP project pipeline is a key tool in that preparation. The DPM s responsibilities in the initial stages will be to: Programming units Project identification, preparation, selection Adjusting the actual OP and preparation the relevant OP for the next period Procurement planning Budgeting for national co-financing Preparing Annual and Final Implementation Reports (OP & IPA) Implementation unit Support CFCU in preparation of procurement notices, tender dossier and calls for proposals preparation Support CFCU in the procurement and tender award ; Managing, Monitor and adjusting contracts ; Applications for payment from EC Verify invoices before project payment Monitoring the OP (through the Information System and Sectoral Monitoring Committee) Managing N+3 Evaluating the OP Closing projects and the OP These broad responsibilities effectively mean the DPM must provide the technical capability to ensure the programming and implementation of funds for the Operational Programme Economic Development. To start with the CFCU will be the contracting authority but if the accession follows the Page 49 of 52

same pattern as other candidate countries the authority will be delegated to DPM some years in the future. What does this look like at a practical level? The current situation is that there is a distinct communication and cooperation gap between the national (ministry) level and the local level (local self-government) in the environmental infrastructure sector. The bottom-up approach to project identification where the most mature proposals are often selected by default represents a lack of a system rather than a deliberate approach. The environmental sector does have relevant strategy documents, like the National Programme for Environmental Protection (2010-2019) and The Waste Management Strategy (2010-2019) but to operationalize them requires the MEMSP to have the necessary information and the capability. Three factors are important: The local authorities are given no direct responsibility or role under this stage of DIS; The central government cannot effectively plan and implement projects without local authority involvement. It also must prepare for municipalities to take ownership of facilities and plan to manage them. No one knows exactly how it will work in Serbia because the processes and accreditation package are still developing. At a central level training on DIS operating structures is being carried out by various EU consultancies. The focus is on the general requirements to gain accreditation and manage the funds in line with EU requirements. It does not cover the specifics of any single priority access like Environment or sub-axis like environmental infrastructure. What is clear is that the DPM, in order to carry out its role, needs to be able to link the available information and future ownership rights of the local administrations to the strategy and access to funds of the national government. The EISP with its proposed capacity building, facilitation and direct environment infrastructure support could be very important in making that connection. The common model for cooperation between external or national funding organisations and local administrations is to form a Project Implementation Units (PIU) at the municipal/regional level consisting of representatives from the key local stakeholders along with a local implementation team. The local implementation team would ideally consist of permanent staff from the PUC which will operate the facility in the future. The PIU should be initiated by the beneficiary municipalities which will be responsible for giving the PIU a mandate and ensuring its sustainability for the duration of the project. Page 50 of 52

Part of the DPM s approach will be to promote or even insist on the formation of such a PIU or similar body as a pre-requisite for cooperation between the central and local authorities. The DPM will then work with the PIU on the development of the project proposal and technical documentation in order to prepare major project application requested by DG Regio. Inputs from the PIU will be used to provide proper technical input for procurement and grant award procedures and drafting of technical documentation related to tenders in order to ensure that tender documentation for approved projects is drafted for the CFCU, in accordance with the EC (DG Regio) requests. CFCU will ensure the signature of contracts with contractors and beneficiaries and prior checks that the eligible expenditure in the contracts is in line with eligible expenditure as laid down in the Financing Agreement. This model is similar to most internationally funded projects except that the link between the donor and the contractor is a Serbian institution not a foreign organisation. The DPM will always be responsible for the quality of IPA documentation. The local administration will always be responsible for the future ownership and operation of the facility that will be provided in the End Recipient Agreement (ERA) signed with the Head of the Operating Structure and End Recipient. A specific model for local cooperation is not prescribed under EU DIS but the format described above uses normal good practice of ensuring the involvement of the end user in the design and construction of the facilities they are due to own and operate. The EISP aims to assist the DPM with standardising this process as part of the development of the project pipeline. As the department gains experience and a better understanding of their own responsibilities and the abilities of each PIU the local team will do more or less of the technical work depending on their capabilities and capacity. The necessary staffing level of the DPM continues to be an uncertain issue. A recent workload analysis undertaken as part of DIS proposes that the staff level is only slightly increased (by 1 person) for the immediate future (until end 2012). At the same time similar departments in national administrations that are further down the accession process are considerably larger, for example in Turkey or Croatia. Therefore it is likely the department size will increase but for now remains limited by IMF restrictions. If it does increase then the EISP work to create a basis of sustainable institutional processes will be important. Programme Based Approach (PBA) and Sector Wide Approach (SWAp) The use of PBA and SWAp in development programming was giving impetus by the Paris Declaration on Aid Effectiveness (2005). A PBA is defined 4 as having the features of: 4 2011-2013. Description of PBA and SWAp definitions can be found in the Needs of the Republic of Serbia for International Assistance Page 51 of 52

Leadership by the host country; A single comprehensive programme and budget framework; A formalised process for donor co-ordination and harmonisation of donor procedures for reporting, budgeting, financial management and procurement; and Efforts to increase the use of national systems for programme design and implementation, financial management, monitoring and evaluation. A SWAp is the process of using PBA at a sector-wide level and in terms of the EISP it is most appropriate to focus on its contribution to SWAp. While the full introduction of SWAp is a long-term process the EISP directly supports certain features. The development of a competent national institution, the DPM, to identify and prioritise projects is essential to Serbian leadership of the environmental sector (in Serbia). The project pipeline being proposed is the tool, or national system, that the Serbian government and donors will have available to enable a collaborative programming and implementation process. The conclusions of the NAD recommend that coordination and implementation can be improved through the introduction of a results-based approach. Among the measures to introduce such an approach are: the better prioritisation of projects and the creation of a pipeline, an improvement in institutional capacity and the development of EU DIS structures. The EISP is therefore directly supporting the NAD and SWAp implementation by focusing on a relatively small institution that will act as the link between the national and the local level for solid waste, wastewater and remediation subsectors. Page 52 of 52