ALBANIA
Integrated Water & EcoSystems Management
GEF Project Document
Europe and Central Asia Region
ECSIE
Date: January 14, 2004
Team Leader: Andreas Rohde
Sector Manager: Sumter Lee Travers
Sector(s): General water, sanitation and flood protection
Country Director: Orsalia Kalantzopoulos
sector (100%)
Project ID: P075156
Theme(s): Biodiversity (P), Pollution management and
Focal Area: M - Multi-focal area
environmental health (P), Other environment and natural
resources management (S)
Project Financing Data
[ ] Loan [ ] Credit [X] Grant [ ] Guarantee [ ] Other:
For Loans/Credits/Others:
Amount (US$m):
Financing Plan (US$m): Source
Local
Foreign
Total
BORROWER/RECIPIENT
3.98
0.00
3.98
EC: EUROPEAN INVESTMENT BANK
0.00
11.15
11.15
GLOBAL ENVIRONMENT FACILITY
0.00
4.87
4.87
Total:
3.98
16.02
20.00
Borrower/Recipient: ALBANIA
Responsible agency: PIU
World Bank Water PIU
Address: Rr. "Bajram Tusha", Lagja Nr 14, Durres, Albania
Contact Person: Mr. Genci Gjeci, Director
Tel: 355 52 64184 Fax: 355 52 64184 Email: ggjeci@yahoo.de
Estimated Disbursements ( Bank FY/US$m):
FY
2005
2006
2007
2008
2009
Annual
0.98
1.70
1.46
0.50
0.23
Cumulative
0.98
2.68
4.14
4.64
4.87
Project implementation period: 5 years
Expected effectiveness date: 06/18/2004 Expected closing date: 12/31/2009
OPCS PAD Form: Rev. March, 2000

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A. Project Development Objective
1. Project development objective: (see Annex 1)
The proposed GEF/EIB project was part of the IDA-financed Municipal Water and Wastewater Project,
but due to an extensive consultation process carried out for the GEF/EIB project, the World Bank
proceeded with the approval of the IDA credit in advance of the GEF approval. The IDA-supported
project and the GEF/EIB-supported project, although technical separated into two projects, are still
together pursuing to achieve an overarching development objective. This overarching development
objective of the two projects is to improve the provision of water supply and sanitation services in selected
Albanian cities by introducing a new approach to utility management that builds upon private sector
participation in the form of a performance and incentive based management contract.
The development objective of the GEF/EIB project is to improve the municipal wastewater services in the
coastal cities of Durres, Lezha and Saranda. By achieving this objective the project will also contribute to
economic growth, because all three project cities (Durres, Lezhe and Saranda) are tourist areas whose
prospering depends heavily on a healthy coastal environment.
The global environmental objective is to improve the health and habitat conditions of globally significant
marine and coastal ecosystems along the coastline of Albania in an integrated manner. The objectives will
be achieved through: (i) reduction of sewage pollution loads through the development and establishment of
low cost water treatment technologies (Constructed Treatment Wetlands) producing environmental
incremental benefits; (ii) promoting the establishment and improve the management of the Kune-Vain
protected marshland; and (iii) improvement of the dialogue between Public Instutitions and citizens through
a public communcation program as well as a program of dissemination and replication of project
achievements.
Both projects, the Municipal Water and Wastewater Project and the Integrated Water and Ecosystem
Management Project, leveraged financing from the European Investment Bank (EIB). This is the first time
the EIB is supporting Albania's water sector which is in dire need of foreign investment especially after the
EU, one of the largest donors in the sector, withdraw from supporting the sector.
2. Key performance indicators: (see Annex 1)
Progress towards the project objective will be measured by the following key performance indicators:
Stress Reduction Indicators:
l
Nutrient (Nitrogen/Phosphorus) removal in the wastewater discharge: 50 percent for nitrogen and
25 percent for phosphor.
l
Removal of organic impurities: 70 percent of unfiltered BOD5.
Environmental Status Indicators:
l
Improved health of the Posidonia Oceanica (seagrass) meadows, which are pollution sensitive and
instrumental for creating a habitat that fosters biodiversity: Biomass per surface unit; shoot
density; epiphyte growth and area covered.
l
Biodiversity in the Kune Vain Managed Reserve regarding the following flagship classes:
Malachofauna, Herpetofauna, Avifauna, and Mammalia.
Process Indicators:
l
Social acceptance of Constructed Treatment Wetlands (CTWs): Number of complains received by
the utilities regarding the operation of the CTWs (odor, noise, mosquitos etc.)
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l
Adoption of the Kune-Vain Management Plan that includes process indicators, stress reduction
indicators, and environmental status indicators.
l
Implementation of a basic monitoring system of the coastal areas.
B. Strategic Context
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)
Document number: 24189-ALB Date of latest CAS discussion: June 20, 2002
The project is included in the CAS of 2002 that emphasized poverty alleviation and social cohesion as the
underlying conditions to assure sustainable development in Albania within a stable Southeast European
Region. Ensuring environmental sustainability and sustainable management of natural resources are one of
the main objectives of Albania's National Strategy for Social and Economic Development (NSSED) that is
the foundation for the CAS.
The main emphasis of the CAS is on accelerating poverty alleviation in connection with economic growth,
improving governance, building capacity in the institutions, and improving natural resource management.
In promoting effective natural resource management, the projects supports the NSSED and CAS goals.
Also, in line with the decentralization strategy in the NSSED and CAS, this project will promote
environment management at the local level by setting up transparent and inclusive mechanisms at the
municipality and community level for decision-making, implementation and management of natural
resources.
Also, the Government is making an effort to highlight environmental-poverty linkages in the NSSED, which
emphasizes the need to reverse environmental degradation, rehabilitate heavily polluted areas that
jeopardize health, and ensure the sustainable use of natural resources. The National Environmental Agency
was upgraded in August 2002 into a Ministry of Environment, and an updated National Environmental
Action Plan was approved by the Government in January 2002. Within this context, there is an
opportunity to strengthen the Government's regulatory capacity, help the Government demonstrate its
commitment to the environment through visible actions, and further increase public environmental
awareness.
1a. Global Operational strategy/Program objective addressed by the project:
The project is fully consistent with OP 12 - Integrated Ecosystem Management, with linkages with OP2,
OP9 and OP10. The project will (i) create an enabling environment for integrated ecosystem management
by supporting the implementation of the recently approved Law on Protected Areas in the Kune Vain
marshlands; (ii) strengthen the local capacity to manage the constructed wetlands and the coastal lagoon
system in an integrated manner and (iii) support investments that address both local and global issues.
The four components that have incremental activities proposed for financing by GEF are: (i)
sewage pollution reduction; (ii) environmental management and monitoring; (iii) Public
communciation and replication; and (iv) project management, monitoring and evaluation.
2. Main sector issues and Government strategy:
2.1 Background
The Albanian Government is very aware of the poor conditions in which the water sector operates, with its
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infrastructure in urgent need of improvement both in terms of physical rehabilitation and management
capability. Albania has no wastewater treatment facilities and raw sewage is discharged untreated into seas
and rivers. Degradation of the quality of transboundary water resources caused by land-based activities is
therefore a very serious problem.
The Adriatic coastal area (the northern part of the Albanian coast) is generally characterized by coastal
lowlands (alluvial plains) intersected by rivers, and flanked by hills along its upland boundary. The coast
is made of long sandy beaches, deltaic river mouths and lagoons. The coastal waters are shallow, receiving
water from the rivers and several drainage canals. At sea, the water depth increases slowly, with first a
sandy bottom with the associated biocenosis, which becomes muddy with increasing depth.
On the sandy or muddy bottoms, the marine flora is scarce or occupies specific areas where currents or
waves have less action. The extensive seagrass beds of Posidonia oceanica are an important part of the
Albanian marine ecosystem, often occupying a considerable part of the littoral zone. Posidonia oceanica
and very well developed marine communities are found along Porto Romano bay (where Durres discharge
the wastewater) and Shengjini bay (adjacent to the Kune-Vain marshland). The underwater rocky bottoms
at Rodoni and Lagji Capes (Durres), and the eastern side of Vlora bay host patches of Posidonia oceanica.
2.2 Main Sector Issues
As identified in the Strategic Action Plan for the Mediterranean Sea, several hotspots along the Adriatic
coast are the main cause of pollution of the marine and coastal ecosystems. In Albania, water pollution,
mainly generated by an increasing population concentrated along the Adriatic coastline, has caused
considerable deterioration of the natural inland ecosystems and the biological productivity of the coastal
areas. Indeed, in all towns wastewater is discharged without any treatment, directly into rivers or drainage
canals, which convey the untreated sewage directly into globally significant tidal marshlands or to the
nearby marine coastal zone. This has extremely negative effects on the biological balance and also
increases the eutrophication phenomena of wetlands.
The coastal lagoon system of Albania constitutes one of the most important wetlands of the region, as
highlighted also by the GEF-supported "Conservation of Wetland and Coastal Ecosystems in the
Mediterranean Region". In particular endangered and endemic species as the Pygmy cormorant
(Phalacrocorax pygmaeus), the Mouse-ear bat (Myotis miotis) and the Otter (Lutra lutra) live in these
habitats and should be considered as flag species. Coastal water pollution from untreated waste waters
heavily affects Posidonia oceanica meadows and the related communities e.g. the endangered species Pinna
nobilis.
The tidal marshland of Kune Vain is one of the most significant wetlands in the coastal lagoon system. It
suffers, however, of several problems, including lack of an integrated sustainable management strategy
based on multiple uses and conservation on the natural resources; progressive spreading and enlargement of
building construction, and illegal building; presence of uncontrolled tree cutting and still illegal fishing;
inappropriate hydraulic management of the lagoons; lack of appropriate aquaculture techniques;
deterioration and degradation of landscape; and lack of financial means for effective management of the
protected area.
Given the limited financial resources available for infrastructure development, the increasing pressure on
the natural resources from higher concentration of urban settlements along the coastal areas, the limited
environmental awareness among the population, and the weak institutional capacity to manage its natural
resources, the Government of Albania is facing one of the most challenging tasks in developing a
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comprehensive approach to water and ecosystem management. The proposed project would assist Albania
in meeting this challenge.
2.3 Government Strategy
The Government of Albania is very concerned with the lack of sustainable management of natural
resources and its negative effect on the environment. The National Environmental Action Plan (NEAP),
updated and adopted by the Government in January 2002, emphasizes the need to reverse environmental
degradation and rehabilitate heavily polluted areas and lists surface water contamination due to lack of
proper wastewater treatment and loss of biodiversity due to lack of proper management of natural
resources as priority issues. In order to develop an environmental management policy it was recognized
that the following areas of intervention are key for the Government of Albania:
l
restructuring economic incentives to encourage and improve efficient resource utilization;
l
preparing environmental legislation, including general and specific laws, and regulations on the
protection of the environment;
l
institutional strengthening of the Albanian environmental authorities and line ministries and
institutions, both at central and local level;
l
developing strategies to reduce the adverse effects of soil erosion and deforestation;
l
developing strategies to improve water management and reduce water pollution problems;
l
developing strategies to improve coastal zone and natural resource management; and
l
developing strategies of environmental education and communication to increase public
participation.
Within this overall framework the Ministry of Environment has identified priority actions that can
significantly and rapidly contribute to the protection of the environment and control negative environmental
impacts. Specifically the measures will be aimed at: (i) developing the institutional and regulatory
framework in line with work already progressing on the institutional and legislative framework; (ii)
strengthening the institutions responsible for the environment; (iii) evaluating and identifying economic
instruments to be implemented in the field of environmental protection and impact mitigation; (iv) assessing
and mitigating pollution at severe environmental hot spots; (v) developing demonstration projects; and (vi)
developing and implementing public communication program, at both central and local level.
Recognizing the importance of improving the water supply and sanitation sector, the Government of
Albania has embarked on preparing a comprehensive Water Supply and Sanitation Strategy focusing on
both urgent system repairs and sector reforms. The Government also adopted a Biodiversity Strategy and
Action Plan in 2000 that include the Kune Vain marshland as one of the priority areas in the network of
protected areas and identifies a lack of adequate management capacity as a key issue for sustainability.
The Government recently approved a law on protected areas that supports a more advanced management
concept based on long-term sustainability. The proposed project supports the Government's strategy on
water and biodiversity by introducing new approaches to integrated wastewater management.
3. Sector issues to be addressed by the project and strategic choices:
The Integrated Water and Ecosystem Management Project will extend and deepen the ongoing Government
reforms in the environmental sector. The key strategic choices made during project preparation were to:
·
Link the project with the currently ongoing Bank financed Municipal Water and Wastewater
Project (MWWP). The project will provide the water utilities of three of the cities targeted by the MWWP
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with low cost wastewater treatment facilities. The private operator recruited under the MWWP will be
instrumental to develop capacity in the water utilities to use this environmental friendly wastewater
treatment technology. It is expected that this will contribute to the introduction of environmentally
sustainable wastewater treatment technology in other cities in the region. Furthermore, in order to
guarantee an optimal cooperation between the two projects and optimization of resources, a common PIU
has been established.
·
Address environmental issues in water sector reform by integrating close-to-nature wastewater
treatment options with management and monitoring of areas with globally important biodiversity. In the
present economic situation with an underdeveloped civil society, lacking of a politically active and
environmental conscious elite to actively steer the country toward an environmentally conscious
development, it is unlikely that nature conservation will be sufficiently supported in the near future.
Therefore it is important that present and future coastal zones and wetland conservation programs in
parallel with sanitation measures lay the ground for decentralized and financially self sufficient
management units with a strong involvement of local civil society. In this context, the project will explore
the possibility of introducing an innovative management scheme for Albanian wetlands by building upon
previous studies such as the EU PHARE financed Karavasta Lagoon ­ Wetland Management Project, and
cooperate closely with the proposed GEF medium size project for biodiversity conservation in the
Karavasta Wetlands. If successfully implemented, this should provide a model, which can be adapted to
particular requirements of other Albanian wetlands and sanitation needs.
·
Address environmental issues in tourist areas. By selecting tourist areas for environmental
improvements, the acceptance and support from the local governments and the customer of the water and
wastewater utilities is much higher. This is due to the fact that environmental improvements benefits also
the tourist industry which needs clean beaches to prosper. This makes it also easier for the water utilities to
introduce wastewater tariffs which cover the operation and maintenance cost for the constructed treatment
wetlands, because the local governments and customers see the additional benefits for the tourist sector
which is crucial for the economic prosperity of the selected areas.
C. Project Description Summary
1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown):
The project will assist the Government of Albania to: (i) reduce sewage pollution loads generated by the
three coastal areas of Durres, Lezha and Saranda through the introduction of low cost wastewater
treatment technologies; (ii) improve the environmental management and monitoring of coastal areas; and
(iii) promote nutrient reduction investments in other parts of Albania and neighboring countries. The
project components which will help to achieve these goals are presented in the table below:

Indicative
Bank
% of
GEF
% of
Component
Costs
% of
financing
Bank
financing
GEF
(US$M)
Total
(US$M)
financing
(US$M)
financing
1. Sewage Pollution Reduction
0.00
0.0
0.00
0.0
0.00
0.0
1.a Wastewater Treatment Facilities
10.93
54.7
0.00
0.0
3.96
81.3
1.b Sewerage Network Rehabilitation
4.86
24.3
0.00
0.0
0.00
0.0
2. Environmental Management and Monitoring
0.70
3.5
0.00
0.0
0.70
14.4
3. Public Communication and Replication
0.13
0.7
0.00
0.0
0.13
2.7
4. Project Management, Monitoring&Evaluation
0.08
0.4
0.00
0.0
0.08
1.6
Taxes and Duties
3.30
16.5
0.00
0.0
0.00
0.0
Total Project Costs
20.00
100.0
0.00
0.0
4.87
100.0
Total Financing Required
20.00
100.0
0.00
0.0
4.87
100.0
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The following breakdown by component does not include taxes and duties.
Component 1: Sewage Pollution Reduction (Total: US$15.79 million; GEF: US$3.96 million, EIB:
US$11.15 million, GoA: US$0.68 million). This component represents an innovative aspect of the
proposed project and has an high replication value throughout Albania and the region. The component
consists of two main parts: (i) the establishment of Constructed Treatment Wetlands and related facilities in
the areas of Durres, Lezhe and Saranda, (ii) the construction of the sewage main collectors required to
connect the current sewerage systems to the new treatment facilities, and (iii) sewerage network
rehabilitation and extension.
Component 2: Environmental Management and Monitoring (Total: US$0.70 million; GEF: US$0.70
million). The component will assist the Ministry of Environment and the Ministry of Agriculture and Food
to carry out the following tasks: (i) Technical assistance for the development of the Kune Vain
Management Plan including a plan for stakeholder participation in management of natural resources and
economic incentives for long term sustainability; (ii) Training for Kune Vain administration staff, rangers,
staff from the relevant line ministries and members of NGOs on natural resource management and
integrated ecosystem management; (iii) Implementation of selected priority measures identified in the Kune
Vain management plan and other measures that improve the environmental conditions of the receiving
waterways; and (iv) Design and implement a monitoring program for water quality and biodiversity
indicators in the Kune Vain Managed Reserve and the coastal areas impacted by the project (including
provision of technical assistance and equipment as needed).
Component 3: Public Communication and Replication (Total: US$0.13 million; GEF: US$0.13
million). This component will finance the following activities: (i) Organization of a stakeholder
consultations program for the preparation and implementation of the management plan for the Kune Vain
Managed Reserve; (ii) Design and implement awareness campaigns on project goals and benefits of an
integrated ecosystem management, local communities' role and responsibilities in managing natural
resources including payment of environmental services (partly covered by IDA project); (iii) Organization
of training and workshops for practitioners and decision-makers on the technical, economic and
environmental benefits of constructed wetlands and integrated ecosystem management; (iv) Design and
implementation of an environmental education and communication program for local communities; (v)
Design and implementation of a pilot teacher's training program in ecology and environmental education in
selected schools; and (vi) Technical assistance to develop a replication strategy, including the identification
of methods of information dissemination, and of repeater projects. These activities are linked to the
undergoing Public Communication program of the MoTAT, financed under the IDA credit, as well as the
communication and consumer relation program of the private operator.
Component 4: Project Management, Monitoring and Evaluation (Total: US$0.080 million; GEF:
US$0.080 million). This component will support a Project Implementation Unit (PIU) within the Ministry
of Territorial Adjustment and Tourism (MoTAT) to implement and monitor the activities under the project.
The project will use the current World Bank Water PIU which is already successfully implementing the
Water Supply Urgent Rehabilitation Project and the Municipal Water and Wastewater Project. The PIU
will have full responsibility for: (i) procurement, financial management and disbursement related to the
activities funded by the GEF grant and the EIB loan; (ii) financial management reporting for the overall
project; (iii) monitoring-evaluation and reporting for the overall project implementation; and (iv)
coordination with local stakeholders. The GEF funds will also be used to complement the PIU with
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adequate technical expertise in constructed wetlands, biodiversity conservation and ecosystem management.
Possibilities for further integrating the project management into Government structures will be explored
during implementation, in line with efforts by the Bank to this end across the broader portfolio. To achieve
this, TA and training can be provided to the Ministry of Environment and the Ministry of Agriculture and
Food.
A detailed description of the components is provided in annex 2.
2. Key policy and institutional reforms supported by the project:
The Government of Albania, assisted by the World Bank, has developed a comprehensive Water Supply
and Sanitation Strategy (official adopted by the Government in October 2003) which calls, among others,
for the introduction of wastewater treatment in environmental sensitive areas and areas with tourist
potential. The preparation of the Water Supply and Sanitation Strategy (WSSS) is one of the priority
measures in the National Strategy for Socio-Economic Development (NSSED). The project will contribute
to achieve the NSSED monitoring indicators No. 6 for urban water supply and sanitation services and the
WSSS target No. III (b) for wastewater treatment. The project is an important part of the ongoing sector
reform because it is helping the Government to implement the WSSS through e.g. (i) introducing low cost
wastewater treatment, (ii) strengthening of local authorities which will be fully responsible for wastewater
treatment, (iii) deliver sustainable wastewater treatment through the help of a private operator, (iv)
strengthening the monitoring and benchmarking of the sector, and (v) invest scares resources for
wastewater treatment in places with tourist industry to foster economic growth.
The Government of Albania is investing considerable effort in developing laws and regulations to address
environmental issues. The environmental legal framework is covered by a new Law "On Environmental
Protection" and the Law "On Environment Impact Assessment", both approved by the Parliament recently.
Within the existent institutional framework the overall responsibility for managing and monitoring the
natural wetlands and coastal areas lies with the Ministry of Agriculture and Food. This is regulated by the
new "Protected Area Law" (n°8906 dated 6/6/2002), and "Protection of Marine Environment from
Pollution" (n°8905 dated 6/6/2002). The very recent approval of the Law "On Protected Areas" opens up
new interesting opportunities for advanced and integrated management of protected areas all over Albanian.
Contacts and consultations are at present in progress between the Ministry for Environment and the
Ministry for Agriculture and Food, in order to define and agree on joint rules and procedures for the
Administration of Protected Areas in Albania, regulated by the Duties, Tasks and Functions. The Law "
On Protected Areas " will allow the GoA to set up new management structures for protected areas by
means of a Decree (By-Law act), which will include a financing plan for the protected area. The present
project will assist the Government in developing and piloting theses new management structures which then
later can be extended to other protected areas in Albania.
The pilot of these new management structures will also assist the Directorate for the Management of
Albania's Protected Areas, which was established recently within the General Directorate of Forests and
Pasture (GDFP). This new Directorate in collaboration with other relevant agencies, in particular with the
Unit of Environmental Management Forest Project, is working to implement rules and duties regarding
management of the Protected Areas in Albania. The improvement of these management structures is one
element of the "Biodiversity Strategy and Action Plan (BSAP)", which was adopted by the Government of
Albania. This document (financed by GEF) is an important step for Albania towards implementing the
Convention on Biological Diversity (CBD).
The project will also help to develop processes in Albania to improve the involvement of the public in the
decision-making process for sustainable resource management and the use of natural protected areas.
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3. Benefits and target population:
At the global level, benefits will be obtained through the reduction of transboundary pollution into the
Adriatic Sea which is currently endangering numerous species hosted in the coastal and marine
environment. Based on the technical assessment of the nutrient trapping capacity of the constructed
treatment wetlands to be financed under this project, about 147 tons of Nitrogen and Phosphorous and 768
tons of BOD5 could be reduced annually. Significant global biodiversity benefits are expected. The
constructed wetlands represent a new natural habitat for flora and fauna and therefore increase the
biodiversity of the area. Also, they represent a buffer zone for the natural wetlands in their proximity.
Specifically the wetlands will have a positive impact on:
·
Endangered marine ecosystems and habitats, in medium and infralittoral level (particularly
Shengjini-Lezha area, Porto Romano bay and Saranda bay);
·
Endangered coastal ecosystems: sand dunes, delta rivers (particularly Drini-Lezha), alluvial and
wet forests, lagoons (Kune and Vaini) and coastal lakes (Kenalla);
·
Risks and adverse impacts on biodiversity. Some of the major adverse impacts have been: habitat
loss and fragmentation, damage (Porto Romano bay and Saranda bay) and degradation (Kenalla
lake) of habitats and ecosystems, loss of species or the threat of their extinction - i.e. the monk seal
and the sea turtle ranked by IUCN respectively as critically endangered and endangered, living in
the waters of Corfu Island, Saranda, Ksamili and Kakome bay; the mouse ear bat, the otter, the
ferruginous duck, the pygmy cormorant, and the pallid harrier living in Kune-Vain marshland,
Durres-Rrushkull-Erzeni River Managed Natural Reserve, Butrinti lake area;
·
Protection of the Posidonia Oceanica meadows, particularly in the Shengjini- Lezha and
Saranda-Ksamili area, but also in the Porto Romano and Lalzi bay. This in turn will have a
positive impact in protecting beaches from erosion as well as providing hatchery and nutrients for
endangered species.
·
Development of some algae populations (Ulva and Enteromorpha), particularly in Saranda bay,
Shengjini bay and Porto Romano bay;
·
Protection from eutrophication in the Saranda bay, Shengjini area and Kenalla lake;
At the regional level the project will have a demonstration impact contributing to the creation of additional
wetlands and protected areas along the coastlines of Albania and neighboring countries. Additional
benefits result from sharing experiences with neighboring countries on the use of constructed wetlands for
nutrient treatment, and on protected areas and wetlands management. Also, the project will contribute to
developing regional natural resource management strategies and regional eco-tourism opportunities. In
addition, at national level there will be progress towards compliance with EU directives and enhanced
capacity of central, regional and municipal institutions to preserve and manage protected areas and
wetlands.
At the local level the principal beneficiaries from cleaner water resulting from nutrient reduction will be
Albanians living in the areas affected by the current damaged environment. In fact the local populations
will benefit from reduced health risk and odor nuisance from untreated wastewater. Also, the Albanian
population at large will benefit from improved water quality suitable for environmentally sound
recreational use at beaches and coastal areas and wetlands. In particular the improved water quality at
beaches will contribute to Albania's economic development by laying the foundation for further
development of the tourist sector. Apart from the above mentioned benefits to the general population and
the population in the area covered by the component (approx. 260,000), the poor will benefit especially
from the improvements because more of them than the average of the population, live close to open ditches
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conveying untreated wastewater.
4. Institutional and implementation arrangements:
Institutional Arrangements: The private operator, already recruited by the participating water utilities
under a management contract, will operate the constructed treatment wetlands as stipulated in the
management contract. The operator has extensive experience in wastewater treatment and will, in
accordance with the management contract, train the local staff to enable them to successfully and
effectively operate the constructed treatment wetlands. In August 2003 the private operator took over the
management of the water utilities of Durres, Lezhe and Saranda (and Fier which is not included in the
project). He was recruited under a five year management contract financed under the Municipal Water and
Wastewater. The operator will be paid a fixed fee and a performance based fee in accordance with the
achievements of targets defined in the management contract. The private operator is fully responsible for
the utility staff and has the right to hire and fire staff, and make incentive payments for staff performing
well. The performance of the operator will be reviewed by the Contract Monitoring Unit, which is part of
the PIU, and by an international recruited independent reviewer.
The Ministry of Environment (MoE), the General Directorate of Forestry & Pastures (GDFP) in the
Ministry of Agriculture and Food and the Bank's project team agreed upon the following road map for
improving the management of the Kune Vain marshland: The Ministry of Environment drafts a decree "On
Protected Areas" that would establish the legal basis for the transfer of all "Hunting Reserves", including
the Kune-Vain Hunting Reserve, into "Managed Reserves". Already during project preparation the
Ministry of Environment presented the above mentioned decree to the Council of Ministers (CM) and
obtained the CM's approval. Based on this decree, the Minister of Environment and the Minister of
Agriculture and Food will issue an order to execute the transfer of the Kune-Vain Hunting Reserve into a
Managed Reserve by November 2003. The objective for the Kune-Vain Managed Reserve (KVMR) is
conservation and sustainable management of the Kune-Vain wetland and the Kenalla lake, with the goal of
integrating the conservation of the important wildlife habitats with the sustainable management of regional
tourism and the area's natural resources, through an innovative management system.
Based on the decree "On Administration of the Protected Areas", which was also already issued by the
Council of Ministers during the preparation, the Ministry of Environment and the GDFP will establish a
new administration and management board for the KVMR. Consultations are at present in progress
between the Ministry of Environment and the Ministry for Agriculture and Food in order to define and
agree on joint rules and procedures for the Administration of Protected Areas in Albania. The KVMR
Board will include representatives from key ministries, the Lezhe District and the Lezhe and Shengjin
Municipalities, Communes near the Kune Vain marshland, users of the KVMR, and local and national
NGOs. The KVMR Board will be responsible for creating and implementing the management plan for the
KVMR. To do so, the KVMR Board will carry out an intensive public consultation program. It is
expected that the area will be separated into different zones with allowable activities defined for each zone.
The KVMR Board will receive TA under the project, including funds for goods and works, to prepare and
implement the Management Plan.
It is proposed that the administrative entity for the KVMR will be established under the budget of the
General Directorate of Forestry and Pasture. The responsibilities of the KVMR Board will be to introduce
a new participatory protected area planning approach. This approach aims (i) to build capacity within
local user groups and other stakeholders, (ii) to implement protection activities, and (iii) to undertake
monitoring and regulatory functions. All these responsibilities will be identified in the Management Plan.
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Implementation Arrangements: The overall coordination of the project will be carried out by the Ministry
of Territorial Adjustment and Tourism in close cooperation with the Ministry of Environment and the
Ministry of Agriculture and Food. The management of the project will be entrusted to the existing Water
PIU under the Ministry of Territorial Adjustment and Tourism.
Implementing Entity: The Water PIU was established in 1994. The PIU was created specifically to
implement Bank-financed projects and has already established a successful track record in its
implementation of these projects. In addition to this new GEF/EIB Project, it is implementing the IDA
financed Water Supply Urgent Rehabilitation Project and Municipal Water and Wastewater Project. Before
these projects the PIU implemented the IDA funded Durres Water Supply Project. The Water PIU reports
to the Ministry of Finance and to the Ministry of Territorial Adjustment and Tourism.
All financial management activities will be carried out by the PIU.
Procurement: All procurement will be carried out by the Water PIU. The Ministry of Environment will
be consulted on all procurement to be carried out under the project components for Environmental
Management and Monitoring and Public Consultation and Replication, and will have a voting member of
the evaluation committees for this type of procurement. The same applies to the KVMR Board for all
procurement related to the KVMR.
Funds Flow: Project funds will flow from: (i) the Bank, either via a single Special Account which will be
replenished on the basis of SOEs or by direct payment on the basis of direct payment withdrawal
applications; or (ii) the Government, via the Treasury at the Ministry of Finance (MOF) on the basis of
payment requests approved by the Treasury Department of the MOF directly to the local supplier for VAT
and other taxes.
Onlending arrangements: The proceeds of the GEF grant will be forwarded via a Grant Agreement
between the Ministry of Finance on behalf of the Government of Albania and the International
Development Association (IDA). The proceeds of the loan from the European Investment Bank (EIB) will
reach the three water utilities via a Loan Agreement between the Ministry of Finance on behalf of the
Government of Albania and the EIB. For reasons of transparency and accountability is was agreed
between the MoF and the EIB that the MoF would onlend the proceeds to the water utilities on EIB terms.
To allow the water utilities to borrow on these semi-commercial terms, the MoF will provide the water
utilities with a transparent subsidy.
Operational and Maintenance Expenditures: Already under the Municipal Water and Wastewater
Project, the MOF agreed to cover, for each participating utility, the shortfall between operation and
maintenance expenditures and revenue generation, which is expected to gradually decline and to be
eliminated over five years of project implementation, i.e., by 2007. The additional operation and
maintenance cost for the constructed treatment wetlands will be minor and not change the target date for
covering the operation and maintenance expenditures (see financial model in annex 5).
Monitoring and Evaluation Arrangements: The PIU will prepare and provide to the Bank, on a
semi-annual basis, consolidated reports on project implementation progress covering the projection for
project financing and implementation, and the status of project finances, procurement of goods, works and
consultants' services. The reports will describe the compliance with the Environmental Management Plan
which is a provision of the Grant Agreement.
The project indicators will be monitored through the monitoring program financed under the project. This
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monitoring program will compliment (i) the self-monitoring of the Constructed Treatment Wetlands which
will be carried out by the water utilities, which are under the management of the private operator, and (ii)
the already ongoing monitoring programs carried out by the Ministry of Environment, the General
Directorate of Forestry & Pastures (GDFP), the General Directorate of Fisheries (GDF) and the UNDEP
under the umbrella of the Mediterranean Action Plan. The monitoring of of pollution reduction will be
executed at several locations in the coastal areas and the Kune Vain Managed Reserve. In all participating
areas the project evaluation will also benefit (i) from the Poverty and Social Impact Assessment which is
currently ongoing for water sector issues, (ii) from the establishing of Water Consumer Panels in each city,
and (iii) from the Water Sector Public Communication Program which is currently under implementation.
D. Project Rationale
1. Project alternatives considered and reasons for rejection:
During project preparation various design alternatives were considered and evaluated. These include:
CTW versus Conventional Wastewater Treatment Systems: The option of conventional wastewater
treatment plants was considered. This proved to be unaffordable for the participating water utilities
because of their dire financial situation, nor is the Government of Albania in a position that would allow it
to provide the needed amount of subsidies for such an expensive scheme. The preferred alternative,
constructed treatment wetlands, require significantly lower construction and maintenance costs than
conventional wastewater treatment plants and thus offers the opportunity to create a low cost municipal
wastewater treatment system relying on natural processes and reducing to a minimum the operational need
for mechanical devices and energy supply.
The selected CTW option will contribute to lower operation costs for the water utilities, making the process
more affordable for all the other utilities that will want to follow the example of the present project.
Moreover, constructed wetlands represent an additional natural habitat for globally endangered species as
well as a connecting corridor and buffer zone toward already existing ecosystems, thereby contributing to
generate additional global benefits. If in the future conventional wastewater treatment becomes affordable
for these Albanian cities, the CTWs could still be used for tertiary treatment. They would then still
provide environmental benefits by further reducing the nutrient discharge and still serve as an additional
habitat for endangered species.
Selection of Sites: The sites selected for the establishment of the Constructed Treatment Wetlands (CTW)
have been carefully considered through an intensive process of public consultation that has involved local
authorities, local communities, civil society and several line ministries. In consultation with the Ministry of
Environment specific criteria were established and each alternative site weighed according those criteria.
Criteria included: potential nutrient reduction capacity, land availability, distance from built-up areas,
adequacy of the site in terms of present and future needs, absence of physical constraints and proximity to
sites for discharging treated water. Other sites, initially considered to be included in this project, were not
selected due to the lack of potential generation of global benefits, conflicts over land use or technical
implementation difficulties.
2. Major related projects financed by the Bank and/or other development agencies (completed,
ongoing and planned).
Latest Supervision
Sector Issue
Project
(PSR) Ratings
(Bank-financed projects only)

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Implementation
Development
Bank-financed
Progress (IP)
Objective (DO)
Water Supply
Water Supply Urgent
S
S
Rehabilitation Project.
Water Supply and Sanitation
Municipal Water and
S
S
Wastewater Project.
Biodiversity
(GEF, World Bank) Albania -
S
S
Biodiversity Enabling Activity
Completed
Biodiversity
(GEF, World Bank) Macedonia
S
S
- Lake Ohrid Conservation
Project
Biodiversity
(GEF, World Bank) Karavasta
Wetlands Conservation Project
Other development agencies
Wetland Conservation
Conservation of Wetland and
Coastal Ecosystems in the
Mediterranean Region (GEF,
UNDP Regional Project)
Ongoing
Capacity building
Strategic Action Program for
the Mediterranean Sea (GEF,
UNDP Regional Project)
Ongoing
Wetland Management
Karavasta Lagoon - Wetland
Management Project (EU
PHARE)
IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)
3. Lessons learned and reflected in the project design:
Project design reflects the Bank's experience in the preparation and implementation of water and ecosystem
management programs in Europe and around the world. Some of the critical lessons learned and applied in
this project's preparation are the following:
·
The early involvement in project concept design of key stakeholders from across the water,
agriculture and environment sector as well as of local communities is essential in order to ensure
ownership, build lasting commitment and achieve successful project implementation. A participatory
approach has been implemented through a process of consultation that has represented an innovative
avenue to arrive to common understanding of the issues related to wastewater management and
environmental protection. This approach has, in turn, broadened the public consensus and helped in
selecting the most socially/politically/environmentally acceptable sites for the construction of the wetlands
in the three cities as well as promoting dialogue within the authorities for the management of the natural
protected areas.
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·
Project design should be kept simple. This was achieved by focusing on management
improvements in only one specific Managed Reserve, the Kune Vain Managed Reserve. Although this pilot
is expected to serve as a very positive example, it was avoided that the project design becomes to
complicated, e.g. by trying to improve the management of Nature Reserves everywhere in the country under
a project with limited resources. By focusing on a specific Managed Reserve, project preparation was
more thorough and an area could be selected where the Bank has established themselves as a reliant and
effective partner, and where a healthy mix of local, national and global benefits are expected.
·
Improvements in water utility management are instrumental to achieve sustainability: This was
achieved by linking, almost blending, the project with the Municipal Water and Wastewater Project, which
focuses on improving water utility management through private sector participation and empowering of
local governments.
·
It is essential to maintain support from central governments, but also to emphasize the
decentralized responsibility for financial and local project management. This was achieved for both, CTWs
and Kune-Vain Managed Reserve, by obtaining excellent support from the Ministry of Territorial
Adjustment and Tourism, the Ministry of Environment and the Ministry of Agriculture and Food (which
also cooperated well among themselves to provide the necessary support), and by building local ownership
and understanding for the project design, project benefits and needs for continuous support for the project.
4. Indications of borrower and recipient commitment and ownership:
The Government through the Council of Ministers, the Ministry of Territorial Adjustment and Tourism, the
Ministry of Environment, the Ministry of Agriculture and Food including its General Directorate of
Forestry and Pastures, and the water utilities and municipalities of Durres, Lezhe and Saranda have all
indicated their full support of the project objectives. To this end the above mentioned stakeholders have
taken the following actions:
·
Enacting the Law "On Environmental Protection" (2002), the Law "On Environment Impact
Assessment", the Law "On Protected Areas" (2002), and the Law "On Protection of Marine Environment
from Pollution" (2002).
·
Enacting decrees (i) which create the legal basis for the transfer of all "Hunting Reserves" into
"Managed Reserves" (2003) and (ii) for setting the framework for creating administrative entities for each
"Managed Reserve" (2003).
·
During project preparation the project team requested the Government to impose an immediate stop
on hunting in the Kune Vain marshland. The General Directorate of Forestry and Pastures acted quickly
and prohibited hunting in the Kune Vain marshland in April 2003.
·
The Government is also moving ahead with the reform of the water supply and sanitation sector. A
Rural Water Supply and Sanitation Strategy was prepared by the Government and the final draft of the
National Water Supply and Sanitation Strategy is currently undergoing the administrative procedures for
Government approval.
·
To enable the water utilities to enforce payments for water tariffs the Government has provided the
water bills with an executive title will allow the utilities to take swift legal action against non paying
customers. In addition the participating municipalities expressed their intention to make the annual renewal
of business licenses depending on the prove that the businesses have paid their water bill.
·
The Government is commitment to continue the necessary sector reform which has gained speed by
enacting the above mentioned laws and decrees.
·
The Ministry of Territorial Adjustment and Tourism, and the Ministry of Agriculture have
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expressed in writing that they will make available at no cost the land required for the construction of the
treatment wetlands, and have provided evidence of the public landownership.
·
All the municipalities have enacted a substantial tariff increase for water supply services and have
introduced a wastewater tariff in the beginning of 2003 and have frequently repeated their commitment to
additional tariff increases in the year 2004 and onwards, with the goal to cover all operation and
maintenance cost by 2007, and thereby achieve independence from Government subsidies for operation and
maintenance.
5. Value added of Bank and Global support in this project:
The design of the proposed project has been tailored to support sector reforms, while responding to the
constraints in Albania. It is quite innovative in its approach and brings into fruition the sector expertise
that the Bank has accumulated in Albania and other developing countries. In particular the Bank has:
·
broad international experience in integrated water and ecosystem management;
·
the experience to coordinate closely with other donors which enabled the European Investment
Bank to co-finance the project as part of their first water sector loan to the Albanian Government; and
·
policy development expertise and experience in the design of institutional reforms in the water
and sanitation sector, as well as in the environment sector.
In addition the Bank is leading the donors water sector dialogue with the Government and has gained
reputation by assisting the Government in designing and implementing the reform.
E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8)
1. Economic (see Annex 4):
Cost benefit
NPV=US$ million; ERR = % (see Annex 4)
Cost effectiveness
Incremental Cost
Other (specify)
The objective of the project is to reduce the sewage pollution load from the three cities of Durres, Lezhe
and Saranda in order to protect and improve the environmental conditions of the coastal and marine
habitats. The project supports the creation of constructed treatment wetlands for wastewater treatment as
well as improved management of the Kune Vain Managed Reserve, which contains globally significant
biodiversity.
The detailed Incremental Cost Analysis of the project is provided in Annex 11. This analysis utilizes the
typical incremental cost assessment approach. The without-project scenario can be summarized as follows:
Water pollution, mainly generated by the increasing population concentrated along the Adriatic coastline,
has considerably degraded the natural inland ecosystems and the coastal ecosystems. This in turn
represents a serious threat to the biological diversity of the natural habitats of the coastal wetlands, rivers
and sea water, as well as a potential risk to public health. Albania has no wastewater treatment facilities
and existing raw sewage outfalls are located either directly on the seacoast, on the bank of coastal rivers, or
on drainage ditches that after a short distance discharge directly into globally significant tidal marshlands
and/or the sea. In the context of the described baseline scenario, at present there are no financial resources
allocated by the Government of Albania to create wastewater treatment facilities which would reduce the
pollution load of the globally important ecosystems.
The difference between the cost of Baseline scenario (US$ 21,930,000) and the cost with the GEF
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Alternative (US$ 33,767,000) is estimated at US$ 11,837,000. This represents the incremental cost for
achieving sustainable global environmental benefits. Of this amount, the Government of Albania has
committed to finance US$ 680,000, while US$ 6,287,000 is leveraged from the European Investment Bank.
The amount requested form GEF is US$ 4,870,000. The incremental cost calculation does not include the
expansion of the sewerage system (US$ 4,862,000) that will be funded directly by the European Investment
Bank (EIB), but includes the additional EIB funding for the upgraded wastewater treatment (US$
6,287,000).
GEF
EIB
GoA
Total
Sewage Pollution Reduction
3,960,000
6,287,000
680,000
10,927,000
Environmental Management and 700,000
700,000
Monitoring
Public Communication and Replication
130,000
130,000
Project Management, M & E
80,000
80,000
Total
4,870,000
6,287,000
680,000
11,837,000
The expected global benefit of the proposed project is the improvement of the health and habitat of globally
significant marine and coastal ecosystems along the coastline of Albania, which will be achieved by
reducing pollution from uncontrolled municipal wastewater generated by the urban settlements of the cities
of Durres, Lezhe and Saranda, and by improving the management of the tidal marshland of Kune Vain near
Lezhe.

2. Financial (see Annex 4 and Annex 5):

NPV=US$ million; FRR = % (see Annex 4)
Financial Rate of Return: A financial rate of return (FRR) has not been estimated for the project since the
project benefits are principally in the form of externalities that do not result in a financial benefit to the
participating companies in the form of increased sales or operating cost savings. However, as seen in the
preceding section on economic analysis, the project has significant economic benefits.
1. Project Financing Plan: The total cost of the project is estimated at US$20 million (including taxes
and duties of US$3.3 million). The project will be financed by a GEF grant of US$4.87 million
equivalent, an EIB loan of US$11.15 million equivalent, and a central government contribution of
US$3.98 million equivalent (covering the cost of land for the project, and taxes and duties on the
project investments).
Financial Assessment of the Participating Companies: All three participating companies are also
participants under the ongoing Municipal Water and Wastewater Project (MWWP) which was approved
by IDA's Board of Executive Directors in January 2003. A detailed financial assessment and analysis of
the companies was carried out under the MWWP and reported in the Project Appraisal Document No.
24826 dated December 30, 2002 (the relevant extract from the report is included as Additional Annex 13 in
the current PAD). As reported there, all three companies are at present in a weak financial situation as a
result of low water tariffs and low collection rates, combined with operating inefficiencies resulting in high
operating and maintenance (O & M) expenses. This has required the central government to provide
operating subsidies to the companies to meet the payments to their suppliers, principally KESH, the
national electricity company. Substantial increases in collection rates, together with progressive increases
in tariff levels and a change in the tariff structure will be necessary to turn the three companies into
financially self-sustaining entities. This is being addressed through the conditionalities for financial
performance improvement that were agreed to in the Credit Agreement under the MWWP and are being
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monitored during the implementation of the MWWP. An important feature of the MWWP is the
introduction of a new incentive-based multi-city management contract with a reputed international operator
to improve water supply and sanitation services and to achieve financial viability in the participating water
utilities. The Operator is already in place under a five-year contract. As a result of the remedial actions
being pursued under the MWWP, the financial situation of the three companies in expected to improve
progressively, resulting in recovery of all cash O & M expenses by 2007 and with full-cost recovery by
2010 at which stage the companies would have positive net income. The wastewater treatment facilities to
be financed through the present GEF/EIB operation will be operated and maintained by the three water
utilities with the help of the Operator. Since the current project does not provide direct financial benefits to
the companies in the form of increased water sales or O & M expense savings, the approach is to cover the
incremental expenses on account of the project through corresponding tariff increases. Financial
projections for the three companies are presented in Annex 5. It is projected that the financial performance
targets set under the MWWP would continue to be met, and the increased tariffs will continue to remain
affordable for the population concerned.

Fiscal Impact:
The main benefits under the project are the environmental externalities that would accrue to the economy as
described in the cost-benefit analysis section earlier in this PAD. To enable these benefits to be realized,
the central government would have to contribute during project implementation an amount estimated at
about US$3.98 million equivalent to finance land (US$0.68 million), and taxes and duties on investments
(US$3.3 million). In addition, the central government will also provide an interest subsidy to the three
companies in respect of the EIB loan (the NPV of the subsidy over the duration of the EIB loan is estimated
at US$ 2.4 million equivalent).
3. Technical:
The Constructed Treatment Wetland (CTW) is a low cost water treatment technology requiring minimal
maintenance and operation costs. It relies on natural processes in the wetlands which do only need to be
supported through a minimum of mechanical devices and energy supply. The mechanisms that occur in
these ecosystems (sedimentation, adsorption, flocculation, precipitation, biological decomposition and
metabolism) decrease the concentration of impurities steadily over the distance the wastewater flows
through the wetlands. Streams, wetlands and lakes all can act as natural treatment systems too, but
wetlands, because of plants abundance and shallow depth, are especially effective in this task. Therefore
wetlands, whether natural or constructed, have been generally selected as efficient and cost effective means
of municipal wastewater treatment. Should in the future a conventional wastewater treatment plant, which
could achieve an even better pollution reduction, become affordable for the participating cities, the
wetlands could be used as an effective tertiary treatment that will further reduce nutrient levels and
continue to act as an additional habitat for endangered species.
In Europe Constructed Treatment Wetlands are rarely used for cities the size of Durres (150,000
inhabitants), mainly because the required space is seldom available or to expensive to obtain. In addition
most of the European cities can bear the higher costs of a conventional treatment plan. To minimize the
technical risk associated with the size of the CTW, the project team was assisted by an outside consultant
which conducted a technical review of the CTW design which led to further optimization. In addition
special attention was paid to the pre-treatment of the wastewater before it reaches the CTWs. The design
report as well as the design review report are in the project files.
4. Institutional:
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4.1 Executing agencies:
Executing agency will be the Water PIU which is already successfully executing the Water Supply Urgent
Rehabilitation Project and the Municipal Water and Wastewater Project.
4.2 Project management:
The proposed project will be managed by the Water PIU the Ministry of Public Works and Tourism, in
cooperation with the three water utilities, the Ministry of Environment, the Ministry of Agriculture and
Food, the local authorities and NGOs.
4.3 Procurement issues:
The PIU will carry out all procurement. Staff from the Ministry of Agriculture and Food, from the
Ministry of Environment and from KVMA Board will participate in writing Terms of Reference, evaluation
of technical proposals and supervision of environmental management and monitoring activities. All other
tasks will be carried out by the procurement experienced PIU staff. Therefore no major issues that requires
special attention are anticipated.
4.4 Financial management issues:
The financial management arrangements of the project are acceptable to the Bank.
As of the date of this report, the borrower is in compliance with its audit covenants of existing
Bank-financed projects. PIU's previous and current project financial statements and auditing arrangements
are satisfactory and it has been agreed that these will be replicated for GEF/EIB Project. The annual
audited project financial statements will be provided to the Bank within six months of the end of each fiscal
year and also at the closing of the project.
The latest Country Financial Accountability Assessment (CFAA) confirms that improvement is required in
the management of public expenditures, including cash management in Treasury and better internal control
throughout the public sector. Absence of a solid legal basis for internal audit further hampers the solidness
of the internal control. Thus, PIU has developed policies and procedures that operate in addition to those of
the current public expenditure management framework to minimize project financial management risks.

The banking sector in Albania is relatively weak and the Bank of Albania where the Special Account will
be opened does not provide normal commercial banking services. However, PIU will open all of its
projects' second-tier Bank Accounts in a commercial bank acceptable to the Bank whose financial status
and statements are reviewed on an ongoing basis by the Bank. As these arrangements have been
satisfactory, they will remain in place during GEF/EIB Project implementation.
5. Environmental:
Environmental Category: B (Partial Assessment)
5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including
consultation and disclosure) and the significant issues and their treatment emerging from this analysis.
The project will finance the construction of low cost ecologically based wastewater treatment technologies,
with the major environmental objective to reduce the amount of nutrients discharged into the Adriatic sea;
making the project environmentally beneficial. The project will address global benefits by reducing
pollution in coastal areas and protecting the marine ecosystem from destruction. Apart from the
constructed treatment wetlands and earth dykes planned to protect the CTW from the floods, no new
physical structures of significant size will be built and no major adverse environmental impacts are
expected. Any potential negative environmental impacts that might emerge, are expected to be localized or
able to be mitigated. Given the nature and location of the areas selected for the establishment of the CTWs
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no impact on cultural properties is expected and also the possibility of chance finds during construction
activities is assessed unlikely. Nevertheless, the Environmental Management Plan (EMP) and the
construction contract(s) will provide appropriate instructions for dealing with the above mentioned events.
Due to the nature of the CTW's work, the project has been classified as Environmental Category "B". In
accordance with the Bank policy on Environmental Impact Assessment (EIA), the Ministry of Territorial
Adjustment and Tourism in collaboration with the Ministry of Environment carried out the Environmental
Impact Assessment of the project. A combination of quantitative and qualitative assessment techniques
(ranging from desk-based analysis, to water and social survey) have been undertaken. The EIA reflects the
environmental guidelines and standards of IDA which are in line with the recently enacted Albanian Law
"On Environmental Impact Assessment". The EIA describes existing environmental conditions at the three
project sites (including climate, hydrology, soil and water quality, groundwater and biodiversity) and
assesses the potential impacts on these conditions from implementation of the project, during the
construction and operation phases. As part of the EIA, an Environmental Management Plan (EMP) was
prepared to identify mitigation measures and monitoring activities that will address potential impacts and
therefore provide an adequate safeguard for the environment. The EIA concluded that the proposed
activities are in compliance with the environmental requirements of both the Government of Albania and
the Bank.
5.2 What are the main features of the EMP and are they adequate?
An Environmental Management Plan (EMP) was prepared prior to appraisal. The EMP includes
monitoring and mitigation activities for the three constructed treatment wetlands during project preparation
and implementation. In addition the EMP includes: (i) a contingency plan to address problems that could
develop during facilities' construction and operation. The contingency plan includes measures for
determining and remediating nuisance conditions, addressing any toxicity observed in the wetland, and
dealing with construction, or operational errors, or unpredictable events; (ii) appropriate instructions for
dealing with Cultural Property Safeguard; (iii) establishment of a comprehensive monitoring program for
potential dangers to the wetland ecosystem, such as bioaccumulation, avian botulism and other avian
diseases, vector problems, invasion of non-native plants and animals, debris accumulation, and nuisance
conditions; (iv) guidelines for sustainable management of the water regimes in the wetlands, such as
procedures in the event of accidental pollution, floods, provision of optimal treatment capacity; (v) soil
removal and selection of suitable landfills for waste disposal from the construction phase; (vi) evaluation of
flooding risks and implications for ground water protection; (vii) environmental management guidelines for
contractors; and (viii) procedures for sludge removal and disposal. Supervision will verify that all these
measures are being implemented.
5.3 For Category A and B projects, timeline and status of EA:
Date of receipt of final draft: March 7, 2003


The Environmental Impact Assessment (EIA) for this project was finalized prior to appraisal. It was
reviewed and commented on by the ECA Safeguard Compliance Unit and changes this Unit requested were
included. The final EIA was disclosed before Negotiations. A final public consultation meeting for the
EIA will be held before Board presentation.
5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA
report on the environmental impacts and proposed environment management plan? Describe mechanisms
of consultation that were used and which groups were consulted?

The preparation of this project built first on the social assessment that was carried out for the Municipal
Water and Wastewater Project and included focus group meetings and a stakeholders workshops. In
addition a public consultation process involving central and local authorities, municipalities, communities
affected by the project, NGOs and local environmental specialists was carried out. As described in other
parts of this document, the participatory approach involved all the above mentioned stakeholders. The
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consultation process increased awareness of environmental issues and built public consensus to help
selecting the most environmentally acceptable solutions/sites for the construction of the wetland in
proximity of the three cities.
Also it is expected that consultation with beneficiaries will be on a continuous basis during project
implementation through public relations campaigns conducted by the private operator under the Municipal
Water and Wastewater Project. The draft EMP was distributed to relevant government bodies, institutions
and NGOs. To facilitate access of the EMP, copies were distributed to local municipalities for public
review and newspaper announcements were be made to inform about the key issues and the availability of
the draft EMPF.
5.5 What mechanisms have been established to monitor and evaluate the impact of the project on the
environment? Do the indicators reflect the objectives and results of the EMP?
Environmental indicators will be monitored annually and obligations for implementation, in accordance
with the Albanian Law on Environmental Protection and the OP 4.01, were included in the contract with
the private operator. Consultants (or/and NGOs) will be engaged to monitor project implementation and
conduct periodic environmental audits.
6. Social:
6.1 Summarize key social issues relevant to the project objectives, and specify the project's social
development outcomes.
Environmental problems in Albania, like in most other transition countries, still take a secondary place in
the order of priorities. The GEF-Integrated Water and Ecosystem Management Project, by reducing
land-based pollution from the three cities of Saranda, Lezhe and Durres and introducing low cost
ecologically based wastewater treatment technologies to protect, restore and enlarge endangered coastal and
marine habitats would put forward the idea of environmental protection as a public good with significant
social (health), and economic (eco-tourism) effects. Thus the rationale behind using constructed wetlands
for natural wastewater treatment should be well communicated to and understood by the authorities and the
public at large, since the long term effects of environment-related activities affect the entire population.
A needs assessment was carried out to analyze the knowledge, attitudes, practices, and barriers to change
the views of all relevant stakeholders. This involved segmenting audiences based on their position,
understanding actors' interests and framing the issues. This assessment helped design a public consultation
program and set the agenda for the discussion on the project activities.
The sanitary and environmental conditions of the communities living near the Chukka channel in Saranda,
and those living by the open-air sewerage canal in Durres are very poor. The communities showed interest
as they found out that the living conditions might improve as a result of the project. In Durres the project
will produce visible and tangible benefits in their livelihood as the channel's water quality will improve and
the waste water redirected. A random sample of inhabitants interviewed welcomed the initiative. Those
inhabitants, mostly coming from the Kosovo area, established their residence in an area around the
wastewater carrying drainage ditches.
During the communication assessment other issues raised by representatives of local authorities were
whether the capacity of the CTW would be in line with future population growth and the location in
compliance with urban development plans; how the problem of mosquito and odor control would be
handled; and what would be the advantages/disadvantages of investing in a constructed treatment wetland
system vis-à-vis a conventional system. In Lezhe particular concerns emerged regarding the
advantages/disadvantages of the selected alternative; the issue of landownership, the lifespan of the selected
system as well as the treatment of the sewage waters of the commune of Shengjin. All the issues identified
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during the above mentioned assessment were satisfactorily addressed during the consultation process and
taken into consideration in the project design.
6.2 Participatory Approach: How are key stakeholders participating in the project?
The project is promoting a participatory approach through a process of consultation that will represent an
innovative avenue to arrive at a common understanding of the issues related to wastewater management and
environmental protection. This approach will, in turn, broaden the public consensus and helped already
during project preparation to select the most socially/politically/environmentally acceptable site for the
construction of the wetland in the three cities. It will also promote the dialogue within the management
Board for the management of the natural protected areas. Building consensus over these issues ultimately
will broaden constituencies support for the water sector reform program currently put in concrete form in
the National Water Supply and Sanitation Strategy of the Albanian Government. By increasing public
awareness on the issue of environmental protection and ecosystem management, the consultations will make
a major contribution to improve environmental governance in Albania.
Three separate consultations - structured in two phases - have been held under the auspices of the
municipalities of Saranda, Lezhe and Durres, organized around the following lines: 1) promoting the use of
man made wetlands for wastewater treatment; 2) promoting a dialogue among public institutions and an
effective collaborative decision making within the framework of the proposed Management Board for the
management of the natural protected areas of Lezhe; 3) identifying in a participatory manner the main
issues of concern and possible areas of improvements. Participants in the first phase included: a) local
authorities (Inspectors of the Ministry of Environment, General Directorate of Forestry and Pasture,
Municipal Representatives, Water Utilities) and Albanian experts; b) local communities affected by the
project; c) local NGOs and environmental specialists. Participants in the second phase include the
self-selected representatives from the three groups and the four level of decision making: 1)Council of
Territorial Adjustment, 2) Ministry of Environment, 3) Ministry of Territorial Adjustment and Tourism, 4)
local municipal authorities. Furthermore, during the implementation of the project, a consultation process
will be established to promote dialogue and build consensus between the Management Board of the natural
protected areas of Lezha and all the other involved stakeholders for the preparation and selection of the
most suitable Management Plan for the natural protected areas of Lezhe.
6.3 How does the project involve consultations or collaboration with NGOs or other civil society
organizations?
In addition to the participation of local NGOs, the National network of Environmental NGOs has been
involved in the process in order to guarantee a fair representations of the views and concerns of civil society
organizations. A meeting has been convened by the Ministry of Environment, with authorities from the
three cities to discuss issues raised by the members of the network and inform the decision making process.
To increase transparency in government/civil society relations the Bank, within the Municipal Water and
Wastewater Project, is also assisting the MoTAT to develop a public communication program. The policy
dialogue component of the program includes the creation of a public information system for water and
wastewater issues as a venue for input and comment by stakeholders. Specifically, this entails a website, an
information point in the Ministry as well as in other major cities, support to the central public information
center, establishment of a hotline for information on water, and publicizing of tendering procedures.
6.4 What institutional arrangements have been provided to ensure the project achieves its social
development outcomes?
The Municipal Water and Wastewater Project will establish a Consumer Panel (CP) in each of the three
cities to enable the population, particularly the poor, to interact directly with management of the water
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utilities about problems and opportunities. The CPs will help channel constructive suggestions and
feedback of consumers' specific needs to the utilities. CPs meetings' findings/recommendations about
improvement of service quality, affordability and other issues would be communicated to all service users.
6.5 How will the project monitor performance in terms of social development outcomes?
The three cities under the GEF/EIB project are included in the ongoing Poverty and Social Impact
Assessment for the water sector that will gauge public perception and understanding of the government
process, to assess what are the major concerns and priorities of the general public, as well as the poor,
regarding the involvement of the private sector in the provision of water services in Albania. Currently the
baseline is established for a Social Impact Monitoring & Evaluation system.
A series of polling will be carried out throughout the project to evaluate the social impact as well as the
public acceptance of the new system. In particular these attitudinal surveys will: 1) identify, evaluate and
monitor critical social indicators measuring the social impacts of the project; 2) test and value public
awareness, support, satisfaction and concerns towards the project as well as perceptions of water services
linked with health and environment (water quality); 3) compare the value of water and wastewater services
with other public services (continuity, reliability, etc.)
7. Safeguard Policies:
7.1 Are any of the following safeguard policies triggered by the project?
Policy
Triggered
Environmental Assessment (OP 4.01, BP 4.01, GP 4.01)
Yes
No
Natural Habitats (OP 4.04, BP 4.04, GP 4.04)
Yes
No
Forestry (OP 4.36, GP 4.36)
Yes
No
Pest Management (OP 4.09)
Yes
No
Cultural Property (OPN 11.03)
Yes
No
Indigenous Peoples (OD 4.20)
Yes
No
Involuntary Resettlement (OP/BP 4.12)
Yes
No
Safety of Dams (OP 4.37, BP 4.37)
Yes
No
Projects in International Waters (OP 7.50, BP 7.50, GP 7.50)
Yes
No
Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)*
Yes
No
7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies.
Environmental Assessment: An Environmental Impact Assessment and Environmental Management Plan
(EMP) was completed before project appraisal.
International Waterways: The Government of Albania notified the riparian countries about the project on
July 8, 2003. The letter is in the project files.
A careful assessment of the project scope and impact lead to the conclusion that the Project: (i) would only
positively affect the quality or quantity of water discharged into the Adriatic Sea; and (ii) would only be
positively affected by the other riparians' water use. In that respect, the project is in compliance with the
Barcelona Convention for the Protection of the Mediterranean Sea against Pollution, signed 16 February
1976, and revised in Barcelona, Spain, on 10 June 1995 as the Convention for the Protection of the Marine
Environment and the Coastal Region of the Mediterranean (in particular, Articles 4.2, 8 (a), and 11 of the
Convention). Although it is not anticipated that the Project will have any negative impact on the quality or
quantity of water in the Adriatic Sea, the riparian countries were provided with relevant details for the
proposed Project, pursuant to paragraph 4 of aforesaid Operational Policy.
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Cultural Property: Although no impact on cultural property is expected, the possibility of chance finds
during construction cannot be completely ruled out. Therefore the EMP and the construction contracts will
provide appropriate instructions for dealing with this possibility. During supervision the project team will
verify if these measures are implemented properly.
Involuntary Resettlement: This safeguard policy does not apply because the project does not involve land
acquisition. All land required for the construction of the treatment wetlands is owned by the Government
and will be made available for the project. There is also no resettlement issue because the land is fallow
land which is not in use - further, there are no squatters or encroachers on this land who will need to be
forcibly removed. The Government confirmed in a letter that the land is owned by the Government,
currently not in use and that it will be made available for the project. The sewerage pipes will be laid in
public roads only - further, provision will be made in the construction contract to offset any temporary
inconvenience caused by obstructions in access to property. Additionally, during supervision the project
team will verify that there is no resettlement or land acquisition.
F. Sustainability and Risks
1. Sustainability:
The project will achieve sustainability by promoting an integrated approach to management of wastewaters
and natural resources. The main purpose is to optimize the ecological, economic and social benefits of the
proposed interventions to better preserve the coastal and marine ecosystems. Environmental sustainability
will be achieved by physically reducing the discharges of nutrient into the coastal lagoon system and sea,
improving the monitoring of the ecosystem health (water quality and biodiversity status), and implementing
a management plan for the Kune Vain Managed Reserve. Institutional sustainability will be achieved by
working at local level with a wide range of stakeholders, building capacity of the water utilities to manage
the constructed wetlands, strengthening the capacity of the local water quality monitoring institutions and
the staff of the Kune Vain Managed Reserve as well as working with the local communities, farmers, and
other user groups. Financial and economic sustainability will be achieved by introducing a private sector
based management approach to water and wastewater utilities, financial support from the Government to
protected areas as foreseen by the new legislation and by exploring other economic instruments for
management of the Kune Vain protected areas. The project builds on several ongoing Government
programs and donor-supported projects that will help sustain the project activities.
1a. Replicability:
The proposed project has a high demonstration value since it is one of the first projects in the region to
promote an integrated approach to water and land management based on constructed treatment wetlands.
Other municipalities in Albania are the most likely candidates for replication since the country has no
wastewater treatments and a long coastline with several lagoons and wetlands of significant value. The
potential for replication in the whole Mediterranean region is quite high. The project therefore will finance
the development of a replication strategy that includes identification of potential sites for replication and
methods for dissemination of lessons. The project will support knowledge sharing within the country and
the region.
The project will also offer the opportunity to implement some of the measures proposed by the recently
approved Law on Protected Areas to strengthen the institutional framework for the management of the
Kune Vain marshlands. The model for management of the protected area adopted in Kune Vain could be
used in other protected areas in the country. As identified in the Strategic Action Plan for the
Mediterranean, several hotspots have been identified along the Adriatic coast.
- 23 -

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2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1):
Risk
Risk Rating
Risk Mitigation Measure
From Outputs to Objective
Lack of continuing commitment from the
M
Regarded as modest because the Government
Government of Albania to the project
has undertaken significant commitments in the
environmental sector and has also some
ecomomic interest in the project because it deals
with tourist areas. The project team will
continue the dialogue with the Government on
the benefits of pollution reduction and natural
areas protection.
Consumers unwilling/unable to pay for
S
1) Willingness-to-pay study shows that
water and wastewater services
willingness-to-pay is high and tariffs are
affordable. Also the willigness to pay for
wastewater treatment is higher compared with
other cities in Albanai, because of the additional
benefits it will bring to the tourist sector.
2) Private Operator is expected to launch public
awareness campaign.
3) Metering in combination with adequate tariff
policy will allow poor customers to reduce
consumption and pay less.
Project not be able to foster economic
S
Ongoing dialogue between the Bank and the
growth through creating an enabling
Government through ESW work and the entire
environment for tourism, if the
project portfolio.
Government fails to further develop
sustainable environmental strategies,
including the enforcement of proper urban
and coastal zone planning.

From Components to Outputs
Lack of commitment of local communities
S
A comprehensive Management Plan will be
and user groups to protected the Kune
prepared following a participatory planning
Vain marschland.
approach and mechanisms will be established
for stakeholders' consultation. Strategies will be
developed to prepare local population for new
job opportunities arising throughout the project
area and any negative impact on existing user
groups, e.g. fishermen, will be mitigated.
Inadequate capacity for the management
N
The operation and maintenance of the CTWs
and maintenance of CTWs and the
will be handed over to the private operator
protected areas.
involved in the Municipal Water and
Wastewater Project, which has suffucient
capacity to manage and maintain the CTWs.
Inadequate financial resources for
S
The Government of Albania is making
management and maintenance of the
considerable commitments in addressing
protected areas.
environmental issues. Administrations will
- 24 -

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receive support to develop fund-raising plans for
long-term financial sustainability.
Possible increased pollution load into
M
(i) CTW's offer a very robust and resilient form
wetlands and coastal areas if the project is
of wastewater treatment that would not fail
successful in increasing waterwater
completely even if badly managed;
collection but not in wastewater treatment.
(ii) the CTW technology has low operation cost
and represents one of the most affordable
options for the cities;
(iii) the design of the CTW was independently
reviewed; and
(iv) the international operator is capable to
operate the CTWs properly.
Overall Risk Rating
S
Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk)
3. Possible Controversial Aspects:
The project is not considered controversial, since the proposed interventions have the support from local
communities and authorities. One possible controversial aspect is the potential indirect impact caused by
the community perception of restricted access to resources in the protected areas. To mitigate this aspect,
the development of the management plan for the Kune Vain Managed Reserve will be done in close
consultation with local stakeholders. The participatory planning approach that started during the
preparatory phase will continue during project implementation.
G. Main Conditions
1. Effectiveness Condition
The Grant Agreement has been duly authorized or ratified by Albania.
2. Other [classify according to covenant types used in the Legal Agreements.]
Conditions for Negotiation
l
Confirmation from the Ministry of Territorial Adjustment and Tourism and the Ministry of Agriculture
and Food, that the land foreseen for the constructed treatment wetlands is owned by the Government
and will be made available to the local governments for the construction of the treatment wetlands
(confirmed to the Bank in a letter dated Sept. 30, 2003).
l
Approval of the National Water Supply and Sanitation Strategy by the Council of Ministers (the
Strategy was approved by the Council of Ministers on October 16, 2003).
Financial Covenants
PIU will maintain a financial management system acceptable to the Bank. The project financial statements,
SOEs and Special Account will be audited by independent auditors acceptable to the Bank and on terms of
reference acceptable to the Bank. The annual audited statements and audit report will be provided to the
Bank within six months of the end of each fiscal year.
Dated Covenants
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The National Councils of Territorial Adjustment of Albania issues the construction site and construction
permission for the construction of the Constructed Treatment Wetlands by March 31, 2005.
Other Covenants
The Recipient shall ensure that all measures necessary for the carrying out of the Environmental
Management Plan shall be taken in a timely manner.

The Recipient shall ensure that a qualified operator for the operation of the Constructed Treatments
Wetlands shall have been retained in a timely manner to enable their effective operation.
H. Readiness for Implementation
1. a) The engineering design documents for the first year's activities are complete and ready for the start
of project implementation.
1. b) Not applicable.
2. The procurement documents for the first year's activities are complete and ready for the start of
project implementation.
3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory
quality.
4. The following items are lacking and are discussed under loan conditions (Section G):
I. Compliance with Bank Policies
1. This project complies with all applicable Bank policies.
2. The following exceptions to Bank policies are recommended for approval. The project complies with
all other applicable Bank policies.
Andreas Rohde
Sumter Lee Travers
Orsalia Kalantzopoulos
Team Leader
Sector Manager
Country Director
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Annex 1: Project Design Summary
ALBANIA: Integrated Water & EcoSystems Management
\
Key Performance
Data Collection Strategy
Hierarchy of Objectives
Indicators
Critical Assumptions
Sector-related CAS Goal:
Sector Indicators:
Sector/ country reports:
(from Goal to Bank Mission)
l Improve infrastructure
l Framework developed for
l Project Status reports
l Government committed
and create institutional
protection of natural
l Project's Implementation
to environmental
environments conducive
resources
Completion Report
sustainability.
to infrastructure
l Enforcement of
l Country reports
sustainability.
environmental
regulations improved
l Promote environmental
l Concrete decentralization
sustainability and
of environmental services
sustainable use of natural
to local government -
resources
quantified
l Integration of
environmental
considerations in sectorial
policies - number of
environmental units
established - effectiveness
of environmental units
GEF Operational Program:
Outcome / Impact
Indicators:

OP12: Integrated Ecosystem
Management.
OP2: Coastal, Marine and
freshwater Ecosystem
OP9: Integrated Ecosystem
Management
- 27 -

---

Key Performance
Data Collection Strategy
Hierarchy of Objectives
Indicators
Critical Assumptions
Global Objective:
Outcome / Impact
Project reports:
(from Objective to Goal)
Indicators:
The global objective of the
l Improved health of
l Project Status reports.
l No additional negative
project is to improve the
posidonia oceanica
l Project's Implementation
environmental impact
health and habitat conditions
(seagrass) meadows:
Completion report.
will occur in the project
of the global significant
biomass per surface unit;
l Coastal Monitoring
area, e.g. oil spill from
ecosystems along the coastline
shoot density, epiphyte
report.
tanker.
of Albania, by significantly
growth and area covered.
l Kune-Vain Monitoring
l Local and Central
reducing uncontrolled
report.
Government are
wastewater discharged into
l Improved biodiversity in
continuing their
international waters and
Kune-Vain Managed
commitment to
improving the management of
Reserve regarding the
environmental protection
the tidal marshland of
following flagship
in the area.
Kune-Vain.
Classes: Malachofauna,
l Government honors their
Herpetofauna, Avifauna,
commitment to support
and Mammalia.
the water and wastewater
utilities in the
l Decrease nutrient load
participating cities.
caused by the wastewater
l Management Contract
to the marine
with Private Operator
environment in the
successfully implemented
project area and the
(under separate IDA
Kune-Vain tidal
project).
marshland as follows:
Nitrogen: 115t/a
Phosphorus: 32 t/a
l Integrated Management
l Project Status reports.
l Commitment of all
Plan implemented for
l Project's Implementation
stakeholders to
Kune-Vain Managed
Completion report.
implement Kune-Vain
Reserve.
l Annual Kune-Vain
Management Plan
Report.
continues.
Project Development Objective
The Project Development
l Wastewater collection
Objective is to improve
and discharge in the
wastewater services in the
participation cities
cities of Durres, Lezhe and
improved.
Saranda.
- 28 -

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Key Performance
Data Collection Strategy
Hierarchy of Objectives
Indicators
Critical Assumptions
Output from each
Output Indicators:
Project reports:
(from Outputs to Objective)
Component:
Sewage Pollution Reduction l CTW constructed and
l Project Status reports.
l Government Counterpart
Component
operational.
l Project's Implementation
funds provided in a
l Removal efficiency of
Completion report.
timely manner.
l Reduce sewage pollution
CTWs: 50 percent for
l No flaws in design of
load into coastal areas
Total Nitrogen
CTW.
and Kune-Vain
(unfiltered), 25 percent
l Land provided by
marshland.
for Total Phosphor
Government in a timely
(unfiltered), and 70
manner.
percent for BOD5
(unfiltered).
l CTW socially accepted.
l Number of complains
received by the utilities
regarding the operation of
the CTW (odor, noise,
mosquitos etc.): less than
3 percent of customers
complains.
Environmental Management
and Monitoring Component
l Increase capacity to
l Adoption of the Kune
l Project Status reports.
l Incentives for rangers in
manage the protected
Vain Management Plan
l Project's Implementation
place to participate in the
Kune-Vain wetland.
that includes process
Completion report.
training and stay in the
l Improve environmental
indicators, stress
job afterwards.
monitoring capacity in
reduction indicators, and
l Sufficient monitoring
Kune-Vain Managed
environmental status
capacity available in the
Area.
indicators.
country, e.g. Tirana
l Improve environmental
l Implementation of a basic
University.
monitoring capacity in
monitoring system of the
coastal areas.
coastal areas.

Public Communication and
Replication Component
l Public communication
l Stakeholders
l Project Status reports.
l Replication potential
program carried out.
consultations for the
l Project's Implementation
exists.
l Increase awareness for
preparation and
Completion report.
l Substantial number of
protecting the
implementation of the
interested decision
biodiversity in the
Kune-Vain Management
makers can be identified
project area.
Plan ongoing throughout
and mobilized.
l Increase the level on
the lifetime of the project.
tranpsarency and public
l Environmental Education
participation on water
and Communication
and envinromental
Program delivered.
isssues
l Coordination between the
l Promote replication of
Central, local authorities
the project in other areas
and private operator
of Albania and the
communiucation
- 29 -

---

region.
activities achieved
l Replication Strategy
developed and
implemented.
l Information to local
communities and decision
makers at potential
replication sites provided.
l Consensus building
program for decision
makers implemented.
Project Management
Component
l Project Management,
l PIU operational.
l Project Status reports.
l Operational support from
Monitoring and
l Project progress reports l Project's Implementation
key government agencies
Evaluation established
delivered on schedule.
Completion report.
provided.
and operational.
Project Components /
Inputs: (budget for each
Project reports:
(from Components to
Sub-components:
component)
Outputs)
Sewage Pollution Reduction Budgets in US$:
l Project Status reports.
l High qualified PIU staff
l Project's Implementation
can be maintained at all
l Wetlands
Incremental Cost:
Completion report.
times.
l Main collectors
l Land acquisition
GEF:
Wetlands:
Environmental Management 3,960,000
and Monitoring
Env. Manag./Monit.: 700,000
Replication:
Public Communication and 130,000
Replication Component
Project Management: 80,000

Project Management
4,870,000
GoA:
Land acquisition: 680,000
680,000
EIB:
Wastewater Treat.
6,287,000
Sewerage:
4,862,000

11,149,000
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Baseline:
IDA:
Management Contract which
includes the operation of the
sewage systems is financed by
IDA under the Municipal
Water and Wastewater Project
________
21,930,000
Total Project cost:
GEF:
4,870,000
GoA 680,000
EIB:
6,287,000
11,837,000
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Annex 2: Detailed Project Description
ALBANIA: Integrated Water & EcoSystems Management
By Component:
Project Component 1 - Sewage Pollution Reduction - US$15.79 million
Total: US$15.79 million; GEF: US$3.96 million, EIB: US$11.15 million, GoA: US$0.68 million)
The sites for the Constructed Treatment Wetlands (CTW) have been carefully selected through a process of
public consultation that involved local authorities, local communities, civil society and different line
ministries. In consultation with the Ministry of Environment specific criteria were established and each
alternative site weighed according those criteria. Criteria included: potential nutrient reduction capacity,
land availability, distance from built-up areas, adequacy of the site in terms of present and future needs,
absence of physical constraints and proximity to sites for discharging treated water. Other sites, initially
considered to be included in this project, were not selected due to the lack of potential generation of global
benefits, conflicts over land use or technical implementation difficulties.
The GEF funds will support the creation of altogether 92 ha of Constructed Treatment Wetlands (CTWs)
in three already identified sites in proximity of the urban areas of Durres, Lezha and Saranda. Mechanisms
that occur in these ecosystems (sedimentation, adsorption, flocculation, precipitation and biological
decomposition) will substantially decrease the concentration of polluting substances flowing through the
wetlands and reduce the impact of untreated wastewater of urban origin on the international waterways and
coastal marshlands. The artificial wetlands offer the opportunity to realize a low cost wastewater treatment
systems that relies on natural processes and reduces the need for energy supply. The evaluation of
alternatives has been carried out through a multi-criteria approach that included: environmental impacts,
project costs, local conditions, institutional framework, training and monitoring requirements, hydro
geological and health risks. The construction works will include civil works, equipment and construction of
infrastructure which will regulate water flows through the wetlands, which will allow to optimize nutrient
trapping and biodiversity restoration.
Financial support from the European Investment Bank (EIB) was identified. It will finance sewage
collectors to connect the existing sewerage outflows of the three urban areas of Durres, Lezhe and Saranda
to the constructed treatment wetlands, the pretreatment facilities to improve the overall performance of the
natural system, and the rehabilitation and extension of parts of the existing sewerage network. The
construction of those sewerage infrastructure will halt the uncontrolled sewage discharge directly into the
coastal lagoon systems that is currently occurring and constitutes the most relevant threat for the survival
of the globally important coastal marine ecosystem and tidal marshlands. Furthermore the EIB will
support the connection of the Shengjin area to the CTW in Lezhe. Shengjin represents an important natural
ecosystem characterized by the presence of marshlands, the Kanalla Lake and by a long beach with a
littoral pine-wood on the coastal dunes. Connecting Shengjin to the CTW will contribute to the protection
of this important environment which is located just next to the Kune Vain Managed Area.
The following tables show a more detailed break down of the investment costs for the Sewage Pollution
Reduction Component:
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Albania - Integrated Water and Ecosystems Management Project
SEWAGE&WWTP SYSTEMS
COST BREAKDOWN
Cost Estimate
Land, Tax&Duty
Cost without tax&Duties
$
GoA ($)
GEF ($)
EIB ($)
1-SEWERAGE COST
Sub-Total 1.1 Construction Works
Cost Estimate
4,834,845.70

920,130.70

N/A
3,914,715.00

Physical Contingency (15% of Cost Estimate)
725,226.85

138,019.60

N/A
587,207.25

Sub-Total 1.2
5,560,072.55

1,058,150.30

N/A
4,501,922.25

Engineering & Consultancy services
Engineering cost for Final Design (see attached)
-

N/A
N/A
Supervision of Works (8% of Sub-Total 1.2) 360,000.00

N/A
N/A
360,000.00

TOTAL INVESTMENT COST ($)
5,920,072.55

1,058,150.30

N/A
4,861,922.25

2-WWTP COST
Sub-Total 2.1 Construction Works
Cost Estimate 10,638,500.00

2,386,600.00

3,189,800.00

5,062,700.00

Physical Contingency (15% of Cost Estimate) 1,595,775.00

357,990.00

478,470.00

759,405.00

Sub-Total 2.2
12,234,275.00

2,744,590.00

3,668,270.00

5,822,105.00

Engineering & Consultancy services
Engineering cost for Final Design
N/A
N/A
N/A
N/A
Supervision of Works (8% of Sub-Total 2 GEF+EIB)
765,000.00

N/A
300,000.00

465,000.00

TOTAL INVESTMENT COST ($)
12,999,275.00

2,744,590.00

3,968,270.00

6,287,105.00

3-TOTAL INVESTMENT COST (1+2)
18,919,347.55

3,802,740.30

3,968,270.00

11,149,027.25

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Albania - Integrated Water and Ecosystems Management Project
SEWERAGE SYSTEM SUB-COMPONENT
COST BREAKDOWN
WWTP COST BREAKDOWN
Cost Estimate
Land, Tax&Duty Cost without tax&Duties
$
Goa ($)
GEF ($)
EIB ($)
Durres
1)-GOA (US$)
1.1)-Land (including tax and duties)
-
-
-
-
2)-Cost for EIB component ($)
Cost (without taxes and duties):
2.1)-In-let & out-let main sewage collector
724,500.00

2.2)-North-Eastern sewage system (Beach area):
(i)-Main collector extension (KFOR area)
402,500.00

(ii)-Secondary sewer and house connection (KFOR area)
241,500.00

(ii)-Improvement of existing n°6 PS
241,500.00

(iii)-PS n°6 and PS n° 7 sewage connection
72,450.00

Total for EIB component 1,682,450.00

1,682,450.00

2.3)-Taxes and duties EIB component
381,038.70

381,038.70

-
Total Cost Sewage system for Durres 2,063,488.70

381,038.70

-
1,682,450.00

Lezha & Shengjin
1)-GOA
1.1)-Land (including tax and duties)
-
-
-
-
2)-Cost for EIB component ($)
Investment cost (without taxes and duties):
2.1)-Lezhe main sewage collectors (CTW in-let & out-let)
644,000.00

2.2)-Shengjin main sewage collector (CTW in-let)
410,550.00

2.3)-Lezhe/Shengjin secondary system & house connection
563,500.00

Total for EIB component 1,618,050.00

1,618,050.00

2.3)-Taxes and duties EIB component
390,759.08

390,759.08

-
Total Cost Sewge system for Lezhe&Shengjin 2,008,809.08

390,759.08

-
1,618,050.00

Saranda
1)-GOA
1.1)-Land (including tax and duties)
-
-
-
-
2)-Cost for EIB component ($)
Cost (without taxes and duties):
2.1)-New main sewage collector to CTW (incl. CTW shifting)
292,215.00

2.2)-Sewage city system extension
322,000.00

Total for EIB component 614,215.00

614,215.00

2.3)-Taxes and duties EIB component
148,332.92

148,332.92

-
Total Cost Sewage system for Saranda 762,547.92

148,332.92

-
614,215.00

Sub-Total 1
Construction Works Cost Estimate 4,834,845.70

920,130.70

-
3,914,715.00

Physical Contingency
(15% of Cost Estimate) 725,226.85

138,019.60

-
587,207.25

Sub-Total 2
5,560,072.55

1,058,150.30

-
4,501,922.25

Engineering & Consultancy services
Engineering cost for Final Design (see attached)
-
N/A
-
Supervision of Works (8% of Sub-Total 2) 360,000.00

N/A
-
360,000.00

TOTAL INVESTMENT COST ($)
5,920,072.55

1,058,150.30

-
4,861,922.25

TOTAL INVESTMENT COST EIB () (1=1,1 $)
4,419,929.32

- 34 -

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Albania - Integrated Water and Ecosystems Management Project
WASTEWATER TREATMENT PLANTS SUB-COMPONENT
COST BREAKDOWN
WWTP COST BREAKDOWN
Cost Estimate
Land, Tax&Duty
Cost without tax&Duties
$
Goa ($)
GEF ($)
EIB ($)
Durres
1)-GOA (US$)
1.1)-Land (including tax and duties)
293,900.00

293,900.00

2)-Cost for GEF component (US$)
Cost (without taxes and duties):
2.1)-Free Water Surface Wetland
2,030,300.00

Total cost for GEF component (US$)
2,030,300.00

2,030,300.00

2.2)-Taxes and duties GEF component
406,100.00

406,100.00

3)-Cost for EIB component ($)
Cost (without taxes and duties):
3.1)-WWTP
(i)-Flow measurement & Bar racks
79,800.00

(ii)-Aerated grit chamber
54,800.00

(iii)-Division unit
56,400.00

(iv)-Aeration tank (two-line)
2,455,800.00

(v)-Secondary settlement tank (two-line)
1,863,200.00

(vi)-Operational Building
69,300.00

Total for EIB component
4,579,000.00

4,579,000.00

3.2)-Taxes and duties EIB component
926,800.00

926,800.00

Total Cost WWTP for Durres
8,235,900.00

1,626,800.00

2,030,300.00

4,579,000.00

Lezha & Shengjin
1)-GOA
1.1)-Land (including tax and duties)
193,300.00

193,300.00

2)-Cost for GEF component (US$)
Investment cost (without taxes and duties):
2.1)-CTW "Fully natural solution"
603,900.00

Total Cost for GEF component (US$)
603,900.00

603,900.00

2.2)-Taxes and duties GEF component
120,800.00

120,800.00

3)-Cost for EIB component ($)
Investment cost (without taxes and duties):
3.1)-Pre-treatment facilities & Aerated oxidation pond:
(i)-Flow measurement & Bar racks
36,300.00

(ii)-Aerated grit chamber
20,200.00

(iii)-Aerated Oxidation Pond
161,100.00

(iv)-Operational Building
24,200.00

Total for EIB component
241,600.00

241,600.00

3.2)-Taxes and duties EIB component
70,900.00

70,900.00

Total Cost WWTP for Lezhe&Shengjin
1,230,300.00

385,000.00

603,900.00

241,600.00

Saranda
1)-GOA
1.1)-Land (including tax and duties)
193,300.00

193,300.00

2)-Cost for GEF component (US$)
Cost (without taxes and duties)
2.1)-CTW "Fully natural solution"
555,600.00

Total cost for GEF component (US$)
555,600.00

555,600.00

2.2)-Taxes and duties GEF component
111,200.00

111,200.00

3)-Cost for EIB component ($)
Cost (without taxes and duties):
3.1)-Pre-treatment facilities & Aerated oxidation pond:
(i)-Flow measurement & Bar racks
52,400.00

(ii)-Aerated grit chamber
28,800.00

(iii)-Aerated oxidation pond
128,900.00

(iv)-Operational Building
32,300.00

Total for EIB component
242,100.00

242,100.00

3.2)-Taxes and duties EIB component
70,300.00

70,300.00

Total Cost WWTP for Saranda
1,172,300.00

374,800.00

555,600.00

242,100.00

Sub-Total 1
Construction Works Cost Estimate
10,638,500.00

2,386,600.00

3,189,800.00

5,062,700.00

Physical Contingency (15%
of Cost Estimate)
1,595,775.00

357,990.00

478,470.00

759,405.00

Sub-Total 2
12,234,275.00

2,744,590.00

3,668,270.00

5,822,105.00

Engineering & Consultancy services
Engineering cost for Final Design
N/A
N/A
N/A
N/A
Supervision of Works (8% of Sub-Total 2 GEF+EIB)
765,000.00

N/A
300,000.00

465,000.00

TOTAL INVESTMENT COST
12,999,275.00

2,744,590.00

3,968,270.00

6,287,105.00

- 35 -

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Project Component 2 - Environmental Management and Monitoring - US$0.70 million
(Total: US$0.70 million; GEF: US$0.70 million)
The component will assist the Ministry of Environment and the Ministry of Agriculture and Food to carry
out the following tasks: (i) Technical assistance for the development of the Kune Vain Management Plan
including a plan for stakeholder participation in management of natural resources and economic incentives
for long term sustainability; (ii) Training for Kune Vain administration staff, rangers, staff from the
relevant line ministries and members of NGOs on natural resource management and integrated ecosystem
management; (iii) Implementation of selected priority measures identified in the Kune Vain management
plan and other measures that improve the environmental conditions of the receiving waterways; and (iv)
Design and implement a monitoring program for water quality and biodiversity indicators in the Kune Vain
Managed Reserve and the coastal areas impacted by the project (including provision of technical assistance
and equipment as needed).
The project indicators will be monitored through the monitoring program financed under the project. This
monitoring program will compliment (i) the self-monitoring of the Constructed Treatment Wetlands which
will be carried out by the water utilities, which are under the management of the private operator, and (ii)
the already ongoing monitoring programs carried out by the Ministry of Environment, the General
Directorate of Forestry & Pastures (GDFP), the General Directorate of Fisheries (GDF) and the UNDEP
under the umbrella of the Mediterranean Action Plan. The monitoring of of pollution reduction will be
executed at several locations in the coastal areas and the Kune Vain Managed Reserve. In all participating
areas the project evaluation will also benefit (i) from the Poverty and Social Impact Assessment which is
currently ongoing for water sector issues, (ii) from the establishing of Water Consumer Panels in each city,
and (iii) from the Water Sector Public Communication Program which is currently under implementation.
Project Component 3 - Public Communication and Replication - US$ 0.13 million
(Total: US$0.13 million; GEF: US$0.13 million)
This component will finance the following activities: (i) Organization of a stakeholder consultations
program for the preparation and implementation of the management plan for the Kune Vain Managed
Reserve; (ii) Design and implement awareness campaigns on project goals and benefits of an integrated
ecosystem management, local communities' role and responsibilities in managing natural resources
including payment of environmental services (partly covered by IDA project); (iii) Organization of training
and workshops for practitioners and decision-makers on the technical, economic and environmental benefits
of constructed wetlands and integrated ecosystem management; (iv) Design and implementation of an
environmental education and communication program for local communities; (v) Design and
implementation of a pilot teacher's training program in ecology and environmental education in selected
schools; and (vi) Technical assistance to develop a replication strategy, including the identification of
methods of information dissemination, and of repeater projects. These activities are linked to the
undergoing Public Communication program of the MoTAT, financed under the IDA credit, as well as the
communication and consumer relation program of the private operator.
The GEF funds will also finance the dissemination of the project's findings to other cities of the region and
investigations to expand the project's approach. The proposed project design has a high potential for
replication in Albania. Natural wastewater treatment using Constructed Treatment Wetlands may become
a demonstration area for similar projects in Albania as well as other developing countries of the
Mediterranean region.
- 36 -

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Project Component 4 - Project Management, Monitoring and Evaluation - US$0.08 million
(Total: US$0.080 million; GEF: US$0.080 million)
This component will support a Project Implementation Unit (PIU) within the Ministry of Territorial
Adjustment and Tourism (MoTAT) to implement and monitor the activities under the project. The project
will use the current World Bank Water PIU which is already successfully implementing the Water Supply
Urgent Rehabilitation Project and the Municipal Water and Wastewater Project. The PIU will have full
responsibility for: (i) procurement, financial management and disbursement related to the activities funded
by the GEF grant and the EIB loan; (ii) financial management reporting for the overall project; (iii)
monitoring-evaluation and reporting for the overall project implementation; and (iv) coordination with local
stakeholders. The GEF funds will also be used to complement the PIU with adequate technical expertise in
constructed wetlands, biodiversity conservation and ecosystem management. Possibilities for further
integrating the project management into Government structures will be explored during implementation, in
line with efforts by the Bank to this end across the broader portfolio. To achieve this, TA and training can
be provided to the Ministry of Environment and the Ministry of Agriculture and Food.
- 37 -

---

Annex 3: Estimated Project Costs
ALBANIA: Integrated Water & EcoSystems Management
Local
Foreign
Total
Project Cost By Component
US $million
US $million
US $million
1. Sewage Pollution Reduction
0.00
0.00
0.00
1.a Wastewater Treatment Facilities
0.58
9.02
9.60
1.b Sewerage
0.00
4.27
4.27
2. Environmental Management and Monitoring
0.00
0.62
0.62
3. Public Communication and Replication
0.00
0.09
0.09
4. Project Management, Monitoring & Evaluation
0.00
0.07
0.07
Taxes and Duties
3.30
0.00
3.30
Total Baseline Cost
3.88
14.07
17.95
Physical Contingencies
0.07
1.30
1.37
Price Contingencies
0.03
0.65
0.68
1
Total Project Costs
3.98
16.02
20.00
Total Financing Required
3.98
16.02
20.00
Local
Foreign
Total
Project Cost By Category
US $million
US $million
US $million
Goods
0.00
2.14
2.14
Works
0.00
12.60
12.60
Services
0.00
1.15
1.15
Training
0.00
0.05
0.05
Incremental Operating Costs
0.00
0.08
0.08
Lands
0.68
0.00
0.68
Taxes and Duties
3.30
0.00
3.30
1
Total Project Costs
3.98
16.02
20.00
Total Financing Required
3.98
16.02
20.00
1 Identifiable taxes and duties are 3.3 (US$m) and the total project cost, net of taxes, is 16.7 (US$m). Therefore, the project cost sharing ratio is 0% of total
project cost net of taxes.
- 38 -

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Annex 4
STAP Review
ALBANIA: Integrated Water & EcoSystems Management
STAP Review of the GEF Project component
GOVERNMENT OF ALBANIA: INTEGRATED WATER & ECOSYSTEMS MANAGEMENT
Richard Kenchington
RAC Marine Pty Ltd
PO Box 588
Jamison
ACT 2614
Australia
Scientific and technical soundness
The detail provided on the operational design of constructed treatment wetlands was limited, but the
scientific and technical basis of using wetlands to reduce the level of sewage pollution contaminants
flowing through to environmental waterways is sound. The project is linked with the Bank's Municipal
Water and Wastewater Project and addresses the critical issue of reducing nutrient pollution resulting from
untreated discharges from the cities of Durres, Lezha and Saranda.. It makes an important environmental
linkage by also addressing the preparation and implementation of an effective Management Plan for
Kune-Vain natural reserve.
The basic premise is to implement environmentally sustainable natural wastewater treatment and link this
with improved management and monitoring of areas with globally important biodiversity. If successful it
will address an important element of the environment/poverty linkage and should contribute to building
national awareness of the importance and benefits of addressing environmental issues.
The proposal is also linked with the EU PHARE financed Karavasta Lagoon ­ Wetland Management
Project and the UNDP GEF project on Conservation of Wetland and Coastal Ecosystems in the
Mediterranean Region. It also links with the Mediterranean Action Plan (MAP) funded and coordinated by
the United Nation Environment Program (UNEP) and within MAP to the Program for the Assessment and
Control of Pollution in the Mediterranean Region More broadly, it builds upon and should extend the
practical demonstration of implementation and benefits of comparable pollution reduction projects being
undertaken in catchments draining into the Baltic and Black Seas.
Global environment benefits and costs
Nutrient pollution of enclosed seas has been identified as an environmental issue of global significance.
Major changes in the Adriatic Sea have been attributed to very high levels of eutrophication with impacts
on the habitats of endangered species and biological diversity generally. If this project achieves its
objectives it will have clear benefits in addressing a significant source of nutrient pollution of the Adriatic
Sea from Albania.
The context of GEF goals and guidelines
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---

The project clearly addresses the issues of surface water contamination within the context of
environmental-poverty linkages. It should bring early benefits through improvements to public health and
the living conditions of some of the poorest people. With adequate attention to information and education it
should help to generate understanding of the social and economic importance of the benefits of good
environmental management.
The project is consistent with the objectives GEF Operational Programs No.2 Coastal, Marine, and
Freshwater Ecosystems; Number 8, "Waterbody Based Operational Program", which focuses "on
seriously threatened water-bodies and the most important trans-boundary threats to their ecosystems".
No.9 Integrated Land and Water Multiple Focal Area; No.10 Contaminated-Based and No.12
"Integrated Land and Water Multiple Focal Areas Operational Program". It applies the guidelines with
respect to incremental costs and the log-frame.
Regional Context
The project is important in the context of addressing eutrophication and other pollution related threats to
the Adriatic and Ionian Seas.
Replicability
This project builds on experience of projects addressing conservation and management of wetlands in
catchments draining into the Black and Mediterranean Seas. It is replicating and extending this experience
in the socioeconomic context of the development of Albania. The clearly stated intention in the design
concept is that this will develop experience and capacity to replicate similar practices in other catchments
draining into the Adriatic and Ionian Seas. The proposal addresses survey and selection of sites for
replication.
Sustainability
The use of constructed treatment wetlands is part of a longer term strategy of progressing from the current
situation of discharge of untreated sewage into marine and riverine waterways to advanced water treatment.
It will bring some immediate environmental improvements.
In the longer term as the financial situation of the water cycle companies is stabilized the strategy envisages
investment in secondary treatment facilities with the constructed and natural wetlands operating to provide
advanced tertiary treatment with an increasing range of benefits from flows of unpolluted waters. Progress
beyond this project to the complete treatment cycle will depend on community willingness to pay the
consequent water and sewage charges. This in turn will depend upon demonstration to the community and
continuing appreciation by decision-makers of the economic, environmental and social benefits of high
quality management of water and sewage, and of the Kune-Vaine protected wetland.
Contribution to future strategies and policies
As discussed above, success with this project should contribute to the broader adoption of high quality
water and sewage management and protection of environmentally significant wetlands in Albania.
Involvement of stakeholders
- 40 -

---

The project proposal recognizes that at this stage of its development:
"environmental problems in Albania, like in most other transition countries, still take a secondary
place in the order of priorities "
and that Albania:
"lacks a politically active and environmental conscious elite to actively steer the country toward an
environmentally conscious development".
To achieve extension needed to secure the long term benefits of this project will require:
"decentralized and financially self sufficient management units with a strong involvement of local civil
society."
A key element for the future is willingness to pay. In this case that will depend on awareness of the social,
economic and environmental benefits of water treatment and wetland management and of the costs of
failure to manage.
The proposal indicates that
"the rationale, benefits and objectives of the project should be made known to all stakeholders
through effective public awareness programs. The benefits of sustainable wastewater treatment need
to be demonstrated and the results widely disseminated."
There is no discussion of approaches to achieve this beyond:
" it is expected that consultation with beneficiaries will be on a continuous basis during project
implementation through public relations campaigns conducted by the private operator under the
Municipal Water and Wastewater Project."
There is no provision for community or school based education in this process and this is a significant issue
given the critical importance of developing the necessary understanding to achieve long term willingness to
pay. Other environmental projects have demonstrated the benefits of accelerating the acceptance of
information into communities through school children having good information and discussing it within
family groups and through encouragement of discussion through local activities in the media, cultural and
community groups.
Risk assessments
To the extent that I can judge, being unfamiliar with the field operating situation, the risks seem to be
reasonably discussed and I generally concur with the assessments. In particular the identification of
willingness to pay as a substantial risk suggests that, as discussed above, a more deliberate and costly
education strategy would strengthen to the proposal.
Costs
I have insufficient operational experience in the target area to make substantial comment on the detail of
funding allocations. However the budget for replication is very small $100K out of $5.5 million GEF or
- 41 -

---

almost $13 million total. Given that replication funding will in any case be used for identifying and
surveying additional sites for replication there is no effective provision for education in this item. It may be
subsumed under another heading but that is not apparent. In the light of comments above on the role of
school and community education in development of willingness to pay I would suggest that the design team
consider making clear provision for an education component of the program.
Conclusion
This is an important project addressing the issues of sewage pollution, wetland in ways that reasonably
reflect the operating constraints of the transitional status of Albania. Subject to adequacy of provisions for
education as a means to address immediate and longer term willingness to pay I recommend that it should
proceed.
R A Kenchington
RAC Marine Pty Ltd
1 March 2003
- 42 -

---

World Bank Response to STAP Reviewer Comments
The STAP Reviewer recognizes the importance of the project in addressing the issues of sewage pollution
in coastal areas and the Kune-Vain tidal marshland. He further concludes that the project reasonably
reflects the operating constraints of the transitional status of Albania. He points out the important
environmental linkage aimed to promote and improve the management of the natural protected area of
Kune-Vain. Also, he judges the risks assessment reasonably discussed and evaluated.
Nevertheless, the STAP reviewer emphasizes the critical importance of developing the necessary
willingness to pay which in turn represent a key element for the future sustainability of the project. In
particular he points out the lack of an education component in the project that would help to develop the
necessary understanding towards the concepts of environmental protection and cost recovery and therefore
to strengthen the willingness to pay of the communities.
As correctly noticed by the STAP Reviewer this project is linked with the Bank's Municipal Water and
Wastewater Project (MWWP) of which is an integral part. The project benefits from the results of the
socio-economic analysis carried out and the institutional and implementation arrangements established
under the MWWP. The MWWP aims to increase the sustainability of water supply and sanitation services
through the involvement of the private sector and the associated improvements in financial and operational
management. On the other hand the presence of a knowledgeable international operator will contribute to
create the local capacity in operating and managing the constructed treatment wetlands. According to the
social assessment the willingness to pay is high. Most households are willing to pay the new tariff. In
addition, almost all households are willing to pay the monthly fee to connect to the central sewage system
and to receive septic-tank cleaning service. Preliminary financial calculations show that the wastewater
treatment will increase the sewage tariff by only 2-5 cents/m3 and therefore will not have a negative impact
on the willingness to pay. Furthermore the MWWP pays attention in establishing mechanisms that increase
public awareness. Public communications activities, awareness campaigns on water and sanitation services
and the need to pay for them are part of the contractual obligations of the operator. The project will also
sponsor the establishment of a Consumer Panel (CP) to enable those who use water to interact directly with
the management and to channel constructive suggestions back to the utilities.
The measures taken in the MWWP are to be considered a sufficient direct contribution to create the
required public awareness and to guarantee the understanding of the principles of sustainability also for this
project. Nevertheless the recommendations of the STAP Reviewer have been taken in consideration and the
PAD has been revised and, subject to the GEF approval, the replication promotion component has been
expanded to incorporate an education program aimed to accelerate the acceptance of the new concept of
sustainable management into communities through dissemination of information in the schools and
encouragement of discussion through local activities in the media, cultural and community groups.
The STAP Reviewer questioned on the implementation of a basic monitoring system of the coastal areas.
Albania is among the contracting parties to the Barcelona "Convention for the Protection of the Marine
Environment and the Coastal Region of the Mediterranean", which revised in 1995 the "Convention for the
Protection of the Mediterranean Sea against Pollution" , of 1977, still in force. Albania and the other
contracting parties to the Barcelona Convention are also part of a comprehensive Mediterranean Action
Plan (MAP) funded and coordinated by the United Nation Environment Program (UNEP) which, among
others, has the objective to protect the Mediterranean Sea against chronic or accidental pollution. Under
the responsibility of the Secretariat of the Mediterranean Action Plan one of the activities implemented
under the MAP is the Program for the Assessment and Control of Pollution in the Mediterranean Region
- 43 -

---

(MED POL) for which a program to monitor marine pollution is carried out on regular basis for identified
pollution "hot spots". For Albania the Faculty of Natural Science of the University of Tirana is
implementing the program of collecting and analyzing environmental indicators. In addition the project will
finance the establishment of a monitoring program for water quality, biodiversity and socio-economic
indicators within the protected areas and the coastal zones involved in the project.
The STAP Reviewer asked clarifications on the criteria and budget for the decision making mechanism for
the management of natural resources at the municipality and community level. According to the action
plan that the Government is implementing towards an integrated and sustainable management of the
protected areas, the Ministry of Environment and the General Directorate of Forestry and Pastures will
establish a new administration and management board for Kune-Vain. This Board will include among
others representatives of the Municipalities and Communes, civil society and a formal representation of the
users of the KV Managed Area. It is proposed that the administrative entity for the KVMA should be
established under the budget of the General Directorate of Forestry and Pasture.
- 44 -

---

Annex 5: Financial Summary
ALBANIA: Integrated Water & EcoSystems Management
ANNEX 5, TABLE 1: PROJECT COST AND FINANCING
(US$ million)
2004
2005
2006
2007
Total
Project Costs
Investment costs
2.28
6.84
6.84
6.84
22.79
Technical assistance
0.11
0.33
0.33
0.33
1.09
Total Project Costs
2.39
7.16
7.16
7.16
23.88
Total Project Financing Required
2.39
7.16
7.16
7.16
23.88
Project Financing Provided
GEF grant
0.49
1.46
1.46
1.46
4.87
EIB
1.37
4.12
4.12
4.12
13.73
Central Government
0.53
1.58
1.58
1.58
5.28
Total Project Financing
2.39
7.16
7.16
7.16
23.88
- 45 -

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ANNEX 5, TABLE 2: SUMMARY OF FINANCIAL PERFORMANCE INDICATORS
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Actual
Projected
DURRES
Domestic water tariff (Lek/m3)
21.0
21.0
35.0
43.5
53.3
65.0
70.0
77.2
77.2
77.2
Billed revenues (Lek million)
205
211
297
439
590
794
879
1083
1058
1028
Collected revenues (Lek million)
70
95
160
263
384
548
695
899
910
915
Collection ratio (%)
34
45
54
60
65
69
79
83
86
89
Cash operating expenses (Lek million)
464
400
394
477
530
569
618
598
591
601
Operating subsidy required (Lek million)
214
130
40
0
0
0
0
0
Net income before subsidy (Lek million)
-458
-392
-116
-191
-224
-130
-60
96
131
137
W orking ratio
6.7
4.2
2.5
1.8
1.4
1.0
0.9
0.7
0.6
0.7
Current ratio
0.3
1.2
1.0
2.7
6.8
14.6
20.7
27.5
27.7
25.7
Receivables/collected revenues (months)
9.4
7.8
5.3
3.7
2.9
2.3
2.0
1.7
1.7
1.8
Payables/Cash operating expenses (months)
28.6
4.0
6.0
2.1
1.7
1.6
1.6
1.5
1.6
1.6
LEZHA
Domestic water tariff (Lek/m3)
15.0
15.0
28.0
37.1
41.2
50.9
60.7
66.1
72.8
80.0
Billed revenues (Lek million)
19
19
33.8
61
81
104
129
142
157
178
Collected revenues (Lek million)
6
6
15.2
34
49
72
102
118
135
160
Collection ratio (%)
33
34
45
55
60
69
79
83
86
89
Cash operating expenses (Lek million)
43
43
62
76
79
83
88
93
95
100
Operating subsidy required (Lek million)
45
31
19
1
0
0
0
0
Net income before subsidy (Lek million)
-43
-55
-21
-32
-37
-44
-27
-26
-11
6
W orking ratio
6.9
6.7
4.1
2.3
1.6
1.2
0.9
0.8
0.7
0.6
Current ratio
0.6
0.7
0.9
1.0
1.3
1.7
4.0
6.8
9.3
12.6
Receivables/sales revenues (months)
11.0
11.9
5.7
3.1
2.5
2.0
1.5
1.5
1.4
1.2
Payables/Cash operating expenses (months)
1.5
1.1
1.2
1.0
1.0
1.0
1.0
1.0
1.1
1.1
SARANDA
Domestic water tariff (Lek/m3)
15.0
15.0
30.0
31.8
34.9
37.3
40.3
46.8
51.5
56.7
Billed revenues (Lek million)
13
13
27
48
68
75
85
101
115
130
Collected revenues (Lek million)
4
5
10
24
40
52
67
84
99
116
Collection ratio (%)
33
34
39
49
59
69
79
83
86
89
Cash operating expenses (Lek million)
27
27
53
64
73
78
85
91
94
91
Operating subsidy required (Lek million)
0
0
41
32
21
16
0
0
0
0
Net income before subsidy (Lek million)
-27
-27
-46
-45
-38
-32
-25
-19
-7
13
W orking ratio
6.2
6.1
5.0
2.7
1.8
1.5
1.3
1.1
0.9
0.8
Current ratio
0.6
0.6
0.7
0.9
1.4
2.1
2.6
3.1
3.5
5.4
Receivables/revenues (months)
4.7
5.1
2.7
1.7
1.4
1.5
1.5
1.4
1.3
1.2
Payables/cash operating expenses (months)
5.0
5.4
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
- 46 -

---

ANNEX 5, TABLE 3: DURRES W & S COMPANY - PROJECTED FINANCIAL STATEMENTS
(000 Lek)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Actual
Projected
INCOME STATEMENTS
Revenues
Water - domestic metered
14862
15722
16324
36551
84762
214108
436156
593635
734948
712610
688127
Water domestic - unmetered
128509
135944
140840
203684
243788
227811
170687
73566
71279
50732
31979
Water - industry and institutions
37756
39940
39940
47260
55458
61863
71740
72017
70549
57372
44308
Water - bulk supply and other
12762
13500
13500
2700
27801
17029
Sewerage - domestic
1356
15838
53210
93859
118811
178616
210250
238609
Sewerage - industry and institutions
5661
11026
16151
22053
21442
27797
27352
24813
Total billed revenues
193889
205107
210604
297213
438674
590171
794495
879471
1083189
1058317
1027836
Collection ratio (%)
33
34
45
54
60
65
69
79
83
86
89
Total collected revenues
63983
69736
94772
160495
263204
383611
548202
694782
899047
910152
914774
Expenses
Electricity
142270
168500
177950
188679
196216
205967
228212
254758
254277
253311
249825
Personnel
73583
92951
101539
106616
79181
81172
83020
85359
89740
94305
99050
Chemicals and materials
28450
29871
32809
31165
32887
35757
36953
37589
35855
33596
32856
Repairs & maintenance
12624
13299
20259
27356
34625
44168
53926
54921
55915
56560
57204
Management fees
18700
42000
88700
93300
102700
70000
70000
70000
Severance payments
0
41933
18612
11281
13477
15425
Contingencies and other cash expenses
14663
16000
17600
21120
50000
56114
62727
69213
76305
83626
91678
Total cash operating expenses
271590
463953
400498
393637
476842
530490
569419
618016
597517
591398
600612
Depreciation
60000
60000
60000
62181
69693
93835
121189
145816
162757
166818
168714
Provision for bad debt
228266
126653
130048
172235
212538
229872
233979
175454
164645
110594
68351
Total operating expenses
559856 650606.5
590546
628053
759072
854197
924587
939286
924919
868810
837678
IDA debt interest and financial charges (at 1.50%)
12180
12180
12180
29851
31357
35122
39196
42440
43086
39711
34423
Less: capitalized amount
-12180
-29851
-31357
-35122
-39196
-42440
Net charges on IDA debt
12180
12180
24360
43086
39711
34423
EIB loan interest and financial charges to the Government (at 4.85%)
1036
15538
34183
52829
62151
62151
62151
Interest subsidy from Govt. to DWSC
715
10732
23611
36490
42929
42929
42929
EIB subloan interest charges to DWSC (at 1.50%)
320
4806
10572
16339
19222
19222
19222
Less: capitalized amount
-320
-4806
-10572
-16339
Net interest charges on EIB subloan
19222
19222
19222
Non-operational income
4103
Net income before operational subsidy
-374044
-457680
-392122
-330839
-320398
-264026
-130092
-59816
95963
130574
136513
Operational subsidy
214442
129704
39567
Net income after operational subsidy
-374044
-457680
-392122
-116398
-190694
-224459
-130092
-59816
95963
130574
136513
BALANCE SHEETS
Assets
Gross accounts receivable
276398
409717
546610
727910
951634 1193604
1439897
1624586
1797896
1914311
1986260
Less: Provisions for bad debt
228266
354919
484967
657202
869740 1099611
1333590
1509045
1673689
1784284
1852635
Net accounts receivable
48132
54798
61643
70708
81894
93992
106307
115541
124207
130028
133625
Inventories
137185
141301
145540
149906
154403
159035
163806
168720
173782
178995
184365
Other current assets
307160
962727 1616443
2296326
2333784
2141724
1958553
Total current assets
185317
196099
207182
220613
543457 1215754
1886556
2580587
2631773
2450747
2276543
Gross fixed assets
4126032 4126032 4126032 4155883 4724492 5728571
6659556
7571106
7805776
7932227
8058677
Less: Accumulated depreciation
1375344 1435344 1495344 1557525 1627218 1721053
1842242
1988058
2150814
2317632
2486347
Net fixed assets
2750688 2690688 2630688 2598358 3097275 4007518
4817314
5583049
5654962
5614594
5572331
Total assets
2936005 2886787 2837870 2818971 3640731 5223273
6703870
8163636
8286734
8065341
7848874
Liabilities and equity
Accounts payable
646430
154651
200249
68401
68123
70911
77293
79734
80504
80979
80594
Other payables
8069
13784
11899
12193
12144
12641
13778
14214
14351
14435
14367
Other current liabilities
Total current liabilities
654499
168435
212148
80594
80267
83552
91072
93948
94855
95414
94960
IDA subloans (including capitalized interest)
1624000 1624000 1636180 1681456 1980247 2367806
2664602
2921083
2823667
2471141
2118615
EIB subloan (including capitalized interest)
128468
517715
912728
1313508
1313508
1313508
1313508
Total liabilities
2278499 1792435 1848328 1681456 2108715 2885520
3577331
4234591
4137176
3784650
3432124
GEF grant
31200
124799
218398
311998
311998
311998
311998
Capital and reserves
1031550 1926075 2213388 2397165 2951488 3884798
4702557
5468404
5592048
5592048
5592048
Retained earnings
-374044
-831724 -1223846 -1223846 -1340243 -1530937 -1755397 -1885488 -1945304 -1849342 -1718768
Current year profit/loss
-116398
-190694
-224459
-130092
-59816
95963
130574
136513
Total equity
657506 1094351
989542 1056922 1451750 2254200
3035467
3835097
4054704
4185277
4321790
Total liabilities and equity
2936005 2886787 2837870 2818971 3640731 5223273
6703870
8163636
8286734
8065341
7848874
SOURCES AND APPLICATIONS OF FUNDS
Sources
Net income (before subsidy, mgmt. fees, sev. pmts, & interest)
-312139
-236465
-156714
-25511
56361
243695
259507
260158
- 47 -

---

ANNEX 5, TABLE 4: LEZHA W & S COMPANY - PROJECTED FINANCIAL STATEMENTS
(000 Lek)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Actual
Projected
INCOME STATEMENTS
Revenues
Water - domestic metered
1216
14021
32017
58392
93092
112079
128917
148405
Water domestic - unmetered
11597
10940
10940
20861
28921
27615
21121
8533
3765
3139
2337
Water - industry and institutions
7895
7448
7448
9140
11666
11797
12894
13882
11576
9970
10967
Water - bulk supply and other
232
219
219
1480
1480
1500
1520
1540
1540
1560
1580
Sewerage - domestic
189
2649
5956
7530
9216
10617
11050
12513
Sewerage - industry and institutions
906
2258
2475
2561
2621
2278
1972
2191
Total billed revenues
19724
18607
18607
33793
60995
81360
104019
128883
141854
156609
177992
Collection ratio (%)
32
33
34
45
55
60
69
79
83
86
90
Total collected revenues
6312
6140
6327
15207
33547
48816
71773
101818
117739
134684
160193
Expenses
Electricity
17142
21450
22828
30960
32384
34343
36823
38897
42476
46397
50269
Personnel
15872
16700
17321
17754
17754
17754
17754
17754
18286
18835
19400
Chemicals and materials
1019
1720
1933
2789
2789
2789
2789
2789
2873
2959
3048
Repairs & maintenance
400
440
490
1018
3119
4448
5923
7341
7676
7909
8041
Management fees
1679
3712
7866
8219
9103
9103
9103
9103
Severance payments
0
7756
3313
2187
2738
3229
Contingencies and other cash expenses
8000
8400
8759
9197
9434
9672
9836
9927
Total cash operating expenses
34433
42509
42572
62200
75913
79271
82892
88056
93314
95038
99788
Depreciation
8735
7415
19842
19851
22023
27824
34900
41688
45274
45508
45508
Provision for bad debt
0
11844
11667
17657
26076
30917
30633
25712
22909
20829
20291
Total operating expenses
43168
61767
74080
99708
124011
138012
148426
155456
161497
161376
165587
IDA debt interest and financial charges (at 1.50%)
470
576
885
1227
1496
1807
1966
1993
Less: capitalized amount
-470
-576
-885
-1227
-1496
Net charges on IDA debt
0
0
0
0
0
1807
1966
1993
EIB loan interest and financial charges to the Government (at 4.85%)
0
693
3466
7624
11783
13862
13862
13862
Interest subsidy from Govt. to LWSC
0
479
2394
5266
8139
9433
9369
9305
EIB subloan interest and financial charges to LWSC (at 1.50%)
0
214
1072
2358
3644
4429
4493
4557
Less: capitalized amount
0
-214
-1072
-2358
-3644
Net interest charges on EIB subloan
0
0
0
0
0
4429
4493
4557
Net income before operational subsidy
-23444
-43160
-55473
-65915
-63016
-56652
-44407
-26573
-25879
-11225
5855
Operational subsidy
45314
30898
19276
713
Net income after operational subsidy
-23444
-43160
-55473
-20601
-32118
-37375
-43694
-26573
-25879
-11225
5855
BALANCE SHEETS
Assets
Gross accounts receivable
5016
17483
29764
48350
75798
108342
140588
167653
191768
213694
235053
Less: Provisions for bad debt
0
11844
23510
41167
67243
98160
128793
154505
177415
198244
218535
Net accounts receivable
5016
5639
6253
7183
8555
10182
11795
13148
14354
15450
16518
Inventories
223
339
381
571
886
1013
1133
1216
1266
1304
1331
Other current assets
3371
4029
6691
12341
46743
93610
143259
209923
Total current assets
5239
5979
6634
11125
13471
17886
25268
61107
109230
160013
227772
Gross fixed assets
170021
268056
558410
558880
666970
848932 1020788 1188332 1200066 1200066 1200066
Less: Accumulated depreciation
34004
41419
61261
81112
103135
130959
165859
207547
252820
298328
343837
Net fixed assets
136017
226637
497149
477768
563835
717973
854929
980785
947246
901738
856230
Total assets
141256
232616
503783
488893
577305
735860
880198 1041892 1056476 1061751 1084002
Liabilities and equity
Accounts payable
6309
7789
7095
10087
10741
11349
12081
12703
13497
14323
15114
Other short term payables
1953
2411
2415
2985
2825
2612
2383
2506
2662
2825
2981
Other current liabilities
Total current liabilities
8262
10200
9510
13071
13566
13961
14464
15208
16159
17148
18096
IDA debt (including capitalized interest)
2149
27449
61414
87670
110876
130109
131965
133821
EIB subloan (including capitalized interest)
0
28796
115613
203716
293105
297392
301679
305966
Total liabilities
8262
10200
9510
15221
69811
190987
305850
419189
443660
450792
457883
GEF grant
0
9280
37119
64958
92798
92798
92798
92798
Capital and reserves
132994
245860
560877
560877
617538
664451
709782
756870
772863
782232
791537
Retained earnings
0
-23444
-66604
-66604
-87205
-119323
-156698
-200392
-226965
-252844
-264070
Current year profit/loss
-23444
-43160
-55473
-20601
-32118
-37375
-43694
-26573
-25879
-11225
5855
Total equity
132994
222416
494273
473672
498215
507753
509390
529905
520019
518162
533321
Total liabilities and equity
141256
232616
503783
488893
577305
735860
880198 1041892 1056476 1061751 1084002
SOURCES AND APPLICATIONS OF FUNDS
Sources
Net income (before subsidy, mgmt. fees, sev. pmts, & interest)
-63766
-50973
-44588
-32774
-13236
-11739
-157
16951
Add: Depreciation
19851
22023
27824
34900
41688
45274
45508
45508
Add: Provision for bad debt
17657
26076
30917
30633
25712
22909
20829
20291
- 48 -

---

ANNEX 5, TABLE 5: SARANDA W & S COMPANY - PROJECTED FINANCIAL STATEMENTS
(000 Lek)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Actual
Projected
INCOME STATEMENTS
Revenues
Water - domestic metered
908
10648
26870
43382
64197
82443
94738
108989
Water domestic - unmetered
6538
6731
6731
17597
27068
27937
18454
6760
3180
2647
1966
Water - industry and institutions
3494
3450
3450
5620
5559
5578
5381
5272
5235
5836
6425
Water - bulk supply and other
2600
3099
3099
1960
1960
1980
2000
2020
2040
2060
2100
Sewerage - domestic
202
1871
4226
5099
6132
7428
8410
9541
Sewerage - industry and institutions
574
958
1037
1017
1012
1030
1134
1268
Total billed revenues
12632
13280
13280
26861
48064
67627
75332
85392
101355
114825
130290
Collection ratio (%)
32
33
34
39
49
59
69
79
83
86
89
Total collected revenues
4042
4382
4515
10476
23551
39900
51979
67460
84125
98749
115958
Expenses
Electricity
5926
8081
8081
21285
22922
26122
29302
31860
33564
34394
30836
Personnel
10880
17406
17406
17841
17841
17841
17841
17841
18387
18947
19421
Chemicals and materials
2082
1889
1889
5417
5417
5417
5417
5417
5942
6480
6642
Repairs & maintenance
671
2362
3614
4961
6414
6845
7205
6804
Management fees
1679
3712
7866
8219
9103
9103
9103
9103
Severance payments
0
5277
3675
1972
2175
2353
Contingencies and other cash expenses
6000
6630
8083
10043
12415
15006
17623
17800
Total cash operating expenses
18888
27376
27376
52894
64162
72617
77756
85225
91201
93753
90605
Depreciation
4700
4700
4700
4700
5282
6555
7694
8464
9022
9257
9257
Provision for bad debt
0
8452
8326
15566
23287
26341
22185
17036
16369
15272
13615
Total operating expenses
23588
40529
40402
73159
92731
105514
107635
110725
116592
118282
113478
IDA debt Interest and financial charges (at 1.50%)
13
214
652
1095
1454
1795
1927
1927
Less: capitalized amount
-13
-214
-652
-1095
-1454
Net interest on IDA debt
0
0
0
0
0
1795
1927
1927
EIB loan interest and financial charges to the Govt. (at 4.85%)
0
106
1596
3511
5425
6383
6383
6383
Interest subsidy from Govt. to SWSC
0
73
1102
2425
3747
4409
4409
4409
EIB subloan interest and financial charges to SWSC (at 1.50%)
0
33
494
1086
1678
1974
1974
1974
Less: capitalized amount
0
-33
-494
-1086
-1678
Net interest on EIB subloan to SWSC
0
0
0
0
0
1974
1974
1974
Net income before operational subsidy
-10957
-27249
-27123
-46298
-44666
-37887
-32303
-25333
-19006
-7357
12912
Operational subsidy
40739
31621
21177
15585
Net income after operational subsidy
-10957
-27249
-27123
-5560
-13045
-16710
-16718
-25333
-19006
-7357
12912
BALANCE SHEETS
Assets
Gross accounts receivable
5157
14054
22819
39204
63717
91444
114797
132729
149959
166035
180367
Less: Provision for bad debt
8452
16779
32345
55632
81972
104158
121193
137562
152834
166449
Net accounts receivable
5157
5602
6040
6859
8085
9471
10639
11536
12397
13201
13917
Inventories
550
1446
1446
3044
3890
4515
5189
5915
6394
6843
6723
Other current assets
5125
15559
24495
34197
42689
71031
Total current assets
5707
7048
7486
9903
11975
19112
31387
41945
52988
62733
91672
Gross fixed assets
198306
198306
198306
198293
276114
392618
496945
595044
606779
606779
606779
Less: Accumulated depreciation
39661
44361
49061
53761
59651
68449
80433
95237
111623
128244
144864
Net fixed assets
158645
153945
149245
144533
216463
324169
416512
499807
495156
478535
461915
Total assets
164352
160993
156731
154436
228437
343282
447898
541753
548144
541269
553587
Liabilities and equity
Accounts payable
10528
11370
12280
8816
10694
12103
12959
14204
15200
15626
15101
Other short term payables
8451
630
604
1167
1416
1602
1716
1880
2012
2068
1999
Other current liabilities
4017
1227
Total current liabilities
18979
12000
12884
13999
13336
13705
14675
16084
17212
17694
17100
IDA debt (including capitalized interest)
2149
27453
61426
87696
110926
128434
128434
128434
EIB subloan (including capitalized interest)
0
13193
53169
93736
134896
134896
134896
134896
Total liabilities
18979
12000
12884
16149
53982
128299
196107
261906
280542
281024
280429
GEF grant
0
8537
34149
59762
85374
85374
85374
85374
Capital and reserves
145373
159950
182053
182053
222728
254353
282268
310044
316805
316805
316805
Retained earnings
0
-10957
-38206
-38206
-43766
-56811
-73521
-90238
-115571
-134577
-141934
Current year profit/loss
-10957
-27249
-27123
-5560
-13045
-16710
-16718
-25333
-19006
-7357
12912
Total equity
145373
148993
143847
138287
165918
180833
192030
194473
182229
174871
187783
Total liabilities and equity
164352
160993
156731
154436
228437
343282
447898
541753
548144
541269
553587
SOURCES AND APPLICATIONS OF FUNDS
Sources
Net income (before subsidy, mgmt. fees, sev. pmts, & interest)
-44607
-35463
-25694
-21017
-12600
-5755
3672
23942
Add: Depreciation
4700
5282
6555
7694
8464
9022
9257
9257
- 49 -

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Annex 5, Table 6: AFFORDABILITY IMPACTS
Unit
2004 2005 2006 2007
2008
2009
2010
Durres
monthly water consumption at 100 lpcd
m3
12.8
12.8
12.8
12.8
12.8
12.8
12.8
less: free consumption at 20 lpcd
m3
2.6
2.6
2.6
2.6
2.6
2.6
2.6
chargeable water consumption
m3
10.2
10.2
10.2
10.2
10.2
10.2
10.2
average combined water & wastewater tariff
lek/m3
52.1
67.2
85.0
90.6
107.6 111.8 115.1
monthly combined water & wastewater bill
lek
532
686
867
924
1098
1140
1174
average household affordability limit
lek
1000 1030 1061 1093
1126
1159
1194
Lezha
monthly water consumption at 100 lpcd
m3
12.8
12.8
12.8
12.8
12.8
12.8
12.8
less: free consumption at 20 lpcd
m3
2.6
2.6
2.6
2.6
2.6
2.6
2.6
chargeable water consumption
m3
10.2
10.2
10.2
10.2
10.2
10.2
10.2
average combined water & wastewater tariff
lek/m3
43.1
49.1
60.8
71.2
77.8
84.5
91.7
monthly combined water & wastewater bill
lek
440
501
620
726
793
862
935
average household affordability limit
lek
1000 1030 1061 1093
1126
1159
1194
Saranda
monthly water consumption at 100 lpcd
m3
12.8
12.8
12.8
12.8
12.8
12.8
12.8
less: free consumption at 20 lpcd
m3
2.6
2.6
2.6
2.6
2.6
2.6
2.6
chargeable water consumption
m3
10.2
10.2
10.2
10.2
10.2
10.2
10.2
average combined water & wastewater tariff
lek/m3
36.8
40.8
44.4
48.1
55.1
59.9
65.1
monthly combined water & wastewater bill
lek
375
416
453
490
562
611
664
average household affordability limit
lek
1000 1030 1061 1093
1126
1159
1194
- 50 -

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Annex 6(A): Procurement Arrangements
ALBANIA: Integrated Water & EcoSystems Management
Procurement
Procurement of goods and works financed by the project will be done in accordance with World Bank
Guidelines: Procurement under the IBRD Loans and IDA Credits (issued in January 1995, revised in
January and August 1996, September 1997, and January 1999). Consulting services, technical assistance
and training financed by the project will be procured in accordance with the Guidelines - Selection and
Employment of Consultants by World Bank Borrowers, issued in January 1997, revised in September
1997, January 1999 and May 2002.
The components of the proposed Project, their estimated cost and procurement methods are summarized in
Table A of this annex. The procurement methods are presented in Table B of this annex. Procurement of
major contracts will be subject to prior review. Table B1 summarizes the capacity of the executive agency
for this project, "MoTAT", the Ministry of Territorial Adjustment and Tourism in procurement, and the
proposed arrangements for procurement and monitoring. Project coordination and management including
procurement will be handled by the existing World Bank Project PIU (created under a previous
IDA-supported project). The PIU was created specifically to implement IDA-financed projects and has
already established a successful track record in its implementation of these projects. In addition to the
current project, the PIU is implementing the IDA-financed Water Supply Urgent Rehabilitation Project and
the Municipal Water and Wastewater Project. Prior to these projects, the PIU implemented the
IDA-funded Durres Water Supply Rehabilitation Project. The PIU reports to the MoF and the MoTAT.
Procurement methods (Table A)
The project includes procurement of civil works, goods, and consultant services. A detailed procurement
plan has been prepared and included in the Project Implementation Plan (PIP).
Procurement of Works. Civil works contracts including the supply and installation of water treatment
equipment estimated to cost US$500,000 equivalent or more will be procured by International Competitive
Bidding (ICB) with post qualification based on the Bank Standard Small Civil Works Document. Contracts
estimated to cost less than $500,000 equivalent per contract may be procured under National Competitive
Bidding (NCB) procedures [ with the specific conditions added to ensure compliance with World Bank
Guidelines, as described in Schedule 3, Section I Part C.1 (b) of the Draft Grant Agreement]. Other smaller
contracts, with a threshold of less than US$100,000 equivalent, will be procured under Minor Works
(MW) procedures.
Procurement of Goods. Goods, including equipment, estimated to cost over US$75,000 equivalent, will
be procured by ICB in accordance with the Bank Standard Goods Procurement Documents. International
Shopping (IS) procedures may be used for readily available goods of standard specifications estimated to
cost less than US$75,000 equivalent per contract. IS procedure will require quotations from at least three
(3) suppliers from two different countries. Goods, including office supplies, estimated to cost less than
US$50 ,000 equivalent per contract may be procured using National Shopping procedure.
Selection Procedures for Consulting Services. Selection of Consulting Firms for services including
engineering and protected area management plan elaboration estimated to cost US$150,000 equivalent or
more per contract, will be done through QCBS. Selection of Consulting Firms for services including the
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monitoring of the biodiversity in the Managed Reserve and the coastal environment, estimated to cost less
than US$200,000 equivalent, will be done through SFB. Consultant services for technical assistance,
including communication campaign and replication or dissemination services, estimated to cost less than
US$100,000 equivalent, will be contracted out under CQ procedures. Consultant services estimated to cost
less than US$150,000 equivalent, will be contracted out under QBS procedures. Auditing or similar
standard services, estimated to cost less than US$100,000 equivalent, will be procured through LC
procedures. Individual Consultants for Project management support services will be procured in accordance
with the procedures set up in Section V, 5.1 to 5.4., of the Guidelines.
Table A: Project Costs by Procurement Arrangements
(US$ million equivalent)

1
Procurement Method




Expenditure Category
ICB

2
NCB
Other
N.B.F.
Total Cost
1. Works
11.55
0.18
0.06
3.34
15.13
(3.66)
(0.15)
(0.05)
(0.00)
(3.86)
2. Goods
0.00
0.00
0.26
2.22
2.48
(0.00)
(0.00)
(0.20)
(0.00)
(0.20)
3. Services
0.00
0.00
1.20
0.36
1.56
(0.00)
(0.00)
(0.68)
(0.00)
(0.68)
4. Land
0.00
0.00
0.00
0.68
0.68
(0.00)
(0.00)
(0.00)
(0.00)
(0.00)
5. Incremental Operating
0.00
0.00
0.10
0.00
0.10
Costs
(0.00)
(0.00)
(0.08)
(0.00)
(0.08)
6. Training
0.00
0.00
0.06
0.00
0.06
(0.00)
(0.00)
(0.05)
(0.00)
(0.05)
Total
11.55
0.18
1.68
6.60
20.01
(3.66)
(0.15)
(1.06)
(0.00)
(4.87)
1/ Figures in parentheses are the amounts to be financed by the Bank Grant. All costs include contingencies.
2/ Includes civil works and goods to be procured through national shopping, consulting services, services of
contracted staff of the project management office, training, technical assistance services, and incremental operating
costs related to (i) managing the project, and (ii) re-lending project funds to local government units.
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Prior review thresholds (Table B)
Contracts of a significant amount wholly or partially financed by IDA will be prior reviewed, although the
PIU has extensive practical experience about the World Bank procurement. The reason for the prior review
is that from a procurement angle, the country is rated as high risk. (See Table B1: Capacity Assessment).
All contracts awarded through ICB will be subject to prior review by the Bank. For works, the first two
NCB and the first two minor works packages will be subject to prior review. For goods, the first two IS
packages will be subject to prior review. With respect to services, Bank prior review will be required of all
terms of reference, irrespective of the contract value. For each contract with a consulting firm estimated to
cost US$100,000 or more, the technical evaluation report will be submitted to the Bank for its review prior
to the opening of the priced proposals. For contracts with individual consultants costing US$50,000 or
more the qualifications, experience, terms of reference and terms of employment shall be furnished to the
Bank for review prior to contract signature. All other contracts will be subject to ex-post review by the
Bank.
Table B: Thresholds for Procurement Methods and Prior Review1
Contract Value
Contracts Subject to
Threshold
Procurement
Prior Review
Expenditure Category
(US$ thousands)
Method
US$ Million
1. Works
Over 500
ICB
(3.66) 11.55
less than 500
NCB (3/)
(0.150)
less than 100
MW
(0.05)
2. Goods
Over 75
ICB
Up to 75
IS
(0.17)
Up to 50
NS
3. Services (local and
Over 150
QCBS
(0.450) 1.2
foreign firms)
Up to 200
SFB
(0.100)
Up to 150
QBS
(0.130)
Up to 100
CQ
Up to 100
LCS
less than 50
IC
(0.050)
4. Miscellaneous
5. Miscellaneous
6. Miscellaneous
Total value of contracts subject to prior review:
12.38MUS$
Overall Procurement Risk Assessment:
High
Frequency of procurement supervision missions proposed:
One every twelve months
(includes special procurement supervision for
post-review/audits)
3/ Borrower has confirmed that Works under NCB procedures shall be launched using IDA `s ECA Regional
Sample Bidding Documents.
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Table B1: Capacity of the Implementing Agency in Procurement and Technical Assistance
Requirements
The PIU, under the Ministry of Territorial Adjustment and Tourism, was first established in 1994 under
the Durres Water Supply Rehabilitation Project, which continued (1999) in its official capacity for the
on-going Water Supply Urgent Rehabilitation Project, and in 2001 the ongoing Municipal Water and
Wastewater Project was added. The above mentioned PIU will be in charge also for the overall
coordination of this GEF project. The PIU has one full time procurement and contract coordination officer
under the supervision of the PIU Director and one additional technical staff. They will be assisted by
international technical and financial auditors. This PIU have gained international experience with the Bank
procurement procedures through the above mentioned Bank financing operations. The overall risk
assessment is rated as high risk although the PIU has been working in the on going projects, taking into
account the overall risky environment for procurement in the country. It is recommended that all major
contracts should be prior reviewed.
The first procurement capacity assessment of the PIU was carried out by the Bank for the Water Supply
Urgent Rehabilitation Project in October 1999. A second capacity assessment of the PIU was carried out in
July 2001 for the Municipal Water and Wastewater Project.
Are the bidding documents for the procurement actions for the first year ready by negotiations: No
Training Information and Development on Procurement
Estimated Date of Project Launch Workshop: March 2004
Date of publication of General Procurement Notice: April 2004
Indicate if there is procurement subject to mandatory SPN in Development Business: Yes
Domestic Preference for Goods: N.A.
Domestic Preference for Works, if applicable: .
Retroactive Financing: No Advance Procurement: No
Explain briefly the Procurement Monitoring System: The PIU will have the responsibility for all
procurement activities and for installation and management of the procurement monitoring system for its
respective component described above. All procurement documentation will be prior reviewed by a PAS
and the relevant technical staff. Procurement information will be collected and recorded by PIU and
submitted to the Bank in the quarterly progress reports. This information would include (a) revised cost
estimates for individual contracts; (b) revised timing of procurement actions including advertising, bidding,
contract award and completion time for individual contracts; and (c) compliance with aggregate limits on
specific methods of procurement. Procurement training is not envisaged under the Project, since there are
only small contracts and major contracts will be prior reviewed.
Co-financing. Explain briefly the Procurement arrangements under co-financing: The procurement
of the co-financed components will be carried out according to the Bank guidelines.
Procurement Staffing:
All procurement will be carried out by the Water PIU. The Ministry of Environment will be consulted on
all procurement to be carried out under the project components for Environmental Management and
Monitoring and Public Consultation and Replication, and will have a voting member of the evaluation
committees for this type of procurement. The same applies to the KVMR Board for all procurement
related to the KVMR.
Explain briefly the expected role of the Field Office in Procurement:
No procurement service support is currently envisioned from the Resident Mission.
_______________________________________________________________________________________________________________
1\ Thresholds generally differ by country and project. Consult "Assessment of Agency's Capacity to Implement
Procurement" and contact the Regional Procurement Adviser for guidance.
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Annex 6(B): Financial Management and Disbursement Arrangements
ALBANIA: Integrated Water & EcoSystems Management
Financial Management
1. Summary of the Financial Management Assessment
The project's financial management arrangements are acceptable to the Bank.
Country Issues
The latest Country Financial Accountability Assessment (CFAA) from May 2002 confirms that
improvement is required in the management of public expenditures, including cash management in Treasury
and better internal control throughout the public sector. Absence of a solid legal basis for internal audit
further hampers the solidness of the internal control. Thus, PIU has developed policies and procedures that
operate in addition to those of the current public expenditure management framework to minimize project
financial management risks.
Strengths and Weaknesses
The significant strengths that provide a basis of reliance on the project financial management system
include: (i) the experience of PIU and its accountant of implementing Bank-financed projects and satisfying
Bank financial management requirements; and (ii) the unqualified audit reports and positive management
letters issued by PIU's project auditors.
There are no significant weaknesses of the project financial management system.
Implementing Entity
The Water PIU was established in 1994. The PIU was created specifically to implement Bank-financed
projects and has already established a successful track record in its implementation of these projects. In
addition to this new GEF/EIB Project, it is implementing the IDA financed Water Supply Urgent
Rehabilitation Project and Municipal Water and Wastewater Project. Before these projects the PIU
implemented the IDA funded Durres Water Supply Project. The Water PIU reports to the Ministry of
Finance and to the Ministry of Territorial Adjustment and Tourism.
All financial management activities will be carried out by the PIU.
Funds Flow
Project funds will flow from: (i) the Bank, either via a single Special Account which will be replenished on
the basis of SOEs or by direct payment on the basis of direct payment withdrawal applications; or (ii) the
Government, via the Treasury at the Ministry of Finance (MOF) on the basis of payment requests approved
by the Treasury Department of the MOF directly to the local supplier for VAT and other taxes.
Staffing
PIU staffing includes one accountant with considerable experience of implementing Bank-financed projects.
Terms of Reference for the PIU with detailed descriptions of duties and staffing have been finalized. The
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PIU has demonstrated that it is fully capable of fulfilling the accounting and reporting needs of the projects
it has been implementing earlier.
Accounting Policies and Procedures
The accounting books and records are maintained on a cash basis and project financial statements are
presented in United States dollars and the local currency Lek. PIU has instituted a set of appropriate
accounting procedures and internal controls including authorization and segregation of duties as far as
possible.
The policies and procedures are further elaborated in the Financial Management Manual.
2. Audit Arrangements
Internal Audit
PIU has no internal audit function and none is considered necessary given the size of the organization.
External Audit
No significant issues have arisen in the audits of previous Bank-financed projects implemented by PIU.
PIU's previous and current auditing arrangements and audit findings are satisfactory to the Bank and it has
thus been agreed that similar audit arrangements will be adopted for the GEF/EIB Project, to include the
GEF/EIB Project's project financial statements, SOEs and Special Account. The auditor will be appointed
by the Ministry of Finance as part of an overall agreement for the audit of the non-revenue earning
Bank-financed portfolio in Albania. Specific terms of reference is used for the projects covered by this
agreement. Despite the MOF's arrangements, the PIU is responsible for delivering to the Bank, within six
months of the closing of each fiscal year, the audited financial statements.
The annual cost of the audits will be covered by the Government of Albania.
In addition the country's supreme audit institution, performs ad hoc external audits of the PIU.
Reporting and Monitoring
PIU produces all financial reports and SOEs for the Bank with the project accounting software, Alpha. PIU
has demonstrated in its previous projects that it is able to report satisfactorily on project expenditures with
this system.
Project management-oriented Financial Monitoring Reports (FMRs) will be used for project monitoring
and supervision and the indicative formats of these are included in the PIU Financial Management Manual.
PIU will produce a full set of FMRs every three months throughout the life of the project. Draft formats of
these FMRs were agreed during negotiations.
Information Systems
The accounting system for the GEF/EIB Project has been fully computerized, adopting a locally developed
software that is able to produce the reports required by the Bank (FMRs). The system has been tailored to
- 56 -

---

the project documents utilizing the work made for the Municipal Water and Wastewater Project.
Based on the financial management system of the Municipal Water and Wastewater Project, the PIU has
prepared a comprehensive Financial Management Manual for the project. The Manual set out the financial
management and internal controls policies and procedures and is intended to guide staff and minimize the
risk of errors and omissions, as well as delays in transactions, recording and reporting. These written
standards also clarify responsibilities, including level of authority, clear control over assets, cash and bank
accounts and timely and accurate financial reporting. In addition to the Financial Management Manual, the
PIU will have to follow the procedures set out in the Project Implementation Manual. The accounting for
the project is cash basis.
Specific procedures for the part of the project financed by EIB will be included through consultations with
the relevant EIB staff.
3. Disbursement Arrangements
Bank funds will be disbursed under the Bank's transactional procedures including SOEs and direct
payments. Supporting documentation for SOEs, including completion reports and certificates, will be
retained by the Borrower and made available to the Bank during project supervision. Disbursements for
expenditures above the SOE thresholds will be made against presentation of full documentation relating to
those expenditures. There is no plan to move to periodic disbursements.
As soon as the project becomes effective the PIU will open and manage a Special Account specifically for
this project, in the Bank of Albania to which the GEF funds will be transferred. Since the Bank of Albania
does not execute commercial transactions with third parties, the PIU will transfer the funds from the
Special Account to a second-level account opened by the project in a commercial bank acceptable to the
Bank from which it pays eligible expenses related to the project. Counterpart funds are transferred, in Lek,
to a specific bank account. Withdrawal applications for the replenishments of the SA will be sent to the
Bank at least every three months, or when the balance of the SA is equal to about half of the initial deposit
or the authorized allocation, whichever comes first.
Supervision Plan
During project implementation, the Bank will supervise the project's financial management arrangements in
two main ways: (i) review the project's quarterly financial management reports as well as the project's
annual audited financial statements and auditor's management letter; and (ii) during the Bank's supervision
missions, review the project's financial management and disbursement arrangements (including a review of
a sample of SOEs and movements on the Special Account) to ensure compliance with the Bank's minimum
requirements. As required, a Bank-accredited Financial Management Specialist will assist in the
supervision process.
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---

Allocation of grant proceeds (Table C)
Table C: Allocation of Grant Proceeds
Expenditure Category
Amount in US$million
Financing Percentage
Goods
0.20
100% of foreign expenditures and 100%
of local expenditures (ex. factory
cost) and 50% of local expenditures for
other items procured locally
Works
3.86
85%
Services
0.68
85%
Incremental Operating Costs
0.08
75%
Training
0.05
100%
Total Project Costs with Bank
4.87
Financing
Total
4.87
Use of statements of expenditures (SOEs):
Project funds will be initially disbursed under the Bank's established procedures, including SOEs.
Disbursements made on the basis of SOEs will be as follows for each expenditure category: (a) goods
under contracts costing less than US$100,000 each; (b) works under contracts costing less than US$
500,000 each; (c) services under contracts less than US$100,000 each for consulting firms, and less than
US$50,000 each for individual consultants; and (d) recurrent costs, under such terms and conditions as the
Bank shall specify. Supporting documentation for SOEs will be retained by the Borrower, be made
available to the Bank during project supervision, and be audited annually by independent auditors
acceptable to the Bank. Disbursements for expenditures above these thresholds will be made against
presentation of full documentation relating to those expenditures.
The Operator, as part of the services to be provided under the management contract, will consolidate
project information for all components and prepare quarterly PMRs including financial report, project
progress report and procurement management report, for project monitoring and reporting for submission
to the Bank through the CMU. The reporting system would support the application of the PMR-based
disbursements, to be made at the mutual agreement of the Government and the Bank.
Special account:
To facilitate disbursements against eligible expenditures, a Special Account (SA) will be established in the
National Bank to be maintained and operated by the PIU under terms and conditions satisfactory to the
Bank.
The IDA would, upon request, make authorized allocation of US$0.5 million into the SA. Applications for
the replenishment of the SA would be submitted on a monthly basis, or when about 20 percent of the initial
deposit has been used, whichever comes first. The replenishment applications will be supported by the
necessary documentation, in accordance with Bank guidelines, including the SA bank statements and a
reconciliation of the bank statements to the project's accounting records. The PIU, with the support of the
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---

Operator, will be responsible for the appropriate accounting of project funds provided under the Credit, for
reporting on the use of these funds, and for ensuring that audits of the financial statements are submitted to
the Bank. Accounting for Special Account transactions and for all other project-related accounts will be
maintained in accordance with the World Bank Financial Accounting Reporting and Auditing Handbook,
January 1995. The SA would be audited annually by independent auditors acceptable to the Bank.
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Annex 7: Project Processing Schedule
ALBANIA: Integrated Water & EcoSystems Management
Project Schedule
Planned
Actual
Time taken to prepare the project (months)

First Bank mission (identification)
10/15/2001
Appraisal mission departure
10/17/2003
09/17/2003
Negotiations
12/03/2003
11/17/2003
Planned Date of Effectiveness
04/18/2004
Prepared by:
Benouniche, Calabrese, Cestti, Christensen, de Soto, Dias, Nadkarni, Purificato, Rohde
Preparation assistance:
PDF Block B for US$350,000
Bank staff who worked on the project included:
Name
Speciality
Andreas Rohde, ECSIE
Task Team Leader / Sanitary Engineer
Claudio Purificato, ECSIE
Water and Sanitation Engineer
Arben Bakllmaja, ECSIE
Consultant
Takao Ikegami, ECSIE
Senior Sanitary Engineer
Manuel Marino, ECSIE
Water and Sanitation Specialist
Juderica Dias
Program Assistant
Rita Cestti, ECSSD
Environmental Specialist
Hermine De Soto, ECSSD
Social Specialist
Olav Christensen, ECSCS
Financial Management Specialist
Junko Funahashi, LEGEC
Counsel
Rohit Mehta, LOAG1
Finance Officer
Salim Benouniche, ECSPS
Procurement Specialist
Ahmet Jehani, LEGEC
Counsel
Artan Guxho, ECSIE
Project Officer
Daniele Calabrese, EXTCD
Communication Associate
Grazia Atanasio, EXTCD
Communication Officer
Ede Ijjasz-Vasquez, ENV
Peer Reviewer, Sr. Environmental Specialist
Phillip Brylski, ECSSD
Peer Reviewer, Sr. Biodiversity Specialist
Paul Mitchel, EXTCD
Peer Reviewer, Manager
Maria Teresa R. Lim, ECSIE
Program Assistant
Susanne Szymanski, ECSIE
Consultant
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---

Annex 8: Documents in the Project File*
ALBANIA: Integrated Water & EcoSystems Management
A. Project Implementation Plan
l
Albania - Integrated Water and Ecosystem Management Project, Draft Project Implementation Plan -
July 2003
B. Bank Staff Assessments
l
Project Concept Document - February 2002 (under Albania - Municipal Water and Wastewater
Project)
l
Project Executive Summary - GEF Council Work Program Submission - March 2003
l
Aide Memoire - November 2001, February 2002, May 2002, August 2002, February 2003, May 2003,
July 2003
C. Other
l
Technical Assessment and Final Design for Construction and Management of Constructed Treatment
Wetlands - Technical Assessment Report (SWS-TEI, October 2002)
l
Technical Assessment and Final Design for Construction and Management of Constructed Treatment
Wetlands - Technical Review Report (Hydro Ingenieure, July 2003)
l
PAD - Municipal Water and Wastewater Project
l
Environmental Impact Assessment (EIA)
l
Environmental Management Plan (EMP)
l
Government letter on international water
l
Government letter committing land for CTWs
*Including electronic files
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Annex 9: Statement of Loans and Credits
ALBANIA: Integrated Water & EcoSystems Management
27-Oct-2003
Difference between expected
and actual
Original Amount in US$ Millions
disbursementsa
Project ID
FY
Purpose
IBRD
IDA
Cancel.
Undisb.
Orig
Frm Rev'd
P077739
2004 PRSC 2
0.00
18.00
0.00
18.28
0.00
0.00
P041442
2003 MUN WATER/WW
0.00
15.00
0.00
16.27
0.78
0.00
P077297
2003 COM WRKS 2
0.00
15.00
0.00
15.56
0.00
0.00
P066260
2002 ROAD MAINT
0.00
17.00
0.00
29.54
0.31
0.31
P069479
2002 FISHERY DEVT
0.00
5.60
0.00
4.93
0.35
0.00
P074905
2002 PWR SECT REHAB/RESTRCT'G
0.00
29.90
0.00
33.17
-0.12
0.00
P057818
2002 FSAC
0.00
15.00
0.00
8.41
-7.94
0.00
P055383
2001 SOC SERV DEVT
0.00
10.00
0.00
10.37
-0.66
0.00
P054736
2001 AG SERVICES
0.00
9.90
0.00
8.44
0.99
0.00
P070078
2001 TRADE & TRANS FACIL IN SE EUR
0.00
8.10
0.00
2.05
3.33
0.00
P069939
2000 PUB ADM REF
0.00
8.50
0.00
7.15
7.61
-0.25
P069120
2000 EDUC REF
0.00
12.00
0.00
5.78
2.13
0.00
P069079
2000 FIN SEC IBTA
0.00
6.50
0.00
3.00
2.42
0.00
P068853
2000 EMG ROAD REPAIR
0.00
13.65
0.00
0.58
1.15
1.15
P057182
2000 LEG/JUD REF
0.00
9.00
0.00
6.60
4.05
1.99
P066491
2000 WS URG REHAB
0.00
10.00
0.00
1.97
1.99
0.78
P051310
1999 MICROCREDIT
0.00
12.00
0.00
0.60
-2.12
0.83
P043178
1999 IRRIG & DRAIN II
0.00
24.00
0.00
1.11
-1.92
0.00
P045312
1998 HEALTH RECOVERY
0.00
17.00
0.00
12.56
12.01
0.00
P040818
1998 DURRES PORT
0.00
16.99
0.00
2.24
2.43
2.23
P040975
1998 LAND DEVT
0.00
10.00
0.00
4.09
3.76
0.00
P008271
1996 FORESTRY
0.00
8.00
0.00
0.36
0.93
0.32
Total:
0.00
291.14
0.00
193.06
31.48
7.36
- 62 -

---

ALBANIA
STATEMENT OF IFC's
Held and Disbursed Portfolio
June 30 - 2003
In Millions US Dollars
Committed
Disbursed
IFC
IFC
FY Approval
Company
Loan
Equity
Quasi
Partic
Loan
Equity
Quasi
Partic
1998
AAP
0.00
28.50
0.00
0.00
0.00
13.53
0.00
0.00
2000
NCBank
0.00
2.00
0.00
0.00
0.00
2.00
0.00
0.00
1999
SEF Eurotech
0.60
0.00
0.00
0.00
0.60
0.00
0.00
0.00
1999
SEF FEFAD Bank
0.00
0.98
0.00
0.00
0.00
0.98
0.00
0.00
Total Portfolio:
0.60
31.48
0.00
0.00
0.60
16.51
0.00
0.00
Approvals Pending Commitment
FY Approval
Company
Loan
Equity
Quasi
Partic
2002
INSIG
0.00
0.00
0.01
0.00
1998
Patos Marinza
0.03
0.00
0.00
0.05
2001
Patos Marinza In
0.01
0.00
0.00
0.00
2002
Savings Bank
0.00
0.00
0.02
0.00
2003
Vodafone Albania
0.05
0.00
0.00
0.01
Total Pending Commitment:
0.09
0.00
0.02
0.06
- 63 -

---

Annex 10: Country at a Glance
ALBANIA: Integrated Water & EcoSystems Management
Europe &
Lower-
POVERTY and SOCIAL

Central
middle-
Albania
Asia
income
Development diamond*
2002
Population, mid-year (millions)
3.2
476
2,411
Life expectancy
GNI per capita (Atlas method, US$)
1,380
2,160
1,390
GNI (Atlas method, US$ billions)
4.4
1,030
3,352
Average annual growth, 1996-02
Population (%)
0.3
0.1
1.0
Labor force (%)
0.7
0.4
1.2
GNI
Gross
per
primary
Most recent estimate (latest year available, 1996-02)
capita
enrollment
Poverty (% of population below national poverty line)
..
..
..
Urban population (% of total population)
44
63
49
Life expectancy at birth (years)
74
69
69
Infant mortality (per 1,000 live births)
23
25
30
Child malnutrition (% of children under 5)
14
..
11
Access to improved water source
Access to an improved water source (% of population)
97
91
81
Illiteracy (% of population age 15+)
14
3
13
Gross primary enrollment (% of school-age population)
107
102
111
Albania
Male
107
103
111
Lower-middle-income group
Female
107
101
110
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
1982
1992
2001
2002
Economic ratios*
GDP (US$ billions)
..
..
4.3
4.8
Gross domestic investment/GDP
..
..
27.0
19.7
Trade
Exports of goods and services/GDP
..
..
19.7
18.9
Gross domestic savings/GDP
..
..
4.6
-4.4
Gross national savings/GDP
..
..
20.9
12.7
Current account balance/GDP
..
..
-6.1
-9.1
Domestic
Interest payments/GDP
..
..
0.2
0.5
Investment
savings
Total debt/GDP
..
..
25.7
27.2
Total debt service/exports
..
0.9
2.4
3.5
Present value of debt/GDP
..
..
17.9
..
Present value of debt/exports
..
..
49.4
..
Indebtedness
1982-92
1992-02
2001
2002
2002-06
(average annual growth)
Albania
GDP
..
6.2
6.8
4.7
5.0
GDP per capita
..
5.9
5.8
3.7
4.0
Lower-middle-income group
Exports of goods and services
..
28.6
23.7
6.2
7.3
STRUCTURE of the ECONOMY
1982
1992
2001
2002
Growth of investment and GDP (%)
(% of GDP)
60
Agriculture
..
..
34.2
33.3
40
Industry
..
..
23.5
23.5
20
Manufacturing
..
..
13.2
12.8
0
Services
..
..
42.3
43.2
-20
97
98
99
00
01
02
Private consumption
..
..
86.2
93.5
-40
General government consumption
..
..
9.2
10.9
GDI
GDP
Imports of goods and services
..
..
42.0
43.1
1982-92
1992-02
2001
2002
Growth of exports and imports (%)
(average annual growth)
Agriculture
..
1.2
1.4
2.0
100
Industry
..
11.1
10.7
8.0
Manufacturing
..
9.6
6.5
7.0
50
Services
..
8.2
8.9
19.9
0
Private consumption
..
7.5
9.5
10.9
97
98
99
00
01
02
General government consumption
..
6.1
15.7
-3.2
-50
Gross domestic investment
..
14.6
11.9
-0.1
Exports
Imports
Imports of goods and services
..
20.5
21.1
11.3
* The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.
- 64 -

---

Albania
PRICES and GOVERNMENT FINANCE
1982
1992
2001
2002
Inflation (%)
Domestic prices
(% change)
40
Consumer prices
..
226.0
3.1
5.4
30
Implicit GDP deflator
..
..
3.9
5.8
20
Government finance
10
(% of GDP, includes current grants)
0
Current revenue
..
..
22.2
22.7
97
98
99
00
01
02
Current budget balance
..
..
-1.2
-0.1
GDP deflator
CPI
Overall surplus/deficit
..
..
-8.2
-6.3
TRADE
1982
1992
2001
2002
Export and import levels (US$ mill.)
(US$ millions)
Total exports (fob)
360
70
305
330
2,000
Agriculture
..
14
28
40
Mineral products
..
16
6
9
1,500
Manufactures
..
..
215
206
Total imports (cif)
438
524
1,332
1,485
1,000
Food
..
224
256
286
500
Fuel and energy
..
35
184
206
Capital goods
..
103
602
672
0
96
97
98
99
00
01
02
Export price index (1995=100)
..
..
..
..
Import price index (1995=100)
..
..
..
..
Exports
Imports
Terms of trade (1995=100)
..
..
..
..
BALANCE of PAYMENTS
1982
1992
2001
2002
Current account balance to GDP (%)
(US$ millions)
Exports of goods and services
374
82
840
915
0
Imports of goods and services
460
628
1,791
2,080
96
97
98
99
00
01
02
Resource balance
-87
-547
-951
-1,165
-5
Net income
13
-29
148
130
Net current transfers
..
148
543
597
Current account balance
-67
-428
-260
-438
-10
Financing items (net)
54
485
395
553
Changes in net reserves
13
-57
-135
-115
-15
Memo:
Reserves including gold (US$ millions)
..
..
737
866
Conversion rate (DEC, local/US$)
..
75.0
143.5
140.2
EXTERNAL DEBT and RESOURCE FLOWS
1982
1992
2001
2002
(US$ millions)
Composition of 2002 debt (US$ mill.)
Total debt outstanding and disbursed
..
633
1,094
1,312
IBRD
..
0
0
0
G: 31
IDA
..
2
366
476
F: 35
Total debt service
..
2
37
58
IBRD
..
0
0
0
B: 476
IDA
..
0
3
3
Composition of net resource flows
Official grants
..
334
137
121
E: 584
Official creditors
..
49
94
130
Private creditors
..
3
-4
1
Foreign direct investment
..
20
207
135
C: 81
Portfolio equity
..
0
0
0
D: 105
World Bank program
Commitments
..
41
20
88
A - IBRD
E - Bilateral
Disbursements
..
2
34
79
B - IDA
D - Other multilateral
F - Private
Principal repayments
..
0
0
0
C - IMF
G - Short-term
Net flows
..
2
34
79
Interest payments
..
0
3
3
Net transfers
..
2
32
76
Development Economics
8/22/03
- 65 -

---

Additional GEF Annex 3: Incremental Cost Analysis
ALBANIA: Integrated Water & EcoSystems Management
Project Background
The aim of this project is to reduce the sewage pollution load from the 3 cities of Durres, Saranda, Lezhe in
order to protect and improve the environmental conditions of coastal and marine habitats. The great part of
the ecosystems considered by the project have been ranked at international level according with the Ramsar
convention. The project will support an integrated approach to ecosystem management based on the
reduction of nutrients through the construction of artificial wetlands for wastewater treatment, as well as
improved management of the protected area of Kune-Vain.
Sector Context and Baseline Scenario
Albania's water infrastructure is in urgent need of improvement, in technical short term rehabilitation and in
medium and long term technical and managerial improvements. Water quality could be improved
significantly with a reliable supply of chemicals. Under existing conditions excessive water losses have
resulted from lack of maintenance and repair and lack of metering and operational control. Wastewater
treatment facilities do not exist in Albania and raw sewage is discharged untreated into sea and rivers.
Several causes for these conditions of Albania's water sector are:
Lack of revenues: Tariffs below the true cost of water and lack of tariff collection enforcement in the
last decade have significantly reduced the income of the water supply companies. Water and sanitation
systems have received virtually no maintenance in the last ten years.
Over consumption: Flat rates rather than metered consumption resulted in massive water waste and
also the collapse of the irrigation system has contributed to a sharp increase in water demand in the last
ten years. On top of this, a massive migration to urban centres, with illegal tapping and no incentive to
reduce water consumption, augmented the water sectors problems.
Inadequacy of the physical infrastructure: Due to the lack of appropriate materials/equipment and
insufficient consideration of the economic aspects in the design, the existing systems are expensive to
run and to maintain.
The Government of Albania (GoA) has embarked on a water sector strategy, that involves a two-tier
approach focusing in the short term on urgent repairs to the systems and on medium term program to
support sector reforms. Within this medium term program, the World Bank recently approved a US$ 21.9
million Municipal Water and Wastewater Project aiming at improving the water and sanitation services in
Albania.
Albania is characterized by the presence of very relevant coastal and marine ecosystems (lagoons,
hygrophilous forests, Posidonia meadows) where the biodiversity value is menaced by the presence of
urban settlements in the surroundings and the associated environmental impacts (in particular the
eutrophication of water due to the existing raw sewage outfalls). The coastal lagoon system of Albania
constitutes one of the most important wetlands of the Mediterranean Region. In particular endangered and
endemic species as the Pygmy cormorant (Phalacrocorax pygmaeus), the Mouse-ear bat (Myotis miotis)
and the Otter (Lutra lutra) live in these habitats and should be considered as flag species.
- 66 -

---

Water pollution mainly associated with the flow of untreated sewage is one of most relevant threats of these
ecosystems which has considerably deteriorated the natural inland ecosystems and the biological
productivity of the coastal areas. Albania lacks of any wastewater treatment facilities and existing raw
sewage outfalls are located either directly on the seacoast, on the bank of coastal rivers or on drainage
ditches that after a short distance discharge directly into globally significant tidal marshlands and/or the
sea. This has the effect of upsetting the biological balance and also increases the subsequent eutrophication
phenomena of wetlands. It is also known that coastal water pollution with particular reference to the
untreated waste waters heavily affects Posidonia oceanica meadows and the related communities (e.g. the
endangered species Pinna nobilis).
The Government is committed to biodiversity conservation and the water sector is one of priorities at
national level in line with the Strategic Principles of the Albanian Biodiversity Strategy. However, urban
population is growing rapidly with increased pressure on the quality of the surrounding water ecosystems
(sea, wetlands). The Government of Albania has very limited financial resources to create wastewater
treatment facilities.
As a consequence of the current course of action coastal areas will likely continue to be under the growing
pollution effects of uncontrolled and increased urban wastewater which can be described as follows:
endangered marine ecosystems and habitats, in medium and infralittoral level (particularly
Shengjini-Lezha area, Porto Romano bay and Saranda bay);
endangered coastal ecosystems: sand dunes, delta rivers (particularly Drini-Lezha), alluvial and wet
forests, lagoons ( Kune and Vaini) and coastal lakes (Kenalla);
risks and adverse impacts on biodiversity, and some of the major adverse impacts have been: habitat
loss and fragmentation, damage (Porto Romano bay, Shengjini and Saranda bay) and degradation
(Kenalla lake) of habitats and ecosystems, loss of species or the threat of their extinction etc.;
reduction of the Posidonia oceanica meadows populations, particularly in the Shengjini- Lezha and
Saranda-Ksamili area, but also in the Porto Romano and Lalzi bay;
development of some algae populations (Ulva and Enteromorpha), particularly in Saranda bay,
Shengjini bay and Porto Romano bay;
observation of some eutrophication in the Saranda bay, Shengjini area and Kenalla lake;
probability to affect reproduction of the fish species (e.g. sea bass) in the marine ecosystems of
Shengjini bay (particularly northern part-Rana e hedhun), in Porto Romano and Lalzi bay and near the
Saranda and Ksamili bay, etc.
negative consequences on the eco-tourism development;
delay for the implementation of the Coastal Zone Integrated Management and of the economic
development;
difficulties in implementing institutional strengthening measures in order to implement the
sustainability and biodiversity maintenance policies.
Regional GEF projects have focused part of their activities on the conservation of biodiversity of Albanian
wetlands and lagoons, like in the case of the Conservation of Wetland and Coastal Ecosystems in the
Mediterranean Region Project (Karaburun, Orikumi, and Narta habitats) and the Lake Ohrid Conservation
Project. Taking into consideration the international relevance of these habitats, other GEF projects have
been planned on other Albanian wetlands as on the lake Prespa, and on the Karavasta lagoon. Very few
activities have been planned for the Albanian marine habitats. This is probably associated with to the
scarcity of data and information on these areas, although live endangered species as the Monk seal
(Monachus monachus) and the Sea turtle (Caretta caretta) do occur in these areas.
- 67 -

---

Global Environmental Objective
Based on the present economic situation and the lack of active environmental pressure groups, it is likely
that biodiversity conservation will not be sufficiently promoted in the near future. This project promotes
and expands the use of CTW's in areas where existing pollution loads are threatening natural wetland
systems critical for biodiversity. The coastal cities of Durres, Lezhe, Saranda do not have any wastewater
treatment facilities, as such the project aims to capture global benefits by reducing land-based pollution
from the three cities and protect and restore endangered coastal and marine habitats by introducing low cost
ecologically based wastewater treatment.
The global objective of the GEF alternative is to improve the health and habitat conditions of globally
significant marine and coastal ecosystems along the coastline of Albania in an integrated manner by
significantly reducing pollution from uncontrolled municipal wastewater generated by human settlements of
the three coastal cities of Durres, Lezha and Saranda that are discharging into international waters and
improving the management of the tidal marshland of Kune Vain (near Lezha).
In order to achieve its objectives the GEF alternative will implement four main activities: (i) Sewage
pollution reduction through construction of low cost environmentally-friendly waste water treatment
facilities (CTW); (ii) environmental management and monitoring through improved monitoring of water
quality and biodiversity indicators and institutional strengthening of the Kune-Vain protected area
management administration; (iii) public awareness and replication and (iv) project management, monitoring
and evaluation.
The CTW provides a noticeable reduction of the pollution loads into the receiving water bodies, which
represents the major contribution to the protection and restoring actions in the endangered coastal zone and
marine habitats. According the analytical calculation, the following Removal Efficiency (RE%) are
expected: BOD 70%, and fecal coliform removal of 95%, studies show the CTW are effective at removing
nutrients such as nitrogen (Re=50%) and phosphorous (Re=25%). Tab. 1/a and 1/b provides an estimation
on the quality of waste water in case of implementation of the constructed wetlands according with Project
Preliminary Design. In Tab. 1/a are shown the Removal Efficiency (RE%)((*) RE% is the ratio of the
out-let concentration versus the in-let concentration of the wastewater pollutant.*) of the CTW according to
the "fully natural" wastewater treatment system (i.e. oxidation ponds interconnected with a Free Water
Surface system). Whereas in Tab.1/b are shown the Removal Efficiency (RE%)20.3/a according CTW
wastewater treatment option with "mechanical aerated ponds" (i.e. aerated ponds interconnected with a
Free Water Surface system).
Table 1/a-Quality of wastewater in Durres, Lezhe, Saranda after project intervention on Project
CTW basic scheme-fully natural solution
Main Parameter
Assumed Sewage
Expected median
Expected median
Inlet concentration
of RE%
Outlet concentration
(mg/l)
(mg/l)
BOD
250-200
70%
75-60
N-total
60-50
50%
30-25
P-total
27-20
25%
20-15
- 68 -

---

Table 1/b-Quality of wastewater in Durres, Lezhe, Saranda after project intervention on Project
CTW option with aerated ponds
Parameter
Assumed Sewage
Expected median
Expected median
Inlet concentration
of RE%
Outlet concentration
(mg/l)
(mg/l)
BOD
250-200
85%
50-30
(range 30%-95%)
N-total
60-50
75%
15-10
(range 20%-80%)
P-total
27-20
65%
15-10
(range 20%-70%)
In addition, the GEF alternative is designed to improve management of wetlands and possibly restoring
precious habitats by strengthening the management of the Kune Vain protected area. The conservation
measures of the proposed GEF alternative are actions which are `additional' to the baseline. These
additional actions will complement existing and planned activities consistent with the Strategic Principles of
the Albanian Biodiversity Strategy and the implementation of the constructed wetlands.
Costs: The total cost of the GEF alternative is estimated at US$ 11,837,000.
Table 2 - Financing Plan
GEF
EIB
GoA
Total
Sewage Pollution Reduction
3,960,000
6,287,000
680,000
11,026,000
Environmental Management and
700,000
700,000
Monitoring
Public Communication and Replication
130,000
130,000
Project Management M&E
80,000
80,000
Total
4,870,000
6,287,000
680,000
11,837,000
Benefits: The implementation of the GEF Alternative would provide the means to protect unique coastal
landscape and marine habitats, as well as restoring high priority wetlands (Kune-Vain) and several habitats
for important bird species. Benefits generated from the project would include those of local nature such as
protection of local and regional environmental resources and increased public awareness of environmental
issues as well as those of global nature such as reduction of nutrients in flow waters and the protection of
rare and unique ecosystem. The GEF grant has helped leverage funds from other donors for additional
activities.
Incremental Costs
The difference between the cost of Baseline scenario (US$ 21,930,000) and the cost with the GEF
Alternative (US$ 33,767,000) is estimated at US$ 11,837,000. This represents the incremental cost for
achieving sustainable global environmental benefits. Of this amount, the Government of Albania has
committed to finance US$ 680,000, while US$ 6,287,000 is leveraged from the European Investment Bank.
The amount requested form GEF is US$ 4,870,000
- 69 -

---

Table 3 - Incremental Cost Matrix
Component
US $
Domestic Benefit
Global Benefit
Sewage Pollution
Baseline:
Improvement in water and
Reduction
US$ 21,800,000
wastewater services, including
(through construction
improved management of
of artificial treatment
water utilities and
wetlands)
rehabilitation of existing
water infrastructure.
Improvement in wastewater
collection will have no
significant impact on nutrient
reduction and therefore
environmental deterioration of
water and land and their
ecosystem will continue.
With GEF Alternative:
Waste water treatment
US$ 32,826,000
through artificial wetlands
will yield significant nutrient
reduction and will help
restore endangered coastal
and marine habitats and
protect globally significant
biodiversity
Incremental Benefit:
US $ 11,026,000
Environmental
Baseline:
Some capacity to monitor water
Management and
US$ 100,000
quality as part of improved
Monitoring
management of water utilities;
(through capacity building
limited capacity to plan and
for water quality and
implement protected area
biodiversity monitoring
management in wetlands and
and protected area
protected areas
management)
With GEF Alternative:
Increased capacity to monitor
Sustainable integrated
US$ 800,000
water quality and biodiversity
management of marine and
indicators; increased capacity to coastal ecosystems and
manage a protected area;
globally significant wetlands;
effective management structure meaningful participation of
for the Kune Vain protected
stakeholders in protected area
area
management activities
Incremental Benefit:
US$ 700,000
Public Awareness and
Baseline:
Increased awareness of
Replication
US$ 30,000
consumers about efficient use of
water resources
With GEF Alternative:
Creation of opportunities for
Increased local, national and
US$ 160,000
public education
international understanding
of threats to globally
significant ecosystems and
strategy for replication of
project achievements
- 70 -

---

Incremental Benefit:
US$ 130,000
Project Management,
Baseline:
Not applicable
Monitoring and
Evaluation
With GEF Alternative:
Increased local capacity to
Information dissemination
US$ 80,000
manage projects
and knowledge sharing
within the country and region
Incremental Benefit:
US$ 80,000
TOTAL
Baseline:
US$ 21,930,000
With GEF Alternative:
US$ 33,767,000
Increment:
US$ 11,837,000
- 71 -

---

Additional GEF Annex 4: Project Area Ecosystems
ALBANIA: Integrated Water & EcoSystems Management
1.
Global Significance of the Project Area
The Integrated Water Management Project concerns the water treatment by "naturalistic methods" in three
well identified areas, which experience high naturalistic values. Their peculiar features can be express as
follows:
Lezhe/shengjin (Kune-Vaini lagoon): The endangered species living in the proposed Managed Nature
Reserve are: (i) the globally threatened Phalacrocorax pygmaeus (Pygmy cormorant); (ii)
Myotis-myotis (Mouse-ear bat); (iii) Rana balcanica and Rana lessonae (Frogs); (iv) Lutra-lutra
(Eurasian river otter).
Durres (Rrushkull lagoon): The area has been identified as Important Bird Area (IBA) for over 10,000
waterbirds.
Saranda Bay and Butrinti lake: 96 endangered species do occur in this area that are included in the
IUCN Red List of Threatened Animals.
Furthermore, these areas, already affected by pollution problems, represent the territories for further
residential settlement, agricultural activities and mainly potential touristic development. These are factors
to be taken into account in the project analysis and alternatives set up and selections, mainly concerning the
impact on the environment.
In particular, Durres area is progressively affected by a noticeable urban settlement, which is experienced
by an uncontrolled expansion. Former use of the plain had a prevailing agricultural destination and a
regular network of surface natural canals was built in order to allow surface run-off to drain into a central
main channel. This channel finally discharges at sea by means of a hydrovore, to keep the plain dried
during and after important rainfalls, due to the presence of a surface aquifer. The central open channel is
now the final receptor of all sewage waters of the Durres District, whose discharge at sea can provoke
pollution effects and damages to the marine environment in the area of Porto Romano. The plain is limited
eastward by the Erzeni River, westward by the system of coastal hills and northward by the rather complex
system of coastal wetlands and dunes of the Lalzi bay. All natural district is threatened by the direct and
indirect impacts provoked on all environmental components by the advancing spreading of the uncontrolled
urban settlement. The western side of the plain is characterized by the older urban as well as industrial
settlement, now completely idle, but land and surface aquifer contamination represent major problems not
yet solved. In the middle part of the plain embankments of an old fishing pond still remain, which represent
a physical constraint to the chaotic expansion of the urban settlement. Being not the settlement advances
suitably planned , the required infrastructures in terms of roads, energy and water supply, sewage water
collection, etc are completely lacking, which implies a strong impact on soil, surface and underlying waters
and a threat to the natural resources of the marine as well as wetland ecosystems.
Saranda bay represents the most attractive coastal area of Albania , where eco-tourism potential is higher
and strategies of sustainable development can be profitably implemented in the short and medium term,
with an interesting return for the local economics. Coastal Zone Integrated Management (CZIM) of
Saranda District, extending to Butrinti Lake, Bistrica Spring and hydrographic catchments and existing
wetlands, can be put forward and implemented only if sanitation problems and waste water treatment and
protection of the natural and marine environment are accomplished. As a consequence an action plan
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combining main sewage water trunk line (covered by PHARE Funds) with a waste water treatment by
naturalistic processes is highly envisaged, to preserve the marine environment from existing pollution
effects. The area identified for the construction of the artificial wetland is located in the proximity of the
Ceka canal, where several solutions can be proposed.
Lagoon of Kune-Vaini is an important Protected Area, of great naturalistic value. City of Lezhe, the
intensive agricultural activity developed in the alluvional area as well as the progressive population
increase and future settlements, represent potential threats to the natural equilibrium and to the biodiversity
preservation of the aquatic ecosystems. Indeed, the sewage waters of Lezhe directly discharge into the
surface waters of the Drini River, whose spreading at sea can affect the environmental conditions of all the
coastal zone surrounding the river mouth, and consequently the lagoon. Direct effects of contamination of
the lagoon waters can also occur by surface run-off of the agricultural fields and a hydrovore, installed to
keep the fields dried after rainfall events, can increase the contaminant's flow. As a consequence the
eutrophication process can arise sometime in the lagoon waters. A coordinated intervention, combining the
waste waters treatment of Lezhe sewage waters by an artificial wetland, with the accomplishment of a
network of natural "filter streep", in order to intercept the surface drainage of waters of agricultural origin
into the lagoon, should provide positive results for the preservation and protection of the natural resources.
It is also necessary to mention the naturalistic site of Kanalla Lake, being a natural spring of karstic
waters existing at the toe of the hills, within the lagoon. This a typical transitional water body, highly
polluted for the direct discharge of sewage waters coming from the village of Shengjin. In such a case the
solution cannot adopt the peculiarities of the natural wetlands, being the lagoon itself a protected area and
therefore no artificial ponds can be built inside. Conventional water treatment plants have to be proposed.
2.
General Description of the Albanian Marine Ecosystem
The Albanian coastal region contains two geographic entities: the Adriatic and the Ionian Sea coastal areas.
The total length of coastline is about 429 km and the national waters confined to territorial waters of 12
miles width. The continental shelf lies entirely within the exclusive zone. The shelf is wider in the north
(Adriatic sea), up to 25 miles across, and narrower in the south (Ionian sea), 2-3 miles width. Beyond 25
miles, sea depth exceeds 1000 m in the international channel.
There is no particular wind that prevails in the coastal plain. In winter, the most frequent one blows from
the Southeast and in the summer season, the prevailing wind blows from the north-western direction. There
are three types of rather low currents in the Adriatic sea: continuous currents, tidal currents, and
wind-driven currents. Strong winds persisting for a couple of days may create temporary currents running
in the opposite direction with respect to steady and tidal currents.
The Adriatic coastal area (the northern part of the Albanian coast) is generally characterized by coastal
lowlands (alluvial plains) intersected by rivers, and flanked by hills along its upland boundary. The coast
is made of long sandy beaches, deltaic river mouths and lagoons. The coastal waters are shallow, receiving
water from the rivers and several drainage canals. At sea, the water depth increases slowly, with first a
sandy bottom with the associated biocenosis which becomes muddy with increasing depth.
On the sandy or muddy bottoms, the marine flora is scarce or occupies specific areas where currents or
waves have less action. The extensive seagrass beds of Posidonia oceanica are an important part of the
Albanian marine ecosystem, often occupying a considerable part of the littoral zone. Posidonia oceanica
and very well developed marine communities are found along Porto Romano bay and Shengjini bay. The
underwater rocky bottoms at Rodoni and Lagji Capes (Durres), and the eastern side of Vlora bay host
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patches of Posidonia oceanica.
Porto Romano and Rrushkull-Erzeni River Outlet (Durres Area)
The area of Porto Romano and Lalzi bay is a narrow, reclaimed part of the coastal plain. There are some
natural habitats left along the coastline, such as a belt of pine trees, temporary marshes, roadbeds and salt
marshes. In addition to the loss of large wetland parts by land reclamation, the quality of natural
environment of that area continues to deteriorate due to the input of the polluted Erzeni river (contaminated
mainly by sewage disposed upstream), direct discharge of untreated urban and industrial wastewater in the
Porto Romano bay, excessive felling of trees for fuel, and uncontrolled hunting and fishing. The
underwater rocky bottoms at Rodoni and Lagji Capes host patches of Posidonia oceanica.
The Lalzi bay with the Erzeni river mouth is an environmentally sensitive area. The coastline of the
Rodoni-Bishti i Palles Capes, of which 35 % are cliffs exposed to mild erosion stretching along both capes.
The remaining parts of this unit are alluvial beaches (actually, the Lalzi bay) of which 18 % is exposed to
erosion and 47 % to deposition. Any intervention altering the quantity of the material carried by the Erzeni
river will affect the littoral, generating new erosion processes. The Porto Romano bay also is a section
attacked by erosion.
Drini Outlet (Lezhe-Shengjin Area)
This unit has about 15 km of the coastline, from Shengjini harbour to the southern part of Vaini lagoon
(including the Drini river), oriented in N-S direction. The shore are sandy and sediment is coming both
from the Buna and Drini rivers transported by the longshore currents. The marine slope is gentle reaching
the 20 m isobath at average of 2.0 km offshore. Kenalla, Kune and Vaini lagoons are separated from the
shallow coastal waters by the narrow sandbars, low and mobile dunes, and the planted pine tree belt (Pinus
halepensis, Pinus pinea).
Posidonia oceanica meadows and Penaeus kerathurus populations are reduced due to the polluted
industrial and urban discharges into this area((1) Albania Coastal Zone Management Plan : Final Report -
Phase One, 1995.1). The breeding grounds of Posidonia oceanica have also deteriorated because of
changes in the structure of the fishing fleet((2) Albanian Convention on Biological Diversity -1999. (2).
Fishing activities occur in the coastal waters including the trawlers from Shengjini and small local fishing
boats. As in other places, the local population is collecting Bivalves along the shores.
The coastal wetlands of Drini river (Kenalla-Kune-Vaini lagoons) are a part of an environmentally
sensitive area. Inland of the Shengjini beach lies the Kenalla lake surrounded by a dike with the open lake
and a dried-up part with salinity tolerant vegetation. Through a pipeline, the urban sewage of Shengjini is
directly drained into the lake. Further south lies the Kune lagoon extending up to Drini river mouth. The
coastal reach in the northern part of Shengjini has presented an coastal erosion phenomena. After that,
until some 2.5 km south of Shengjini, the coast is relatively stable or slightly receding.
Saranda Bay and Ksamili Bay (Saranda Area)
The coastline of Saranda bay to Ksamili bay can be divided into several sections: the area including the
town of Saranda shows a recent development on the northern bluff near the entrance to the harbour; the
area south of Saranda where the cliffs are steep and cut with caves and intermittent sandy beaches; the
abandoned citrus plantations and deforested areas in the vicinity of Ksamili; the Ksamili islands, with small
sandy beaches, wind-sculpted maquis forests, and extensive Posedonia oceanica meadows covering the
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shallow areas of the bay of Ksamili. The whole area from Ksamili Islands to Stillo bay could be integrated
in a protected and managed area with interconnected areas. In Ksamili bay and inlets, a marina and
environmentally sound resort place could be settled.
3.
General Description of Natural Wetlands Ecosystems
3.1
Kune­Vain Wetland and Kenalla Lake
The Kune­Vain wetland and Kenalla Lake or complex Kune­Vain lagoon represent one of the important
coastal Albanian wetland. Area of Kune­Vaini wetland and Kenalla lake represents a wetland area of
multiple ecological and economic values and uses, as provide fish and wildlife habitats, support complex
food web, absorb water to reduce flooding and damage from storms, provide erosion control, improve the
quality of water in particular provide open space & aesthetic value. The Drini River is the longest river of
Albania, and the Kune-Vain lagoon complex has been built by the accumulation of the river sediments.
This area is comprised in the network of Albanian Protected Areas, as described in the document
"Biodiversity Strategy and Action Plan (BSAP)", approved by Government of Albania in the year 2000.
The delta of Drini is recognized internationally as an Important Bird Area (IBA) and a Specially Protected
Area (SPS) and represent the area of Kune-Western part of Kune lagoon, defined in the network of
Albanian Protected areas as Scientific Reserve, according to the 1st category of IUCN. The site of delta of
Drini is one of the most important areas of Albania for wintering waterbirds; the most important site for the
nesting of herons (Ardeidae), and potential breeding site for the cormorants. including pygmy cormorant
(Phalacrocorax pygineus). The other two parts of this lagoon complex, Kenalla­Eastern part of Merxhani
lagoon and Drini River Outlet with Ceka (part of Vain wetlands) and Vaini wetlands are defined as
Managed Nature Reserve, in according to the 4th category of IUCN.
Ecological Description of the Kune Lagoon and Kenalla Lake
The lagoon of Kune presents rich floristic and faunistic values. In the group of fauna are included:
vertebrates (animals, birds, reptiles, amphibian, fish) and non-vertebrates (mollusks, crustaceans). The
macrobenthos of this lagoon is characterized mainly by an intense growth of Annelids, Tubuliferae,
Hydroids and Carcinus aestuarii. Also this area is rich of the birds as Rallus aquaticus, Gallinula
chloropus, Nycticorax Ardeola ralloids. Besides the main other bird species are present (see Annex 10 and
17). The diversity of the species is higher compared with the other part of the ecosystem (Kune-Vain
lagoon and Kenalla lake). The micro algae biomass level indicates high quantity of phytoplankton with a
relatively great number of species). Some of the diatoms are determined Dinoflagellates are presented in
few species (see Annex 10 and Annex 17). Regarding flora and vegetation, they mainly consist of: aquatic
vegetation; hydro-hydrogrophylic vegetation; halophyl vegetation; the psamophyl or sandy-dune vegetation;
forest vegetation. The amphibian are represented mainly by Rana lessonae, Rana dalmatina, Triturus
vulgaris, Rana balcanicaetc. Different kinds of reptiles, usually threatened, can be mentioned, like Sea
turtle and Earth tortoise. The observation of fishery catches and hypoeutectic salinity gradient divide Kune
lagoon in three main sub areas corresponding to fish species in these sub area (see Annex 10). The main
fish specie are the eurohaline species: (Sparus aurata) gilthead seabream, Dicentrarchus labrax, Mugilidae
spp., Anguilla anguilla etc.
Ecological Description of the Vain Lagoon
The lagoon of Vain presents rich floristic and faunistic values. In the group of fauna are included:
vertebrates (mammals, birds, reptiles, amphibian, fish) and non-vertebrates (mollusks, crustaceans). The
zooplankton was found on low quantity in general. The lagoon of Vain has vegetation similar to the lagoon
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of Kune. More than half of the water surface is covered by flooded Phragmites communis beds with
Thypha latifolia, the banks are composed of sedge communities, riparian woods of black alder galleries
with Alnus glutinopsa, Populus alba, Ulmus campestris, Fraxinus angustifolia, Salix alba and Quercus
sp. which are replaced over time by pine plantations. Maquis is composed mainly of: Tamarix parviflora,
Cornus mass, Juniperus macrocarpa, Rubus ulmifolium, Ruscus aculeatus; the herbaceous vegetation of
the marshland is characterized by Cynadon dactylon, Dactylis glomerata, Agrostis sp., Phragmites
communis, Juncus acutus, Salicornia fructicosa. The birds species observed in the lagoons are:
Phalocrocorax carbo sinensis, Nycticorax nycticorax, Egretta garzetta, etc (see Annex 10). Regarding
the mammals can be found in the area: Mustela nivalis, M. putorius and Vulpes vulpes. The dominant fish
species are Anguilla anguilla and Mugil cephalus, and this lagoon presents lower salinity than Kune
lagoon. Also are present in this lagoon, in the low quantity the other eurohaline species as: (Sparus aurata)
gilthead seabream, (Solea vulgaris) common sole, (Liza aurata) golden grey mullet, (Liza saliens) leaping
mullet, (Chelon labrosus) thicklipped grey mullet, (Dicentrarcus labrax) european seabass, etc.
3.2
Rrushkulli­Erzeni River Outlet
The Rrushkulli-Erzani River Outlet area is situated in Lalzi bay, the central part of the Adriatic coast of
Albania, between Rodoni cape in the north and Bishti Palles cape in the south. It is boarded in the north
and east by a hilly ridge reaching a maximum height of 225 m, while in its south-east it continues with the
drained fields of Qerreti and Durresi, formerly salt marshlands. The catchments area of the Lalzi bay is
estimated at about 250 km2. Some parts of the area, close to the coast, are depressions reaching up to - 1.5
m. They are kept dry by the actively pumping water through the pumping station near Hamalla village.
The most of the area is occupied by the agricultural land, while the once well developed hygrophilic flood
plain forest has almost disappeared; some small spots of it are still present only along the coastline north of
Erzeni river mouth. Sand dunes relatively well developed, halo-phyte and hygro­phyte vegetation, and a
planted pine forest can be found in this area. Waterbird and waterfowl censuses of the last two years have
identified this area as an important IBA (over 10000 waterbirds and wetlands birds have been counted
here). The Erzeni River Delta is important for migratory fish species breeding in freshwater. Posidonia
meadows, Posidonia oceanica, and very well developed marine communities are found along the rocky
littoral and Porto Romano Bay.
Ecological Description of the Area
The area of Rrushkull-Erzeni River outlet is originated from the alluvial sediments of the Erzeni river,
which meanders across the area.. The sub area Rrushkull­Hammalla lays in the Lalzi bay, from outlet
(mouth) of Erzeni river in the South to the overflow of the Tarini stream in North and in the East in some
cases, it lays for many kilometres, and it is limited from the agricultural land of the ex state agriculture
farm Sukth (Hamallaj, Rrushkull, Jubë). The terrestrial environment of this area presents these types of
habitats: sand dunes, salt tolerant vegetation, flood plain and pine forests, and wetlands/marshlands. Sand
dunes occupy a belt from 10 to 50 m in width along the entire coastline. There are two main types of the
dune vegetation: Plant community dominated by Cakile maritima, in the form of isolated spots, 4-5 m
distant from each other, closer to the shoreline. Plant community dominated by Elymus farctus, on the well
developed dunes, in which apart from the Dominant species, are present other species like; Eryngium
maritimum. Echinophora spinosa, Euphorbia paralias, etc. Salt tolerant vegetation is mainly present in
the left hand side of the Erzeni river mouth. This type of vegetation is characterized by succulent plants
like: Arthrocnemum fruticosum, A. perenne, Salicornia europaea, Halimione portulacoides, Limonium
vulgare, Inula crithmoides etc. The dominant species are Pinus pinaster and P. halepensis. This
formation is generally not so dense and rather young. The area contains also some rare and endangered
plant species as: Quercus robur, Fraxinus excelsior, Juniperus oxycedrus, Matthiola tricuspidata,
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Pancriatium maritimum, Quercus ilex, Adiantium capillus-veneris, Butomus umbellatus, Salix triandra.
The coastal area presents the important fishing site for Mugil sp., Liza sp., Dicentrachus labrax, Umbrina.
cirrosa, Lichia amia, Sparus sp., Alosa phalax, Anguila anguila and for crustaceans Paeneus ceraturus
and for bivalves Venus galina and Donax trunculus.
3.3
Butrinti Lake and Related Wetland Environment
This area includes Butrinti lagoon, Ksamil Island and Stillo Island and cape in the zone from Cape Qefali
to the Greek border. This area belongs to the District of Saranda and covers 35 km of coastline. The relief
is not very important with an altitude of 363 m at about 4.5 km of the coast east to Butrinti lake. In
Butrinti area, grey herons, gulls, egrets, ducks and snipes are seen on the mudflats and saltmarshes
bordering the mouth of the Butrinti canal and river up to 4 km inland. The phytoplankton population of the
lagoon is abundant and mainly composed of diatoms Cheatoceros sp., Cyclotella sp. and Peridinates
Prorocentrum sp. and Peridinium sp.. The accumulation of phanerogam Zostera noltii foliage is an
indication of its extensive presence within the lagoon. Balanidae are very common among Crustacea and
Mytilus galloprovincialis among Molluscs. The birds seen in the area are: Larus cachinnans, L.
argentatus, sparrows Passer hispaniolensis, P. montanus on the lake. While in marshland and the
mudflats at the estuary are reported marsh harriers Circus aeruginosus, Acrocephalus scirpaceus, etc.
Great concentrations of migratory birds occur in fall and winter, waders on the mudflats, saltern and in the
estuary of the channel while Anatids assemble in large colonies on the lake during the coldest months. This
area is also the richest of Albania for amphibians and reptiles. Otters have been recorded in the lagoon.
The terrestrial vegetations are characterized by associations of Caxilo xanthum italici (Caxile maritima,
Xanthium stumerium), Crithmo-Limonictum anfract. (Crithmum maritimum, Limonium anfractus),
associations of Crithmetum (Crithmum maritimum), associations of Ammophiletum arundinaceae
(Ammophila arerrari, Medicago marina, Echinophora spinosa), of Salicornictum fructicosae
(Arthrocnemetum fructicosum), Salicornictum radicentis (Arthrocnemum perenne), Juncetum maritimi
(Juncus maritimus), Juncetum acuti (Juncus acutus) and of Sporoboletum (Sporobolus pungeus).
4.
Surface Water Quality and Pollution Loads
During the study a water/wastewater and seawater quality examinations have been performed, in order to
confirm or adjust available water quality data. The examination mainly concerned raw sewage and
receptor water-bodies quality. The sea water quality have been investigated in terms of indices on water,
sediments and biota. The analyzed sewage samples taken at project's sites wastewater facilities can be
characterized as strong-moderate with typical domestic composition. The analyses and assessment of
existing studies, as well as the analyses performed during the study, show the degradation of the quality of
water resources by pollution from land-based activities (nutrients, pathogens and oxygen demanding
wastes), in the all coastal cities of Durres, Lezhe and Saranda. The results of the water/wastewater and sea
quality examinations are fully described in Annex 4. The expected wastewater pollution effects on the
marine environment are described in following paragraph 5.
5.
Wastewater Pollution Effects on the Ecosystem
Environment is an end user of water resources which poses therefore sometimes severe restrictions
particularly on the emission of wastewater from other water use sectors. High BOD loads and suspended
materials may influence biochemical and light conditions in the marine environment; industrial
micropollutants may be directly toxic for aquatic life and fish; and pollution from excess agrochemicals
may have similar effects.
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The marine ecosystem, though almost certainly damaged by uncontrolled wastewater emission of coastal
urban concentrations, industry and polluted rivers, is still generally in a reasonable condition and its
ecological and economic value may be considerable. Unfortunately, studies about the value and eventual
degradation of the marine ecosystem are rare and an overall inventory has never been executed. The
Biodiversity Action Plan has as a priority the mapping of the sea meadows with Posidonia oceanica and
the study of animal groups and plants, because of lows scale of knowledge of a considerable part of these
plants.
Little is known in Albania about marine environment along the Adriatic Coast and the effects of the
considerable pollution of the last 30 years, both by discharge into the sea of polluted river water and by
direct discharge of untreated urban and industrial wastewater. Except for smaller areas along the coast in
the vicinity of cities and industrial concentrations, inspection shows in general visually clear and unaffected
waters. However, systematic research on marine ecosystems and the effect of pollution has never been
executed.
The problem of pollution in the marine environment becomes ever more serious. Adriatic Sea is easily
exposed to pollution because of restricted water exchange and long shore lines. Areas with stagnant or
partly stagnant conditions are especially sensitive to pollution due to slow water exchange. Organic wastes
from communities and industries will cause an oxygen reduction process in the water. Oxygen is utilized
for oxidation of the organic matter and nutrients bound in the matter will be released. This process will
cause an increase of the primary plankton production in the area. This again will increase the oxygen
utilization. A secondary oxygen reduction process will begin, where the new organic matter is oxidized.
This secondary oxygen reduction may require two to five times more oxygen than the primary process.
This secondary process is not accounted for in the conventional BOD techniques.
The enrichment of natural waters by nytriens (eutrophication), primarily nitrogen in marine waters but also
phosphorus, has been associated with increased primary productivity and nuisance algal growth in coastal
zones and semi-enclosed and enclosed areas of seas. Increased loads of nutrients to coastal waters have
caused increasing eutrophication and the major sources of nutrients to coastal waters are from sewage
disposal. The primary production increases until the light penetration limits it. The consequences of
eutrophication can be increased frequency of algal blooms (sometimes toxic), increased water turbidity,
slime production, oxygen depletion in deep waters and mass fish and benthic fauna kills. Signs of such
eutrophication can be observed in the Saranac bay, Shengjini and Kamala. The relatively low
concentrations of dissolved oxygen in Saranda bay (approx. 7.63 mg/l), in Shengjini bay, Kenalla Lake
(approx.8.46 mg/l) and Drinit river (9.70 mg/l), are to be related to pollution by organic matter. Also the
results of the chemical analysis into the sea near the points of sewage discharge (see Annex 4) demonstrate
the presence of nitrites. Particularly in Saranda bay, Shengjini bay and Porto Romano bay, it was
observed((3) Kashta L. and Mio A., 1992-Tirana University.3) the development of some nitrofile algae
populations (Ulva rigida and Enteromorpha spp.), and this is an other demonstration of eutrophication in
this waters. Ammonia can be converted to organic nitrogen by these resident algae (Ulva, Enteromorpha).
Ulva blooms can become so luxuriant that the algal decay products are more unpleasant than the sewage
itself. Sewage pollution is directly responsible for the closure of many molluscan shellfish growing areas
in Europe. Shellfish can accumulate and retain pathogenic organisms and toxic organic and inorganic
substances present in the growing areas. During the last years mussel breeding was practically stopped,
both for internal organizational reasons, but above all because of the block on exports imposed by the EC
for sanitary reasons, in October 1994 for all living products of the fishery sector. The main requirement
for the export of live mussels to the EU is the setting up of a shellfish monitoring system to guarantee the
safety of bivalves harvested from water bodies. Currently Albania faces a ban due to a previous outbreak
of cholera in live molluscs. This issue is now being addressed through the development of a monitoring
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system to certify the areas on the Albanian coastline and the marine waters that can harvest and export
mussels. This is covered by EC/91/492 on placing live bivalves on the EU market.
Posidonia oceanica meadows populations are reduced due to the polluted industrial and urban discharges
into this area, particularly in the Shengjini- Lezha and Saranda-Ksamili area, but also in the Porto Romano
and Lalzi bay. This has been associated with an increase in water turbidity (Secchi disc. 1.25-1.50 m,
Annex 4) reducing the amount of light exposure on the sea bed and this caused reduction in the Posidonia
oceanica beds over the last decades (Kashta L., 1998). In sea areas with a low nutrient content a release of
organic wastes may cause eutrophication of the surface water in the whole area. The increased biological
production may be beneficial to the surface water by increasing the fish yield, but it can have serious
effects on conditions in the deep water. Increased decaying organic matter there may lead to oxygen
deficiency and can destroyed bottom fauna. It seems to be very difficult for nature to restore oxidizing
conditions when such a fertilization cycle has started.
In Albania, the major types of endangered ecosystems and habitats are not only coastal (sand dunes, river
deltas, alluvial forests, lagoons, and coastal lakes), but also marine ecosystems at medium and infralitoral
level ((1) Albania Coastal Zone Management Plan : Final Report - Phase One, 1995.1). The Posidonia
meadows represents an important ecosystem in the Adriatic Sea. The fundamental role played by the
marine phanerogam meadows and in particular by Posidonia, can be summarized in the following points:
stabilization of the sea-bed through the development of an effective radical and stoloniferous apparatus;
reduction of the intensity of movements of water with consequent maintenance of coastal balance, thanks to
the softening effect of the "matte" and the layer of vegetation; high production of oxygen and organic
material by means of photosynthesis; direct and indirect source for numerous organisms and starting point
for a complete food web; habitat of choice for numerous commercially important species, such as fish,
cephalopods and crustaceans.
Information from all three project areas gives quite a clear picture of the organic load of the respective
coastal zones. In all the project areas the urban centres discharge sewage directly into the sea (Saranda,
Porto Romano-Durres and Shengjini bay) or into the wetlands (Kenalla ) or into the river (Drini-Lezhe) at
short distances from the sea and discharged sewage is not treated. The situation is particularly severe in
Saranda, Shengjini and Kenalla. In the city of Saranda, urban and industrial waste is discharged directly in
the central part of Saranda bay, and through the Cuka channel ((2) According EU Phare
Program-"Emergency Measures-Saranda Water Supply and Sanitation"-see Annex 92) into the sea. The
waste plume spreads across the bay of Saranda, in a northern direction, polluting waters in front of
Saranda.
These discharges of untreated domestic sewage can significantly add to the total loads of contaminants.
Due to the breakdown of organic matter, such discharges can cause immediate problems to marine life from
high oxygen demands in the water column and sediments and through toxic effects of ammonia. Of
immediate concern to humans is the presence of large numbers of pathogens that can cause illness and
disease. Also associated with the presence of pathogens is the potential contamination of seafood,
particularly shellfish, which in Saranda bay and Butrinti lagoon (mussel Mytilus galloprovincialis) and in
areas like Porto Romano, Lalzi and Shengjini (clams Chamelea gallina, Ruditapes decussatus etc) are
commercially very important for Albanian fishery.
Pollutants may affect reproduction in many different ways. Teratological development of embryos may
result in deformed or malfunctioning larvae which do not survive hatching. Reproduction may be
influenced by behavioral changes of the adults during the mating season. Their behavior, the production of
eggs and sperm, the secretion of egg membranes, eggshells and production of egg nutrients, may be all
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affected by changes of hormone function and enzyme activity. Changes in the ecosystem may influence
reproductive success when vitellogenesis is directly influenced by the availability of food. In the coastal
area of Shengjini bay (particularly northern part-Rana e hedhun), in Porto Romano and Lalzi bay and near
the Saranda and Ksamili bay there are very important areas for reproduction of some fish species, first of
all for sea bass (Dicentrarchus labrax).
6.
Synthesis of the Pollution Effects in the Project Areas
According the available data and observations, the pollution effects by uncontrolled and increased urban
wastewater discharges into the marine environment can provide negative consequences both at the
environmental level and to the institutional and economic ones.
A list of potential problems is put forward in the following:
endangered marine ecosystems and habitats, in medium and infralittoral level (particularly
Shengjini-Lezha area, Porto Romano bay and Saranda bay);
endangered coastal ecosystems: sand dunes, delta rivers (particularly Drini-Lezha), alluvial and wet
forests, lagoons ( Kune and Vaini) and coastal lakes (Kenalla);
risks and adverse impacts on biodiversity, and some of the major adverse impacts have been: habitat
loss and fragmentation, damage (Porto Romano bay, Shengjini and Saranda bay) and degradation
(Kenalla lake) of habitats and ecosystems, loss of species or the threat of their extinction etc.;
reduction of the Posidonia oceanica meadows populations, particularly in the Shengjini- Lezha and
Saranda-Ksamili area, but also in the Porto Romano and Lalzi bay;
development of some algae populations (Ulva and Enteromorpha), particularly in Saranda bay,
Shengjini bay and Porto Romano bay;
observation of some eutrophication in the Saranda bay, Shengjini area and Kenalla lake;
probability to affect reproduction of the fish species (e.g. sea bass) in the marine ecosystems of
Shengjini bay (particularly northern part-Rana and hedhun), in Porto Romano and Lalzi bay and near
the Saranda and Ksamili bay, etc.;
negative consequences on the eco-tourism development;
delay for the implementation of the Coastal Zone Integrated Management and of the economic
development;
difficulties in implementing institutional strengthening measures in order to implement the
sustainability and biodiversity maintenance policies.
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Additional GEF Annex 13:
ALBANIA: Integrated Water & EcoSystems Management
FINANCIAL ASSESSMENT OF THE THREE PARTICIPATING COMPANIES
EXTRACT FROM THE PAD (REPORT NO. 24826) FOR THE MWWP


NPV=US$ 5 million; FRR = 15 %
Project Financing Plan: The total cost of the MWWP is estimated at US$21.93 million (including taxes
and duties of US$2.65 million). The IDA credit of US$15 million equivalent will account for about 68%
of the Project cost. The entire balance of US$6.93 million (or 32%) will come from the central government
as grants since all four utilities would not be in a position to generate funds for investment purposes from
internal sources throughout the Project implementation period. With the help of the Operator, all four
utilities are projected to break-even on a cash flow basis (i.e., collected cash revenues covering all cash
operating expenses) in 2007, the penultimate year of project implementation, and to reach full-cost
recovery, including depreciation, not later than 2010.
Financial System and Tariffs: Water companies in Albania follow financial regulations, and accounting
and tax rules, issued by the central government. These rules and regulations deviate substantially at
present from international accounting standards (IAS) for similar revenue-earning entities. This affects the
presentation of financial information by the utilities. In the case of the Durres Water and Sewerage
Company (DWSC), some improvements in its financial management systems, as well as external audits,
were introduced under the earlier Bank projects; nevertheless there is scope for further strengthening as
identified by the auditors. One of the key tasks of the Operator, therefore, would be to develop and
implement appropriate improvements for each utility that would provide adequate, relevant and accurate
information for management decision-making and external financial reporting.
Until 1993, the water supply utilities were under the central government's Ministry of Territorial
Adjustment and Transport (MoTAT). In that year, responsibility for operation of the utilities was
transferred to the local governments. However, the central government still owns the utilities, and with the
exception of the four participating utilities, continues to review and approve all investment decisions.
Wastewater services were provided by departments of the municipalities. They were entirely dependent on
the budget for their revenues. In the case of Fier, Lezha, and Saranda, the water supply and wastewater
services have now been merged. A decision to merge in the case of Durres has been taken and is expected
to be implemented soon.
Until 1998, all decisions in regard to potable water tariffs were centralized and subject to the central
government's approval. In 1998, under a policy of liberalization of water tariffs, water supply enterprises
were required to make an assessment of the costs of providing the services and to propose tariff structures
to their local authorities. Upon the approval of the authorities, the proposed structure is then presented to
the NWRC for approval. The decentralization law, which came into effect in January 2002, transferred the
tariff setting function to the local governments alone.
Past and Present Financial Position: Historical financial statements for each of the four utilities are
presented in Annex 5. With the exception of DWSC, the financial statements have not been the subject of
independent external audits since these were not required under the governing local regulations (for DWSC,
the audits were required under the Project Agreement with IDA). During the three-year period 1998 to
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2001, the financial situation of each utility worsened. All four utilities incurred annual losses in each of the
years. In 2001, losses for Durres, Fier, Lezha and Saranda were Lek 314 million, 136 million, 43 million
and 27 million, respectively for a combined loss of about Lek 520 million (US$3.7 million equivalent).
Collected revenues have not been adequate to cover the utilities' cash operating expenses (not taking into
account depreciation and other non-cash charges). The increasing cash deficits have been met through a
combination of direct and indirect subsidies from the government's budget -- direct subsidies include
payments made directly to KESH, the electricity company which is the utilities' principal creditor, and to
the water utilities themselves, and the indirect subsidies, the accumulation of tax and other payables.
The main issues and problems affecting the utilities' financial performance are the following: On the
revenues side, (i) low percentage of billed water: For each utility, the share of billed water consumption
out of total water production is low, which reduces the revenue base; (ii) low tariff levels and distorted
tariff structures: The tariffs, particularly for residential consumers, have been kept at low levels on
political considerations. The levels currently in force are not adequate to cover the utilities' cash operating
expenses even if the utilities were able to enforce 100% collection of billed revenues. The situation is
further exacerbated by the fact that residential consumption accounts for the bulk of water consumption for
each utility. Although tariffs for the other consumers are currently higher, the utilities are unable to enforce
collections, including from institutional and budgetary agencies; and (iii) low collections: Collected
revenues have generally ranged between 30% to 35% of the billed revenues for the four utilities. Although
nominally the utilities can enforce collection by discontinuing service to non-paying consumers, in practice
it has proved difficult to enforce due to political interference and influence which in effect discourage
disconnections. Collections have also been problematic in the case of supply to villages where a tradition
of non-payment has evolved over time.
On the expenses side, (i) operating inefficiencies: The physical facilities and equipment have progressively
deteriorated due to the lack of adequate funds for replacement and maintenance. Repairs and maintenance
are undertaken on an ad hoc basis in response to day-to-day needs, and are severely limited by the
resources available. Break-downs and make-shift fixes increasingly have taken the place of planned
maintenance, and contributed to rising operating expenses. Specific consumption of electricity per unit of
water produced has also been increasing due to inefficient pumping and other equipment; (ii)overstaffing:
Productivity ratios (employees per 1,000 connections) are lower by a factor of three to four as compared to
well-run Western European utilities. Although salary levels are low in comparison with Western Europe,
the overstaffing results in the share of personnel expenses in total expenses equaling or exceeding Western
European levels; and (iii) rising input prices: Electricity expense is a major item for each utility accounting
for 30% to 50% of total expenses. Electricity tariff levels in Albania have been rising as KESH, the
electricity company, progressively achieves full-cost recovery, as required under the Action Plans agreed
with IDA and bilateral donor agencies.
Overall, in addition to these problems related to revenues and expenses, the utilities' financial management
systems are in need of substantial improvement. The existing systems, particularly for Fier, Lezha, and
Saranda, do not provide adequate, timely, and relevant information to the utilities' management, including
for monitoring and controlling of receivables and payables, or for external financial reporting.
Recent Actions Taken by the Central Government, the Municipalities and the Utilities: As part of its
Action Plan for the recovery of KESH, the electricity enterprise, the central government compensated
KESH in the amount of Lek 1.1 billion (US$7.9 million equivalent) in 2001 for its arrears from the water
companies. Since KESH was the water companies' main creditor, this has provided substantial relief to the
water companies. Under a program agreed with the IMF to foster greater transparency and discipline in the
settlement of inter-enterprise arrears and arrears towards the budget, the Government has required all
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state-owned companies, budgetary agencies, and water companies to prepare jointly agreed statements as to
their respective collectibles and obligations. Thereafter the MoF intends to enter into agreements with the
companies seeking subsidies from the central budget which will specify the undertakings and obligations of
the enterprises in return for the subsidies. These agreements are expected to reduce uncertainty and provide
greater stability in the financial planning of the entities.
The local governments of Durres, Fier, Lezha, and Saranda have approved water supply tariff increases for
the year 2003 and the introduction of a sewerage tariff. The approved levels are in line with those
discussed by Bank staff with the utilities as part of the first year of the overall recovery program during the
period of Project implementation. These initial increases will be followed by further progressive increases
during Project implementation, keeping in view affordability considerations.
Future Finances: Projections of the four utilities' financial statements, including the main assumptions
made, are provided in Annex 5. A key assumption in the projections is that the selected Operator would be
in place by early 2003 so that the expected improvements in operating and financial performance would
progressively be achieved thereafter. To determine the respective levels of contribution by the utilities and
the local/central governments, financial analysis was carried out during Project preparation (available in
Project Files) examining the implications and impacts of alternative scenarios as to the speed of full-cost
recovery by the utilities from their current low positions. Conclusions from this analysis, discussed with
the utilities, the municipalities, and the MoF, were that, given the current low levels of tariffs, collections,
and cost-recovery, and taking into account affordability and social impact considerations, the most realistic
scenario is to require the utilities to target to achieve a cash break-even (collected revenues not less than
cash operating expenses) by 2007, the penultimate year of the project implementation period. Furthermore,
the on-lending of the IDA credit to the utilities would have to be close to IDA terms if the utilities are to be
able to make the minimum level of investments needed after 2007 from internally generated funds. Thus,
the IDA credit would be onlent to the four utilities for the same grace and maturity periods (10/20 years)
but at a higher interest rate of 1.5% per annum. However, during the period 2003 to 2007, since the
utilities will continue to incur operating deficits, the interest payable by them on their subloans will be
capitalized and added back to their subloans. Starting 2008, the utilities will begin paying in full the
interest on the subloans (including the capitalized interest). The Government and the utilities will review
the situation in 2008, the last year of project implementation, to determine if any change in the terms (e.g.,
a higher interest rate) is feasible and warranted.
The financial projections carried out for this alternative indicate that: For the utilities,
cash operating break-even (i.e., a working ratio not greater than 1.00) would be achieved not later
than 2007;
full-cost recovery (including depreciation and adequate provisioning), would be achieved not later than
2010;
domestic tariffs would need to be progressively increased in real terms during the implementation
period by an estimated 168% for Durres, 120% for Fier, 263% for Lezha, and 200% for Saranda;
collection ratios would need to be progressively doubled from the current low levels; and
the utilities would have to start servicing the debt on the subloans (including the capitalized interest
for the period 2003 to 2007) starting in 2008.
For the central government, during the implementation period, 2003 to 2008, the Government would need
to contribute an estimated amount of Lek 2,060 million (US$14.73 million equivalent) to cover both
Project investment-related financing as well as subsidies to cover operating cash deficits and debt service,
as follows:
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Local counterpart financing (including taxes and duties) for the project (US$3.16 million);
Technical assistance (US$4.05 million);
Operating subsidy (on a declining basis, expected to be eliminated by 2007) to cover electricity and
other operating expenses (US$5.65 million); and
Debt service towards IDA on the existing and new debt in the case of Durres, and the new debt in the
case of the other three utilities (US$0.68 million).
In addition, the central government would also have to provide financing, through the social security
funding sources, for the severance payments to the employees rendered redundant when the Management
Contract is implemented (US$1.19 million).
The net fiscal impact on the central government's budget is discussed in the relevant section below.
The respective obligations and undertakings on the part of the central government and the utilities/local
governments are reflected in the Credit Agreement between IDA and Albania, and will be reflected in the
Subsidiary Loan Agreements between the MoF and each utility.
Affordability: The scope and size of the Project have been based on affordability considerations. The rate
of tariff increases over the implementation period has taken into account the impact on household water and
sewerage bills. The socially acceptable rate of tariff increases has also been used to determine the relative
contributions of the utilities and the central government during the Project period. To provide relief to
low-income households, the utilities and their municipalities have accepted that an amount of 20 lpcd will
be supplied free of charge to all metered consumers. Any consumption over this level would be charged at
the tariff rate for metered consumption. If a metered household consumes amounts higher than 20 lpcd and
fails to pay the dues, it will be subject to disconnection. The estimated affordability impacts are
summarized in Annex 5, Table 9. The estimates show that the projected higher water and sewerage tariffs
will remain affordable (less than 4% of monthly income) for average income households (monthly income
of Lek 45,000) at consumption levels of up to 150 lpcd. With the progressive introduction of metering, as
planned, households would have both the ability and the incentive to further limit their consumption and
eliminate wastage. Consumption of the poorer households tends to be lower, and will remain affordable
(3% of monthly income) for levels of up to 40 lpcd. For the extreme poor households, in case they are
unable to pay, it will be ensured that they have reasonable access to standpipes for their water supply. The
municipalities, in cooperation with the Operator, will monitor the success of the affordability approach.

Financial Rate of Return and Risk Analysis: The financial viability of the Project depends critically on the
anticipated improvements from the management contract. The Operator is expected to be able to
progressively improve the collection performance as indicated while at the same time enabling cash O & M
expense savings through improved techniques and practices. The utilities' experience has proved that such
improvements would not be possible without the assistance of the Operator. The Project's FRR is therefore
based upon the incremental benefits (incremental collected revenues plus incremental O & M expense
savings) to be derived from the management contract. The assumptions and the analysis are summarized in
Annex 5, Tables 7 and 8. The FRR is estimated at 15% with a Net Present Value (NPV) of Lek 752
million (US$5 million equivalent) at a discount rate of 10%.
The main financial risks are: (i) the Operator is not effective in securing the necessary improvements due to
either (a) inadequate performance, or (b) lack of the required support from the utilities, the municipalities,
and the central government. This would affect the Project through:
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lower than anticipated revenues due to lower than projected tariffs or lower than projected collection
ratios or both; and lower than estimated O & M expense savings; this includes delays in the planned
staff reduction.
(ii) failure on the part of the central government to provide the required financial contributions in a timely
and adequate manner which could adversely affect Project implementation and entity performance.
The risk in regard to the Operator's performance is sought to be mitigated through:
selection of an internationally reputed firm with experienced staff assigned to the Project;
performance incentives built into the management contract where a substantial part of the overall
compensation would be determined by performance in achieving agreed targets; and
establishment of an appropriate oversight arrangement composed of municipal and utility
representatives to monitor progress and provide required support.
The risk in regard to the Operator obtaining the required support from the local/central governments would
be mitigated through the establishment of the Executive Committee consisting of representatives of the
central and local governments which would periodically meet with the Operator to review progress and
address issues. IDA would have to remain involved in the process through proactive and diligent
supervision to anticipate problems to the extent possible and to help in expediting solutions.
The risk in regard to the timely and adequate financial contributions by the central government is mitigated
to some extent by the fact that the key ministries (MoF, MoTAT) have been involved in the Project
preparation process which has included joint reviews of the Project objectives, the financial constraints and
alternatives, and the sharing of the financial burden between the central government and the
municipalities/utilities. In addition, the central government would participate in the Executive Committee
responsible for contract supervision. The central government's obligation to financially support the Project
is reflected in the Credit Agreement. Nevertheless, the risk cannot be entirely eliminated, and needs to be
viewed in the context of IDA's exit strategy in case of non-performance by the central/local governments
and/or the utilities.
Sensitivity analysis for the FRR is presented in Annex 5, Table 8. The collection rate is the most
significant variable for the FRR; a shortfall of 10% in the collection rate would drive the FRR from 15% to
9%.
Financial Conditionality: The enabling of successful performance by the Operator, and timely and
adequate financial contributions by the central government, would be critical for the success of the Project.
To ensure this, under the Credit Agreement, the central government is required to:
confirm that it would provide, annually during project implementation, in a timely and adequate
manner the funds required by each utility to cover (i) local counterpart financing of the Project cost;
(ii) import duties, VAT and other applicable taxes on Project investments; (iii) operating subsidies to
cover all operational expenses which cannot be covered by revenues collected, including but not
limited to, expenses for operations and maintenance cost, social security payments, VAT payments,
and profit tax; and (iv) debt service towards IDA in respect of the subloans from the existing and new
IDA credits;
enable the municipalities and the utilities to put into effect the tariffs proposed by them during the
implementation of the project; and
ensure that budgetary institutions and agencies timely and fully meet their payment obligations
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towards the utilities.
Under the Subsidiary Loan Agreements, each utility would be required to:
review with IDA on a semi-annual basis its financial performance, including revenues and
expenditures for the preceding and following semesters, and annually its projected performance for the
following two years, on the basis of forecasts prepared by it, and to take steps as necessary, including
but not limited to tariff increases and improved collections, to ensure the adequacy of the revenues to
meet the projected financial requirements; and not incur any new debt unless the forecasts show that
debt service coverage can be maintained at a level of not less than 1.5.

Fiscal Impact:
Over the implementation period, the MWWP would have a net positive impact on the central government's
budget through progressive reduction and elimination of subsidies. Although the central government would
have to contribute to Project financing through coverage of the local counterpart financing requirements,
the applicable taxes and duties on the investments, and the debt service on the IDA credit (during 2003 to
2007), this would be more than offset by the progressive elimination of the operating deficits of the four
utilities with the help of the Operator. In the absence of the Project, the present situation of major drain on
the central government budget through direct and indirect subsidies would continue and likely progressively
worsen; under the Project, the need for operating subsidies is expected to be eliminated by 2007. Beyond
the implementation period, the improvements in revenues generated under the Project would yield increased
VAT net transfers to the budget.
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