PROJECT INFORMATION DOCUMENT (PID)
CONCEPT STAGE
Report No.: AB1088
Project Name
BLACK SEA NUTR REDUC (GEF)
Region
EUROPE AND CENTRAL ASIA
Public Disclosure Authorized
Sector
Sewerage (50%);General water, sanitation and flood protection
sector (50%)
Project ID
P074971
GEF Focal Area
Borrower(s)
MINISTRY OF ENVIRONMENT
Implementing Agency
Ministry of Finance
Hungary
Municipality of Budapest
1364 Budapest 4
P.O. Box 1
Public Disclosure Authorized
Hungary
Tel: 36 1 3176310
Fax: 63 1 3271811
pocs@ccmail.fph.hu
Environment Category
[ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined)
Safeguard Classification
[ ] S1 [X] S2 [ ] S3 [ ] SF [ ] TBD (to be determined)
Date PID Prepared
November 22, 2004
Estimated Date of
February 18, 2004
Appraisal Authorization
Estimated Date of Board
May 31, 2005
Approval
Public Disclosure Authorized
1. Key development issues and rationale for Bank involvement
Project Support to the Borrower's objectives, policies and strategies in the sector. The Project is
fully consistent with regional cooperation agreements1 to remedy environmental degradation in
the Danube River and Black Sea, to which Hungary is signatory, and with Hungary's
commitments under its accession to the EU.
The Government has been rather successful in the provision of water supply, with services
decentralized to local governments, and tariffs reflecting in most cases the cost of services. The
Government, released from the pressure of providing water supply services, is now switching
priorities to closing the gap between water supply coverage and wastewater collection and
treatment coverage, including nutrient reduction in discharges into the Danube water basin.
Hungary has recently joined the EU and is in the process of adapting its legislation with the
Public Disclosure Authorized
adoption of the EU Directives on Water. The adoption of such a Directives results in more
1 The countries of the region drafted and signed the Bucharest and Sofia Conventions for the protection of the Black
Sea and the Danube in the early 1990s and launched two complementary Regional Environmental Programs
restrictive limits for wastewater discharges into the Danube River. Because of this, priorities for
investment which were given in the Budapest wastewater master plan to the expansion of
sewerages and to conventional treatment, are being changed to include the reduction of nutrients,
with explicit consideration for trans boundary impacts in the formulation of national water
policies.
Hungary's investment needs in waste water treatment to comply with EU directives are
estimated as EUR4.0 billion over the next fifteen years. Most of this investment is responsibility
of municipal governments. The ongoing Municipal Wastewater Project finances a EUR100.0
million investment aimed at reducing the pollution load in the Danube River Basin. The
proposed Project will follow up with this reduction, concentrating in further decreasing the
discharge of nutrients into the Danube.
Under the Sofia and Bucharest conventions, environment programs have been drawn up defining
strategies and identifying hot spots for which investment were needed to address trans boundary
concerns. Together with pollution control, these programs highlight the environmental and
economic values of wetlands in the Danube basin, as well as their contribution to reduce the flow
of pollutants carried downstream by the river. GEF and the Bank, supporting these efforts,
established the GEF Partnership on Nutrient Reduction for the Danube and Black Sea Basin.
The Project complies with eligibility criteria set for the Partnership, through a multi-focal
approach, including investment in two focal points of this criteria: (i) advanced wastewater
treatment; and (ii) restoration of wetlands to recover their function as nutrient traps.
Borrower's commitment and ownership of relevant policies and strategies. The municipality of
Budapest MOB-, which is leading the efforts for nutrient reduction, prepared a long-term
comprehensive plan for wastewater collection and treatment in Budapest, complying with the
government goal of reducing pollution in the Danube River, and completed feasibility, design and
environmental studies for a first investment project. The Ministry of Environment and the
Danube-Drava National Park -DDNP- have implemented pilot projects for the recovery of
wetlands in the park. These experiences have been successful and demonstrated the importance of
proceeding with a full scale operation. The Government confirmed the priority of the Project and
presented an application for financial support from the World Bank-GEF Strategic Partnership.
The Government recently gave assurances for the required counterpart financing in the DDNP
Project component and for the GEF approved PDF to help finance Project preparation.
How the operation supports the relevant CAS objectives. The last full CAS for Hungary was
discussed at the Board of Executive Directors on January 1998, and covered the period FY98-00.
Since then, the Hungarian authorities initiated an accelerated graduation process with the Bank,
and consequently, the Bank prepared a CAS Progress Report which outlines a pre-graduation
assistance program limited to analytic and advisory services. The proposed Bank strategy
supports the Government in its efforts to comply with the requirements derived from the
accession to the EU. It includes the completion of the ongoing Municipal Wastewater Project
and the implementation of the GEF Nutrient Reduction Project, which is proposed under this
note.
Lessons from previous Bank assisted projects. The Project would be a follow-up operation of the
successfully implemented Hungary Municipal Wastewater Project, where installations of three
wastewater treatment plants are being financed by two Bank loans to the municipalities of
Budapest and Dunaujvaros. The Project is designed to maintain project management at the
beneficiary level, by giving full responsibility for project preparation and implementation to
MOB and DDNP, maintaining most implementation procedures as established for the ongoing
project. As DDNP did not receive previous Bank financing, MOB has agreed to provide the
required assistance.
Comparative advantage of using Bank's lending. The Bank started the assistance to the water
supply and wastewater sector in Hungary with the approval in 1999 of a loan to finance the
Municipal Wastewater Project, co-financed with a EU Phare Grant. Funds from this loan are to
be used by the MOB to complement GEF grant funds. Baseline investments for the Project have
also been financed by this loan. In the 1990s, the Bank had an active role in establishing the
Environmental Program for the Danube River Basin and the Black Sea Environment Program,
and in helping establish regional coordination and institutional cooperation required by these two
programs. An Investment Fund, for the recovery of the Black Sea, funded by GEF and
implemented by the World Bank, catalyzes the investment response necessary to accelerate
urgent action by a wide group of stakeholders. The participation of the Bank has been
instrumental in getting GEF's approval of a PDF Grant under this Fund, to finance Project
preparation.
Preparedness to work on Project preparation.
The Government has given the overall responsibility for Project preparation and implementation
to the Ministry of Environment and Water -MOEW. A Steering Committee with representatives
of the MOEW, the MOB, the Southtransdanubian Environmental and Water Authority WA-
and the DDNP has been set up for advisory and coordination purposes. Project preparation and
implementation activities will be carried out through respective offices at the MOB and WA,
which will act on behalf of the DDNP.
Project preparation by the MOB is rather advanced. In June 2002, MOB hired consultants to
define the package of works to be executed in the MOB component, and prepare the feasibility
study and the application for a preliminary water license, which has been granted. The
consultants are now in the process of refining the studies and setting up the technical
specifications for bidding. The MOB also defined the studies regarding the economic, financial
and social feasibility of the Project, required for Project appraisal, which have been completed
and submitted to the Bank in August 2004. Based on these reports and information, the MOB
component is ready to be appraised. Besides, the MOB informed the mission that the company
that will provide the engineering supervision services, covering both the final designs and
supervision, has been selected through Hungarian Public Procurement procedures and contracted
to independent consultants, internationally recognized. The cost of these services will be part of
the Project and financed by the MOB contribution.
The MOEW has set up an Implementing Team within the WA to assist the DDNP in Project
preparation. DDNP has detailed the Project scope and the location and cost of the proposed
interventions, which mostly consists of dredging and construction of flow regulating devices.
The WA, on behalf of the DDNP, is contracting out consultants to prepare, under PDF-B
financing, the studies needed to appraise this component. In particular, necessary studies include
a feasibility report for the component and the environmental report required by Hungarian
standards. It is expected that preparation for the wetlands restoration component will be
completed by December 15, 2004. On the basis of the above information, the Project would be
ready for appraisal in January, 2005.
2. Proposed
objective(s)
At the global level, the Project will help the Hungarian Government to reduce trans boundary
pollution into the Danube-Black Sea region, which represents the single most important body of
water in Europe. The strategic importance of the region is increasing in the context of an
enlarged Europe, and the development of new areas, which will further challenge the purification
ability of the ecosystems. At the national level, the Project will support Hungary's progress
toward compliance with EU directives. At the regional level, the Project will help securing a
safer environment for water intakes and recreation in the Hungarian part of the Danube and
compare the effectiveness of wetlands and point source tertiary treatment. At the local level, the
Project will permit water companies to test the latest technologies for abating pollution
discharges into the environment.
3. Preliminary
description
The Project (overall budget of 28.9 million US$, of which 8.9 million US$ would be financed by
the GEF grant) is simple in design, with three focused components: (a) installation in the North-
Budapest wastewater treatment plant of tertiary treatment facilities to reduce nutrients in the
effluents from the city of Budapest (26.7 million US$); (b) improvements in the trapping
capacity of about 10.000 hectares of wetlands in the Gemenc and Beda-Karapancsa region, to
further reduce nutrients in the Danube river (2.5 million US$); and (c) a project management,
replication and dissemination component, to support project implementation and promote further
action on nutrient reduction in the basin (0.4 million US$).
4. Safeguard policies that might apply
[Guideline: Refer to section 5 of the PCN. Which safeguard policies might apply to the project
and in what ways? What actions might be needed during project preparation to assess
safeguard issues and prepare to mitigate them?]
Safeguards policies.
Environmental Assessment (OP/BP 4.01).
The MOB completed the environmental assessment report for its component and got
Government's approval. The DDNP is working in the preparation of the required assessment. As
the process for its approval is rather bureaucratic in Hungary, the Project provides for late
implementation for the DDNP component.
Natural Habitats (OP/BP 4.04)
The possible application of the Safeguard policy on Natural Habitats will be determined during
project preparation, once the location of the 10,000 hectares is further known.
Projects on International Waterways (OP/BP/GP 7.50).
Notification to other riparian countries has been made within the scope of the Danube
Commission.
No other Safeguard Policy is expected to be triggered. In particular, no land acquisition or
resettlement will be necessary in any of the two Project components
5. Tentative
financing
Source: ($m.)
BORROWER/RECIPIENT 20.0
INTERNATIONAL BANK FOR RECONSTRUCTION AND
0
DEVELOPMENT
GLOBAL ENVIRONMENT FACILITY
8.9
Total
28.9
6. Contact
point
Contact: Manuel G. Marino
Title: Lead Water and Sanitation Specialist
Tel: (202) 473-6692
Fax: (202) 614 9002
Email: Mmarino@worldbank.org
WB19639
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September 3, 2004 4:29 PM