THE WORLD BANK/IFC/M.I.G.A.
OFFICE MEMORANDUM

DATE:
April 5, 2002


TO:
Mr. Ken King, Assistant CEO, GEF Secretariat
Att: GEF PROGRAM COORDINATION













FROM:
Lars Vidaeus, GEF Executive Coordinator


EXTENSION:
3-4188

SUBJECT:
REGIONAL: Black Sea/Danube Strategic Partnership ­ World Bank-GEF Nutrient
Reduction Investment Fund: Tranche 2


Work Program Inclusion - Resubmission


Please find enclosed the electronic attachment of the above mentioned project brief for
work program inclusion. The amount requested for tranche 2 is US$16 million. In May 2001
Council approved the first tranche of the proposed US$70 million Investment Fund under the
Strategic Partnership for the Black Sea/Danube basin. The Partnership framework brief identified
the second and third tranches of the Investment Fund as US$25 million each. The amount
requested now has been reduced to US$16 million in light of the funding constraints currently
experienced by the GEF. The enclosed project brief has been adjusted to reflect the reduced
envelope for tranche 2 and the lower number of projects which can be funded. However, the
World Bank continues to develop the project pipeline envisaging the availability of a US$70 million
total envelope as originally proposed.

The enclosed project brief addresses comments received from the GEF Secretariat dated
March 20, 2002 on the project brief that was submitted for the Work Program Submission on
March 11, 2002. GEFSEC comments (in italics) have been addressed as follows:

· Title page needs to be added. The Project Brief cover has been added to the Progress
Report.

· A Cover Note addressing the sub-project review criteria needs to be submitted. This
cover note has been updated to include the section on Criteria for Review of GEF Projects
(please see below).

· The title needs to be changed to reflect the May 2001 approved title. The progress
report title has been changed into: "Strategic Partnership for Nutrient Reduction in the
Danube River Basin and Black Sea ­ World Bank-GEF Nutrient Reduction Investment

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Mr. Ken King
-2-
April 17, 2002


Fund: Tranche 2" to be consistent with the title of the Investment Fund Project Brief
approved by Council on May 2001.

· Consideration should be given to including the brief approved by Council in May
2001 as an annex. The Progress Report now includes two annexes: Annex 1 contains the
Framework Brief for the GEF Strategic Partnership on the Danube/Black Sea Basin (page
11) and Annex 2 contains the World Bank-GEF Nutrient Reduction Investment Fund
Project Brief (page 30), both approved by the 2001 GEF Council.

The proposal is consistent with the Criteria for Review of GEF Projects as presented
below:

· Country Drivenness: 17 countries of the Danube/Black Sea Basin developed this
programmatic approach in collaboration with WB, UNDP and UNEP (Annex 1 para. 5-9 and
Annex 2 para. 10). The Investment Fund supports agreed incremental costs of single country
investments in nutrient reduction.

· Endorsement: Endorsement by basin countries' GEF focal points were provided with the
submission of the Investment Fund Tranche 1. Furthermore, country endorsement for individual
sub-projects is sought at the time of project concept development.

· Program Designation & Conformity: The Strategic Partnership and the project developed
under its framework respond to the objectives of OP8 (Annex 1 para. 3).

· Project Design: The WB-GEF Nutrient Reduction Investment Fund provides a regional
framework for country level investments in advanced municipal and industrial wastewater
treatment, agricultural pollution and wetland restoration, aimed at the common goal of
combating eutrophication in the Black Sea. The Fund allows for streamlined procedures for
project processing by GEF (Progress Report para. 1-2, Annex 2 para 13-14 and 16). Ten
projects in the 3 eligible sectors are at various stage of preparation/implementation (Progress
Report para 3). Tranche 2 of the Investment Fund is consistent with Tranche 1, which was
approved by Council in May 2001.

· Sustainability: Sustainability of country investments is addressed by individual sub-projects.
A critical goal of the Investment Fund is to increase GEF grant leveraging against other project
financing sources and to encourage other partners to take over larger shares of nutrient
reduction investments (Progress Report para. 16-17, Annex 2 para. 17).

· Replicability: The Partnership is designed to produce replication measures throughout the
Danube/Black Sea basin in order to achieve effective demonstrations of nutrient reduction in
the different countries (Annex 1 para. 16, Annex 2 para. 18).

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Mr. Ken King
-3-
April 17, 2002


· Stakeholder Involvement: To be addressed by individual sub-projects.

· Monitoring & Evaluation: To be addressed by individual sub-projects.

· Financing Plan: The GEF grant amount requested for tranche 2 of the Investment Fund is
US$16 million with an expected co-financing of US$75 million (Progress Report para.15-17).

· Cost Effectiveness: To be addressed by individual sub-projects if feasible.

· Core Commitments and Linkages: The Strategic Partnership and interventions supported
under it are the result of joint efforts undertaken by the basin countries through the Danube and
Black Sea conventions, the EU and other donors, and the three GEF Implementing Agencies.
The Partnership builds upon the Danube Basin GEF international waters project and the Black
Sea GEF international waters project (Annex 1 para. 5-9).

· Consultation, Coordination and Collaboration between IAs: The Strategic Partnership has
been developed jointly by the 3 GEF Implementing Agencies and the WB-GEF Investment
Fund is the element focusing on single country investments. (Annex 1, para 8-10). In
implementing the Investment Fund the Bank has been in regular contact with both UNDP and
UNEP and cooperated with the European Commission and other donors (Progress Report
para 23 ­ 27)

· Response to Reviews: GEFSec comments on the Progress Report have been addressed in the
sections above. STAP roster review is addressed by individual sub-projects.

Please let me know if you require any additional information to complete your review prior
to inclusion in the work program. Many thanks.














Distribution:

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Mr. Ken King
-4-
April 17, 2002


cc: Messrs./Mmes. Tuck, Holt, Bromhead, Goldberg, Marc, Krzyzanowski, Arin, Battaglini
(ECSSD); Razavi, Busz, Konishi, (ECSIE); Hatziolos, Khanna, Wedderburn, Aryal (ENV);
ENVGC ISC; ECA Files, ECSSD Imaging

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PROJECT BRIEF
1. IDENTIFIERS:
Project Number:

N/A
Project Name:
Regional (Belarus, Bosnia-Herzegovina, Bulgaria, Croatia, Czech
Republic, Georgia, Hungary, Moldova, Romania, Russian Federation,
Serbia & Montenegro, Slovak Republic, Slovenia, Turkey, Ukraine):
GEF Strategic Partnership on the Danube/Black Sea Basin - WB-
GEF Nutrient Reduction Investment Fund: Tranche 2
Duration:


6 years
Implementing Agency:

The World Bank
Executing Agency:

Varies by individual country
Requesting Country:
Regional (Belarus, Bosnia -Herzegovina, Bulgaria, Croatia, Czech
Republic, Georgia, Hungary, Moldova, Romania, Russian Federation,
Serbia&Montenegro, Slovak Republic, Slovenia, Turkey, Ukraine)
Eligibility:
Parties of the Danube and Black Sea Conventions
GEF Focal Area:
International Waters
GEF Programming Framework: OP 8 (Water Body-Based OP) and 10 (Contaminant-Based OP)

2. SUMMARY:

The World Bank-GEF Investment Fund is the investment arm of the GEF Strategic Partnership on the
Danube/Black Sea Basin. The Fund constitutes a proposed envelope of US$70 million, to be approved by the
GEF Council in several tranches, to grant-finance investment projects in the Black Sea/Danube Basin that aim
at nutrient reduction. In May 2001, the GEF Council approved the first tranche of the Investment Fund,
US$20 million. Eligible sectors for investment under the Fund include advanced municipal and industrial
wastewater treatment, agricultural nutrient pollution control and wetland restoration. The Investment Fund
provides a focused regional framework for country level investments aimed at a common goal of combating
eutrophication in the Black Sea and allows for a streamlined approached to project processing by the GEF.
This progress report on the Investment Fund has been prepared to request tranche 2 of the Investment Fund in
the amount of US$16 million. The report describes the project pipeline and the stage of development of each
project proposal, discusses progress to date on program leveraging targets, and addresses cooperation and
coordination of the Fund with the regional projects under the Partnership and other key partners. The report
also presents information on knowledge sharing activities, a website and the Distance Learning Program for
the Black Sea/Danube Basin initiated under the Investment Fund.

3. COSTS AND FINANCING (US$ million):
GEF :

16.0
Other sources:
74.8 (projected)
Total Project Costs: 90.8 (projected)


4. ASSOCIATED FINANCING:
Not applicable

5. OPERETIONAL FOCAL POINT ENDORSEMENT:
Countries' endorsement of the Investment Fund was received prior to May 2001 Council approval. Country
endorsement for individual projects is sought prior to project preparation.

6. CONTACT:
Emilia Battaglini
GEF Regional Coordinator, Europe and Central Asia, The World Bank
Tel #: (202) 473-3232, Fax #:(202) 614-0696/7/8;
ebattaglini@worldbank.org

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GEF Strategic Partnership on
the Danube / Black Sea Basin 1


WORLD BANK-GEF NUTRIENT REDUCTION INVESTMENT FUND:
TRANCHE 2


1.
The World Bank-GEF Investment Fund (IF) is the investment arm of the GEF Strategic
Partnership on the Black Sea/Danube Basin which also funds two regional projects, one in Black
Sea littoral countries and one in the Danube Basin, focusing on capacity building activities. The
Fund constitutes a proposed envelope of US$70 million, to be approved by the GEF Council in
several tranches, to grant-finance investment projects in the Black Sea/Danube Basin that aim at
nutrient reduction. In May 2001, the GEF Council approved the first tranche of the Investment
Fund, US$20 million. The Partnership Framework Brief submitted to the GEF Council identified
the second and third tranches as US$25 million each. Eligible sectors for investment under the
Fund include advanced municipal and industrial wastewater treatment, agricultural nutrient
pollution control and wetland restoration. The Investment Fund provides a focused regional
framework for country level investments aimed at a common goal of combating eutrophication in
the Black Sea and allows for a streamlined approached to project processing by the GEF.

2.
This progress report has been prepared to request tranche 2 of the Investment Fund in the
amount of US$16 million. The amount requested is lower than originally planned due to the
funding difficulties that the GEF is currently experiencing. Following the instructions in paragraph
20 of the Investment Fund Project Brief submitted to the GEF Council in 2001, the report
describes the project pipeline and the stage of development of each project proposal, discusses
progress to date on program leveraging targets, and addresses cooperation and coordination of the
Fund with the regional projects under the Partnership and other key partners. The report also
presents information on knowledge sharing activities, a website and the Distance Learning
Program for the Black Sea/Danube Basin initiated under the Investment Fund.

Project Portfolio

3.
The Black Sea/Danube Investment Fund portfolio covers all three eligible sectors. As of
March 2002, the portfolio includes four agricultural pollution control projects (APCP), five
advanced wastewater treatment projects (WWTP) and one wetlands restoration project (Table 1).
The Romania APCP was the first project to be approved by the GEF CEO and the World Bank
Board of Directors (December 2001) and is currently under implementation. The other projects
are at various stages of preparation. A summary of the status and financing of each proposed
project is provided in Table 1. General observations and trends are presented below.

4.
Agricultural Pollution Control. APCPs included in the portfolio aim at reducing nutrient
discharges from non-point agricultural sources through the adoption of environmental friendly

1 Annex 1 contains the Framework Brief for the GEF Strategic Partnership on the Danube/Black Sea Basin and Annex
2 contains the World Bank-GEF Nutrient Reduction Investment Fund Project Brief, both approved by the 2001 GEF
Council.

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3
agricultural practices. These practices include improved management, handling, storage and use
of manure, crop rotation, conservation tillage, organic farming, buffer strips along rivers, as well
as rehabilitation of floodplains and wetland areas. Investments in these projects also include
facilities for soil and water quality monitoring, such as relevant laboratory equipment. In addition
to investments, where needed, APCPs offer farmer training to facilitate the adoption of these said
practices. Furthermore, APCPs typically contain a component that aims at strengthening the
countries' national policy, regulatory and institutional capacity to control nutrient pollution.
Typically countries choose to adopt European Union Nitrate Directive, including the Code of
Good Agricultural Practices. Finally, the APCPs have a component dedicated to public awareness
raising and replication strategy to enhance the sustainability and replicability of the project
interventions.

5.
The strength of the portfolio in APCPs is based on a number of factors. First, most basin
countries are currently undergoing a transition in their agricultural sectors that has led to the
abolishment of fertilizer subsidies and the break-up of large livestock farms. This offers an
opportune time for introducing environmentally friendly agricultural practices. Second,
environmentally friendly agricultural practices are more cost-effective in reducing nutrients than
wastewater treatment plants (Table 2).

6.
APCPs have leveraged significant financing from other sources. A GEF funding of
US$21.15 million is expected to leverage US$105.65 million from other sources, which
corresponds to a ratio of 1 (GEF) : 5 (other) (Table 1). This was achieved mainly through linking
GEF grant operations with World Bank lending operation: the Romania APCP is linked with the
Agricultural Support Services Project. In Turkey, APCP is being blended with the US$50 million
Bank-funded Anatolia Integrated Watershed Management Project which is based on identifying
investment needs at the micro-catchment level. In Moldova, the APCP is being blended with the
US$40 million Rural Investment Support Project and will provide farmers who wish to invest in
environmentally friendly agricultural practices a grant amount of up to 20% of their total loan from
a commercial bank. In Russia, local administrative agencies in Krasnodar Krai, a region of 4,432
thousand ha intensively cultivated farmland and a Black Sea coastline of 570 km., will provide
140% of co-financing in order to introduce good agricultural practices in their Krai.

7.
Advanced Wastewater Treatment. The Investment Fund Portfolio presently contains two
advanced WWT plant projects (Russia Rostov and Hungary) and three projects that will support
artificial ("constructed") wetlands. Issues arising in developing a portfolio of advanced municipal
wastewater treatment projects are discussed in this section.

8.
The main issue arising in initiating projects that promote nutrient reduction through
advanced secondary or tertiary municipal wastewater treatment plants has been the high cost
associated with the establishment and, even more importantly, operations and maintenance (O&M)
of primary and secondary treatment. In the majority of the Basin countries, primary and secondary
treatment facilities do not exist, or where they do exist, they are in a dilapidated state. The utilities
are generally inefficiently managed and in severe financial difficulties as a result of high
operations costs and low tariff collection rates. However, difficult economic conditions have made
local governments/utilities reluctant to raise tariffs. Utilities have also been reluctant to implement
reforms, such as privatizing management services. Lack of financial viability has prevented the


GEF Strategic Partnership on the Danube/Black Sea Basin
World Bank-GEF Nutrient Reduction Investment Fund: Tranche 2
April 5, 2002

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4
World Bank from carrying out loan operations to build or rehabilitate municipal wastewater
treatment plants with which a GEF funded advanced treatment operation could be funded. It
should be noted that advanced treatment adds significantly to O&M costs, exacerbating the
problem of financial sustainability.

9.
The World Bank intends to seek creative solutions to reduce the O&M costs of WWT
plants. One promising option is to invest in technology changes which would improve the energy
efficiency of treatment operations and reduce the energy bill. Such investments may be funded
through a combination of a WB loan and a GEF grant under the Climate Change program. Energy
efficiency gains may be significant in WWT plants of large cities.

10.
Advanced treatment through artificial wetlands offers a plausible alternative to advanced
secondary or tertiary WWT plants in small to medium size towns as the O&M are significantly
lower than the latter. Main issues arising in this approach are related to the need for un-contested
wetland area and the existence of primary and secondary treatment plants for the treatment of
sewerage before being channeled to the constructed wetland for nutrient reduction. The Bank
adopted this approach in the GEF-funded Albania Integrated Water and Ecosystem Management
Project and is exploring it for the Black Sea/Danube Basin in the Moldova Environmental
Protection Project, the Ukraine Integrated Coastal Zone Management Project and the Croatia
Nutrient Reduction Project. These projects would serve as demonstration projects for further
replication in the region.

11.
The Bank is also exploring opportunities to reduce nutrients in wastewaters from industries
that were identified as hotspots in the Black Sea Diagnostic Analysis. Specifically, the Bank is
currently exploring the possibility of blending an industrial WWT rehabilitation operation in the
Turkish Black Sea region with a large Environment and Privatization Support Adjustment Loan.
If successful, this would be a good model for the entire basin.

12.
The preparation of the Russia Rostov Reduction of Nutrient Discharges and Methane
Emissions has been delayed due to internal administrative issues in the Russian Federation. As of
February 2002, the PDF-B Agreement had not been signed by the Government. The Bank has
been in dialogue with both Federal and Oblast Authorities and expects that the Agreement will be
signed soon.

13.
Wetland Restoration. Bulgaria Wetlands Restoration and Pollution Reduction Project is
first in the portfolio to be prepared in this sector. The project objective is to promote the adoption
of sustainable natural resources management practices among local communities and authorities in
the Persina Nature Park and Kalimok/Brushlen Protected Site areas. The project will help
demonstrate how environmentally friendly rural development activities can improve livelihoods.
The global objective is to reduce transboundary nutrient and other agricultural pollution loads
flowing into the Danube and Black Sea and to conserve biodiversity in the project area through
wetlands restoration and protected areas management programs, and support for stakeholders in
two protected areas to adopt environmentally-friendly activities.

14.
In support of these objectives, the project will assist in: (i) restoring priority wetlands in the
Danube River Basin and piloting the use of riparian wetlands as nutrient traps; (ii) establishing a


GEF Strategic Partnership on the Danube/Black Sea Basin
World Bank-GEF Nutrient Reduction Investment Fund: Tranche 2
April 5, 2002

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5
comprehensive water quality and ecosystems monitoring system; (iii) supporting protected areas
planning in Persina Nature Park and Kalimok/Brushlen Protected Site; (iv) strengthening capacity
to protect and manage biodiversity and natural resources; (v) building public awareness of
biodiversity conservation; and (vi) promoting and supporting entrepreneurial and agricultural
activities which are compatible with biodiversity conservation and also ensure natural resource
sustainability within the project region. The total project cost is estimated at US$13.38. US$7.50
will be requested from the GEF under the Investment Fund and the rest will be provided by EU
PHARE, the Governments of Austria and Denmark, the Government of Bulgaria and local
municipalities and beneficiaries. During project preparation technical issues were encountered.
Successful solutions to these issues will produce a strong, replicable model for the region. The
project is expected to be submitted for GEF CEO endorsement in May 2002.

Projects under each Tranche

15.
As the Investment Fund Project Brief states, projects are funded on a first-come-first-
served basis and none of the tranches may be earmarked. Hence, projects in the pipeline will be
funded in the order in which their preparation activities are completed. Current state of
preparation of the projects in the pipeline suggests that US$ 17.65 million of the first tranche of the
Investment Fund, US$ 20 million, will be used to fund the Romania Agricultural Pollution
Control, Bulgaria Wetlands Restoration and Nutrient Reduction, and Moldova Agricultural
Pollution Control Projects. Furthermore, it is likely that the remaining funds from the first tranche,
US$2.35 million, and the second tranche, US$ 16 million, will be used to fund the Russia Rostov
Reduction of Nutrient Discharges and Methane Emissions and the Turkey Agricultural Pollution
Control Projects.

Co-funding Leveraging Ratio

16.
The Investment Fund Project Brief presented to the May 2001 GEF Council stipulates an
overall leveraging ratio of 1 (GEF) : 3 (other) by the end of the program. The overall ratio targeted
by the end of the second tranche is 1 : 2. Individual projects may have ratios as low as 1 : 0.5,
although this applies mainly for countries with severe financial difficulties and or projects that are
exceptionally effective in reducing nutrients. A large variety of sources, including WB loans,
client country government or bene ficiaries, and grants and loans from other international
financiers, are acceptable for co-financing under the Investment Fund.

17.
Current projections indicate that the Investment Fund program will surpass its co-funding
targets in both tranches. Based on likely project compositions of each tranche (para. 9), the
projects funded under the first tranche will leverage non-GEF funding of US$51.65 million, which
corresponds to a leveraging ratio of 1 : 2.9. Under the first tranche, two projects, Bulgaria
Wetlands Restoration and Nutrient Reduction and Romania APCP, achieved co-financing ratios
slightly below and above 1 : 1. Both projects are first of their type to be introduced in the
program. The second APCP will leverage eight times as many non-GEF resources as the GEF
grant (Table 1). The projects that will likely to be funded under the second tranche will leverage
US$74.8 million in non-GEF resources, yielding a ratio of 1 : 4.7. This high ratio is mainly due to
the high co-funding secured for the Turkey APCP. In keeping with its commitment under the


GEF Strategic Partnership on the Danube/Black Sea Basin
World Bank-GEF Nutrient Reduction Investment Fund: Tranche 2
April 5, 2002

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6
Partnership, the World Bank will continue its efforts maximize non-GEF funds for interventions
aimed at reducing pollution loads to the Danube and Black Sea.

Policy Reform and Mainstreaming

18.
In implementing the Investment Fund the World Bank committed to promoting policies
that address nutrient reduction as part of its country dialogue and incorporating Danube/Black Sea
restoration issues in its Country Assistance Strategy development process. The recent ly approved
Romania Agricultural Pollution Control project supports the Romanian government in the
adoption and application of the European Union Nitrates Directive and harmonization of
legislation with the EU requirements. Romania took the first step in creating the legal framework
for water and soil protection with its Governmental Decision No. 964 of October 13, 2000 which
introduces the provisions of the EU Nitrate Directive into Romanian legislation. As a following
step, the project will support the preparation and adoption of the Code of Good Agricultural
Practices which will not only assist in EU accession but also with improving agricultural
production.

19.
The project is included in the World Bank Country Assistance Strategy (CAS) of June
2001 which identifies five priorities: promoting economic growth, building capacity to strengthen
the rule of law, increasing access to opportunity, strengthening the safety net, and protecting and
managing natural resources and the environment in a sustainable manner. By improving manure
management and agricultural practices, and by sustainably managing two high priority former
floodplain areas the project directly addresses the major development challenge of protecting and
enhancing the environment. The project also assists the Government of Romania in building local
and national capacity to honor its international commitments to reduce nutrient discharge to the
Black Sea from agricultural sources.

Directions in Further Portfolio Development

20.
The World Bank has adopted a strategy to phase out of Central and Eastern European
Countries, to "poorer" Southeastern European countries, the Caucasus and Central Asia. Some of
the latter countries have per capita GDP and poverty levels that are comparable with the poorest
regions of the world and the Bank believes that it can make the biggest difference in terms of
poverty reduction in these countries (Table 3). The Bank intends to focus its operations under the
IF to poorer countries of the Black Sea/Danube Basin. However, wealthier countries of the Basin
will continue to have access to grant funding under the Investment Fund through other IFIs which
have executing agency status with the GEF, such as the EBRD, as stated in para. 24 of the
Investment Fund Project Brief.

21.
The implication of this trend for the Black Sea/Danube Investment Fund is related to the
fact that poorer countries have more difficulty raising co-financing (own or other, such as EU) for
a nutrient reduction intervention which, as a global issue, may no t rank first in the country's
priority list. This is particularly true for the wastewater treatment sector where poorer countries
have difficulty establishing and operating primary municipal and industrial wastewater treatment,
let alone advanced secondary or tertiary treatment. Nevertheless the Bank has found creative


GEF Strategic Partnership on the Danube/Black Sea Basin
World Bank-GEF Nutrient Reduction Investment Fund: Tranche 2
April 5, 2002

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7
solutions, including "blending" with related projects to produce synergies and ensure better
sustainability and replicability prospects of the nutrient reduction projects.

22.
The Bank considers a varied approach to nutrient reduction investments under the
Investment Fund that would maximize the Fund's global benefits. In expanding its IF portfolio,
the Bank intends to take into account the need to:

·
Broaden scope of investment operations to creative approaches beyond the three
sectors. Lessons learnt in Central Asian wetlands restoration project should be
applicable to the Black Sea/Danube Basin;
·
Try new financing modalities, such as contingent financing, public private
partnerships;
·
Diversify nutrient reduction strategy according to composition of nutrient pollution
in different parts of the Black Sea. Take into account the "limiting factor"; and
·
Focus on Nitrogen reduction which is present in far larger quantities than
Phosphorus.

Coordination with Partners

23.
The Bank has cooperated with the European Commission and its relevant programs (ISPA,
Phare, Tacis) to further donor cooperation on the Black Sea/Danube Basin. Bank staff attended
and contributed to three meetings of Danube and Black Sea Commissions, interested bilateral
donors and international organizations/IFIs organized by the European Commission. These efforts
have led to a more structured approach to donor cooperation and the Bank expects that better
harmonized activities on the ground, such as ISPA co-financing, TACIS technical assistance to
supplement Bank lending operations, will result. A fist tangible result of the better cooperation
among the different players in the Danube - Black Sea Region is the recent signing of a
"Memorandum of Understanding on Common Strategic Goals" between the Danube and the Black
Sea Commissions.

24.
The World Bank has been in regular contact with UNDP/UNEP to ensure coordination and
cooperation between investment projects under the IF and the regional projects. Potential areas of
close cooperation are training and regulatory reform. Coordination will ensure that synergies are
achieved and overlap is avoided.

Knowledge Dissemination

25.
Web Site. A web site on the Partnership (www.worldbank.org/blacksea-danube) was
launched in November 2001 with the objective of disseminating information about the Black Sea
Danube Basin environmental problems and the Partnership. It is updated on a continuing basis.

26.
Distance Learning. A DL Program to disseminate knowledge about the causes and possible
solutions to water pollution in the Black Sea and Danube Basin is being prepared. Examples for
potential courses include "Nutrient Management and Partnership in the Black Sea Basin",
"Experiences in other parts of the world ­ A case study: Adaptive Nutrient Management in the
Chesapeake Bay Basin", "International Financing for Nutrient Reduction". The program would be


GEF Strategic Partnership on the Danube/Black Sea Basin
World Bank-GEF Nutrient Reduction Investment Fund: Tranche 2
April 5, 2002

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8
implemented over a period of 4-5 years. Pilot sessions will be carried out in April-June 2002
involving Ministers of Environment of littoral countries, high level representatives of related
government agencies, NGOs and private enterprises, as well as a high-level World Bank manager.
The pilot session will provide a forum for the participants to discuss with their counterparts and the
World Bank their countries' information needs, priorities, plans and information needs regarding
the clean-up of the Black Sea and Danube Basin. It is expected to lead to an agreement on a
preliminary course agenda for the Black Sea/Danube DL program. The DL program is being
developed in close cooperation with UNDP, Black Sea and Danube Commission Secretariats, the
World Bank GDLN Program and the GEF supported IW:LEARN Project.

Request for Tranche 2 Funding

27.
The Bank has developed a strong portfolio of investment interventions to reduce nutrient
loads to the Black Sea which has achieved a higher than planned co-funding ratio. Investment
operations have been complemented with active involvement in donor cooperation and knowledge
sharing. The second tranche of US$ 16 million is being requested from the GEF Council.

28.
This Progress Report includes two annexes: Annex 1 contains the Framework Brief for the
GEF Strategic Partnership on the Danube/Black Sea Basin (page 11) and Annex 2 contains the
World Bank-GEF Nutrient Reduction Investment Fund Project Brief (page 30), both approved by
the 2001 GEF Council.




GEF Strategic Partnership on the Danube/Black Sea Basin
World Bank-GEF Nutrient Reduction Investment Fund: Tranche 2
April 5, 2002

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9
Table 1: Portfolio of Black Sea/Danube Investment Fund Projects
GEF Funded
Co-Funding
Co-funding
Title
Status
Cost
Leveraged
ratio
(US$ million)
(US$ million)
(GEF : Other)
Wetland Restoration



Bulgaria Wetlands
Advanced Preparation
Restoration and Nutrient
PDF-B Grant Approval: 11/9/2000
7.50
6.00
1 : 0.8
Reduction
Expected WB Board Approval: 6/13/2002
Sub-total

7.50
6.00
1 : 0.8




Agricultural Pollution Control



Under Implementation
Romania Agricultural
PDF-B Grant Approval: 1/5/2002
5.15
5.65
1 : 1.1
Pollution Control
CEO Endorsement: 11/2/2001
WB Board Approval: 12/13/01
Moldova Agricultural
Under Preparation
Pollution Control
PDF-B Grant Approval: 8/29/2001
5.00
40.00
1 : 8
Expected WB Board Approval: 9/25/2003
Turkey Agricultural Pollution
Under Preparation
6.00
53.00
1 : 8.8
Control
PDF-B Grant Approval: 6/2/2001
Expected WB Board Approval: 4/29/2003
Russia Krasnodar
Pending GEF Pipeline Inclusion
5.00
7.00
1 : 1.4
Agricultural Pollution Control
PDF-B Grant: Under Preparation
Expected WB Board Approval: 8/1/2003
Sub-total

21.15
105.65
1 : 5






Wastewater Treatment


Russia Rostov Reduction of
Under Preparation
Nutrient Discharges and
PDF-B Grant Approval: 1/30/2000
10.00
21.8
1 : 2.2
Methane Emissions
Expected WB Board Approval: 4/15/2003
Under Preparation
Hungary Nutrient Reduction
PDF-B Grant : Under Preparation
7.50
17.00
1 : 2.3
Expected WB Board Approval: 6/1/2003
Moldova Environmental
Pending GEF Pipeline Inclusion
2.00
12.00
1 : 6
Protection
PDF-B Grant: Under Preparation
Expected WB Board Approval: 7/25/2003
Ukraine Integrated Coastal
Pre-Pipeline
4.00
8.00
1 : 2
Zone Management
Croatia Nutrient Reduction
Pre-Pipeline
4.00
8.00
1 : 2


Sub-total

27.5
68.8
1 : 2.3






Total
56.15
180.4
1 : 3.2



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Table 2: Cost effectiveness ratios for nutrient reduction measures by sector for the Black Sea
($ / kg nutrient removed / year)

Non-Point Source
Point Source*

Wetlands
(Agriculture)
Industrial
Municipal
High estimate
5.80
6.00
3.50
7.00
Nitrogen
Low estimate
8.75
11.00
4.00
8.00
High estimate
58.00
60.00
20.00
40.00
Phosphorus
Low estimate
88.00
88.00
25.00
50.00
* Annual capital costs only, excludes annual O&M costs, which are higher for wastewater treatment facilities than for
agriculture or wetlands.
Source: "Strategic Partnership for Nutrient Reduction in the Danube River Basin and the Black Sea - Benefit -cost
Analysis". ECSSD, April 2000

Table 3. Absolute Poverty Rates of Transition Economies in Europe and Central Asia, 1995-1999


Headcount index
1998 GNP in US$ per capita
Country
Household
Survey year $2.15/day
$4.30/day
Atlas Method
1996 PPP
Tajikistan
1999
68.3
95.8
370
1,040
Moldova
1999
55.4
84.6
380
1,995
Kyrgyz Republic
1998
49.1
84.1
380
2,247
Armenia
1999
43.5
86.2
460
2,074
Azerbaijan
1999
23.5
64.2
480
2,168
Georgia
1999
18.9
54.2
970
3,429
Russian Federation
1998
18.8
50.3
2,260
6,186
Albania a
1996
11.5
58.6
810
2,864
Turkmenistan
1998
7.0
34.4
502
2,875
Romania
1998
6.8
44.5
1,360
5,571
Macedonia, FYR
1996
6.7
43.9
1,290
4,224
Latvia
1998
6.6
34.8
2,420
5,777
Kazakhstan
1996
5.7
30.9
1,340
4,317
Bulgaria
1995
3.1
18.2
1,220
4,683
Lithuania
1999
3.1
22.5
2,540
6,283
Ukraine
1999
3.0
29.4
980
3,130
Slovak Republic
1997
2.6
8.6
3,700
9,624
Estonia
1998
2.1
19.3
3,360
7,563
Hungary
1997
1.3
15.4
4,510
9,832
Poland
1998
1.2
18.4
3,910
7,543
Belarus
1999
1.0
10.4
2,180
6,318
Croatia
1998
0.2
4.0
4,620
6,698
Czech Republic
1996
0.0
0.8
5,150
12,197
Slovenia
1997/98
0.0
0.7
9,780
14,399
Bosnia Herzegovina
n.a.
n.a.
n.a.
1,160
n.a.
Uzbekistan
n.a.
n.a.
n.a.
710
2,130
F.R. of Yugoslavia
n.a.
n.a.
n.a.
n.a.
n.a.
Source: Adapted from Making Transition Work for Everyone ­ Poverty and Inequality in Europe and Central Asia,
World Bank, 2000 and from World Development Indicators. Italics indicate countries eligible for funding under IF.
Turkey is excluded from the table since it is not a transition economy.


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FRAMEWORK BRIEF

GEF STRATEGIC PARTNERSHIP ON THE DANUBE/BLACK SEA BASIN


INTRODUCTION

1. In the International Waters focal area, countries often face very complex, water-related
environmental problems. In order to develop the joint political commitment to be successful in
addressing these transboundary problems, the GEF Operational Strategy recognized that a series
of international waters projects may be needed over time to: (a) build the capacity of countries
to work together, (b) jointly understand and set priorities based on the environmental status of
their waterbody, (c) identify actions and develop the political commitment to address the top
priority transboundary problems, and then (d) implement the agreed policy, legal, and
institutional reforms and investments needed to address them.

2. The 17 countries of the Danube, Dnipro, Dniester, and Don basins draining to the Black Sea
face a variety of shared environmental problems that are transboundary in nature. Through two
GEF assisted projects since the Pilot Phase, the countries have identified the excessive release of
nutrient pollution from agriculture, municipal, and industrial sources as the top priority
transboundary water problem and releases of toxic substances from hotspots as an additional
priority. Beginning with the Pilot Phase of the GEF, the Danube Basin countries have worked
together as have the 6 countries surrounding the Black Sea with European Union and GEF
assistance. The series of two pilot phase projects and two small follow-on projects has resulted
in the countries learning to work together, setting priorities related to the most serious
transboundary problems, and jointly agreeing on what interventions are needed to address the top
priorities through their programs or plans of actions (known as "Strategic Action Programs"
(SAP) in the GEF Operational Strategy).

3. The Danube Basin SAP and the Black Sea SAP are now ready for implementation by the
countries consistent with GEF Operational Program 8 in the International Waters focal area. In
order to accelerate on-the-ground implementation of the SAPs, this Strategic Partnership is being
proposed for Council approval. The Partnership has been developed over the last 24 months, has
been discussed at a Stocktaking meeting in June 2000 with all 17 basin countries, and has been
"mainstreamed" into the programs of GEF Implementing Agencies (IA) as a way of meeting the
country-driven needs according to the comparative advantages of each IA. This Strategic
Partnership also responds to Objective 8.5(e) of Operational Program 8 as part of a test to
determine whether GEF can serve as a significant catalyst in leveraging policy/lega l/institutional
reforms and priority investments for reversing degradation of a damaged large marine ecosystem
and its contributing freshwater basins. This basin-wide, multi-stakeholder collaboration is also a
globally significant test to determine whether on-the-ground implementation of measures can be
accelerated to reverse nutrient over-enrichment and toxics contamination of the Black Sea as part
of the Global Programme of Action (GPA) to protect the Marine Environment from Land-Based
Activities.



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4. This Framework Brief is included in the Work Program for Council approval. It (a) reviews
the background of GEF assistance and the development of this Strategic Partnership, (b) outlines
the objectives and indicators of meeting those objectives for the six year Partnership that have
been adopted by the 17 collaborating nations (15 recipient plus Austria and Germany) and IAs,
(c) describes the tranches that are being sought for the three initiatives under the Partnerships and
their first tranche outputs and success criteria for which Council approval is sought, and (d)
includes as Attachments the three individual elements according to IA comparative advantage
that together constitute the Strategic Partnership. Council is being asked to approve a first
tranche of USUS$29 million. This will consist of USUS$9 million for the two regional capacity
building/technical assistance projects to be implemented by UNDP and UNEP and US$20
million for the World Bank Partnership Investment Fund for Nutrient Reduction. In total, the two
Regional Projects would be allocated US$25 million and the Investment Fund US$70 million
over multiple tranches. The Partnership would be allocated a total of US$95 million in GEF
funds over multiple tranches. The Investment Fund will aim to leverage US$210 million to
accompany US$70 million GEF grant funds for nutrient reduction investments in the agriculture,
and municipal and industrial wastewater treatment sectors and for wetland restoration. The two
Regional Projects will in total leverage US$26.5 million in co-financing and a US$907 million
baseline to complement the US$25 million total GEF financing over the two tranches.

BACKGROUND

5. Based on years of preparatory discussions and closely following the Rio Earth Summit in
1992, Danube River basin countries signed a convention pledging to work together to restore the
environment of their transboundary river system and the six Black Sea countries signed their
own convention pledging to do the same for the Black Sea environment. In 1992 the European
Union joined forces with the Pilot Phase of GEF to provide US$12 million in co-finance for a
Danube Basin GEF international waters project (US$8.5 million GEF grant) and in 1993
provided US$23 million in co-finance for a Black Sea international waters GEF project (US$9.3
million GEF grant). Both projects were led by UNDP, predated the GEF Operational Strategy,
and were aimed at building the countries' capacity to work together to solve their shared water
problems.

6. Both pilot phase international waters projects came to a close just as Council adopted the
GEF Operational Strategy. In 1996, Council approved two small "bridging projects" to complete
the strategic work recommended by the GEF Operational Strategy in Operational Program 8. The
Danube basin bridging project ran from 1997-1999 with a GEF grant of US$3.9 (US$6 million
co-finance) and the Black Sea bridging project from 1998-2000 with a GEF grant of US$1.8
million (US$4million co-finance). The other large, multi country river draining to the Black Sea
is the Dnipro River. An international waters project was approved by Council for that three-
country basin in 1998 with UNDP (US$7.3 million GEF, US$11 million co-finance) and is under
implementation to complete equivalent strategic work to the rest of the basin and begin
implementation of nutrient reduction measures.






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Box 1. Black Sea/Danube and Other Waterbodies Experience Serious Nutrient Pollution

Nutrient overenrichment or eutrophication is becoming a more widespread pollution
problem around the globe. Countries of Europe, North America, and Asia are still trying
to reverse nutrient pollution of coastal and marine water bodies, such as the North Sea,
Baltic Sea, Adriatic, Gulf of Mexico, Chesapeake Bay, Albemarle/Pamlico Sound,
Florida Bay, and the Seto Inland Sea. Overfertilization of coastal waters with excessive
amounts of nitrogen from a man-induced disruption of the global nitrogen cycle has
become a problem on every continent. Until the 1960s, the Black Sea was known for its
productive fishery, scenic beauty, and as a resort destination for millions of people.
Since that time, as with other waterbodies around the world, massive overfertilization of
the sea by nitrogen and phosphorus from agriculture, municipal, and industrial sources
has seriously degraded the ecosystem, disrupted the fisheries, reduced biodiversity,
posed health threats to humans, and resulted in billions of dollars of economic losses to
the economies of the 6 countries. Pollution from 17 countries (15 GEF-recipient
countries as well as Germany and Austria) has created this transboundary water quality
problem. Since 1992, efforts have been underway with European Union and GEF
support to gradually reverse the situation; this proposal for a Strategic Partnership is
aimed at accelerating implementation of nutrient reduction measures and
policy/legal/institutional reforms in the basin draining to the fragile sea.


7. Beginning with the Council Paper entitled STREAMLINING THE PROJECT CYCLE
(GEF/C.12/9) in 1998, Counc il was alerted to the opportunity that such strategic partnerships
could help expedite meeting programmatic objectives of the GEF Operational Strategy. In 1999,
Council was informed in paragraph 42 of the GEF CORPORATE BUSINESS PLAN, FY 01-03
(GEF/C.14/9), that such a partnership was under development for the Danube/Black Sea Basin.
At its Spring, 2000 meeting, Council received a progress report on the development of strategic
partnerships and programmatic approaches in GEF/C.15/3 that referred to the accompanying
Council Information Document (GEF/C.15/Inf.6) on the approach under development for the
Danube Basin and Black Sea. Following its initial presentation as a Council INF document,
funding limitations prevented the proposed Partnership from being presented to Council in
November, 2000. The Strategic Partnership is now being presented to Council for approval.
8. Elements of the proposed Strategic Partnership were developed by the IAs in consultation
with the countries and the GEF Secretariat. The draft approach papers were discussed with
representatives of all 17 countries in a Stocktaking Meeting held in Istanbul, on June 29-30,
2000. The Stocktaking meeting was organized by the International Commission for the
Protection of the Danube River and the Black Sea Commission and all 3 IAs and the GEF
Secretariat participated in the dialogue for accelerating implementation of the Danube and Black
Sea action programmes. Following incorporation of recipient country comments, the elements of
the Strategic Partnership were discussed at subsequent Danube Commission and Black Sea
Commission meetings. Adjustments were adopted in 2001 by the two groups to a tranched
approach to the Partnership in response to funding shortages and to better match actual demand
for resources.


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9. The processes of consultation in formulating this strategic partnership not only helped to
develop common understandings among recipient countries, IAs, and the GEF Secretariat but
also served as an instrument for involving other organizations wishing to assist the countries so
that coordination and collaboration may be achieved rather than duplication or creation of gaps.
In particular, the European Union, EBRD, EIB, USAID, WWF, and the Governments of
Germany, Austria, Canada have been involved in the process, are contributing to accelerate SAP
implementation, and provide important coordinated support to the larger strategic framework.
The EU is taking a leadership role in convening partners for better coordination, including
sponsorship of periodic donor and agency coordination meetings with the first held in February
2001 in Brussels. This may help to shorten by one-half the time frame experienced elsewhere in
Europe and North America of two to three decades for developing necessary political
commitments and institutional reforms to foster enough action on transboundary waterbodies.

THE STRATEGIC PARTNERSHIP

10. GEF and its Implementing Agencies are proposing a Strategic Partnership consisting of
capital investments, economic instruments, development and enforcement of environmental law
and policy, strengthening of public participation, and monitoring of trends and compliance over
the period of 2001-2007 for the 17 countries of the Danube/Black Sea basin. This would
complement the activities of the countries, EC, EBRD, EIB, and bilaterals aimed at similar
objectives as well as fit programmatically with the on-going GEF project for the Dnipro basin.
Through the formulation process, six objectives with indicators of success were adopted by the
17 nations for this Strategic initiative for the entire 6 year period. They are listed in Box 2. The
Partnership consists of three elements which fit together to assist the countries in a collaborative
manner according to IA comparative advantage. Each element has received endorsement from
the GEF Operational Focal Points of all the participating countries.


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Box 2. Objectives and Indicators of Success for the Danube/Black Sea Basin Strategic Partnership for 2001-2005

Objective
Indicator
In support of the implementation of the Black Sea Strategic Action Plan and
By 2007, 100% of participating countries introduce one or more policy or regulatory
the "Common Platform for Development of National Policies and Actions
measures (including P-free detergents) to reduce nutrient discharges in the agricultural,
for Pollution Reduction under the Danube River Protection Convention",
municipal, or industrial sectors, to restore nutrient sinks (wetlands, flood plains), and to
1
and taking into account the mandate of the Sofia and Bucharest
prevent and remediate toxics "hot spots", and 50% adopt multiple policy measures,
Conventions, Danube/Black Sea basin countries adopt and implement
towards goals of maintaining 1997 levels of nutrient inputs to the Black Sea, and reducing
policy, institutional and regulatory changes to reduce point and non-point
toxics contamination in the basin.
source nutrient discharges, restore nutrient `sinks', and prevent and
remediate toxics "hot spots".
Countries gain experience in making investments in nutrient reduction and
100% of participating countries initiate one or more investments in agricultural,
prevention and remediation of toxics "hot spots".
municipal, land use or industrial sectors for nutrient discharge reduction, nutrient sink
2
restoration, and prevention and remediation of hot spots of toxic substances, some with
GEF assistance, by 2007 to accompany expected baseline investments.
Capacity of the Danube and Black Sea Convention Secretariats is increased
Payments of contributions by all contracting parties to the Danube and Istanbul
through, sustainable funding, and development of international waters
Conventions made for 2000 and 2001 and pledged for the period beyond project duration.
3
process, stress reduction and environmental status indicators adopted
Nutrient control, toxics reduction and ecosystem indicators assessing processes in place,
through Convention processes.
stress reduction, and environmental status, are developed, harmonized and adopted for
reporting to Secretariat databases by 2006.
Country commitments to a cap on nutrient releases to the Black Sea at 1997
Countries adopt protocols or annexes to their two conventions and/or develop legally
levels and agreed targets for toxics reduction for the interim, and possible
binding "Action Plans" regarding nutrients and toxics reduction commitments as part of
future reductions or revisions using an adaptive management approach after
their obligations under the GPA for Land-Based Sources of pollution to the Danube/Black
4
2004 are formalized into specific nutrients control and toxics discharge
Sea basin by 2006 towards agreed goal to restore the Sea to 1960's environmental status.
protocol(s) or Annex(es) to both Conventions.
For the Danube, such a commitment will be contained in the revised Nutrient Reduction
Plans (coherent with the ICPDR Joint Action Programme) and developed in accord with
the application of the relevant EU Water Directives.
Implementing Agencies, the European Union, other funding partners and
Regular programs of IA's and EC support country nutrient and/or toxics reduction
countries formalize nutrient and toxics reduction commitments into IA, EU
commitments during 2001-2007 as part of expected baseline activities and incorporate
5
and partner regular programs with countries.
them into CCF (UNDP), GPA Office Support (UNEP), CAS (WB), and EU (Accession
support) by 2005.
Pilot techniques for restoration of Danube/Black Sea basin nutrient sinks and All countries in basin begin nutrient sink restoration and non-point source discharge
reduction of non-point source nutrient discharges through integrated
reduction by 2007 through integrated river sub-basin management of land, water and
management of land and water resources and their ecosystems in river sub-
ecosystems with support from IA's, partners and GEF through small grants to
6
basins by involving private sector, government, NGO's and communities in
communities, biodiversity projects for wetlands and flood plain conservation, enforcement
restoration and prevention activities, and utilizing GEF Biodiversity and
by legal authorities and holistic approaches to water quality, quantity and biodiversity of
MSP projects to accelerate implementation of results.
aquatic ecosystems. Plans (coherent with the ICPDR Joint Action Programme) are
developed in accord with the application of the relevant EU Water Directives.


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Elements of the Strategic Partnership

11. The following three elements constitute the proposed Strategic Partnership:

1.
A GEF Black Sea Regional capacity building and technical assistance element
implemented (in cooperation with the Black Sea Commission under the leadership of
UNDP and with the assistance of UNEP for defined components - two tranches;

2.
A GEF Danube River basin regional capacity building and technical assistance
element implemented (in cooperation with the ICPDR) under the leadership of UNDP -
two tranches;

3.
A GEF / World Bank Partnership Investment Fund for Nutrient Reduction focused
on single country nutrient reduction investments - multiple tranches.

Elements 1 and 2: Capacity Building and Technical Assistance

12. The two regional elements are aimed at addressing transboundary environmental degradation
in the Danube/Black Sea basin through policy and legal reform, public awareness raising, and
institutional strengthening. Each element will be operated through or closely linked to the
respective Black Sea and Danube Secretariats in Istanbul and Vienna. The first tranche of each
of the two elements are presented in Attachments 1 and 2. They will each focus on the following
areas within the Danube and Black Sea convention countries, with the GEF lead agency shown
for each:

Actions to revise and/or create a nutrients and toxics reduction protocol/annex to the Black
Sea Convention in accordance with the Global Programme of Action to Protect the Marine
Environment from Land Based Activities (UNEP). For the Danube, strategies and measures
for nutrient reduction will be reflected in the ICPDR Action Plan, which will be endorsed and
thus become legally binding to the contracting Danube countries under the DRPC (UNDP);

Activities to develop and implement policies and legislation aimed at addressing sectoral
causes of nutrient and toxics releases, such as phosphate detergent phase-out, agricultural
reform, cleaner production in industry, etc. (UNDP);

Policy and legislative reforms aimed at promoting the protection and restoration of critical
nutrient sinks, particularly wetlands and floodplains (UNDP);

Strengthening of the institutional capacities of the Black Sea and Danube Secretariats to
build in long-term capacity to understand, address and monitor levels and impacts of
transboundary nutrients and toxics (UNDP);

Public awareness raising in support of basin-wide nutrient and toxics reduction efforts
(UNDP);



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Harmonization of water regulatory standards (in line with EU regulations, where applicable)
among the Danube/Black Sea basin countries to include similar nutrient and toxics reduction
provisions (UNDP);

Development of Black Sea and Danube River basin Monitoring and Evaluation indicators
harmonized among countries for process, stress reduction and environmental status indicators
(UNDP);

Strengthening of the Information System to allow interactive information exchange and
update and development of public area for specific topics of nutrient reduction (UNDP);

Support to further development of NGO activities at national and regional level (UNDP);

Establishment of Small Grants Fund to reinforce community based actions for nutrient
reduction with particular attention to agricultural reform projects, wetland restoration and use
of lagoons for nutrient reduction (UNDP);

Feasibility studies for a nutrients emission trading system at the national and regional levels.
UNDP will coordinate an overall feasibility study for the Black Sea basin as a whole while
the ICPDR/KfW will carry out a study specific to the Danube River Basin towards the
possibility of developing economic instruments for nutrient management in the Danube River
Basin (UNDP).

Element 3: GEF / World Bank Partnership Investment Fund for Nutrient Reduction

13. A paper describing the Partnership Investment Fund for Nutrient Reduction in the
Danube/Black Sea Basin is proposed for approval by Council (Attachment 3). A summary of
this investment fund is described below.

14. The Partnership Investment Fund for Nutrient Reduction would be funded by GEF for a total
of US$70 million over multiple tranches. The World Bank in using this fund commitments to
assisting the 15 recipient countries in the Basin as they implement the two SAPs in addressing
the top transboundary priority nutrient reduction. The World Bank would commit to (a)
incorporating in its country dialogue with each of the 15 GEF-recipient countries policies that
address nutrient reduction in the agriculture, municipal, and industrial sectors, (b) promoting
inclusion of Danube/Black Sea restoration issues in the on-going Country Assistance Strategy
(CAS) development processes, and (c) using the Bank's convening powers and comparative
advantage to mobilize funding and engage other donors/partners to achieve an overall
contribution of US$3 from other sources for every US$1 from GEF in implementing nutrient
reduction measures.

15. The Investment Fund would fund modest investments in nutrient reduction as part of
domestic and industrial wastewater treatment, agricultural pollution control and wetland
restoration projects in individual countries. Projects would be selected by the World Bank
according to specific, pre-approved eligibility criteria, including country identification as a


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priority investment as part of the SAP development process; potential for replicability and
commitment to specific activities that promote replicability; country commitments to
policy/legal/institutiona l reforms related to nutrient reduction and water quality improvement;
GEF focal point endorsement; the country being up-to-date on contributions to its regional
convention(s); and acceptable level of co-financing secured. Each project would be approved
and implemented following standard World Bank procedures and therefore would be subject to
World Bank Board approval. Project implementation under the Investment Fund would be
streamlined through delegation of approval authority to the GEF CEO under Council authorized
GEF funding envelopes the first of which is sought in this work program. Replenishment of
tranches for the Investment Fund would be requested from the GEF Council together with a
progress report with information on the overall leveraging ratio achieved to date and the project
pipeline.

16. Replicability. Replication of nutrient reduction interventions throughout the Black
Sea/Danube Basin will be one of the most important objectives of the Partnership Investment
Fund. Projects supported through GEF funds will have design elements to facilitate their
replication. This is important since GEF funds invested through the Partnership will constitute
only a small fraction of the total resources needed to finance the priority hot spots identified by
Danube and Black Sea Strategic Action Plans and to make a difference in the Black Sea's
ecological state.

17. Leveraging Ratios. The Investment Fund would aim at leveraging GEF grant funds against
other project financing sources at a target overall program ratio of 1 (GEF) to 3 ( other sources)
which would when this is achieved, represent some of the higher. Co-financing may be secured
from a combination of national sources, loans from the World Bank or other IFIs, and additional
grant funding from donors/partners. The minimum leveraging ratio for individual projects has
been established as of 1 (GEF) to 0.5 (other) and would only be allowed in very exceptional
cases, such as in countries with the most significant resource constraints or critical wetland
restoration projects with funding constraints. Such low-leverage projects would be offset by
other investments, such as nutrient reduction at wastewater treatment plants, where the
proportion of GEF incremental cost financing would be expected to be significantly lower. The
World Bank will assist countries of the region in finding co-finance sources so that they may
participate in the Partnership.

18. Reporting Requirements. The CEO will circulate each proposal intended for approval to
Council for information for a two weeks period in which comments would be welcomed. The
World Bank will report annually to the Council on status of the Partnership and to the two
commissions periodically at their meetings. The CEO will transmit a report to Council on
achievement of progress and indicators in the first tranche for consideration at a Council meeting
before authorizing the start of the second tranche. A final report with lessons learned and
recommendations will be submitted to Council.

19. Monitoring and Evaluation provisions. Each individual project will have its own monitoring
indicators, benchmarks, and monitoring plan to confirm actual nutrient reduction achieved. This
is very important globally in that cost-effectiveness indicators (US$/kilogram nitrogen or
phosphorus removed) will be established through the Partnership for different situations to be


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used in possible future applications by GEF and by the international community as non-recipient
countries enhance their actions to reduce nutrient over enrichment of coastal/marine ecosystems.




SUMMARY OF FIRST TRANCHE PROPOSALS FOR MAY 2001 COUNCIL APPROVAL ---
OUTPUTS and SUCCESS CRITERIA

1.
Black Sea Regional Project (US$4 million)

Objectives/Outputs/Success Criteria

Objectives
Success Criteria
The long-term objective is for all Black Sea basin 1. For the long term objective, the availability of state of
countries to take measures to reduce nutrient levels and the Black Sea reports that permit comparison with the
other hazardous substances to such levels necessary to historical data on the state of the Black Sea before the onset
permit Black Sea ecosystems to recover to similar of severe eutrophication.
conditions as those observed in the 1960s.


2. Full compliance with the new Protocol for Landscape
Intermediate objective: Urgent control measures should and Biological Diversity to the Bucharest Convention.
be taken by all countries in the Black Sea basin, in

order to avoid that discharges of nitrogen and
3. For the intermediate objective, annual reporting of the
phosphorus to the Black Sea exceed those levels
discharges of P and N from rivers, direct point sources and
observed in 1997.
airborne fluxes (estimates based on ground stations).

Immediate Objectives:
4. Full compliance with the new LBA Protocol to the
1. Reduction of the nitrogen and phosphorus loads to Bucharest Convention.
the Black Sea;
2. Enhancement of the service function of wetlands
and benthic (seabed) plant communities for the
assimilation of nutrients;
3. Improved management of fisheries to permit their
economic recovery in parallel with improvements to
the ecosystem.
4. In addition to the above, and where appropriate,
attention will also be given to transboundary
contamination by hazardous substances, particularly
where these have similar sources to nutrients. In the
case of oil pollution (a significant problem in the Black
Sea), attention will also be given to measures that may
reduce the risk of spillage by ships.

Objective 1. Support the integration of a Sustainable Secretariat for the Bucharest Convention
Outputs
Success Criteria
1. A management regime capable of coordinating
1. Programme Implementation Unit (PIU) fully staffed
regional actions to overcome the key
and operational
transboundary issues facing the Black Sea,
2. Joint Management Committee established and
primarily the control and abatement of
operational
eutrophication and hazardous substances but also
3. Advisory Groups and Activity Centres operational and
the improved management of fisheries (see
engaged in addressing transboundary issues
component V).
4. Istanbul Commission able to raise funding for
2. A permanent mechanism for co-operation with the
transboundary projects


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ICPDR (Danube) and other emergent river basin
5. Inter-Commission Working Group operating and
commissions in the Black Sea Basin.
setting common management objectives
3. Publicly accessible programme materials in all
6. Information in the public domain throughout the Black
Black Sea languages
Sea coastal region regarding the transboundary
problems and solutions offered.
Objective 2. Regional actions for improving LBA legislation to control eutrophication and for tackling
emergent problems.
Outputs
Success Criteria
1. A new and more comprehensive protocol for the
1. New LBA Protocol approved and endorsed
control of land-based activities in the Black Sea.
2. Feasibility study of the MEH published.
This will pay particular attention to the integral
3. Black Sea Futures report approved by the Istanbul
control of eutrophication.
Commission and published.
2. A detailed study of emergent issues in the Black
Sea and their social and economic root causes
based on application of the GIWA methodology.
3. A feasibility study for the establishment of a
marine electronic highway (M EH) in the Black
Sea and Turkish Straits.
Objective 3. Assist countries to improve their knowledge of the process of eutrophication in the Black Sea
Outputs
Success Criteria
1. State of the Black Sea report (as required by the
1. Integration of international study group on Black Sea
SAP), focusing on eutrophication and hazardous
2. Peer reviewed study
substances, in December 2001. This activity will
3. Completion of 4 surveys in 2001 and studies of nutrient
enable the report to be made despite the absence of
sources
a functional monitoring network (see Objective 4).
4. Publication of State of the Black Sea Report, 2001
2. Satellite maps of indicators of eutrophication
5. Copies of the satellite color scan maps and explanatory
issued weekly.
reports distributed widely in all six Black
3. Recommendations to the Istanbul Commission and 6. Use of the information in setting new adaptive
ICPDR for new nutrient control objectives within
management
the concept of adaptive management (see also Obj.
5)
Objective 4. Introduce new sectoral policies and a system of process, stress reduction and environmental status
indicators for monitoring the effectiveness of measures to control eutrophication (and hazardous substances
where appropriate).
Outputs
Success Criteria
1. Sectoral nutrient control master plans and
1. Written agreement of the agricultural, industrial and
associated indicators (agriculture, industry,
municipal sectors in each country to cooperate on
municipalities) for each country.
specific indicators and to help to develop and
2. Amended laws and policies, as appropriate.
implement measures within their area of responsibility.
3. National nutrient reduction strategies.
2. Adopted new system of process, stress reduction and
4. An Istanbul Commission information base,
environment status indicators employed, similar to that
initially managed by the PIU.
described in Annex 8.
5. Annual environmental status monitoring reports,
3. Indicator data used to enforce existing/new regulations
starting in 2002 and incorporating process and
and for regional status and trends reports
stress reduction indicators by 2003.
4. Use of the information base by all six countries.
5. Status reports showing positive trends in selected
indicators.
Objective 5: Support the Commissions in their periodic review of Adaptive Management objectives
Outputs
Success Criteria
1. A benefit/cost study of the application of the
4. Publication and positive reception of the benefit/cost
recommendations (to be conducted jointly with the
study
ICPDR)
5. Recommendations for new objectives and priorities
2. Technical recommendations for new objectives
formulated.
including recommendations of target sectors/sub-
6. Approval of the new objectives by the two


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sectors for control measures and/or investments.
Commissions (hopefully also the new Dnipro
3. Final recommendations to the Commissions (from
Commission).
the Joint Working Group
Objective 6. Assist the public in implementi ng activities to reduce eutrophication through a programme of
grants for small projects and support to regional NGOs.
Outputs
Success Criteria
1. Reports describing 29 completed actions in the
1. Full implementation of first tranche of 29 projects
first tranche (e.g. wetlands restored, videos
(independent review).
produced, farms converted to organic production,
2. Successful second call for proposals.
etc.)
3. Full implementation of the second tranche
2. Reports, as above, for the second tranche.
(independent review).
3. Regional NGO newsletter `Black Sea Shared'
4. Effective contribution of NGO evinced by the
produced and distributed quarterly (mainly
establishment of a regional NGO WG on nutrient
electronically)
reduction, media reports and presence at significant
4. Regional report on wetland protection and
regional open meetings.
restoration and recommendation for local actions
5. Increased number of wetlands protected and/or restored
(WWF)
(WWF)
5. Inclusion of the Black Sea in WWF's Europe-wide 6. Introduction of fisheries no-take zones and analysis of
reports on the reform of fisheries management
those subsidies to fishing that may be damaging to
(WWF).
stocks or the environment(WWF)­see also Objective 8.
Objective 7. Formulate proposals for market-based or alternative economic instruments for limiting nutrient
emissions and establish private-public sector partnerships for environmental protection in the Black Sea.
Outputs
Success Criteria
1. `Gap analysis' published, showing difference
1. Reports of actions taken within countries to correct
between the current use of economic instruments
identified gaps in the application of instruments.
and those that would be required for the effective
2. Decision of Commissions regarding mechanism for
implementation of national nutrient reduction
nutrient trading and/or alternatives.
strategies.
3. Loans for nutrient-related investments channeled
2. Feasibility study of the nutrient trading mechanism
through regional or national development banks.
and its alternatives (including action-oriented
4. Substantial project portfolio that can be taken to a 2005
recommendations for the Commissions).
donor conference or similar funding mechanism
3. Letters of agreement and other practical
arrangements with regional/national funding
institutions.
4. Long-term investment priorities for the post
Strategic Partnership period.
Objective 8. A fisheries exploited within its maximum sustainable yield and incorporating measures to protect
ecologically sensitive areas.
Outputs
Success Criteria
1. First Black Sea Fish Stock Assessment
1. Reports demonstrating effective protection of sensitive
2. Declaration of fisheries free zones to allow for
habitats as fisheries free zones
restoration of macrophyte habitats and recovery of
2. Recovery of macrophyte beds damaged by trawling
nursery grounds.
gear (indicators as per Annex 8).
3. Measures for enforcing the above.
3. Independent review of stock assessment.
4. Signed fisheries convention with measures to limit 4. Signature, ratification and implementation of the
fishing effort and provisions for enforcement.
Fisheries Convention
5. Signature, ratification and implementation of the new
Biological and Landscape Diversity Protocol to the
Bucharest Convention (prepared with BSEP (GEF and
Tacis) funding.
6. Sustained increases in sensitive stocks (e.g. Turbot,
Sturgeon)




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2.
Danube River Basin Regional Project (US$5 million)

Objectives/Outputs/Success Criteria
Objectives
Success Criteria


1. Long-term Development Objective:
Overall Project Objective: At the end of Phase 1 of the

Project, methodologies and concepts have been developed
The long-term development objective of the proposed
under the DRPC to introduce and implement legal and
Regional Project is to contribute to sustainable human
institutional mechanisms for efficient pollution control and
development in the DRB through reinforcing the
reduction of nutrient loads to the Black Sea. At the end of
capacities of the participating countries in developing
the Project Phase 2, all Danube River Basin countries have
effective mechanisms for regional cooperation and
developed and ratified policies and legal instruments for
coordination in order to ensure protection of
sustainable water management and nutrient reduction and
international waters, sustainable management of
have put in place mechanisms for exacting compliance.
natural resources and biodiversity.


Objective 1: At the end of the Project Phase 1, all Danube
2. Overall Objective:
River Basin countries have reviewed policies and legal
instruments in relation to ecological land use (River Basin
The overall objective of the Danube Regional Project is Management) and water management and have prepared
to complement the activities of the ICPDR required to
mechanisms to adapt their national legislation to
provide a regional approach and global significance to
international and EU standards.
the development of national polic ies and legislation

and to the definition of priority actions for nutrient
Objective 2: By end of Phase 1, operational mechanisms
reduction and pollution control with particular attention for the monitoring of water pollution and control of
to achieving sustainable transboundary ecological
emissions from point and non-point sources and a reliable
effects within the DRB and the Black Sea area. The
information system under the ICPDR are designed and
combined structural (US$882 million baseline) and
ready for implementation at the regional and national level
non-structural (this project, Phases 1 and 2)
to assess improvement of water quality and nutrient
interventions will reduce nitrogen and phosphorus
reduction in the Black Sea.
burdens to the Danube River basin by an estimated 22

and 33 percent, respectively.
Objective 3: At the end of Phase 1 of the Project the

Secretariat of the Danube Environmental Forum (DEF) is
The specific objectives of Phase 1 of the Project are: fully operational and national representations exist in all
1. Creation of sustainable ecological conditions for
Danube countries. National NGOs are involved in project
land use and water management
preparation and have identified community-based nutrient
2. Capacity building and reinforcement of reduction projects to be financed under the GEF Small
transboundary cooperation for the improvement of Grants Programme and have prepared at least two national
water quality and environmental standards in the DRB
awareness-raising campaigns.
3. Strengthening of public involvement in
Objective 4: At the end of Phase 1 of the Project, the
environmental decision making and reinforcement of
ICPDR has conceptualized and developed its monitoring
community actions for pollution reduction and
and evaluation system and has identified the indicators for
protection of ecosystems
pollution reduction and environmental status; knowledge on
4. Reinforcement of monitoring, evaluation and
removal of nutrients and toxic substances is increased and
information systems to control transboundary pollution, economic instruments to encourage investments for nutrient
and to reduce nutrients and harmful substances.
reduction are developed at the national and regional level.
Objective 1: Creation of sustainable ecological conditions for land use and water management
Outputs
Success Criteria
Output 1.1:
1. River Basin Districts are defined
Development and implementation of policy
2. River basin management practices are identified and gaps
guidelines for river basin and water resources
and needs in relation of WFD requirements are clarified
management.
3. Methodology for preparation of RBD management plans
is implemented in pilot river basins
4.Transboundary cooperation and coordination is enhanced


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Output 1.2:
1. List of priority agricultural `hot spots' and assessment of
Reduction of nutrients and other harmful substances
legislation on point and non-point sources of pollution are
from agricultural point and non-point sources
updated
through agricultural policy changes
2. Review of hazardous agrochemicals and their impacts is
worked out
3. Conventional and alternative agricultural practices and
farming in line with EU requirements for central and
downstream Danube countries are analyzed
4. National deficiencies in agricultural policy are identified
Output 1.3:
1. Assessment of practical promotion of best agricultural
Development of pilot projects on reduction of
practices and manure handling is updated
nutrients and other harmful substances from
2. Alternative concepts for farming and manure handling in
agricultural point and non-point sources
line with EU requirements for central and downstream
Danube countries are elaborated
3. Needs for pilot activities in best agricultural practices are
identified in UA, MO, RO, BG, YU and B-H
4. Understanding of decision makers and farmers on the
need to introduce new concepts for animal farming and
manure handling is addressed
Output 1.4:
1. Areas for land use planning in pilot river basins are
Policy development for wetlands rehabilitation under
identified
the aspect of appropriate land use
2. Methodology and concepts for appropriate land use and
wetland restoration are developed
3. Inappropriate land use at wetland restoration is discussed
with stakeholders (workshop)
Output 1.5:
1. Updated list of priority `hot spots' and inventory on
Industrial reform and development of policies and
industries with outdated techniques and facilities
legislation for application of BAT (best available
(accidental risks), related to SIAs, are produced
techniques including cleaner technologies) towards
2. Existing policies and legislation at the national level are
reduction of nutrients (N and P) and dangerous
collected and existing gaps with EU legislation are
substances
identified
3. Workshop programmes for BAT introduction are
prepared
Output 1.6:
1. Deficiencies in international comparison related to
Policy reform and legislation measures for the
tariffs, metering, types of collection etc. are identified
development of cost-covering concepts for water and 2. Most appropriate cost recovery models and gradual
waste water tariffs, focusing on nutrient reduction
tariffs reform are proposed for specific countries
and control of dangerous substances
Output 1.7
1. Present systems of charges, fines and incentives is
Implementation of effective systems of water
analyzed nationally and DRB-wide.
pollution charges, fines and incentives, focusing on
2. Alternative concepts for the introduction of incentive
nutrients and dangerous substances
based instruments for groups of DRB countries are
identified
3. Institutional, economic and social capabilities to
implement economic instruments are assessed
Output 1.8:
1. Analysis of legal and institutional possibilities for
Recommendations for the reduction of phosphorus in
introducing restrictive standards for detergents use in
detergents.
particular DRB countries is performed
2. Proposals of severe standards and implementation
schedule for phosphorus reduction are developed
3. Proposals for enforcement and compliance are elaborated
4. Organization of workshops on phase out of phosphorus in


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detergents
Objective 2: Capacity building and reinforcement of transboundary cooperation for the improvement of water
quality and environmental standards in the DRB.
Outputs
Success Criteria
Output 2.1:
1. Existing structures and mechanisms for implementation
Setting up of "Inter-ministerial Committees" for
of environmental policies and legislation analyzed
development, implementation and follow-up of
2. Adequate structures proposed in cooperation with
national policies legislation and projects for nutrient
relevant ministerial departments
reduction and pollution control
3. Inter-ministerial Committees established
Output 2.2:
1. Water quality objectives and nutrient and toxics quality
Development of operational tools for monitoring,
conditions are developed
laboratory and information management and for
2. Statistics of emissions from point and non-point sources
emission analysis from point and non-point sources
for P and N are existing
of pollution with particular attention to nutrients and
3. Inventory of priority chemicals in line with EU is
toxic substances
prepared
4. Laboratory equipment in selected countries is reinforced
5. Information system and network are improved
Output 2.3:
1. National stations - PIACs for MD, UA, BiH, YU are
Improvement of procedures and tools for accidental
planned and programme for implementation prepared
emergency response with particular attention to
2. Inventory and assessment of high accidental risks spots
transboundary emergency situations
are produced in all countries
3. DBAM is prepared for improvement to respond to
pollution transport issues
Output 2.4:
1. ICPDR Information System is fully operational with
Support for reinforcement of ICPDR Information
internal working area and public accessible area
and Monitoring System (DANUBIS)
2. Networking within DANUBIS by all ICPDR contracting
parties is developing
3. Interactive DANUBIS web site is developing
4. Mechanisms for many users of having access to
information are available
Output 2.5:
1. Joint work programme for MoU is approved
Implementation of the "Memorandum of
2. Agreement of status indicators is reached
Understanding" between the ICPDR and the ICPBS
3. Joint AQC system is defined and agreed
relating to discharges of nutrients and hazardous
4. Rules of reporting are developed
substances to the Black Sea
5. Agreement on regular meetings is concluded
6. MoU is signed.
Output 2.6:
1. Training needs are assessed, training programmes and
Training and consultation workshops for resource
course materials are developed.
management and pollution control with particular
2. Sub-contractors and organizations for training courses are
attention to nutrient reduction and transboundary
identified and contracts are prepared.
issues


Objective 3: Strengthening of public involvement in environmental decision making and reinforcement of
community actions for pollution reduction and protection of ecosystems
Outputs
Success Criteria
Output 3.1:
1. Optimal operation of DEF secretariat is achieved
Support for institutional development of NGOs and
2. Training needs identified and programmes on
community involvement
environmental issues developed
3. Publications and materials for awareness raising on
nutrient and toxics are conceptualized and prepared
4. Training courses and materials to reinforce NGO


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cooperation are prepared.
Output 3.2:
1. Conditions and implementation mechanisms for Small
Applied awareness raising through community based
Grants Programme prepared and disseminated (topics,
"Small Grants Programme"
criteria, timing)
2. Calls for a regional and two local grants programmes
Output 3.3:
1. Realistic approach on organizing public campaigns is
Organization of public awareness raising campaigns
developed
on nutrient reduction and control of toxic substances
2. Sufficient and reliable information for mass media
purposes are prepared and published
3. Basin-wide documents are periodically published
Objective 4: Reinforcement of monitoring, evaluation and information systems to control transboundary
pollution, and to reduce nutrients and harmful substances
Outputs
Success Criteria
Output 4.1:
1. Monitoring and evaluation system for project
Development of indicators for project monitoring
implementation is developed
and impact evaluation
2. Indicators for emissions and water quality are reviewed to
respond to nutrient concerns
3. Progress indicators for monitoring project
implementation are developed
4. Impact indicators to evaluate environmental effects are
defined
5. Environmental status indicators are developed
Output 4.2:
Carried out only in the 2nd Phase of the Project
Analysis of sediments in the Iron Gate reservoir and
impact assessment of heavy metals and other
dangerous substances on the Danube and the Black
Sea ecosystems
Output 4.3:
1. Criteria for wetlands classification and observation
Monitoring and assessment of nutrient removal
priorities are defined
capacities of riverine wetlands
2. Methodological approach for assessment of nutrient
removal capacities is developed taking into account
results of other projects
3. Observation programme to assess annual removal
capacities is designed and approved
Output 4.4:
1. Economic instruments for nutrient reduction analyzed
Danube Basin study on pollution trading and
elaborated
corresponding economic instruments for nutrient
2. Assessment on legal and policy issues related to
reduction
economic instruments in DRB countries
3. Needs and barriers for "pollution trading" studied


World Bank GEF Partnership Investment Fund for Nutrient Reduction (US$20 million)

20. The World Bank is submitting the overall framework for a Nutrient Reduction Investment
Fund and seeks GEF financing of US$20 million for a first envelope of funds under a longer
term program requesting US$70 million of GEF resources. This envelope of funds would be
used to commit resources against individual eligible projects at the CEO endorsement stage. An
important feature of the proposed Partnership Investment Fund is that these funds will not be
earmarked against any particular project at the time of GEF Council approval. This feature is
intended to promote competition for best practice projects, to promote early action, and to
provide flexibility in managing investments in accordance with partnership eligibility criteria and


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objectives. Currently, seven proposed projects are at various stages of development
(summarized below) and are likely candidates to access funds from the first tranche. The
demand for GEF resources that this pipeline of projects reflects are well in excess of US$20
million that would be approved in the first tranche. A second tranche will be requested at the
December 2001 Council meeting. Periodic progress reports to the GEF Council during the
Partnership implementation period will describe the ongoing project pipeline ­ and future
tranche funding requests will report retrospectively on the use of funds committed under earlier
tranches. Outputs and success criteria for the Partnership Investments Fund are described in the
Investment Fund Paper (Attachment 3) including leveraging targets, replication goals; and
contribution to nutrient reduction. Progress on Investment Fund indicators will be described in
the periodic progress reports to the Council. Each project under the Partnership will include its
own measures for success relating to nutrient reduction, sustainability and replicability.

Status of Project Pipeline Development

21. Three advanced concepts. The proposed Romania Agricultural Polution Control, Bulgaria
Wetlands Restoration, and Russia Rostov Reduction of Nutrient Discharges and Methane
Emissions on Rostov-on-Don Projects are at an advanced stage of preparation and expected to
require GEF resources in the calendar year 2001. These are model projects for the Partnership
Investment Fund and their concept notes were presented to the GEF Council in May 2000.
These concept notes are attached again as an annex to the Investment Fund Paper. In case these
projects fall behind schedule or fall out of compliance with Partnership criteria (for example
arrears on Commission dues), then there are other project proposals under development that may
be committed sooner.

22. Two less advanced concepts. The proposed Turkey Agricultural Pollution Control and
Russia Krasnodar Agricultural Pollution Reduction Projects are at early project concept note
stage and have not yet received preparation grants, but both governments have indicated their
desire for preparation funds.

23. Two very preliminary concepts. The proposed Moldova Agricultural Pollution Control, and
Hungary Wastewater Nutrie nt Reduction Projects are at early stages of discussion. The Moldova
project may be blended with a World Bank agricultural credit and extension project targeted at
small and medium sized enterprises. Contingent finance with GEF grant funds is under
consideration/review. The Hungary Project may be blended with EU and EBRD financing.
Additional project ideas are expected. Presented below are a quick summary of each of the three
most advanced projects.





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ROMANIA: AGRICULTURAL POLLUTION CONTROL PROJECT

Project Objective. The overall objective of the project is to increase the use of environmentally-friendly agricultural
practices in the project area and thereby reduce pollution from agricultural sources in Romania to the Danube River and
Black Sea and at the same time assist Romania in meeting European Union standards in agricultural pollution control. The
project, which will focus its activities in the Calarasi county in the southern part of Romania, along the lower Danube, could
be used as a demonstration activity to be replicated in similar sites in Romania as well as other Black Sea riparian countries.

Rationale. Romania is the largest contributor of nutrients to the Black Sea as its entire territory drains into the Black Sea.
In 1994, nutrient calculations in surface waters consisted of about 284-306 tons of nitrogen/year and 39-40 kilo tons of
phosphorous/year. Agriculture accounts for 44% of the total nitrogen and 58% of total phosphorous contamination.
Groundwater pollution with nitrates and microbial organisms from agriculture has major implications for drinking water
supply for rural settlements in Romania. Between 1996-1999, forty five cases of acute nitrate poisoning were reported in the
project area; in fact, all cases of acute nitrate poisoning in 1997 in Romania were in the Calarasi judet. Since the economic
decline in the region in the past decade and the success of nutrient load reduction programs, the overall discharge of nutrients
to the Black Sea have reduced and this offers a window of opportunity for actions aimed at improving the quality of the
Black Sea which will also help Romania in its EU accession process.

Project Components. Component 1: Activities in the Calarasi Judet, which will include: (i) promotion of environment-
friendly agricultural practices by farmers' associations, family farms and individual farmers in seven communas; (ii) manure
management practices; (iii) promotion of ecologically sustainable land use in the Boianu-Sticleanu Polder, including a
conservation management plan for the Iezer Calarasi water body; (iv) water and soil quality monitoring; and (v) public
awareness and replication Component 2: National level Activities, incl.: strengthening national policy and regulatory
capacity, including harmonizing relevant legislation with the requirements of the EU; and (ii) public awareness activities and
replication strategy. Component 3: Regional Collaboration, which would include regional workshops, field trips, training
and other activities to promote replication of project activities in other Black Sea riparian countries.




RUSSIAN FEDERATION: REDUCTION OF NUTRIENT DISCHARGES AND METHANE EMISSIONS IN
ROSTOV-ON-DON
Rostov Oblast and the city of Rostov have been identified as a "hot-spot" by the Black Sea Environmental Program Strategic
Action Plan (SAP). As such, it is a priority and is eligible for GEF financing under the Partnership for Nutrient Reduction in
the Danube River Basin and Black Sea (Partnership). The Russian Federation Environmental Management Program has
already developed the Environmental Strategic Action Plan for Greater Rostov (GRESAP). The action plan analyzed the
environmental priorities of the Rostov Water and Wastewater Municipal Company (Rostov Vodokanal ­ RVK) and their
possible impact in the restoration of the Azov/Black Sea watershed. Both GRESAP and SAP have identified municipal
wastewater pollution as the most serious problem facing the Azov/Black Sea region. The priority for these programs is to
reduce pollution fro m wastewater operations, particularly nutrient discharges from wastewater treatment operations.

By improving wastewater treatment schemes through an integrated investment program and changes in consumer practices,
the project would complement the regional Don River Pollution Reduction Program and assist the Government in meeting its
international obligations under the Bucharest Convention and the Odessa Ministerial Declaration on the Protection of the
Black Sea. The identified components of the project are (a) Sewerage Network Improvement; (b) Upgrading of the
Wastewater Treatment Plant; (c) Sludge Handling Improvement and Utilization of Methane Gas; (d) Policy Reform
Programs; (e) TA for Replication; and (f) Project Management and Monitoring.

The project will demonstrate effective mechanisms for rehabilitation of wastewater schemes to reduce the nutrient loads and
prevent wastewater sludge spillover into the Don River and Azov/Black Sea, reduce methane emissions from wastewater
operations, and will facilitate replication of this comprehensive approach in other parts of Russia and in other countries of the
Black Sea basin.



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BULGARIA: WETLANDS RESTORATION AND POLLUTION REDUCTION PROJECT

Environmental degradation in the Black Sea Basin has caused significant losses to riparian countries in reduced revenues
from tourism and fisheries, loss of biodiversity, and increased water-borne diseases. Pollution is likely to increase as the
regional economy recovers. As reflected in the Danube/Black Sea Partnership Strategy Report, the most urgent actions to
address the degradation of the Black Sea are the implementation of measures aiming to reduce excessive nutrient loads,
mostly nitrogen and phosphorus, in the rivers discharging into the Black Sea, particularly into the Danube. Indeed, this is the
focus of the Bulgaria Wetlands Restoration and Pollution Reduction Project. Although the project focuses on directly
addressing the restoration of a few priority wetlands in Bulgaria, the implementation of the project will play a critical
demonstration role within the region and help to promote nutrient reduction investments in other parts of Bulgaria and
neighboring countries.

The Bulgaria Wetlands Restoration and Pollution Reduction Project would support the restoration of critical wetlands in the
Danube river basin and the use of the riparian zones of the wetlands as nutrient traps. The project will also support
sustainable management of selected areas in the flood-plain of the Danube, improved water quality and monitoring, and
public awareness. The identified components of the project are (a) Integrated Nutrient Reduction Strategy and Action Plan;
(b) Wetlands Restoration and Protected Areas Management; (c) Monitoring Program; (d) Sustainable Livelihoods Program;
(e) Public Awareness and Participation Program; and (e) Project Management and Coordination.




TURKEY: AGRICULTURAL POLLUTION CONTROL PROJECT

Project Objective. The overall objective of the project is to assist the Government of Turkey in reducing the discharge of
agricultural pollutants to the Black Sea and assist it in meeting European Union standards in agricultural pollution control.

Rationale. Turkey with a Black Sea coastline of about 1,700 km, and three large rivers (Sakarya, Kizilirmak and
Yesilirmak) flowing into it, is a significant contributor of nutrients and agricultural pollutants to the Black Sea. The Nutrient
Reduction Action Plan for Turkey identified agricultural non-point source pollution as a very significant source of nutrient
pollution of Turkish rivers discharging into the Black Sea. Kizilirmak and Yesilirmak deltas are subject to intensive
horticultural and small scale livestock production. The Government of Turkey, with international assistance, is seeking to
introduce sustainable river basin management for all three rivers flowing into the Black Sea and has therefore tentatively
selected the Yesilirmak basin (provinces of Samsun, Tokat and Amasya) and, possibly, selected water catchments in the
Kizilirmak river basin as the proposed project site. The project would benefit approximately 1.5 million people in the project
area and help Turkey in its EU accession process.

Project Components include (i) Promotion of environmentally-friendly agricultural practices, including crop rotation,
integrated pest management, manure management, soil and water quality monitoring; (ii) Strengthening of national policy
and regulatory capacity towards meeting EU standards, including support for harmonizing national legislation with EU
standards; and (iii) Public Awareness and Replicability, to increase understanding for the environmentally-sound agricultural
practices and dissemination of good agricultural practices for conservation of biodiversity, and water and soil protection.




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RUSSIA ­ KRASNODAR AGRICULTURAL POLLUTION REDUCTION PROJECT


Project Objective. The overall objective of the project is to increase the use of environmentally-friendly agricultural
practices and improved land management in the project area and thereby reduce nutrient runoff and pollution in the Black
Sea. The project activities will initially focus on Krasnodar Kray area and could be replicated in similar sites of the region.
The Project would help the Russian Federation meet EU standards in agricultural pollution control.

Rationale. Intensive farming and poor land use management practices have contributed to declining soil fertility and rill
erosion in Krasnodar Kray, leading to significant nutrient run-off into the Black Sea. Over the past 30 years, soil loss from
erosion is estimated at 600 million tons. In the past few years, due to the economic crisis, although application of fertilizers
and other chemicals has fallen sharply, the danger of increased input use is imminent as the economy recovers. There is now
a "window of opportunity" to introduce integrated nutrient management practices and the project proposes to select pilot
farms in three to four districts in Krasnodar to test and demonstrate improved agricultural practices, and strengthen the
national policy and regulatory capacity that will help make agriculture environmentally sustainable in the project area.

Project Components include: (a) Promotion of environmentally-friendly agricultural practices;; (b) Strengthening national
policy and regulatory capacity, including harmonizing relevant legislation towards meeting EU standards; (c) Public
awareness, capacity building and replication of project activities to other similar local, national and regional areas; and (d)
Development of a pilot system to monitor changes in land use patterns and the quality of land and develop a Code of Good
Agricultural Practices.


SEQUENCE OF TRANCHES

24. The GEF Secretariat, the Implementing Agencies, and requesting countries have agreed to
phase the funding of the partnership to help better match the requirement for GEF funds. The
CEO will submit for Council's approval in May 2001 the Strategic Partnership and a request for
a first tranche of funds. The sequence of tranches would be proposed as follows:

i)
May 2001 tranche. Regional capacity building activities for the first three years (US$9
million, led by UNDP) and an envelope for priority investments that would be identified
and well advanced in preparation by that time (US$20 million, led by the World Bank).
ii)
December 2001 tranche. Additional identified investments in nutrient reduction (US$25
million, led by the World Bank).
iii)
May 2002. Final capacity building activities (US$16 million, led by UNDP).
iv)
November 2002. Additional identified investment projects (US$25 million, led by the
World Bank).


ATTACHMENTS

FIRST TRANCHES FOR THREE ELEMENTS OF THE PARTNERSHIP

(1)
BLACK SEA REGIONAL PROJECT
(2)
DANUBE BASIN REGIONAL PROJECT
(3)
WORLD BANK PARTNERSHIP INVESTMENT FUND FOR NUTRIENT REDUCTION


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Strategic Pa rtnership for Nutrient Reduction
in the Danube River Basin and Black Sea
World Bank -GEF Nutrient Reduction Investment Fund
The Challenge
1. The Black Sea is facing a potential ecological disaster. Its fragile ecosystems, stable
until the late 1960s, have go ne into a steep decline caused by two events. The first of
these was a disruption of the ecological balance due to the eutrophication in large
areas of the sea, particularly the northern shallows, caused by increased nutrient loads
from agricultural, industrial and municipal sources along the coast and tributary
rivers, particularly the Danube. Second, native species have been destroyed by
aggressive exotic species introduced through ballast waters of ships, which have
thrived as a result of eutrophicatio n. Together these events led to a sharp
deterioration in coastal water quality, an acute decline in benthic communities and a
rapid decrease in fishery yields.

Between the1960s and today, Romania and Bulgaria have seen a tenfold drop in the Black Sea

fishery catch; moreover, the catch is now skewed toward smaller less valuable species (only 6 of
the 26 previously commercially fished species). Extremely valuable algae beds have been

reduced from more than 10,000 square km to less than 1,500. Only a small fraction of 15 million
potential tourists has been realized (reductions of more than 50% are common) with huge

economic and employment losses to the littoral areas. Health impacts associated with
environmental degradation and inadequate infrastructure are also evident across the region, with
more than 21,000 cases of serious water-borne infections a year in littoral states.


2. The Black Sea and its main tributary the Danube River face additional threats from
growing international shipping traffic and from potential discharges of polluting
substances. The January, 2000 Tisza River cyanide spill, which originated in
Romania and wove its way downstream toward neighboring riparian countries, is a
prime example of how these shared water resources in Central Europe are vulnerable
to the effects of individual incidents and decisions.
Figure 1. Nitrogen loads to Black Sea
3. While the Black Sea littoral states (Romania,
Bulgaria, Turkey, Georgia, Russia, Ukraine)
Georgia
0.36%
quickly became aware of the economic losses
Romania
22.40%
caused by the ecological degradation of the
Sea and the pollution originating in the
Danube, it became evident that any possible
Danube
57.84%
solution would require a regional approach.
Ukraine
17.32%
The Danube River contributes the highest
Bulgaria
0.56%
nitrogen loads to the Black Sea, with Romania
Turkey
Russia
1.40%
0.11%
being the largest source(Figure1). Phosphorous
loads from the Danube comprise a similarly
large share relative to the contribution from


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littoral states. No state acting alone could rescue either the sea or the river, because
all 17 states of the two wider drainage basins, including the riparian states of the
Danube and other rivers such as the Dnipro, Dnister and Don, contribute to the
cumulative nutrient and pollution loads. In response, 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. The structure of the Conventions and the
Programs, although complex, provides a framework for regional cooperation. It also
allows the linkage of the many actions and instruments to effectively address the
recovery of the ecological balance of the Danube River and the Black Sea.
4. Current poor economic conditions have resulted in a decline in the discharge of
nutrients and other pollutants to the Danube and Black Sea, accompanied by a
noticeable improvement in ecosystem conditions. This demonstrates that it is
possible to reverse the current degradation of the Black Sea over the medium to long
term if nutrient reduction measures are implemented. It also underscores the
importance and urgency of taking steps to prevent a return to higher levels of nutrient
and pollutant discharges now, before a more accelerated economic recovery and
expansion occurs. The severity of ecological degradation could be aggravated to the
point of irreversible damage, if the expected increase in economic activity is not
accompanied by well planned and effectively implemented preventive environmental
measures.
The Planning Process
5. The Global Environment Facility (GEF) has played an important role in supporting
the establishment of the Environmental Program for the Danube River Basin
(EPDRB) and the Black Sea Environment Program (BSEP) since the inception of
these programs in 1991 and 1993. GEF funding, with the support of the United
Nations Development Programme (UNDP) and the World Bank, has been
instrumental in helping establish regional coordination and institutional cooperation,
critical to successful implementation of the long-term multi-country strategy
supported by the two programs. GEF support has also been crucial in formulating the
Strategic Action Plans (SAPs) for the Danube River Basin and the Black Sea. These
efforts have raised awareness of the critical situation in the Black Sea, the pollution in
the Danube and its significance in contributing nutrient loads to the Black Sea.
6. The Danube River Convention has been in force since October 1998 with its
permanent Secretariat established in Vienna in 1999 and an operating budget of
contributions from the Contracting Parties, including the European Union (EU). The
Istanbul Commission, established in 1992 under the Bucharest Convention, has its
Secretariat in Istanbul which is also functioning and operating with contributio ns
from its littoral states. The two Secretariats have served as program implementing
agencies and coordinators of parties working on common water basin issues. They
also serve as primary information resource centers for Black Sea and Danube issues.
With the support of EU TACIS and PHARE, regional institutions and regional
centers focused on priority international water technical issues needing focused


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attention (i.e. biodiversity, monitoring, oil spill control, etc..) have been established in
various member countries, and their work has increased the regional implementation
capacity for future interventions.
7. The Danube and Black Sea Programs, with support from GEF, have developed
strategies and identified priority "hot spots" for investments where interventions are
needed to address transboundary concerns, particularly nutrient reduction. However,
to date, there has been limited investment in the priority projects identified by the two
SAPs, and those which have been implemented are ad hoc in focus and impact.
Black Sea and Danube "hotspots" have not yet figured prominently in national public
investment priorities. This is understandable, because key environmental benefits of
addressing these hotspots are primarily transboundary, and potential local bene fits of
the investment have not been highlighted, or fully understood. Also, the economic
crisis has limited the availability of national funds.
8. For future interventions, the GEF and its implementing agencies (UNDP, UNEP, and
the World Bank) have agreed to a Proposed GEF Partnership on Nutrient Reduction
for the Danube/Black Sea Basin that supports next steps in implementing the Danube
and Black Sea SAPs. The Partnership's programmatic approach includes two
regional projects to assist countries in their efforts to adopt policy, legal, and
institutional reforms through the Danube and Black Sea Secretariats and an
Investment Fund to co-finance nutrient reduction investments. Under this Partnership
with GEF, the UNDP and UNEP will focus on implementing the two technical
assistance projects, and the World Bank will administer the Nutrient Reduction
Investment Fund.
9. The World Bank GEF Investment Fund for Nutrient Reduction was endorsed by
World Bank ECA Management in May 2000. A concept paper was distributed at the
May 2000 GEF Council meeting together with three model project types, with the
understanding that the Partnership would be submitted to the November, 2000
Council for approval. The Partnership was presented to the Black Sea and Danube
Commissions at meetings in June and September, 2000 where their endorsements of
the proposal were received. The Partnership could not be submitted to the November
2000 GEF Council Meeting due to an unexpected GEF funding shortage. As a result,
the Council was provided with a progress report for the November meeting. A
decision on procedural arrangements between GEF and the two agencies in the light
of funding shortages was reached in December, 2000 and posted on the GEF
Secretariat's web site. Council submission of the Partnership was deferred to May
2001 with funding of a reduced first tranche for the Investment Fund, and the
remaining funding to be allocated against progress reports at future GEF Council
meetings.
10. Within the World Bank, a Partnership Coordination team has begun to work with
program team leaders in the Bank infrastructure, environment and agriculture sectors,
as well as with Bank country units to raise awareness in regional client countries on
the need for nutrient reduction in the Black Sea/Danube Basins and the availability of
the Investment Fund. These efforts have led to initial project proposals by several


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countries. The European Commission (EC) has declared its strong support for the
restoration of the ecological balance in the Black Sea and its readiness to take the
political lead in promoting the Partnership objectives. An interagency and donor
meeting was hosted by the EC in February 2001, with the aim of establishing better
coordination for nutrient reduction investment financing among IFIs, and multilateral
and bilateral donors. The Commission has indicated its readiness to cooperate with
the Investment Fund through its various regional investment programs (Phare,
TACIS, ISPA, Europe Aide, SAPARD, MEDA Turkey) under a Memorandum of
Understanding between the EC and the World Bank, signed in March 2000.
The Proposed Nutrient Reduction Investment Fund
11. An Investment Fund funded by the GEF and implemented by the Strategic
Partnership between the World Bankand the GEF, focused on the recovery of the
Black Sea, is proposed as a means for catalyzing an investment response necessary to
accelerate urgent action by a wide group of stakeholders. This Investment Fund will
provide a regional context under which countries can pursue investments aimed at
common nutrient reduction goals, and help jump start and further accelerate key
investments. As a part of this partnership, the GEF will commit to a targeted
envelope of US$70 million, approved in several tranches based on progress reports
submitted to the GEF Council.
12. The World Bank's role in the Partnership will be to promote use of the Partnership
funds in country-based dialogues with stakeholder governments; to promote inclusion
of Black Sea/Danube issues in the ongoing Country Assistance Strategy (CAS)
process; to promote policies that address nutrient reduction; and to use the Bank's
convening powers to engage other donors and partners in helping meet financing
needs. Grant funds provided under the Partnership will both help leverage World
Bank investment lending with borrower countries, and attract additional resources
from other international lenders and donors toward the same nutrient reduction
objectives.
13. Four key elements of an Investment Fund are: (1) the up-front commitment to an
envelope of funds by the GEF Council to signal the availability of a predictable
envelope of grant financing for beneficiary countries and co-financiers to access; (2)
delegated authority for project approval to the GEF Chief Executive Officer; (3) the
bundling together of critical investment needs to promote higher political visibility
and interest; and (4) a design framework that takes advantage of on-the-ground
learning to replicate and transfer investment experiences throughout the region.
These four key elements provide the backbone of the strategy proposed.
14. A strategic regional approach to investments has a number of important advantages.
A regional investment framework provides a vehicle for focusing individual country
investments on regional objectives, helps to transfer knowledge and share best
practices, and promotes adoption of policies to achieve common objectives.
Stakeholders in individual countries can gain satisfaction from knowing they are
doing their part to contribute to wider regional investment. A regional framework


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provides a better mechanism for cooperation with a multitude of diverse partners, for
example, the EU has a significant role to play as a political mobilizer for action and
cofinancier of investments in this region. A strategic versus individual project-by-
project approach provides a more cost-effective vehicle to demonstrate benefits. A
strategic approach will also help provide a targeted timeframe to promote action over
a shorter period so that more tangible results can be achieved
Implementing the Investment Fund

15. Role of the Bank. Overall program management and oversight responsibility will rest
with the World Bank. In addition, the World Bank will commit to:
· Promoting the Investment Fund in country dialogues;
· Including the Black Sea and Danube perspectives in relevant World Bank
Country Assistance Strategies (CASs) as they are updated;
· Promoting policies that address nutrient reduction as part of country dialogues;
· Being a champion and helping to mobilize funds for nutrient reduction
investments in dialogue with countries and the donor community;
· Working closely with UNDP and UNEP to maximize coordination between the
regional TA projects and individual investment projects; and
· Working closely with the Secretariats of the two Commissions on the project
selection/preparation process, ensuring that the projects address priority hot spots
and actions, and during implementation, keeping them informed on the project's
progress and impact.
Administrative costs for management of the Partnership will be provided by standard
GEF agency fees, which will be over and above the US$70 million intended for direct
investments.
16. Types of Projects2. Three types of projects (or a combination thereof) will be
eligible for financing under the Partnership:
· Restoration or creation of wetlands that reduce nutrients discharge or loads.
· Reform and improvement of agriculture and land management practices with
impact on nutrient use and/or non-point discharges through run-off.

2 Three model projects were presented with the proposed Partnership paper to the May 2000 Council:
Russia-Rostov Reduction of Nutrient Discharges and Methane Emissions Project; Bulgaria Wetlands
Restoration and Pollution Reduction Project; and Romania Black Sea Agricultural Pollution Control
Project. The projects are at various stages of preparation. Draft Project Concept Documents are attached to
this document.


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· Wastewater treatment in communities and industries, for reduction of nutrient
discharges.
17. Leveraging. A critical goal of the proposed Investment Fund will be to increase GEF
grant leveraging against other project financing sources, and to increasingly
encourage other partners to take over larger shares of nutrient reduction investments.
A minimum leveraging ratio of 1 (GEF) to 0.5 (other) has been established and will
only be allowed in very exceptional cases such as countries with the most significant
resource constraints or wetland restoration projects. These will be offset by other
investments, such as nutrient reduction at wastewater treatment plants, where the
proportion of GEF incremental cost financing will be expected to be significantly
lower. The total program leveraging target is a 1 (GEF) to 3 (other) ratio by the end
of the program. Co-financing may be obtained from Baseline costs could be covered
bya combination of national financingsources, loans from the World Bank or other
IFIs, or additional grant funds from the EU and bilateral sources. Participation in the
Partnership does not necessarily require the use of loans, but it does require
counterpart finance which will include in-kind contributions from countries or other
donor support. This reflects the standard incremental cost financing principle of the
GEF. Progress reports for approval of subsequent tranches will discuss progress
toward leveraging goals.

18. Replicability. A second important goal of the Investment Fund will be to promote
replication of nutrient reduction investments within the Danube and Black Sea
Basins. Since the Investment Fund will provide only a small portion of the
investment needs to achieve significant reductions in nutrient loads ­ the proposed
fund will specifically finance project components that promote wider replication of
the investments. As an incentive for projects to include replication components
targeting other countries - replication components up to US$0.5 million per project
will not be counted against the GEF amount for purposes of leveraging requirements.
For example- communications campaigns, study tours, and other replication activities
cooperating with other countries in the region will be encouraged.
19. Monitoring and Evaluation. The Investment Fund will place a high importance on
monitoring and evaluation of nutrient reductions from individual projects because of
the role that this information can play in demonstrating benefits and encouraging
replication of investments. Each individual project will have its own national
monitoring indicators, benchmarks and monitoring plan to measure nutrient
reduction. Monitoring indicators will be useful to retrospectively measure the actual
cost effectiveness of investments and to guide future investment prioritization.
20. Progress reporting. Joint progress reports to the GEF Council will be prepared on
the Black Sea/Danube Strategic Partnership by the World Bank, UNDP, and UNEP
periodically when resource commitments (tranches) are requested. For example, a
progress report will be sub mitted to the Council with each tranche request to fund the
Investment Fund or the Regional Projects. Reporting for the Investment Fund will
consist of progress to date on program leveraging targets; a description of the project


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pipeline and the stage of development of each project proposal; and coordination of
the fund with the regional projects and other key partners.
21. Investment Program Eligibility. Project proposals from countries in the Danube
River Basin and the Black Sea will need to fulfill the following basic eligibility
criteria for financing under the Investment Fund:
· Be of one of the three eligible project types (as described earlier in paragraph 16).
· Respond to regional priorities as identified by the respective SAPs adopted by the
Danube and Black Sea Commissions, and be selected as a priority investment in the
proposing country's Black Sea or Danube National Environmental Program. The
project proposal should clearly explain what sources of nutrients are targeted and why
this project area is a priority in the proposing country.
· Have secured financing for baseline non-incremental project costs and ensure that the
minimum leveraging requirement is met.
· Adhere to the principles of the GEF Operational Programs. Projects will follow the
approaches of Water Body-Based Operational Program (OP 8) and Contaminant-
Based Operational Program (OP 10), particularly in the selection of projects with
crosscutting and demonstration potential and proven implementation capacity.
· Submit an endorsement from the proposing country's GEF focal point.
· Ensure that the country is up-to-date on its contributions to the Black Sea and/or
Danube Commission(s) and Secretariat(s) to which they belong.
Additionally,
· Project proposals will be encouraged to include country-expressed commitment to
policy, institutional, or legal reforms related to regional nutrient reduction and
improved water quality management.
· Whenever a project has potential for additional global environmental benefits,
such as conservation of biodiversity (for example, through management and/or
rehabilitation of a site designated as of international significance under the
Ramsar Convention) or reduction of greenhouse gas emissions, the existence of
such additional benefits will be a positive factor, but not constitute per se an
eligibility condition. In all cases, nutrient removal is the essential eligibility
condition for projects.
Project Cycle
22. Projects will be identified by the proposing country, with assistance from the World
Bank and/or other eligible financiers and either the Danube or Black Sea


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Commissions.3 No portion of the GEF grant will be earmarked for any individual
country or specific project. All eligible countries will have an equal opportunity to
benefit from the GEF allocation to the Investment Fund and will be encouraged to
submit project proposals. Project proposals submitted by riparian countries will each
be considered based on merit. In the interest of speedy advancement of investments,
funds will be made available to countries on a "first come first served" basis in line
with standard project processing procedures.
23. Eligible projects will be prepared and appraised under standard World Bank
procedures before being submitted to the GEF Secretariat for GEF Chief Executive
Officer (GEF CEO) approval. Project concept notes will be submitted to the World
Bank Investment Fund Coordinators for screening against Partnership eligibility
requirements and for assistance in elaboration of project designs. These notes will
subsequently be submitted to the GEF Secretariat for approval by the World Bank
GEF Regional Coordinator on a rolling basis following standard procedures for
formal "pipeline entry". A project concept note should indicate whether or not a
PDF-B (preparation grant) will be requested. Preparation grant resources will be
allocated separately from Investment Fund resources. Projects under the Partnership
will not be submitted to the GEF Council for approval through standard work
programs at Council Meetings or Intersessionals. Rather, upon completion of project
preparation, the World Bank will submit projects to the GEF CEO for endorsement
following streamlined procedures similar to procedures for GEF medium sized
projects. If found satisfactory, the GEF CEO will approve individua l projects up to
the funding limit of each Investment Fund tranche. Projects will be processed to the
World Bank Board of Directors for final approval and implemented following
standard World Bank procedures. The financial management, procurement and
disbursement procedures of the World Bank will be used.
24. If the Investment Fund co-finances with another IFI which has executing agency
status with the GEF (i.e. under the expanded opportunities policy such as EBRD), the
management arrangements will follow existing procedures established for World
Bank and Executing Agency Cooperation. For example, standard project appraisal
procedures and fiduciary requirements of the applicant executing agency and not the
World Bank will be in effect. PDF-B submissions to GEFSEC in this case will also
be handled by the Executing Agency instead of the World Bank. The World Bank's
role with respect to such Executing Agencies will be for the Investment Fund
Coordinators to provide guidance to the applicant Agency on project eligibility, and
reporting vis a vis the Partnership; to ensure coordination with the overall Investment
Funds activities, to include the status of these projects in routine reporting of the
Partnership; to ensure that monitoring and evaluation aspects of these projects are
consistent with other Partnership proposals; to act as the GEF Implementing Agency
for the project; and for the World Bank GEF Regional Coordinator to process projects
for CEO Endorsement. When the Investment Fund co-finances with other donors and

3 The World Bank would assist countries or mobilize donor support for strengthening their institutional
capacity for project development.


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agencies where there is no prior agreement for cooperation on the GEF, the GEF
components of these projects will be processed as a standard World Bank operation.
Conclusion
25. Declaration of approval for the Investment Fund by the GEF Council will give a
strong signal to potential recipient countries that grant funds will be made available.
The declared Strategic Partnership for the Recovery of the Black Sea will also help
begin to steer co-financing by other donors to the nutrient reduction investment
objectives. It is expected that private sector interest and action will also be catalyzed
through the presence of the Partnership. As a first model for a more programmatic
investment approach in the International Waters Focal Area, it will serve as a model
for the future, in line with GEF commitments and trends to move toward more
strategic approaches.
26. Access to these funds in the medium and long term will give leverage to
environmental governmental bodies, local governments and agricultural interests in
their efforts to cooperate with their respective ministries of finance in implementing
environmental protection measures. This should assist in moving the regional/global
environmental agenda to a higher rank in national investment priorities. Moreover, a
regional partnership will help lower perceived risk that the impact of investments for
protection of international waters could be adversely affected by the behavior of
neighboring states.
27. For more information on the GEF-World Nutrient Reduction Investment Fund
contact:
Piotr Krzyzanowski,
Program Manager
Environment Unit, ECA Region
The World Bank
1818 H St, NW, Washington , DC, 20433, USA
Phone: (1 202) 473 3638
Fax: (1 202) 614 0697
E mail: pkrzyzanowski@worldbank.org



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