PROJECT INFORMATION DOCUMENT (PID)
CONCEPT STAGE

Serbia & Montenegro: Serbia Danube River Enterprise Pollution Reduction
Project Name
Project
Public Disclosure Authorized
Region
Europe And Central Asia
Sector
Central government administration (40%)
Agro-industry (40%)
Petrochemicals and fertilizers (20%)
Project ID
P084604
Borrower(s)
Republic of Serbia
Implementing Agency
Ministry for Protection of Natural Resources and Environment
Environment Category
[ ] A [x] B [ ] C [ ] FI [ ] TBD (to be determined)
Safeguard Classification
[ ] S1 [x] S2 [ ] S3 [ ] SF [ ] TBD (to be determined)
Date PID Prepared
March 9, 2004
Estimated Date of Appraisal
November 15, 2004
Authorization
Estimated Date of Board
May 15, 2005
Approval
Public Disclosure Authorized


1. Key development issues and rationale for Bank involvement

The Republic of Serbia has made the strategic choice of seeking access to the European Union. It has already
started to harmonize it policy and legal framework with the EU acquis. Environment is a sector with comprehensive
requirements. There has been significant donor support, notably by the European Agency for Reconstruction
(EAR), in revising legislation, but very little in piloting the investments which would be necessary for compliance.
The Government's vision for environmental management is one of a strong regulator that cooperates with the
private sector to reduce the negative impact of pollution on public health, natural habitats, amenity and other
economic values of environment. This is in particular the principle behind the draft new System Law for
Environmental Protection which was approved by the Government of Serbia in May 2002 and is awaiting
consideration by the Parliament. The draft Law is in harmony with the EU Integrated Pollution Prevention and
Control Directive. It introduces an integrated permit system according to which the regulator agrees on a phased
Public Disclosure Authorized
compliance plan with polluting enterprises and has the authority to annul the permit in case of non-compliance. The
Law also provides for the establishment of an Environmental Protection Agency (EPA) tasked with monitoring and
enforcement of the permit system..

Having identified lack of proper waste management (lack of any proper landfills, disposal of hazardous and medical
waste on waste dumps without any separation, widespread unprotected scavenging of waste by the Roma,
widespread improper storage and discharge into the environment of hazardous materials, the frequent industrial and
transportation accidents involving hazardous materials) as Serbia's number one environmental problem, the
Government has also approved a new Law on Waste Management (to be approved by the Parliament), prepared a
draft National Strategy for Waste Management, and is currently working on a feasibility study for a set of
investments related to hazardous waste management. It also intends to align its Water Law with the EU Water
Framework Directive. With considerable progress made in putting in place a satisfactory legal framework, the
Government is now focusing on implementing it. It has turned to the World Bank and to other donors for funding
assistance.
The proposed GEF Danube River Enterprise Pollution Reduction (DREPR) Project will cover a part of the waste
Public Disclosure Authorized
problem. It will focus on reducing discharges/runoff of a sub-group of wastes, namely manure, slaughterhouse
waste and phosphogypsum and other nutrient (phosphorus and nitrogen) containing waste from fertilizer factories.
The proposed project will provide best practice examples that will help Serbia bring its agricultural waste
management practices in line with the requirements of the EU Water Framework Directive. It will also help Serbia
and Montenegro fulfill its international commitments as signatory of the Convention on Cooperation for the

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Protection and Sustainable Use of the Danube River (ratified 2003), the Sava River Agreement (signed with Croatia,
BiH and Slovenia in 20021) and as a member of the International Commission for the Protection of the Danube
River (ICPDR) by reducing its nutrient containing waste discharges into the Danube. Indeed since Serbia was
ranked second and third among 13 Danube countries in terms of phosphorus and nitrogen discharges, respectively,
reduction of these will lead to regional benefits all Danube River downstream and Black Sea countries.
Improving the quality of river and groundwater resources will also reduce the costs of treating
river water for the drinking water supply of cities and reduce the risk of health problems caused
by elevated concentrations of nitrates in groundwater, which is the main drinking water source in
rural areas. These improvements in waste management will be achieved through the provision to
polluting enterprises of partial grant financing for cost-effective measures.

The Bank's recent "SaM - A Country Environmental Analysis" (CEA) (February 2003) identified waste
management a Serbia's highest priority environmental problem and recommended that a project be carried out to
reduce nutrient discharges as part of the GEF Black Sea Danube Partnership. Furthermore, both the proposed
DREDR and the proposed Hazardous Waste Management component would contribute to the attainment of the
Transitional Support Strategy (TSS) goals "Stimulating near-term growth and creating the basis for a sustainable
supply response" and "Improving social well-being of the most vulnerable and building human capacity" as they
will both make economic activities more sustainable from an environmental point of view and protect vulnerable
populations from the health hazards associated with exposure to hazardous wastes, and water and soil pollution
caused by them. The DREDR project is included in of the TSS, which discusses investment lending in FY03 and
states, "A GEF grant for Serbia on nutrient pollution prevention will also be pursued" (para. 34).

2. Proposed
objective(s)
The development objective of the project is to increase prevalence of environmentally friendly practices among
eligible enterprises and thereby reduce nutrient pollution of the Danube River. It will also aim to build capacity to
improve environmental management. The global environment objective is to reduce nutrient pollution of the Danube
River and the Black Sea. This will help SAM meet its international commitments under the Danube River
Convention and the Sava River Agreement. The project will also help the Republic of Serbia attain its goal of
harmonizing its environmental management practices with those of the European Union.

3. Preliminary
description

Component 1. Regulatory Reform and Capacity Building. The project will support policy and legal reforms that
target reduction of enterprise nutrient pollution, and support SAM in its goal to gradually harmonize its
environmental laws and regulations with those in the EU aquis. In particular, the project will provide technical
assistance for

i) Revision of the water law in such a way that it provides proper incentives for reducing nutrient
discharges from industries into water bodies. The new Water Law would also include provisions
regulating nitrate discharges and runoff from agricultural enterprises that are in harmony with EU's
Water Framework Directive and with the EU Directive on Dangerous Substances;
ii) Enforcement of the revised laws and regulations, including upgrading of the Republic's water quality
monitoring capacity through laboratory equipment and training; and
iii) Drafting of guidelines on manure management and storage that are in line with the new Law on Waste
Management.

Component 2. Investment in Nutrient Reduction. Investment support in the form of grants will
be provided to fertilizer factories, agro-processors, notably slaughterhouses, and large-scale

1 Its priorities are reestablishment and development of international navigation on the Sava and its main tributaries
Drina and Una; establishment of sustainable water management and undertaking of measures to prevent or limit
hazards and reduce the adverse consequences of floods, droughts and incidents involving hazardous substances.

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livestock farms that are nutrient pollution hotspots. Medium size farms will also be considered if
it is established that demonstration activities in several smaller farms would lead to the reduction
of larger amounts of nutrient runoff than interventions in a limited number of large farms. The
project area will be Vojvodina and parts of Central Serbia where intensive farming is prevalent.
The details of the organization and management of this scheme, including beneficiary selection
criteria, will be addressed during project preparation. For all beneficiary enterprises, level of
cost sharing will be a significant selection criterion. Eligible activities supported under the
project will include environmentally friendly production technologies, advanced waste
management and wastewater treatment to reduce nutrient discharges into the Danube river
system. Among hotspots, support would be given to enterprises that are privately owned.
Enterprises that have been slated for restructuring and privatization will only be given support
after ownership and financial issues have been clearly settled. Another selection criterion will be
the co-financing made available from other sources, including those of the beneficiaries
themselves, Government, WB or other IFIs loans, or bilateral cooperation. Monitoring of
reduction in nutrient discharges will also be carried out under this component.

Component 3. Awareness Raising and Replicability Strategy. The project will carry out public information
campaigns at the national and local levels to raise public awareness on waste management and water pollution, and
their impact on public health, economy and ecosystems. The project will also institute on a pilot basis a "Public
Environmental Information Sharing Scheme" in which information on pollution emissions from industrial
enterprises and their potential impact on public health and the economy would be shared with the public in an easily
interpretable manner. The scheme will pilot a constructive dialogue between citizens' groups and enterprises on
ways to reduce environmental pollution. This project sub-component will also help the Republic of Serbia honor its
commitments under the Aarhus Convention.

Component 4 will focus on Project Management and Project Impact Monitoring. The project will be managed by a
Project Implementation Unit (PIU). Indicators on the project objectives and outcomes which will be developed
during project preparation will be monitored. Furthermore, the social and environmental impact of the project will
be monitored.

4. Safeguard policies that might apply

Environmental Assessment (OP/BP 4.01)
Natural Habitats (OP/BP 4.04)
Projects on International Waterways (OP/BP 7.50)

5. Tentative
financing
Source:
($m.)
Borrower
2.50
GEF
6.00
European Agency for Reconstruction
6.00
Beneficiaries
4.00
Government of Austria
0.35

Total 18.85

6. Contact
point

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Task Team Leader:
Tijen Arin
The World Bank
1818 H Street, NW, Room H 5-431
Washington D.C. 20433
Telephone: 202 473 5535

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