54289 v1
BOSNIA AND HERZEGOVINA ­ Water Quality Protection GEF Project
PROJECT ID: P085112
Grant TF No. 55265
Restructuring Memo for Reallocation of Proceeds

1. Proceeds for Bosnia and Herzegovina, Water Quality Protection GEF Project, Grant No
55265, Project ID: P085112 will be reallocated as follows:
Category of
Allocation
% of Financing
Expenditure
Current Revised
Current Revised
Current
Revise
Works
5,730,000 5,300,000
80% 80%

Goods


80% of foreign expenditures,
80% of
1,540,000 700,000
100% of local expenditures (ex-
foreign
factory cost), and 80% of local
expenditures,
expenditures for other items
100% of
procured locally
local
expenditures
(ex-factory
cost), and
80% of local
expenditures
for other
items
procured
locally
Consultants'
1,100,000
2,700,000
100% for foreign consulting
100% for
services,
firms and foreign individual
foreign
training and
consultants, and 80% for local
consulting
audits
consulting firms and local
firms and
individual consultants, and
foreign
100% for training
individual
consultants,
and 80% for
local
consulting
firms and
local
individual
consultants,
and 100%
for training

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Incremental
200,000
200,000
100% until December 31, 2006,
100% until
operating
and 90% thereafter
December
costs
31, 2006,
and 90%
thereafter
Unallocated
330,000 0


TOTAL
8,900,000 8,900,000
2. Overall progress in project implementation was proceeding more slowly than expected. However,
after initial delays, overall implementation progress has been accelerated since 2009, and the
project is making steady progress towards achieving its development objectives. Most of the
remaining required actions for timely implementation are now close to completion. Two of
three studies have been completed and the third study will be completed by October 2010.
High priority investments in the wastewater sector are presently under or close to
implementation. The rehabilitation of the Waste Water Treatment Plant (WWTP) in Trnovo
has been completed and the plant is now ready for operation. Rehabilitation of the WWTP in
Odzak has started and the plant will be commissioned towards the end of the year. The
remaining funds needed for the Zivinice subproject have been secured from IPA funds and an EIB
loan, closing the financing gap for the sub-project which had been a major cause of delay. The
preparation of designs for the rehabilitation of the WWTP in Zivinice is underway and
construction works will start in September. It should be noted that in addition to the initial
delays, project implementation was significantly delayed in Mostar in 2009, as a result of the
political stalemate that froze the city council since local elections in October 2008. After long
delays, the Mostar City Council had finally constituted and taken the crucial outstanding
decisions to approve project implementation activities to move forward in Mostar. The final
designs for the Mostar Dual Sewer System have been completed, and construction of the first
section of the system will start soon. The preparation of final designs for the Mostar WWTP
is underway and a first construction phase of the plant is expected to start not later than
September, 2010. There are no outstanding issues in financial management or procurement.
The Project was included in the joint fiduciary review conducted during December 2009. The
review concluded that the financial management system, including accounting, budgeting,
and reporting, continues to be adequate and satisfies the Bank's requirements. The project is
in compliance with all environmental safeguards requirements. Finally, even though the
disbursement rate has been significantly increased in the past months and is expected to pick
up again in the coming months, the IP rating will remain downgraded to MU until signing
contracts for the Mostar sub-project.
3. The proposed reallocation requested by the Ministry of Finance and Treasury of Bosnia and
Herzegovina on March 23, 2010 is necessary to allow the Borrower to (i) address the
increased amount required for consultants' services, which became necessary because of
higher cost of studies under preparation than originally estimated; and (ii) to reflect the
decreased amount required for goods, because most work contracts for rehabilitation of
selected waste water treatment plants include procurement of goods. Because of the higher

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cost of the above mentioned studies and designs, the Borrower proposes a reallocation of the
grant funds from Category 1(Works), Category 2 (Goods) and Category 5 (Unallocated) to
Category 3 (Consultants' Services, training and audits). The requested reallocation of funds
under the categories is expected to support the achievement of objectives.

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