Submission Date: October 15, 2007

Re-submission Date: 15 February, 2008

Indicative Calendar
Milestones	Expected Dates
Work Program (for FSP)	April, 2008
CEO Endorsement/Approval	June, 2008
GEF Agency Approval	July, 2008
Implementation Start	July, 2008
Mid-term Review (if planned)	March, 2010
Implementation Completion	Sept., 2011

part i: project IDentification

GEFSEC Project ID[1]: 2544

gef agency Project ID: 3246

Country(ies): Ukraine, Belarus

Project Title: Implementation of The Dnipro Basin Strategic Action Program for the reduction of persistent toxics pollution

GEF Agency(ies):UNDP

Other Executing partners: UNOPS

GEF Focal Area (s): International Waters

GEF-4 Strategic program(S): IW-SP 4,

A. Project framework (Expand table as necessary)

Project Objective: Begin implementation of the ministerially approved SAP via governance reforms and demonstration projects aimed at reducing transboundary persistent toxic pollutants by small/medium size industries discharging through municipal waste systems in the Dnipro basin.
Project Components	Indicate whether Investment, TA, or STA**	Expected Outcomes	Expected Outputs	Indicative GEF Financing*		Indicative Co-financing*		Total ($)
				($)	%	($)	%
1. To implement Pilot Projects introducing cleaner production methods to small/medium size industry discharging persistent toxic pollutants into municpal waste water treatment systems: a) To introduce innovative and sustainable financial mechanisms, b) To conduct a feasibility study for the establishment of a regional Cleaner Production Centre(CPC)	a) TA b) TA c) TA	a) Replicable pilot/demo projects demonstrate stress reduction measures of persistent toxic pollutants. Improved profitability of industries applying cleaner technologies result in enhanced economic productivity in both countries. b) increased capacity development for adoption of the Cleaner Production concept at the national level	2-3 industries in both Belarus and Ukraine will introduce appropriate cleaner technologies (CT). a) report of tailored proposals of soft loans, tax incentives, licensing, tariffs and incremental costs. b) report of recommendations detailing regulatory changes needed to facilitate introduction of cleaner technologies. c) report detailing proposed systems to monitor at point of discharge for compliance and/or effectiveness of CT process.	1,400,000	31	1,000,000 (Belarus and Ukraine) 1,500,000 (participating Private industry) 250,000 (EU) 150,000 (Canadian CIDA) 200,000 (Germany)	69	4,500,000
2. To prepare Transboundary Monitoring and Indicators Program(TMP) for SAP implementation;	TA	a) Effective and sustainable mechanisms in place for monitoring long-term SAP implementation. b) Relevant government bodies and other stakeholders better informed on effectiveness of SAP policies.	a) An expanded TMP which will include the use of Process Indicators, Stress Reduction Indicators and Environmental Status Indicators. b) A regional targeted transboundary monitoring program with information needs and end-users clearly identified.	200,000	23	400,000 (Belarus and Ukraine) 100,000 (EU) 100,000 (Canadian CIDA) 60,000 (UNDP)	77	860,000
3. (a) To strengthen regulatory and legal frameworks governing cleaner technologies(CT) (b) To introduce harmonised environmental legislation in line with that prevailing in the EU . c) To improve monitoring procedures, strengthen regulatory and legal frameworks	TA	a) A better legislative enabling environment for CT investment. b) Improved national and regional legislative frameworks for transboundary pollution reduction in the Dnipro River basin. c) Reduced point source discharges to shared waterbody resulting in improved chemical, biophysical and biological parameters.	a) adoption and ratification of the draft Dnipro Agreement on Cooperation in the Dnipro basin. b) Belarus and Ukraine begin the process of adapting their environmental legislation to an agreed set of EU norms focusing on six preselected EU directives.	100,000	11	500,000 (Belarus and Ukraine) 100,000 (EU) 100,000 (Canadian CIDA) 90,000 (UNDP)	89	890,000
4. To establish key institutional and management structures within the wider SAP implementation management bodies.	TA	a) Permanent and sustainable multi-country institutional (policy and executive) and participatory mechanisms established and operational for long-term integrated management of the Dnipro River basin	a)Agreed timetable and regular meetings of management bodies and records of meetings publicly available; b) Confirmed and sustainable budgetary provisions for supporting the SAP management bodies; c) Regular reporting procedures in place, including the interpretation of monitoring data to guide decision making and policy modification; d) Stakeholder involvement expanded to include private sectors, specifically private industries and other local organizations in areas affected by SAP interventions; e) Revised and updated SAP and TDA, in response to impacts of SAP implementation projects, new challenges and modified environmental quality objectives, annual amendments as required.	150,000	14	450,000 (Belarus and Ukraine) 50,000 (UNEP) 50,000 (UNDP) 400,000 (Coca-Cola)	86	1,100,000
5. Project management				185,000	24	450,000 (countries) 100,000 (EU) 50,000 (UNDP)	76	785,000
Total project costs				2,035,000	25	6,100,000	75	8,135,000

· List the $ by project components. The percentage is the share of GEF and Co-financing respectively to the total amount for the component.

** TA = Technical Assistance; STA = Scientific & technical analysis.

B. Indicative Financing Plan Summary For The Project ($)

	Project Preparation*	Project	Agency Fee	Total
GEF	700,000 previously approved PDF from GEF 3	2,035,000	270,000	3,005,000
Co-financing	1,520,000	6,100,000		7,620,000
Total	2,220,000	8,135,000	270,000	10,625,000

* Please include the previously approved PDFs and planned request for new PPG, if any. Indicate the amount already approved as
footnote here and if the GEF funding is from GEF-3.

C. Indicative Co-financing for the project (including project preparation amount) by source and
by name (in parenthesis) if available, ($)

Sources of Co-financing	Type of Co-financing	Amount
Project Government Contribution	Government grants and/or credits	2,800,000
Multilateral Agency(ies) EU Neighborhood policy, and Canadian CIDA; Bavarian State Ministry	Grants	1,100,000
Private Sector Participating industry investing in cleaner production	Investment Grants	1,500,000 400,000
UNDP	Grants	250,000
UNEP	Grants	50,000
Total co-financing		6,100,000

D. GEF Resources Requested by Focal Area(s), agency (ies) share and country(ies)*

GEF Agency	Focal Area	Country Name/ Global	(in $)
			Project Preparation	Project	Agency Fee	Total
		Regional (Belarus and Ukraine)	700,000	2,035,000	270,000	3,005,000
Total GEF Resources			700,000	2,035,000	270,000	3,005,000

* No need to provide information for this table if it is a single focal area, single country and single GEF Agency project.

part ii: project JustiFication

A. State the issue, how the project seeks to address it, and the expected global environmental benefits to be delivered:

1. The Dnipro Basin Environment Programme – a GEF co-sponsored initiative of the governments of Belarus, Russia and Ukraine – was created to develop a programme of measures and implementation mechanisms to protect the transboundary Dnipro river thereby contributing to the protection of the Black Sea and global international waters. The Black Sea is now widely recognized as one of the regional seas most damaged by human activity and the environmental problems of the Black Sea reflect the environmental problems of the river systems that flow into it.

2. In the first phase of the Dnipro Programme the riparian countries were highly successful in developing a Transboundary Diagnostic Analysis (TDA) and a Strategic Action Programme(SAP) which identified and began to address the principal causes of transboundary degradation in the Dnipro river. The co-operation required by the three countries to jointly develop the TDA and SAP was greatly enhanced by their common heritage in terms of scientific background, environmental legislation and economic development.

3. The resultant Dnipro SAP has now been endorsed at the highest level by the governments of Ukraine and Belarus. Together these two countries comprise 80% of the territory of the Dnipro basin. Regrettably the Russian Federation was unable to accord the SAP similar endorsement status and will therefore not participate in the next stage of proposed GEF activities. Nonetheless Belarus and Ukraine will continue to encourage Russian cooperation in the Dnipro basin through existing bilateral and future initiatives.

4. The TDA and SAP identified as an agreed priority the management of transboundary pollution, in this case persistent toxic pollution. The Priority Investment Program, drawn up during the preparation of the SAP, indicates a major problem in the discharge of industrial waste through municipal waste water treatment systems (the Vodokanals).

5. Accordingly the proposed Full-sized project will target the Vodokanals in both countries and conduct several small scale demonstration projects addressing key IW portfolio gaps which will demonstrate innovative approaches, financing, and the introduction of cleaner technologies. In doing so the project will draw on lessons from an earlier UNDP-GEF project introducing cleaner technologies in the Danube river basin.

6. The immediate outcome of the project will be a series of demonstrable examples of stress reduction of specific PTS based on preliminary indicators and past test results derived from the SAP and from the industries themselves. A collateral benefit is also expected from the robust implementation of cleaner technology methodology which will deliver a more comprehensive suite of indicators which can then be utilized by other industries. Taken together they will result in an efficient capture of knowledge products, lessons and best practices to be delivered to other Vodokanals for replication. It is anticipated that successful demonstration projects will also attract serious interest in future large scale financing from EBRD and the WB. The long term expected outcome anticipates a significant reduction in wastewater discharge into the Dnipro river with immediate benefits for the Black Sea. This in turn will have a positive downstream impact on the Mediterranean region and by extension to the wider global environment as well.

7. A more long lasting impact of the Full-sized project will be the activities aimed at harmonization of environmental legislation in line with EU approaches and rendering support for the creation of an International Commission for the Management of the Dnipro River. Such measures are likely to be introduced gradually and the project will advise on implementing appropriate legislative changes and will monitor compliance and progress as they are implemented.

Describe the consistency of the project with national priorities/plans: f

8. In the first phase of the Dnipro Basin Environment Programme the riparian countries jointly developed a SAP as well as National Action Programs to carry out interventions to manage pollution and other national and transboundary issues. Accordingly this Full-sized project proposal is fully consistent with existing National environmental strategies being implemented by the countries.

9. In Belarus the key principles in their environmental policies were set out in the “National Sustainable Development Strategy of Belarus (1997)”, which includes the rational use and protection of water resources.

10. In 1991, Ukraine adopted the law “On the Protection of the Natural Environment”, which in turn guided their policy - “Main Directions of the National Policy of Ukraine in the Field of Environment Protection, Nature Resource Use and Environmental Safety”. This policy document recognises the need to work at the basin level, both on environmental rehabilitation and water quality improvements. More recently Ukraine has already made significant commitments to implementing some of the proposed actions in the SAP and the Ukraine NAP. Ukraine’s head start is due in large part to its pre-existing National Programme of Ecological Rehabilitation of the Dnipro River Basin and Improvement of the Drinking Water that was passed into law on 27 February 1997. An amount of 4.2 billion UAH (approx. 2.4 billion USD) was committed for the period 1997 - 2010. Such funding has enabled the removal of minor sluices and cleaning of tributaries, both of which have led to improvements in water quality, with positive responses from local NGOs.

11. While at present time there is no single legal framework for environmental cooperation on the Dnipro river, there are existing bilateral agreements between the riparian countries on the joint use and protection of transboundary waters.

12. However, in order to provide a stronger joint commitment to action, the countries have jointly drafted an “Agreement on Cooperation in the Field of Management and Protection of the Dnipro Basin” which is currently being vetted through the respective government ministries in both Belarus and Ukraine. This agreement, when adopted, entered into force, and implemented, will provide for the creation of an international management commission for the Dnipro river together with its management and financial infrastructure. The impetus for this Agreement was the signing of the historic Kyiv Declaration on the Cooperation in the Dnipro Basin during the 5^th Pan European Conference of European Environment Ministers in May of 2003 and more recently the Joint Declaration approving the Dnipro SAP signed by Belarus and Ukraine in July of this year.

Describe the consistency of the project with gef strategies and strategic programs:

13. The first GEF response to concerns about progressive degradation of the Dnipro River ecosystem was to finance the development of the Dnipro Basin Strategic Action Program (SAP) (2000-2005). The SAP identified persistent toxics, particularly from small scale industrial sources, as the highest priority transboundary issue.

14. The proposed Full-size project fits Strategic Objective 1 for GEF 4 by facilitating the implementation of agreed policy/institutional reforms (including creation of a International Commission for Dnipro river) and on-the-ground stress reduction investments to address transboundary water concerns.

15. The project also supports the GEF-4 priority transboundary concern of reducing Land-based pollution through implementation of national policy, legal, and institutional reforms consistent with agreed transboundary action programs; innovative demonstration projects and financing options in the agriculture, municipal, and industry sectors. The latter will consist of several small scale local demonstration projects focusing on the introduction of cleaner technologies and wastewater discharge abatement. This fully conforms with Strategic Objective 2 for GEF 4 and especially with Strategic Programme 4 which focuses on the reduction release of Peristent Toxic Substances(PTS). GEF’s contribution will have the added benefit of reducing human and ecosystem health risks from PTS at these selected demonstration sistes. The immediate benefits from such intervention should lead to PTS pollution prevention strategies becoming increasingly acceptable as mainstream policy programmes for private sector industries.

Outline the Coordination with other related initiatives:

16. The proposed Dnipro Full-size project will build on previous regional experience of joint management of shared water bodies, including the on-going and recently concluded GEF programs supporting the improved management of the Black Sea, the Danube and the Caspian Sea. In particular the project will draw on lessons from the. earlier UNDP-GEF project introducing cleaner technologies in the Danube river basin. By addressing the issue of persistent toxic pollution discharging through the Vodokanals the project has the capacity to provide lessons for joint management of other water bodies in Europe and Central Asia countries (ECA).

17. There are many other agencies currently working and/or planning activities in the Dnipro and Black Sea region as well. The World Bank (WB) is by far the largest single donor currently active in Belarus and Ukraine. At the present time the WB finances a range of initiatives to reduce nutrient load into the Black Sea through the World Bank-GEF Investment Fund, under the Strategic Partnership addressing Transboundary Priorities in the Danube/Black Sea Basin. Unlike the proposed Dnipro Full-sized project the WB initiative focuses generally on heavy industry and includes such proposals as the Pollution Reduction in Industry Loan targeting many of the heavy industrial environmental hot spots identified in the SAP. More generally, the WB supports reforms in the environmental sector under Programmatic Adjustment Loans through indexing environmental fees and fines and the introduction of Integrated Pollution Permits for Industrial Enterprises. Neither of the above duplicate the efforts of UNDP-GEF as the WB is focused almost exclusively on heavy industry involving large scale lending supported by state guarantees. To a lesser degree the same applies to EBRD as well.

18. The EBRD is currently negotiating with the riparian countries on the provision of loans to small industries, loosely based on their experience of previous investments in the region. In December 2003, the EBRD stated that one of their key objectives for the Ukraine was the support of private sector development through establishing credit lines and equity funding in joint ventures and local private companies. Similar financial commitments are indicated in their “Statement of cumulative net commitments” to Russia and Belarus.

19. The move to ever-closer ties with the EU, largely supported through TACIS, has introduced other common elements relevant to the Dnipro. The revised TACIS council regulation, running from 2000 to 2006, focused on six aspects, including institutional and legal reform, environmental protection and private sector and economic development. Of immediate relevance to the Dnipro is the continued river basin management planning process still underway on the Pripyat River, a major tributary of the Dnipro, as part of the EU/TACIS funded Transboundary Water Quality Project. The project deals with three other shared river bodies, where, at present only water quality monitoring is taking place. The Dnipro project has offered to share its management planning experience of preparing a TDA and SAP in the event the TACIS project intends to expand to include such objectives.

20. A more recent development is the recently announced (2007) European Neighbourhood Partnerships Instrument – replacing TACIS – which will focus on CIS neighbouring states to the EU and the Caucuses. The intended focus will be on biodiversity and ecosystems protection together with integrated water resources management. Although the EU initiative is still early in the conceptual stage, the Dnipro project will actively seek to identify opportunities for Ukraine and Belarus to take advantage of the EU’s focus on reinforcing the integrated water management planning process based on the WFD.

21. In addition the EU has recently announced a new regional cooperation initiative “Black Sea Synergy” which would focus on issues and cooperation sectors reflecting common EU priorities. The environment, among others, would be one of 13 focal areas under consideration and would involve 10 countries ranging geographically from Bulgaria in the west to Azerbaijan in the east. An overriding emphasis will be placed on the need to enhance implementation of multilateral environmental agreements and strategic environment co-operation. Unfortunately the timing of the project has yet to be announced and would not extend to include Belarus.

22. A review of the above would indicate that no one agency has a sufficiently broad holistic program of multi-sector interventions which might infringe upon and/or duplicate the efforts of UNDP GEF. Rather, each agency has concentrated on establishing an area of comparative advantage intended on maximizing its individual strength, resources and experience. In this respect UNDP GEF stands alone in its focus on remedial waste water treatment at the municipal level.

Discuss the volue-added of GEF involvement in the project demonstrated through incremental reasoning :

23. The GEF has already made a considerable investment in supporting the regional development of the Dnipro SAP and in defining preliminary interventions to counteract major environmental issues, especially those of a transboundary nature. This involvement goes back to 1995, when the three riparian countries agreed upon a memorandum requesting UNDP assistance in the development of a GEF Environmental Management Plan for the Dnipro Basin. In 1999, the GEF agreed to fund the Dnipro Basin Environment Programme and support the development of a SAP and TDA. This historic decision was a logical step for the GEF given the Dnipro river’s large pollution transfer to the Black Sea, rivaled only by the Danube. However, more significantly, the GEF signaled its willingness to risk involvement in a region previously untouched by major donors and lacking an ‘anchor’ country able to provide guidance and mentorship to its co-partners.

24. In retrospect the decision was justified and validated by the ensuing surpassing of expectations when the countries took on additional activities in an effort to prepare a permissive legal environment enabling future cooperation in the Dnipro basin. The result of these efforts, supported by GEF, has brought the countries significantly closer to the creation of a Commission as evidenced by the signing of two Ministerial declarations in 2003 and 2007, together with a draft Agreement on co-operation currently being vetted by the governments of Belarus and Ukraine.

25. Due to political considerations, the Russian Federation was regrettably unable to respond to the ‘raising of the bar’ and Belarus and Ukraine are now left with the joint task of sustaining momentum and showing that SAP endorsement can/will lead to further support aimed at alleviating specific pollution issues in the basin. Given that Belarus and Ukraine have only recently commenced the difficult political and economic transition from soviet style management, the risk of failure due to abandonment continues to remain high. Failure to sustain this process also carries the inherent risk that the underdeveloped capacity of the governments to resist centrifugal forces will lead them to revert back to earlier methods of central control, fragmented policies and lack of transparency. The resultant impact on the environment and set back to the reform process would be immeasurable.

26. Given the earlier and ongoing support, it would be inconsistent for GEF not to fund the development of a Full-sized project which would ensure that the aforementioned process continues to move forward. At this critical juncture such support is both vital and necessary, not least for the environmental issues which need to be addressed, but also for the reduction of regional political tensions which have escalated in recent years. GEF is perceived as a respected neutral player in the region and its presence and continued support acts as a stabilizing factor which extends much further than the parameters of the project itself.

Indicate risks, including climate change risks, that might prevent the project objective(s) from being achieved, and if possible including risk measures that will be taken:

27. There are no foreseeable climate change risks that could affect the outcome of the project. The Full-size project is sufficiently technical in nature that improved qualitative changes in waste water discharges will be identifiable regardless of any climate changes at the regional or global level.

28. The potential risks to achievement of overall project objectives are political instability, reflecting the frequent changes of government in Ukraine and an unlikely political shift in Belarus. However such risks have always been part of the political background to the Dnipro project and fortunately have not had a major impact on the attainment of project objectives. Russia’s recent passive withdrawal from project planning activities and SAP endorsement is admittedly a problem. However the consequences to this development have been self-contained within the project and nothing that has transpired since would prevent Russia from continuing with its overall cooperation in the Dnipro basin in the future.

29. At the present time Belarus and Ukraine have intensified their co-operation in basin issues and the SAP implementation activities currently underway are neither politically nor ideologically sensitive. Only two months ago the countries officially signed a joint declaration endorsing the Dnipro SAP and confirmed what had previously been adopted by their respective cabinets. As a result there does not appear to be any major risk of policy shifts which may result in a withdrawal from such collateral objectives as developing a transboundary monitoring program, harmonization of legislation or the long range goal of establishing an International Commission for the Dnipro river.

30. However a narrower and more unpredictable risk lies in the effective participation of select industries in the anticipated demonstration projects. Since the planned industrial participants will all be commercial entities from the private sector the exigencies of economics might impact on the will of management to see their respective participation to its effective conclusion. As a result the project development phase will have to pay particular attention to issues of demonstrated managerial commitment, financial stability and focused corporate objectives such as the desire to attain ISO 14,000 standards. Fortunately the number of potential candidates incorporating the above attributes are continuously increasing.

describe, if possible, the expected cost-effectiveness of the project:

31. The project will draw on lessons from the earlier UNDP-GEF project introducing cleaner technologies in the Danube river basin. This project clearly demonstrated that the success of direct investment in the introduction of Clean Production Processes depends to a large degree on the cost effectiveness of the enterprises and the proposed production systems.

32. To this end various cost-effectiveness criteria will be adapted from the aforementioned Danube project together with others which will be developed during the project preparation period. This approach adopts a critical path analysis, starting with the financial viability of the enterprise, following by a cleaner production assessment, which identifies pollutant reduction measures that an enterprise could undertake using available financial resources.

33. This in turn is followed by an industrial management assessment. At the end of these two assessments (cleaner production and industrial management), the enterprise would have sufficient information about its production processes and problems to undertake an environmentally sound technology assessment. This assessment is intended to identify the combination of best available techniques (combination of process change, pre-treatment and final treatment) and best available practice (sectoral environmental control strategies and measures) that would bring the enterprise into compliance with environmental norms.

34. In many cases such assessments may show that there is merely a need for retrofitting facilities to keep the industries competitive while reducing emissions and complying with local regulations. It may also be that the assessments will identify that the starting point should be the introduction of energy reducing processes, leading to immediate financial returns that can then be reinvested in other aspects of cleaner production.

35. The objective in all cases will be for a win-win situation, with enhanced profits through more efficient environmentally sound production; and with environmental gains through minimized pollution. The most cost effective measure to achieve these twin objectives continues to be GEF support for the introduction of cleaner technologies methodology to medium sized enterprises discharging toxic waste to Vodokanals in the Dnipro basin.

Justify the comparative advantage of GEF agency:

36. UNDP-GEF has implemented a suite of projects that have resulted in the high-level adoption of 11 SAPS, of which seven are now under implementation. In addition to this, it has assisted in the creation or strengthening of 14 multi-country marine/coastal and river basin Commissions, and specifically the International Commission for the Protection of the Danube River which together with the Danube Project has played a significant role in mentoring both Belarus and Ukraine and the Dnipro basin programme in particular. Its efforts to achieve nutrient reduction goals have lead to the establishment of the innovative Strategic Partnership with the World Bank, European Union and other partners on nutrient reduction in the Danube/Black Sea basin which has resulted measurable reductions of nutrient and other pollution loads. In addition to this, the merger of the UNDP-GEF IW cluster with UNDP’s Water Governance Programme means that the agency is well positioned to provide support in integrated water resources management, and water supply and sanitation. Thus it can be stated that UNDP has established itself as one of the leading international organizations supporting the improved governance of transboundary waterbodies.

PART III: approval/endorsement by gef operational focal point(s) and GEF agency(ies)

A. Record of Endorsement of GEF Operational Focal Point (S) on Behalf of the Government(S): (Please attach the country endorsement letter(s) or regional endorsement letter(s) with this template).

Vasily Podolyako First Deputy Minister of Ministry of Natural Resources and Environmental Protection, Republic of Belarus

Date: (Month, day, year) February 23, 2005 (Previous PDF endorsement)

Anatoliy Hrytsenko Deputy Minister of Ministry of Environmental Protection Ukraine

Date: (Month, day, year) February 1, 2005 (Previous PDF endorsement)

B. GEF Agency(ies) Certification

This request has been prepared in accordance with GEF policies and procedures and meets the GEF criteria for project identification and preparation.
John Hough UNDP-GEF Deputy Executive Coordinator, a.i.	Vladimir Mamaev Project Contact Person
Date: 15 February 2008	Tel. and Email: vladimir.mamaev@undp.org

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