Submission Date: 16 October 2007

Re-submission Date:

Indicative Calendar
Milestones	Expected Dates
Work Program (for FSP)	n/a (BSDP)
CEO Endorsement/Approval	11/02/07
GEF Agency Approval	11/29/2007
Implementation Start	01/10/2008
Mid-term Review (if planned)	12/31/2009
Implementation Completion	01/31/2012

part i: project IDentification

GEFSEC Project ID[1]: 3148

gef agency Project ID: P100639

Country(ies): Croatia

Project Title: Agricultural Pollution Control Project

GEF Agency(ies):

Other Executing partner(s): Ministry of Agriculture, Food and Water Management of Croatia

GEF Focal Area (s): ,

GEF-3 Strategic program(S): IW-SP2

Name of parent program/umbrella project: Investment Fund for Nutrient Reduction in the Danube-Black Sea Basin (Tranche 3 approved by Council in 2003)

A. Project framework (Expand table as necessary)

Project Objective: The development objective of the project is to significantly increase the use of environmentally friendly agricultural practices by farmers in Croatia’s Pannonian plain in order to reduce nutrient discharge from agricultural sources to surface and ground water bodies. The global environmental objective of the project is to reduce the discharge of nutrients into waters draining into the Danube River and Black Sea.
Project Components	Indicate whether Investment, TA, or STA**	Expected Outcomes	Expected Outputs	Indicative GEF Financing*		Indicative Co-financing*		Total ($)
				($)	%	($)	%
1. Mitigating Nutrient Loads to Water Bodies from Point-Source Pollution (Manure Management).	Investment and TA	Improved manure management practices adopted by households with livestock in targeted counties. Water quality monitoring, analysis and reporting capacity of Croatian Waters strengthened.	At least 25% of livestock farms in project counties are adopting improved animal waste management practices Unified set of monitoring guidelines and standards for soil and water adopted and monitoring program implemented	3.36	22.87	11.33	77.12	14.69
2. Development and Promotion Agri-Environment Measures	Investment and TA	EU compliant Code of Good Agricultural Practice (CGAP) legislated. CGAP technology successfully tested and applied.	Promulgation of CGAP legislation. At least 200 ha of pilot GAP demonstration sites in each of the three counties. Multi-annual applied research into economic crop fertilizer response successfully completed. At least 40% of farmers in project area implementing measures under the Code	1.16	30.28	2.67	69.71	3.83
3. Public Awareness and Replication Strategy	TA	Rural populations aware of actions required to reduce nutrient loads to water bodies.	75% of population in project area and 30% of population in non-project areas aware of and initiating /implementing actions related to nutrient reduction	0.31	42.0	0.43	58.0	0.74
4. Project management				0.17	23.00	0.57	77.00	0.74
Total project costs				5.00		15.00		20.00

* 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		5,000,000
Co-financing		15,000,000
Total		20,000,000

* 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
GEF Agency(ies) - IBRD		13,900,000
Bilateral Aid Agency(ies)
Multilateral Agency(ies)
Private Sector
NGO
Others	Cash	1,100,000
Total co-financing		15,000,000

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
Total GEF Resources

* 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: In Croatia, the Danube River, as well as its tributaries, the Sava and Drava, drain sixty percent of Croatia’s territory (approximately 33,940 sq km out of a total of 56,538 sq km). The three rivers flow southeastward, through the Pannonian plain, which comprises nearly half of Croatia’s agricultural land, an area often described as the bread basket of the country. The Pannonian region is characterized by intensive agriculture production, with the majority of livestock production and food processing industry concentrated in the region. However, the majority of the medium- and small-scale farms do not have manure storage facilities and those facilities that do exist on larger farms are often inadequate in terms of size or imperviousness. This, coupled with uncontrolled application of manure and slurry, is compounding the problem of rising levels of nitrate pollution in soil and water bodies in the Pannonian plain. Intensive fertilizer application is also a significant source of nutrient pollution in Croatian soil and waters. Although existing Croatian regulations limit the application of agricultural inputs, notably fertilizers, their imprecise nature leads to their liberal interpretation. Farmers are generally unaware of the damage that can be caused by inappropriate nutrient management practices. Such pollution, both point-source from manure and non-point from unsustainable agricultural practices, are of particular concern, especially in light of the high groundwater table that characterizes the Pannonian plain, so that during winter and early spring, groundwater often merges with surface waters and contaminates the country’s drinking water supplies. In the Danube basin area of Croatia, studies conducted in 2005, indicate that 51 percent of the nitrogen load to the surface waters in the basin is from agriculture. The nitrogen content of both the Sava and Drava rivers, flowing through Croatia’s most intensive agricultural area, is considerably above the maximum allowed content (MAC). This has significant implications for the quality of drinking water in the region: the majority of non-public water supply systems, on which most of the country’s population is dependent, face severe problems with nitrates and concentrations often exceed the Croatian MAC. Public health repercussions of nutrient, agrochemical and bacterial groundwater pollution in an environment where access to piped household water supply is inadequate, is widely recognized by the rural population of the Pannonian plain to be the major threat to the well being of the affected communities. Croatia is committed to improving water quality and reducing nutrient pollution over its entire territory as agreed under the Danube River and Black Sea Conventions and is in the process of negotiating its EU accession agreements for the Nitrates and Water Framework Directives. Although a substantial endeavor is underway in policy, institutional and environmental reform in the agriculture sector, as outlined above, there remains a significant unfinished and under-financed government agenda, in particular to reduce nutrient loads to Croatian water bodies from agricultural sources as well as to put in place an accredited Agri-Environment (AE) Program. In light of this, the government has requested GEF support to assist with a pilot effort in three high-priority counties of the country: (i) Osiječko-Baranjska; (ii) Vukovarsko-Srijemska; and (iii) Varaždinska where livestock and poultry densities are high. The following activities are proposed under the project: (1) Mitigating Nutrient Loads to Water bodies from Point Source Pollution-Manure Management. This component will assist in the establish of a Nitrates Management Fund that would disburse sub-grants for sustainable manure management practices, including storage, handling and application. This component will also assist the Croatian Waters Authority to put in place a uniform water quality monitoring system in line with the EU system; (2) Promotion of Agri-Environment Measures. This component will assist with the implementation of the Code of Good Agricultural Practices, currently under development by the government of Croatia. The Croatian Agricultural Extension Institute, to be strengthened by the appointment of three additional GEF-supported nitrate management specialists, will interpret the Code in a manner that ensures farmer buy-in and be responsible for disseminating the Code throughout the farming community, using multiple vehicles such as brochures, mass media, fairs, etc. where farmers would be informed of the most cost-effective, on-farm technologies that need to be employed for complying with the EU Nitrates Directive. The CAEI will also undertake a training and demonstration program to educate and train the livestock community in sustainable, cost-effective manure management practices as well as other nutrient management practices, inclduing inter alia, optimal use of organic and mineral fertilizers and cover crop technology that reduces nutrient losses. (3) Public Awareness and Replication Strategy. The CAEI will implement a nation-wide public information campaign to disseminate the benefits of proposed project activities with a view to their replication with EU IPARD support. The project will provide for organization of workshops, field days, study tours, training and publications to promote replication of project activities in other similar areas of Croatia as well as Black Sea riparian countries. With an emphasis on knowledge sharing, the project will assist the CAEI to develop a website containing detailed information on project activities as well as provide support to relevant project staff to participate in GEF IW-LEARN conferences for exchange of experiences. Implementation of proposed project activities would result in global benefits that will accrue through: (i) a continual reduction in the discharge of nutrients and sediments into Danube River and Black Sea and the accompanying improvements in the local and Black Sea water quality; (ii) broad-based stakeholder participation that will increase public awareness and demand-driven approaches for protecting the Black Sea; and (iii) improving habitat for local flora and fauna and thereby improving biodiversity in the watershed of the Black Sea.

B. Describe the consistency of the project with national priorities/plans: The reduction of nutrient run-off from agriculture has been accorded priority status and forms an integral part of the country’s environmental strategy. The Government of Croatia is a member of the 1991 Environmental Program for the Danube River Basin (EPDRB) and a signatory to the 1994 Danube River Protection Convention (DRPC). The MAFWM is committed to addressing the EU Nitrate Directive which is mandatory for EU accession. The government is working to put in place EU-compliant AE policies and has established a comprehensive agricultural support scheme for farmers that proposes (but not yet implemented) provisions for promotion of environmentally friendly agriculture practices. Recent policy initiatives include the introduction of new economic instruments (e.g. organic farming), and the strengthening of extension services. Recently passed legislation include the: (i) Ordinance on the Protection of Agricultural Land from Contamination by Harmful Substances; (ii) Ordinance on Environmental Impact Assessment; (iii) Law on Plant Protection; (iv) Law on Agricultural Land that prescribes measures protecting land against adverse agricultural practices and regulates application of harmful substances to the soil; and (v) Law on Organic Agriculture. The Government is also taking steps to institute various forms of fines, penalties and charges to deter unsustainable agricultural practices. The enforcement of these penalties, however, is inadequate and largely ignores the private farming sector. Currently, Croatia has no comprehensive legislation specifically aimed at protecting water from nutrients derived from agricultural sources. The government has also sought international support to promote environmentally friendly agricultural practices and improve the overall performance of the agricultural sector. The World Bank financed Agricultural Acquis Cohesion Project aims to develop sustainable systems and capacities within the Government to enable Croatia to capture benefits in the agricultural sector accruing from accession to the EU and to meet EU acquis requirements. EU CARDS, PHARE and SAPARD projects are focusing on, inter alia, approximation of Croatian water management legislation with the EU Water Acquis; capacity building and development of guidelines for the implementation of the Water Framework Directive; and a Croatian soil monitoring program.

C. Describe the consistency of the project with gef strategies and strategic programs: The project has been prepared under the Black Sea Danube Strategic Partnership Nutrient Reduction Investment Fund that was approved by the GEF Council under GEF-3. The project is consistent with both GEF 3 and GEF 4 priorities in the IW focal area, viz., GEF 3 IW 1 and 3 and GEF 4 IW 2 (as described in (iv) below). Project design and activities meet the eligibility criteria for financing under the Investment Fund (IF) as follows: (i) Project Type - The project is consistent with the type of project to be financed under the IF, viz. "reform and improvement of agriculture and land management practices with impact on nutrient use and non-point discharges through run-off"; (ii) Priority Investment - The proposed project is considered a prioirty investment by the Government of Croatia as it will not only assist with improving agricultural productivity and water quality but also with compliance with the EU Nitrate Directive which is mandatory for EU accession; (iii) Leveraging and Co-funding Ratio - The GEF funds for the proposed project has leveraged government contribution (through the ongoing IBRD-supported AACP) of $13.9 million and beneficiary contribution of $1.1 million and meets the overall co-funding ratio of 1:3 as stipulated in the IF Brief; (iv) Program Conformity - the project is consistent with OP-8 Waterbody Based Operation Program and targets Strategic Priority IW-3 as it strives to “Undertake Innovative Demonstration for Reducing Contaminants (in this case Nitrates) and Addressing Water Scarcity”, and contributes to SPIW-1 Catalyzing Financial Resources for Implementation of Agreed Actions as the proposed intervention will help stimulate follow-on investments at the farm level and support institutions in strengthening nitrates management policy, promoting mitigating action and monitoring outcomes. The project also targets GEF-4 IW-Strategic Priority 2: Nutrient Reduction as project activities are primarily designed to promote nutrient reduction to water bodies from agricultural sources; (v) Replicability - The project has been designed to promote replication of nutrient reduction ivestments on a national scale within Croatia. Activities in each of the three project counties will serve as pilots for the entire country and provide benchmarks for good practices. The project will develop and maintain a website focusing on the project’s objectives, activities, progress and impact as well as clearly demonstrating how it is achieving the objectives of the Partnership Program. The project has earmarked funds for participation in IW-Learn workshops as well as for travel of country official(s) to participate in two GEF International Waters conferences as well as to brief the Danube and Black Sea Commissions on project progress; (vi) Monitoring and Evaluation - Project performance indicators as well as the arrangements for results monitoring have been developed in close consultation with key stakeholders. The Project Management Unit would annually monitor and evaluate project performance through conducting beneficiary surveys. Project interventions will be monitored against both process as well as environmental stress reduction indicators developed at the start of project. The results of M&E activities will be fed back into the implementation process as improved practices; (vii) Government Contribution to the Black Sea and/or Danube Commission(s) and Secretariat(s) - The Government of Croatia has regularly made timely payments of all dues to the Commission and Secretariat; and (viii) Government Commitment to policy, institutional or legal reforms for regional nutrient reduction and improved water quality management - The government of Croatia is committed to reducing agricultural nutrient pollution to the country's surface and groundwater and thereby improve the waters of the Danube River and Black Sea. Croatia is a member of the 1991 Environmental Program for the Danube River Basin (EPDRB) and a signatory to the 1994 Danube River Protection Convention (DRPC). The MAFWM is committed to addressing the EU Nitrate Directive and putting in place EU-compliant agri-environment policies and has established a comprehensive agricultural support scheme for farmers that proposes (but not yet implemented) provisions for promotion of environmentally friendly agriculture practices. Recent policy initiatives include the introduction of new economic instruments (e.g. organic farming), the strengthening of extension services as well as several ordinances and laws on the protection of agricultural land from contamination by harmful substances, environmental impact assessment, plant protection, etc. The government has also sought international support to promote environmentally friendly agricultural practices and improve the overall performance of the agricultural sector through the ongoing Bank-financed Agricultural Acquis Cohesion Project aims to develop sustainable systems and capacities within the Government to enable Croatia to capture benefits in the agricultural sector accruing from accession to the EU as well as several EU CARDS, PHARE and SAPARD projects focusing on, inter alia, Croatian water management legislation in line with that of EU, capacity building for implementation of the Water Framework Directive, soil monitoring program.

D. Outline the Coordination with other related initiatives: The government of Croatia has sought technical and financial assistance from various international donors in its efforts towards improving the quality of Croatia’s surface and groundwater bodies. The aim is to improve the overall performance of the agricultural sector, protect the environment and implement measures for compliance with the EU Nitrates Directive. The GEF project is part of an overall program to assist the country develop sustainable systems and capacities within MAFWM to ensure timely compliance with EU acquis conditions in the rural sector. Towards this, the government is currently implementing the IBRD-supported Agricultural Acquis Cohesion Project (AACP) designed to address the country’s strategy on sustainable agricultural development, whose fundamental goal is to encourage efficient and sustainable production and marketing of agricultural products in a way that protects the natural resources of the Republic of Croatia. The AACP is providing $13.9 million in co-financing that will assist in: (i) capacity building for MAFWM support for sustainable, competitive agriculture in Croatia compliant with EU acquis requirements: (ii) the establishment of a transparent and efficient payment system for the disbursement of GEF-financed and subsequent government grants for structural reform in the agri-environment sector; (iii) the reorganizatiopn and reinforcement of government inspection services supporting environment regulations and (iv) project management. GEF funds will provide incremental support for nutrient management activities in the agricultural sector to assist the country comply with the requirements of the EU Nitrates Directive and thereby assist the government in not only establishing a competitive agricultural sector but also assist it with honoring its international commitments to improve the waters of the Danube River and Black Sea.Several EU-supported projects are also currently under implementation, including, inter alia, (i) Capacity Building and Development of Guidelines for the Implementation of the Water Framework Directive. Supported by the EU-CARDS 2004 Program, the overall objective of the project is to improve the water quality standards and water management in Croatia in line with EU standards and requirements. It also strives at further institutional and administrative capacity strengthening of the Croatian water management administration as well as relevant state institutions, stakeholders and NGOs; (ii) Approximation of Croatian Water Management Legislation with the EU Water Acquis. Supported under EU-CARDS 2003, the project aims at supporting MAFWM with: (a) completing a legal, administrative and institutional assessment and identifying regulatory actions for further approximation to the EU water acquis; (b) preparing a draft Strategy and Action Plan for the approximation of Croatian legislation with EU water acquis as a part of the overall National Environmental Accession Strategy developed under the CARDS 2002 project led by MEPPPC; (c) conducting, for the identified areas, a horizontal impact assessment on Nitrates, Drinking Water, dangerous substances and UWWTD; (d) drafting of the compliance plan for the UWWT Directive; and (e) definition of priority areas for future activities of the SAPARD Program - Agriculture and Rural Development Plan 2006; (iii) EU-LIFE Project. Within the framework this project, the EU is supporting the development of a Croatian soil monitoring program. It aims at developing a Soil Monitoring Program that will serve as the basis for the development of a harmonized and coherent Croatian soil information system, compatible with the European Soil Information System – EUSIS, and will provide vital data for policy-making and international networks; (iv) Investments in Agricultural Holdings. This SAPARD-supported measure provides for investments in the construction and/or adaptation and/or equipping of animal sheds, including “investment in animal manure, slurry reservoirs and specialized manure”. The project will also be closely linked to the IW-LEARN Initiative. Towards this, the project will participate in all relevant events / conferences hosted by IW-LEARN.

E. Discuss the vAlue-added of GEF involvement in the project demonstrated through incremental reasoning : GEF sub-grants will be provided to farmers for implementing nutrient management activities. These sub-grants will finance the provision of internationally-tested, low-cost, effective technologies as well as training so that farmers can apply these practices efficiently. In the absence of the provision of GEF grants, farmers would undertake none or few ad hoc measures to reduce nutrient loads to water bodies which would achieve limited or temporary results at best. Most members of the farming community have limited knowledge of sustainable manure management practices or good agricultural practices that would curtail leaching of nutrients into soil and water bodies. Given that improving the quality of the Danube River and Black Sea is a collective effort by all riparian countries, it is imperative that Croatian farmers undertake effective nutrient reduction activities on their farms. In the absence of their contribution to such efforts, the efforts of other riparian countries would be undercut so that the objectives of the Black Sea Partnership Program would be difficult to achieve. Without GEF support, which in turn is leveraging additional funds from other donors, farmers would be unable to "keep their land in good agricultural condition" to qualify for EU support - EU support would in the long-term make the implementation of such nutrient management activities continue beyond the life of the project. Thus GEF funds are helping to build sustainability of nutrient reduction measures among farmers. GEF support would bridge critical policy and technical gaps and jump-start a much larger program of investment in nitrates management that will be financed primarily through planned Croatian investment in structural reform in the agriculture sector managed through institutions and processes established under the AACP.

F. 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: (i) Risk: Delays with the accreditation of AE measures. Mitigation Measure: Project will support the MAFWM with the development of policies and procedures as required by EU and will provide funding for the timely testing of implementation of those measures. (ii) Risk: Delays in aligning national non-point source discharge standards with EU standards and associated compliance requirements. Mitigation Measure: Project will help government to adjust and adapt polices and enforcement mechanisms to rapidly align national standards to those of the EU. (iii) Risk: Farmers demonstrate limited willingness to adopt improved, environmentally-friendly agricultural practices. Mitigation Measure: Benefits of compliance with good agricultural practices will be widely disseminated through Training and Demonstration Sites. Regular social assessment; participatory approach to project implementation; on-location advice; advocacy of immediate and long-term benefits of project activities; and farmer training. (iv) Risk: Agro-processors and farmers do not have access to credit, machinery and inputs that would enable them to practice mitigation measures. Mitigation Measure: Banks are already pre-financing SAPARD investments and contractor credit is available. Cost-sharing in kind by farmers will be encouraged thus reducing cash contributions.

G. describe, if possible, the expected cost-effectiveness of the project: The project has been designed to ensure that resources are judiciously allocated for nutrient management activities in the country without compromising impact on the ground. One option considered was to undertake the proposed project activities in all nitrate vulnerable zones throughout the territory of Croatia. This option was rejected as it was considered more cost-effective to target three high prioirty areas, test the efficacy of the low-cost, internationally-proven nutrient management techniques being proposed under the project and subsequently replicate these with EU grant funds in other similar nitrate vulnerable zones. Also, undertaking such pilot activities in selected sites would help leverage additional resources for nutrient management interventions from other sources once implementation of the public awareness component of the project was underway. Dissemination of the benefits of the proposed pilot project would encourage further beneficiary and government buy-in for nutrient reduction activities. Without GEF support there would be a limited impact on nutrient reduction at a higher cost to the government. Thus GEF funds would act as "seed funds" for stimulating further investments in this area from other donors which in turn would help achieve greater substantial benefits and a wider impact on the ground at a lower-cost to both the GEF and government of Croatia.

H. Justify the comparative advantage of GEF agency: The Bank has a comparative advantage in helping Croatia institute such measures. It is the main implementing agency for the Investment Fund for Nutrient Reduction in the Danube and Black Sea Basin and currently has a portfolio of over a dozen projects in the basin at various stages of preparation and implementation, each of which aims at reduction of nutrient pollution. The Bank has gained considerable experience with cost-effective methods for the reduction and management of nutrient pollution from agriculture, water quality monitoring, capacity building and the implementation and enforcement of appropriate legislation to promote environmentally friendly agricultural practices, all in the context of the Black Sea/Danube Partnership Program as well as EU agriculture and environment acquis. It is supporting several such ongoing projects in Romania, Turkey, Bulgaria, Moldova, Georgia and Serbia. Croatia’s committed efforts towards EU accession, the favorable political climate, the recognition of the links between sustainable agriculture and the environment and government’s commitment to large scale investments in structural reform provide a window of opportunity for the Bank and the GEF to assist the country in piloting a nutrient reduction program that will kick-start a much larger and longer term investment in agricultural competitiveness and agri-environment management, including nitrate reduction.

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).

Ms GordanaRuklic Expert Advisor Ministry of Environmental Protection, Physical Planning and Construction

Date: October 18, 2005

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.
Steve Gorman GEF Executive Coordinator, The World Bank Group	Emilia Battaglini GEF Regional Coordinator, ECA
Date: October 18, 2007	Tel. and Email: 202-473-2332; ebattaglini@worldbank.org

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