Document of

The World Bank

Report No: NUMBER

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED GRANT FROM THE

GLOBAL ENVIRONMENTAL FACILITY

IN THE AMOUNT OF US$18.0 MILLION EQUIVALENT

TO

ESTONIA, LATVIA, LITHUANIA AND RUSSIAN FEDERATION

FOR A

BALTIC SEA REGIONAL PROJECT

January 31, 2001

Environmentally and Socially Sustainable Development Sector Unit

Natural Resources/Agricultural Services Sector Unit

Rural Development and Environment Sector

Europe and Central Asia Regional Office

CURRENCY EQUIVALENTS

Currency Unit = US$

EUR = $.090

FISCAL YEAR

2001

ABBREVIATIONS AND ACRONYMS

AAS Agriculture Advisory Services

AC Assistant Coordinator

BAAP Baltic Agriculture Run-off Action Program

Baltic 21 Baltic 21 Process for an Agenda 21 for the Baltic Sea Region

BOOS Baltic Oceanographic Observation System

BSLME Baltic Sea Large Marine Ecosystem

BSSG Baltic Sea Steering Group

C1C Component 1 Coordinator

CPAR Country Procurement Assessment Report

CAS Country Assistance Strategy

CBSS Council of the Baltic Sea States

CCB Coalition Clean Baltic

COMBINE HELCOM‑Cooperative Monitoring in the Baltic Marine Environment

EEA European Union Environmental Protection Agency

EIB European Investment Bank

EMP Environmental Management Plan

EQI Ecosystem Quality Indicators

EU European Union

EU (Phare) European Union Programme for Assistance to the Countries of Central and Eastern Europe

EU (Tacis) European Union Program for Assistance to the Countries of the Commonwealth of Independent States

EU (Sapard) Special Accession Programme for Agriculture and Rural Development

EUR Euro – European Monetary Union unit of currency

FIO Farm Interest Organization

FMS Financial Management System

FRR Financial Rate of Return

GEF Global Environment Facility

GIWA Global International Waters Assessment

GOOS Global Ocean Observer System

HELCOM Helsinki Commission - Baltic Marine Environment Protection Commission

Helsinki Convention Convention on the Protection of the Marine Environment of the Baltic Sea (1974 and 1992)

IBSFC International Baltic Sea Fisheries Commission

ICES International Council for the Exploration of the Sea

ICR Implementation Completion Report

JCP Baltic Sea Joint Comprehensive Environmental Action Program (1992, 1998)

LACI Loan Administration Change Initiative

LIL Learning and Innovation Loan

LIU Local Implementation Unit

LME Large Marine Ecosystem

LPM Local Project Manager

MARE MISTRA’s Marine Research on Eutrophication

MEP Ministry of Environmental Protection

MISTRA Swedish Foundation for Strategic Environmental Research

MIS Management Information System

MLW HELCOM-PITF-Working Group on Management Plans for Coastal Lagoons and Wetlands

MMED Multiple Marine Environmental Disturbances

MoA Ministry of Agriculture

MoE Ministry of Environment

MoF Ministry of Finance

NOAA National Oceanographic and Atmospheric Administration

NEFCO Nordic Environment Finance Corporation

NGO Nongovernmental Organization

Nitrates Directive European Union - Council Directive on the Protection of Waters Against Pollution caused by Nitrates from Agriculture (91/676/EEC)

NMR Nordic Council of Ministers

PIP/PPP Project Implementation Plan and Project Procurement Plan

PITF HELCOM - Programme Implementation Task Force

PMU Project Management Unit (HELCOM)

PMR Project Management Report

Project Baltic Sea Regional Project

PY Project Year

RWB Regional Water Management Boards

SAP Strategic Action Program

SLU Swedish University of Agricultural Sciences

SMHI Swedish Meteorological and Hydrological Institute

STAP Scientific and Technical Advisory Panel of the Global Environment Facility

TAC Total Allowable Catch

UNDP United Nations Development Programme

UN/ECE United Nations Economic Commission for Europe

VASAB 2010 Visions and Strategies Around the Baltic 2010

WWF World Wide Fund for Nature

Vice President: Johannes F. Linn Country Managers/Directors: Michael F. Carter and Julian F. Schweitzer Sector Manager/Director: Kevin M. Cleaver Task Team Leader/Task Manager: Stephen F. Lintner Deputy Task Team Leader: Inesis Kiskis

ESTONIA, LATVIA, LITHUANIA AND RUSSIAN FEDERATION

BALTIC SEA REGIONAL PROJECT

CONTENTS

A: Program purpose and Project Development Objective................................................ 1

1. Program Purpose and Program Phasing............................................................................ 1

2. Project Development Objective........................................................................................ 1

3 Global Objective and GEF Operational Strategy.................................................................. 1

4. Key Performance Indicators............................................................................................ 2

B: Strategic Context........................................................................................................... 2

1. Sector-Related Country Assistance Strategy (CAS) Goal Supported by the Project............. 2

2. Main Sector Issues and Government Strategy................................................................... 3

3. Sector Issues to be Addressed by the Project and Strategic Choices................................... 4

4. Program Description and Performance Triggers for Subsequent Grant Disbursements......... 4

C: Project Description Summary........................................................................................ 4

1. Project Components........................................................................................................ 4

2. Key Policy and Institutional Reforms Supported by the Project........................................... 6

3. Benefits and Target Population......................................................................................... 7

4. Institutional and Implementation Arrangements.................................................................. 7

D: Project Rationale............................................................................................................ 9

1. Project Alternatives Considered and Reasons for Rejection................................................ 9

2. Major Related Projects Financed by the Bank and/or Other Development Agencies.......... 10

3. Lessons Learned and Reflected in the Project Design...................................................... 10

4. Indications of Borrower Commitment and Ownership...................................................... 12

5. Value Added of Bank and Global Support in This Project................................................. 13

E: Summary Project Analysis............................................................................................ 13

1. Economic...................................................................................................................... 13

2. Financial and Financial Management............................................................................... 14

3. Technical...................................................................................................................... 14

4. Institutional.................................................................................................................... 14

5. Environmental Assessment............................................................................................. 15

6. Social............................................................................................................................ 16

7. Safeguard Policies......................................................................................................... 18

F: Sustainability And Risks............................................................................................... 19

1. Sustainability................................................................................................................. 19

2. Critical Risks................................................................................................................. 19

3. Possible Controversial Aspects....................................................................................... 20

G: Main Loan Conditions.................................................................................................. 21

1. Effectiveness Conditions................................................................................................ 21

2. Conditions of Board Presentation.................................................................................... 21

3. Conditions of Negotiations.............................................................................................. 21

4. Other Covenants........................................................................................................... 21

H: Readiness for Implementation..................................................................................... 21

I: Compliance With Bank Policies.................................................................................... 22

Annexes

Annex 1. Project Design Summary

Annex 2. Detailed Project Description

Annex 3. Incremental Cost Analysis

Annex 4. STAP Technical Review

Annex 5. Public Participation Summary

Annex 6. Transboundary Analysis

Maps

Map 1. Baltic Sea Sub-Regions (IBRD 31061)

Map 2. Watershed, Coastal and Off-Shore Sites (IBRD 310620)

Map 3. Coastal Zone Management Demonstration Sites (IBRD 31063)

ESTONIA, LATVIA, LITHUANIA AND RUSSIAN FEDERATION

BALTIC SEA REGIONAL PROJECT

PROJECT APPRAISAL DOCUMENT

Environmentally and Socially Sustainable Sector Unit

Natural Resources/Agricultural Services Sector Unit

Rural Development and Environment Sector

Europe and Central Asia Regional Office

A: Program purpose and Project Development Objective

1. Program Purpose and Program Phasing:

Program Purpose. The purpose of the Baltic Sea Regional Project (BSRP) is to ensure that, by year 2006, an ecosystem-based approach for sustainable use of Baltic Sea resources has been demonstrated at the field level and is being adopted for management actions by cooperating international bodies, national governments, local organizations and NGOs. The field level activities would be undertaken in Estonia, Latvia, Lithuania, and the Russian Federation, along their Baltic coastal areas and in the adjacent coastal and open sea area.

Program Phasing. The program purpose will be achieved with steady progress over an agreed 5-year period including the following phases:

· Phase 1. Introduction of the Ecosystem Approach (2001-2002). Establishment of the regional framework for introduction of the ecosystem approach; mobilization of partners in management of coastal and open sea marine resources; and initial activities for land and coastal management.

· Phase 2. Demonstration of the Ecosystem Approach (2003-2004). Undertaking cooperative activities for assessment and management of coastal and open sea marine resources; expansion of activities for land and coastal management; and joint activities for linkage of land, coastal and open sea management programs.

· Phase 3. Application of the Ecosystem Approach (2004-2006). Identification of next steps by the cooperating parties for expanded application of the ecosystem approach for land, coastal and open sea management; completion of field based management and demonstration activities; and preparation and evaluation of assessment studies.

Annex 1, the Project Log-frame, provides the key performance indicators for progress towards achieving the program purpose, and performance triggers to move from one phase to the next will be tracked through a monitoring and evaluation system. This system is detailed in the Project Implementation Plan and Project Procurement Plan (PIP/PPP).

2. Project Development Objective:

Project Development Objective. The development objective of the Baltic Sea Regional Project (BSRP) is to facilitate the restoration of a sustainable l ecosystems, improve coastal zone management and reduce agricultural non-point source pollution through the introduction of ecosystem-based approaches for land and coastal and open sea environmental management. The Project’s long-term goal is to provide the three Baltic Sea cooperating international bodies—the Helsinki Commission (HELCOM), the International Baltic Sea Fisheries Commission (IBSFC) and the International Council for the Exploration of the Sea (ICES), and the recipient countries with management tools for sustainable agricultural, coastal and open sea management, while improving the social and economic benefits of the farming, coastal and fishing communities.

3 Global Objective and GEF Operational Strategy:

Global Environmental Goal. The Project’s global environmental objective is to contribute significantly to the “reduction of stress to the international waters environment” in the region by integrating sound land and water resource management tools. Project activities support implementation of the Baltic Sea Joint Comprehensive Environmental Action Program (JCP), developed by the Helsinki Commission. The JCP provides the basis for the Project, which is fully consistent with GEF Operational Program Number 9 (OP-9), “Integrated Land and Water Multiple Focal Area Operational Program^[4].” The objective of OP-9 is to support “better land and water resource management practices on an area wide basis.” The Project provides opportunities for the GEF to be a “catalyst for action to bring about the successful integration of improved land and water resource management practices on an area wide basis while providing preventive measures to address threats rather than remedial measures.” The Project has a regional focus, involving local communities and stakeholders; its biodiversity considerations focus on “prevention of damage to threatened waters.” As part of an integrated approach, Project activities will support linkages with activities of the cooperating countries, international financial institutions, European Union, bilateral donors and NGOs.

Removing Barriers for Transboundary Management. Designed within the context of the Large Marine Ecosystem (LME) concept, the Project includes activities for improving ecosystem health and productivity, social and economic development, and provision of ecosystem management tools for decision-makers to address transboundary issues identified in Annex 6. The most important aspects of the Project are its linkages between land-based activities, coastal zones and open sea environments. The GEF funds, as incremental costs, will achieve global environmental benefits by removing barriers to transboundary management of land and open sea resources.

Cooperation and Coordination. With the support of the Global Environment Facility (GEF), UNDP and the World Bank, Project activities will assist the recipient countries in implementing the Helsinki Convention; other international agreements; and national policies and legislation. It will also support Estonia, Latvia, and Lithuania in meeting their obligations under the European Union accession process. The Project provides the basis for strengthening cooperation between the three international bodies—HELCOM, IBSFC, ICES; recipient country counterparts and other cooperating organizations. Preparation of the Project has been coordinated with the Rural Environmental Protection Project in Poland and the Global International Waters Assessment (GIWA), which are both supported by GEF.

4. Key Performance Indicators: (see Annex 1)

The Project will be implemented as an integrated activity, with HELCOM serving as the GEF executing agency, and working in coordination with IBSFC and ICES. Achievement of Project objectives will be judged by following key indicators:

· Improved economic welfare and standard of living within the pilot watersheds and coastal communities;

· Increased awareness of environmental issues related to coastal and open sea issues;

· Continued use of sustainable agricultural practices by significant numbers of farmers with notable environmental quality improvements in the Baltic Sea ecosystem;

· National integrated coastal zone management based on sound technical inputs incorporated into the political agenda; and

· Comprehensive integrated regional approach for ecosystem-based management in practice.

B: Strategic Context

1. Sector-Related Country Assistance Strategy (CAS) Goal Supported by the Project (see Annex 1):

Global and Regional Strategies. The Project is consistent with the goals of Bank’s draft Environment Strategy, supporting sustainable development, reducing poverty, and improving quality of life by removing the environmental constraints to economic development, and empowering people and societies to manage their environmental resources. At the ECA level, it is consistent with the draft Regional Environmental Strategy and the Regional Natural Resource Management Strategy. In addition, the Project is consistent with the Bank’s high-level commitment since 1990 to work with HELCOM and its member countries to support implementation of the JCP in order to achieve the long-term objective of “[restoring] the ecological balance of the Baltic Sea.” The proposed Project would be the first regional project undertaken by the Bank to support the JCP and would build upon successful experience with previous national level JCP related projects in Estonia, Latvia, Lithuania and the Russian Federation.

Sector Related CAS Strategies. For all recipient countries, the Project is consistent with CAS development objectives pertaining to sustainable rural development, strengthened local institutions, and protection of natural resources.

Estonia – CAS document number 13539-EE, Date of latest CAS discussion September 21, 1994.

A primary CAS objective is to prepare the agriculture sector for EU accession, reform production and improve management practices; this is addressed within Component 2.

Latvia – CAS document number 17706-LV, Date of latest CAS discussion April 21, 1998.

Rural areas are some of the most economically depressed areas in Latvia. The CAS goal is to stimulate the economy in rural areas, and improve environmental management to promote regional development and build sub-national government capacity. The Rural Development Project (Report No. 18158 /FY99) supports sustainable agricultural activities to lay the groundwork for increasing income levels and improving living standards of the rural population; this Project builds on those activities.

Lithuania – CAS document number 19135-LT, Date of latest CAS discussion April 19, 1999.

Two CAS goals are to develop the rural economy and meet the formal EU accession agenda in agriculture. This will require institutional strengthening, improvements in agricultural efficiency and product quality, and upgrades and maintenance of infrastructure and environmental management. The proposed activities for Component 2 focus on these goals.

Russian Federation – CAS document number 19897-RU, Date of latest CAS discussion December 1, 1999.

The Russian Federation faces several constraints on sustainable poverty reduction; a number of simultaneous actions are being taken to reduce poverty. The CAS objective pertains to strengthening institutional frameworks and enforcing existing national and international laws and regulations; utilizing environmentally responsible practices; and reducing widespread degradation of land, fisheries, and forests. The Project addresses this objective by supporting practical actions to improve management of fishery resources, coastal zones and agricultural production in the Kaliningrad Oblast. The Project complements the recently approved Municipal Water and Wastewater Project (Report No. 21416-RU) that will support investments in several municipalities in the Baltic Sea drainage basin.

2. Main Sector Issues and Government Strategy:

The recipient countries, as contracting parties of the Helsinki Convention, are obligated to reduce point and non-point source pollution, improve coastal zone management, and support sustainable fishery practices, to restore over the long-term the ecological balance of the Baltic Sea. To this end, they have established environmental policies and priorities that support the Helsinki Convention and the JCP. Other than the Russian Federation, the recipient country governments are committed to moving into compliance with relevant EU directives as part of the accession process.[5] The national governments recognize this Project as a critical mechanism for supporting national programs and meeting the regional obligation of improving environmental management of the Baltic Sea.

3. Sector Issues to be Addressed by the Project and Strategic Choices:

The Project represents a strategic choice to concentrate human and financial resources to strengthen regional management within the fisheries and agriculture sectors to achieve sustainable ecosystem management over the medium and long term. It also includes measures to support coastal zone management, which is a critical link between land, coastal and open sea environments. Component 1 addresses the marine ecosystem sector and supports a coordinated approach to monitoring and assessment of coastal and open sea resources, improving fisheries management practices, and strengthening regional management for decision-makers. Component 2 addresses the agriculture sector, promotes investing in environmentally responsible agricultural practices, supports monitoring and assessment of land-based inputs to the coastal and open sea ecosystem, and strengthens national and regional capacity for integrated management. Component 2 together with Component 1 will include targeted activities for coastal zone management that are in the areas influenced by the agricultural demonstration sites. Component 3 provides support for institutional strengthening and capacity building measures that are necessary for implementation of the ecosystem management approach promoted by the Project.

4. Program Description and Performance Triggers for Subsequent Grant Disbursements:

The program consists of a complementary series of actions undertaken at the regional, national and local level that support the demonstration and adoption of an ecosystem-based approach for sustainable use of Baltic Sea resources. These activities would be coordinated by HELCOM, working in cooperation with IBSFC and ICES, and would support the recipient countries in using this approach to meet their environmental obligations under the Helsinki Convention. The development of the program, its strategic and technical aspects and details of activities to be supported are provided in Annex 1. Additional information about the JCP, which provides the overall framework for the program, is available in the project files.

The program triggers for each phase would be as follows:

· Phase 1. Introduction of the Ecosystem Approach (2001-2002). Triggers to move from Phase 1 to Phase 2 would be the establishment of the regional management structure; initiation of operations at Coordination Centers; and successful implementation of initial activities for land and coastal management.

· Phase 2. Demonstration of the Ecosystem Approach (2003-2004). Triggers to move from Phase 2 to Phase 3 would be successful undertaking of monitoring and assessment activities for coastal and open sea areas; continued implementation of land, coastal and open sea management activities; and initiation of cooperative programs that link land, coastal and open sea management issues.

· Phase 3. Application of the Ecosystem Approach (2004-2006). This phase would provide the basis for the expansion of the application of the ecosystem-based approach to a broader range of activities within the context of the HELCOM JCP and at the national and local level within recipient countries.

Annex 1, the Project Log-frame, provides the key performance indicators for project. Performance indicators of progress towards achieving the program purpose, and performance triggers to move from one phase to the next will be tracked through a monitoring and evaluation system. This system is detailed in the Project Implementation Plan and Project Procurement Plan (PIP/PPP).

C: Project Description Summary

1. Project Components (see Annex 2 for a detailed description):

The Project components are based on the Large Marine Ecosystem (LME) concept and include integrated land, coastal and open sea activities to strengthen the local and regional capacity to achieve sustainable ecosystem management of the Baltic Sea resources. Sustainable management will improve ecosystem health while providing social and economic benefits to farming, coastal and fishing communities and sectors such as businesses and tourism. The Project has four components. Annex 2 provides the Project description, identifies the management and implementation responsibilities, Annex 2, Figure A illustrates the project design; the Project’s organizational structure is represented in Figure B; Attachment A summarizes the Component activities, sub-activities and tasks, and the proposed phases for component activities, and Attachment B summarizes the phased GEF funding related to the Component Activity performance indicators.

Component 1 – Large Marine Ecosystem Management Activities (US$17.7 million, or 44 percent of the total cost) The prevailing coastal and open sea water management issues in the Baltic Sea are ecosystem impacts from eutrophication and over fishing. Successful management of these issues requires strengthened institutional and technical coordination of information, resources and management activities at the regional and local levels. While threats to the system and other transboundary issues have been identified, current resource management policies and practices are not holistic and ecosystem-based. To address these issues and meet national obligations under the Helsinki Convention, the Component was designed within an LME context with an ecosystem-based approach to monitoring, assessment, and management of the Baltic Sea resources. The component’s primary objective is to introduce the principles and demonstrate the application of the LME concept for Baltic Sea coastal and open sea resources. Component activities are interdependent and will be used jointly to overcome short-term sector-by-sector attempts to manage resources and environments. Component 1 will introduce jointly planned and implemented multi-national monitoring surveys that facilitate local cooperation and coordination and use of innovative methodologies for assessing the changing state of the ecosystem and development of effective strategies for the management of these shared resources. Component activities provide the mechanisms to meet these objectives through improving coastal and open sea monitoring and assessment practices, understanding the carrying capacity of the coastal and open sea ecosystem, promoting sustainable fishery practices, and supporting strengthened regional management and local capacity. In coordination with the other Project components, Component 1 will: (i) establish local and regional administrative and organizational mechanisms, through the Coordination Centers, for cooperative monitoring and assessment activities, (ii) develop management tools through modeling and assessment to provide proposals for ecosystem-based management of land, coastal zones and open sea waters, and (iii) support cooperating countries to move toward compliance with international agreements, regional priorities and national policies, including the Helsinki Convention, Baltic 21, and EU environmental and water management directives (Russian Federation excluded). The Project will support activities in the coastal near shore environment of the Eastern Baltic Sea and in selected adjacent sections of the open sea environment. In general, the coastal near shore activities and monitoring network will correlate with land-based coastal and associated demonstration activities supported under Component 2.

Component 2 – Land and Coastal Management Activities (US$18.3 million, or 46 percent of the total cost). Addressing land-based agricultural inputs to coastal and open sea waters and improving coastal zone management are critical for management of the Baltic Sea ecosystem. The JCP highlights management of agriculture inputs and coastal areas of the Baltic as priority issues. The agricultural element of the Component will (i) test administrative and organizational mechanisms (regional and local) and provide advice and support to the farming community; (ii) assess farmers’ interest in and willingness to pay for improving their environmental management practices; (iii) assist farmers to lower both the risk and barriers that currently hinder adoption of new practices; and (iv) provide support for small-scale environmentally responsible agricultural investments. The Project will partially finance investment costs for on-farm environmental facilities, operating expenses of local implementers, equipment recommended by the farm management plans, and recurrent costs for local capacity building. The coastal zone management element of the Component will (i) focus on the role that can be played by local communities in sustainable management of coastal resources; (ii) link activities in the demonstration watershed to measures being taken on the coast; (iii) support implementation of previously prepared management plans; and (iv) assist local communities to overcome barriers to adoption of new planning and management methods in these sensitive areas. The Project will partially finance costs for management activities, small-scale investments and demonstration activities and selected costs for local capacity building.

Component 3 – Institutional Strengthening and Regional Capacity Building. (US$1.0 million, or 3 percent of total cost). The Component’s primary objective is to strengthen regional and local capacity to successfully utilize outputs and recommendations from Component 1 and Component 2 activities for sustainable ecosystem-based management. It will include activities for (i) regional capacity building that will focus on regional administrative, socioeconomic, and technical matters as they pertain to management of Baltic Sea resources; (ii) targeted activities to facilitate improved regional level coordination and cooperation between HELCOM, IBSFC, ICES and regional stakeholders; (iii) support for improved valuation of ecosystem goods and services though an evaluation of the socioeconomic implications of reduced eutrophication on ecosystem resources; (iv) a program to support training activities for community-based groups and local NGOs; and (v) a regional public outreach program.

Component 4 – Project Management (US$3.0 million, or 7 percent of total cost). Component costs are for local and regional Project management, contracting procurement services, and costs for the social assessment and required financial audits.

Summary of Costs for Project Components

2. Key Policy and Institutional Reforms Supported by the Project:

Although the Project does not include policy or institutional reforms as a specific activity, it is inherent in the overall objective to facilitate strengthening of regional, national and local capacities to promote, support and implement improved ecosystem-based management. This Project will provide the recipient countries with opportunities to develop mechanisms to implement and/or reinforce existing regional, national and local policies.

· Component 1 Large Marine Ecosystem Management Activities. This Component will provide opportunities for improving current fisheries management practices and subsequent policy reforms compatible with IBSFC and HELCOM recommendations for fisheries and application of EU directives in its member countries within the Baltic Sea region.

· Component 2 – Land and Coastal Management Activities. Through support for agricultural run-off demonstration activities and farm level management actions and investments, this Component will assist in application of the Code of Good Agricultural Practices, which will support national sustainable agriculture policy reforms. Coastal zone management activities will facilitate implementation of demonstration activities in areas that have benefited from cooperative planning and management studies prepared by national and local governments. This will allow for operational experience with the coastal zone management process.

· Component 3- Institutional Strengthening and Regional Capacity Building. This Component will build local and regional capacity and strengthen institutions, providing them with experience in development and application of ecosystem based management tools. The proposed Baltic Sea Steering Group (BSSG) will serve as a mechanism for overall oversight of project implementation, and its members will be instrumental in resolving the emerging issues and disseminate information and experiences throughout the region.

· Component 4 - Project Management. This Component will provide an opportunity for expanded operational level cooperation among the three international bodies - HELCOM, IBSFC and ICES - all of which have roles in management of the common resources of the Baltic Sea.

3. Benefits and Target Population:

The primary regional benefit lies in strengthening the decision making process at the regional, national and local level for sustainable ecosystem-based management of the Baltic Sea resources. This should result in:

· Strengthened regional institutional capacity for coordinated decision making and dissemination of recommendations;

· Empowerment of local communities in the management of agricultural and coastal resources;

· Demonstration of an effective mechanism for environmental management and on-farm environmental investments in agriculture;

· Demonstration of community based coastal zone management activities;

· Reduction of nitrate input to Baltic Sea coastal and transboundary waters;

· Sustainable use of fishery resources at the regional and national levels;

· Improved marine ecosystem health and related benefits associated with fisheries, other living resources and coastal populations; and

· Progress towards meeting HELCOM’s goal of restoring the ecological balance of the Baltic Sea.

The Project’s target population and beneficiaries include:

· The Three International Bodies—HELCOM, IBSFC, and ICES: will benefit from the efforts to facilitate regional cooperation and coordination in the decision-making process;

· Recipient Country National and Local Governments: will have an opportunity to improve their technical capacities and participate as equal technical and political partners in the three international bodies;

· Farming Communities: through farm investments, farmers will save money by not using chemical fertilizers, increase revenues from improved productivity, and reduce noxious impacts from odor;

· Coastal Communities: will be able to utilize resources from a better managed coastal ecosystem, which will indirectly benefit the local businesses and employment through an increase in tourism;

· Fishing Communities: will be able to use more efficient technologies and methodologies for sustainable use of fishery resources; and

· Tourism Interests: will benefit in the long-term through a rise in sustainable coastal tourism that emphasizes natural resource and cultural values.

4. Institutional and Implementation Arrangements:

Project Coordination. HELCOM will serve as the executing agency for the Project and will undertake this work in full coordination and cooperation with IBSFC and ICES. A Project Management Unit (PMU) will be established in HELCOM headquarters in Helsinki, staffed with a Project Manager and Financial Management Specialist. An independent consultant that will support procurement and disbursement actions will assist the PMU staff. The current BSRP Core Group[6], which has supported preparation of the Project, will be replaced by the BSSG that will provide broad-based support for the implementation process. The BSSG will consist of members from HELCOM, IBSFC, and ICES, senior level representatives of the recipient countries, Baltic 21, UNDP, World Bank and WWF. The PIP/PPP will provide TORs and details of the administrative and Project management arrangements.

Management of the Components. The following arrangements will be used for management of the components included under the Project:

· Component 1 – Large Marine Ecosystem Management Activities. Component 1 will be implemented under the supervision of ICES, working closely with IBSFC and HELCOM. ICES will contract a Component 1 Coordinator (C1C), who will be responsible for overall management of Component 1 and will supervise the implementation of Project-supported activities. The Assistant Coordinator (AC1) will operate locally and serve as the Local Implementation Unit (LIU). The AC1 will be responsible for day-to-day Project management and administration. The AC1 will work directly with the Local Project Managers (LPMs) at the technical Coordination Centers. The LPMs will be responsible for day-to-day implementation responsibilities in their respective countries. The PIP/PPP will provide TORs for the C1C, AC1, and LPM/Coordination Centers.

· Component 2 - Land and Coastal Management Activities. Component 2 will be implemented under the supervision of HELCOM, in coordination with IBSFC, ICES, and WWF.

à Agricultural Activities. The Swedish University of Agricultural Sciences (SLU) will manage the agricultural activities under this component on behalf of HELCOM. The SLU will contract a Component 2 Coordinator (C2C), who will be responsible for overall management of Component 2 and will work with existing field structures established under the Swedish supported BAAP project and the Rural Environmental Protection Project in Poland. The LIU will operate in each country, and will be responsible for day-to-day Project implementation and administration. The LIUs will be staffed with a unit manager, technical specialists, and agricultural advisors. The PIP/PPP will provide TORs for the C2C, and the LIUs.

à Coastal Zone Management Activities. The coastal zone management activities under Component 2 will be coordinated with Component 1 and managed by the WWF, who will provide a coordinator to work with the Area Task Teams, established in the demonstration areas during the HELCOM Project Implementation Task Force (PITF) Working Group on Management Plans for Coastal Lagoons and Wetlands (MLW) supported planning and management studies. The studies will serve as the basis for implementation of these activities, and will be coordinated by local governments, community based organizations and nongovernmental organizations. The PIP/PPP will provide TORs for the coordinator and local counterparts.

· Component 3 - Institutional Strengthening and Regional Capacity Building. This Component will be managed by HELCOM in cooperation with IBSFC and ICES. The BSSG will work with these three institutions to review and disseminate information and management tools developed under the Project.

· Component 4 - Project Management. Component 4 will provide support for Project management by HELCOM and the cooperating parties. This includes support for the PMU at HELCOM and the various administrative services required for Project reporting, procurement, disbursement and financial management. It will also include support for the independent audits required by the Bank. As noted above, HELCOM will retain the services of a qualified firm, with significant experience in Bank procedures, to assist with procurement and disbursement actions. The firm will undertake preparation of the bidding documents and review of bids for civil works and equipment, and preparation of terms of reference for services and facilitate evaluations and support HELCOM in negotiations. The firm will also provide basic training concerning procurement and disbursement procedures to Project personnel in the early phase of the Project and provide additional training as appropriate.

Accounting, Auditing and Reporting Requirements. The Project will comply with the “Guidelines for Financial Reporting and Auditing of Projects Financed by the World Bank.” The Bank together with HELCOM will agree upon reporting requirements for Project management reports (PMR). Project progress will be reported through annual, semi-annual and quarterly Project progress reports, and an Implementation Completion Report (ICR) will be prepared within six months of Project completion. The Project will be consistent with the requirements of the World Bank, including the provisions of the Loan Administration Change Initiative (LACI). A LACI assessment and an up front agreement on accounting and auditing procedures that are acceptable to the Bank were reached in May 2000 with HELCOM. This agreement includes a time-bound action plan to address financial management issues and a reporting system that fully complies with LACI requirements. The PIP/PPP will detail the relevant Bank policies and requirements.

Project Monitoring and Evaluation. HELCOM will report to the Bank and be responsible for ensuring that all GEF funded activities are carried out in compliance with Project design and contracts. The Project will comply with the required monitoring and evaluation procedures as required for the Mid-Term Review and Implementation Completion Report. The evaluation will rely on both qualitative and quantitative criteria using Bank guidelines, “Monitoring and Evaluation of Program Impacts.” Resources have been set aside to support the conduct of both these evaluations by independent reviewers. The Mid-Term Review will provide suggestions on possible improvement of the implementation plan and steps that could be taken to ensure achievement of Project goals in the remainder of the implementation period. The Mid-Term review will be conducted during the second half of the second year of implementation and the Implementation Completion Report will be completed no later than four months prior to closure of the Project. The PIP/PPP will detail the process for these reviews.

D: Project Rationale

1. Project Alternatives Considered and Reasons for Rejection:

In designing the Project, several options were considered. In terms of financing, the Project was originally planned and submitted to GEF as a traditional Bank operation; however, due to financial management concerns with the GEF, the Project was restructured to an Adaptable Program Lending (APL) to better match GEF resources in a phased approach. In terms of Project design, the proposed Project was selected on the grounds that it provides for an integrated approach to addressing the land, coastal and open sea issues while achieving JCP priorities. Component 1 is designed to provide linkages with existing regional programs and initiative and to meet Helsinki Convention obligations, while Component 2 builds on and expands the successful pilot demonstrations begun under the BAAP, and complements the GEF supported Rural Environmental Protection Project in Poland. It also supports implementation of the Coastal Lagoon and Management Plans developed by the HELCOM PITF MLW. Component 3 is critical to facilitate the strengthening of regional and local capacity. The other design alternatives reviewed and considered include:

· Individual National Programs: These would be costly and likely result in duplication and inconsistencies. Individual programs could not address transboundary issues or the need for systematic and coordinated monitoring and assessment for regional management of the Baltic Sea resources.

· Curative Investment Programs: These would respond only to problems rather than proactively addressing the problems’ source. Ultimately this type of program would be expensive with minimal sustainable results, and provide little opportunity for coordinated regional management.

· Sector Specific Programs – Agriculture, Coastal or Open Sea Resource Programs: These would have limited benefits, as they would address only half of the ecosystem issues. Addressing only the open sea issues, for example, ignores the predominant problem of pollution from non-point sources. Again, sector specific programs would not provide opportunities for regional management.

2. Major Related Projects Financed by the Bank and/or Other Development Agencies (in the last five years completed, ongoing and planned):

The BSRP, builds on the lessons learned from complementary projects, and provides linkages with ongoing projects in the area. This Project has been designed in conjunction with the Rural Environmental Protection Project in Poland and has been coordinated with the work of GIWA, which is conducting a pilot study on the Baltic Sea.

Sector issue	Project	Latest Supervision (PSR) Ratings
		(Bank-financed Projects only)
		Implementation Progress (IP)	Development Objective (DO)
Bank-financed
1) Estonia - environmental management in coastal areas	Haapsalu and Matsalu Bays Environment Project	S	S
2) Estonia – strengthening agricultural practices.	Agricultural Development Project	S	S
3) Latvia - environmental management in coastal areas	Liepaja Environment Project	HS	HS
4) Latvia – strengthening agricultural management practices	Rural Development Project	HS	HS
5) Lithuania – watershed and water quality management	Siauliai Environment Project	S	S
6) Lithuania - water quality and environment management in coastal areas	Klaipeda Environment Project	S	S
Other
Regional - Government of Sweden	Baltic Agricultural Run-off Action Program (BAAP)

IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), and HU (Highly Unsatisfactory)

3. Lessons Learned and Reflected in the Project Design:

Lessons learned in the region, including those from GEF projects [7] were considered during Project preparation. A reviews of “lessons learned” prepared for the first phase of the JCP and development of Baltic 21 identified three key measures as critical to the success of activities at the regional, national and local level: (i) sustained political and public commitment to the long-term objectives of the program; (ii) a “shared vision” provided through a commonly prepared “strategic action program” or similar document; and (iii) a broad based partnership to support implementation of the agreed “preventive” and “curative” actions. It has been recognized that the major challenge facing all regional environmental programs/projects is translating plans into action. At the operation level, the key lessons learned by the donors and recipient countries that have worked in the region on agricultural and environment projects include:

· Long-term commitment is required from the recipient countries to address the regional issues.

The recipient and cooperating countries are members of HELCOM, and have a demonstrated record of taking actions to meet their commitments under the Helsinki Convention.

· All participants must have a shared understanding of the goals necessary to address the issues.

The three cooperating international bodies and representatives of the recipient countries have actively participated in the Project preparation process and in the previous activities related to implementation of the JCP.

· Linkages with other ongoing activities are necessary to optimize benefits for the recipient countries.

The Project design builds on BAAP project activities, and links with GEF, EU, and Bank projects where appropriate. Special measures will be used for coordination with the Rural Environmental Protection Project in Poland and the Baltic Sea pilot activities supported by GIWA.

· Capacity building is critical for innovative and effective decision-making and management.

The Project objective is to build regional, national and local capacity to strengthen the decision making process for sustainable ecosystem-based management of the Baltic Sea resources.

· Consistent procedures are needed to evaluate and monitor transboundary issues.

The Project supports upgrading of the quality of the systems used by HELCOM, IBSFC and ICES to evaluate, assess and monitor transboundary environmental conditions in the Baltic Sea. These systems will be used by regional, national and local organizations for more effective environmental management. The PIP/PPP will detail the monitoring and evaluation process, which addresses transboundary issues.

· The project design considers the cost-effectiveness and affordability of project activities.

The activities for Component 1 focus on streamlining current practices and optimizing more cost-effective monitoring and assessment processes. Experience from BAAP activities for agricultural management and previous Bank and WWF supported coastal zone management activities confirms that the proposed activities are cost-effective.

In addition, the Bank’s experience in the region has generated important lessons for Project design and implementation mechanisms. These include:

· Project design must consider and include lessons learned from similar rural development and environmental management projects in the region.

Design of the Project has benefited from the experience gained to date in implementation of a series of rural development and environmental management projects that have been supported by the Bank over the last decade in the Baltic Sea region. The design has also benefited from lessons from the Swedish funded BAAP Phase I that addressed management of agricultural run-off at the regional level, as well as related national level activities supported by the European Union, Denmark, Finland, Netherlands, Norway and United States. It also included examination of lessons learned in coastal zone management from previous European Union, WWF and Bank supported activities in the region.

· Mutual understanding and agreement is needed between the donors and local counterparts on project process and expectations.

The Project Core Group has used a consultation process involving representatives from the recipient countries and donor community who have been involved in Project design and preparation, including participation in regional workshops. Project preparation included a regional meeting to review transboundary water management issues in the region, a regional workshop on living marine resources management, and a regional workshop on management of non-point source pollution from agriculture. A study tour was also made to Poland to review the experience and management of the Rural Environmental Protection Project.

· Project goals and activities must be clearly defined in addressing the issues.

The transboundary and priority issues were identified in the JCP process, which helped in defining the Project objective and supporting component activities. The goals and activities have been developed through an interactive process that has included extensive regional workshops as well as meetings at the national and local level. The Project builds upon earlier activities supported by HELCOM in the context of implementation of the JCP.

· A clear project framework is necessary for successful implementation.

The Project design supports the current development for ecosystem-based approach to management and is consistent with the LME concept for sustainable ecosystem-based management and the activities under the components have been divided in a manner to allow for effective management, supervision and monitoring. The PIP/PPP will clearly outline the implementation process for successful implementation.

· The procurement and disbursement procedures are clearly understood by the regional partners and recipient countries early in the project process.

The procurement needs are clearly identified, and HELCOM will subcontract an independent firm with experience in Bank procurement and disbursement procedures. Basic training on procurement and disbursement procedures will be provided by the consultant to Project managers and local counterparts early in the Project implementation process and supplemental training will be provided as necessary.

· Capacity building, assessing community needs, and working with the community to raise public awareness can assure product quality.

The focus of the Project is on building capacity for the use of ecosystem based management for the Baltic Sea at the regional level and at the same time strengthening capacity at the national and local level to better manage environmental dimensions of agriculture, coastal zones and fisheries. Previous work under the JCP, especially in agriculture and coastal zone management, has been based on extensive consultations with communities to identify their goals and needs. Social assessment work to be conducted during the Project will facilitate further consultations and improve the targeting of interventions. All Project supported activities will include specific provisions for public awareness activities for decision makers as well as farming, coastal and fishing communities.

· It is important to have political support to establish a strong, functional institutional infrastructure.

The recipient countries are all members of HELCOM and are committed to meeting their obligations under the Helsinki Convention. At the regional, national and local level throughout the region, there is strong political and public support for measures to improve environmental management and to take actions to restore the ecological balance of the Baltic Sea. The Project builds upon the long established institutional infrastructure of HELCOM, IBSFC and ICES, which complements existing national and local institutions. All activities build upon existing networks established by the three cooperating international bodies in undertaking their work, as well as on the BAAP agricultural network and the WWF coastal zone management network.

4. Indications of Borrower Commitment and Ownership:

All the recipient countries are contracting parties to, and support implementation of the Helsinki Convention; contribute to the operational costs of HELCOM; and are active in undertaking priority activities included in the JCP. The Project design promotes strengthened coordination between the three international bodies responsible for regional activities in the Baltic Sea and supports priority preventive and curative measures and institutional development activities identified in the JCP. Preparation of the Project has been conducted under the joint supervision of HELCOM, IBSFC and ICES with the participation of national and local level representatives of the recipient countries. This process has included the involvement of national academic organizations, applied research institutes, farmer organizations and nongovernmental organizations. The cooperating international bodies have made a commitment through formal decisions of their executive bodies to support implementation of the Project and have provided significant expertise in the preparation process. At the national and local level, government officials and experts have participated in a large number of regional and national level workshops and meetings that have been conducted in all cooperating countries to support the design process. In this context, the cooperating international bodies and countries have made facilities available for these consultations, which have included broad based participation. At the local level, significant commitment and ownership has been shown for activities concerning agricultural and coastal management by local communities and residents that have worked with the HELCOM/SLU, NEFCO and WWF in the preparation process. Latvia also hosted a regional meeting to support preparation of Component 1; Lithuania hosted a regional meeting to support preparation of Component 2; and Poland hosted a field visit program to review implementation experience with activities supported by the Rural Environment Protection Project.

5. Value Added of Bank and Global Support in This Project:

The GEF’s added value is to provide incentives for sustained operational level cooperation among the three international bodies and financially support national and local governments and participating nongovernmental organizations to address priority transboundary water problems in the Baltic Sea ecosystem. The Project’s regional approach, with GEF support, contains provisions for making available financial resources to the recipient countries; to meet the “incremental costs” to address transboundary issues on an accelerated basis by buying down the costs for actions by the recipient countries. GEF funds will specifically assist in providing linkages and harmonizing national and local actions with regional environmental objectives. The GEF is leveraging funds from national and local governments, European Union, bilateral donors, NEFCO, applied research foundations and WWF that contribute to more effective regional coordination and cooperation. Without the combined regional experience of the Bank, NEFCO and WWF, and the incremental resources of the GEF, implementation of the Project would proceed at a slower pace and would not fully benefit from integration, coordination and management actions promoted by this Project. In addition, the GEF will support small-scale investments in agriculture, coastal zone management and fisheries management that may provide a framework for potential future investments supported by national and local governments in cooperation with the European Union, bilateral donors and international financial institutions.

E: Summary Project Analysis

1. Economic (supported by Annex 3 - Incremental Cost Analysis):

Consistent with GEF operational policy, the requested GEF funds would only be used to finance the incremental costs associated with addressing transboundary costs in the Baltic Sea region. The GEF Alternative Scenario has evaluated a series of critical measures for transboundary management that require support from GEF and other international sources to remove barriers to implementation of key elements of the JCP. This Project is composed of a series of necessary activities to improve transboundary management of freshwater, coastal and open sea ecosystems. Support from GEF is necessary for transaction costs for cooperation to: (i) provide linkages and develop common approaches and standards for marine ecosystem protection; (ii) coordinate efforts to close gaps in spatial and temporal transboundary monitoring and assessment surveys; (iii) establish a practical framework for sustainable fisheries management; (iv) assist local communities in implementation of coastal zone management plans; (v) support measures to assist countries to reduce transboundary non-point source pollution from agriculture; and (vi) facilitate strengthening of regional, national and local capacities for environmental management. The incremental cost of realizing the benefits of the overall JCP have been estimated at US$18.0 million and are additional to what each government could be reasonably expected to finance if national benefits alone were included in the economic analysis. These also complement GEF investments made for the complementary Rural Environment Protection Project under implementation in Poland.

2. Financial and Financial Management

The total cost for the Project is estimated at US$40.0 million of which GEF will finance US$18.0 million (45 percent). The GEF will finance foreign and local incremental costs and part of the recurrent costs. Local costs are US$6.8 million (17 percent), which will be provided in kind by national and local governments and farmers through their contributions of labor and materials for on-farm improvements. Part of the national government in-kind cost will be their contribution to HELCOM. The co-financing contribution is the remaining US$15.2 million (38%). Currently US$7.6 million (50% of the proposed co-financing) has been committed by NEFCO, Sweden, and United States (NOAA). Discussions are ongoing with European Union, bilateral donor organizations, NEFCO, applied research foundations and the WWF for the additional US$7.6 million. The discussions will be completed in spring 2001. The Project complies with relevant Bank policies (OP/BP 10.02).

The incremental costs from GEF, lines of credit from NEFCO, donor contributions and assistance from WWF will supplement the recipient country national and local government contributions to this Project. The budgets will be revised at the completion of negotiations; support from NEFCO will be subject to cross conditionality of effectiveness with the GEF agreement signed with the Bank. The Project has secured donor support and co-financing from the recipient countries; the GEF funds will only be used to cover the incremental costs, minimizing the financial risks.

At the outset, disbursement will be based on traditional disbursement procedures and will be converted to disbursement under the LACI framework based on quarterly Project management reports (PMRs) at a date determined during negotiations. A Financial Management System (FMS) conforming to LACI guidelines will be updated for this Project. The financial management reports will be generated from the FMS. The Project will provide for design and implementation of a Management Information System (MIS) that will include key aspects of the FMS, such as budgeting. Funds are available to conduct audits of Project accounts.

3. Technical:

The Project will support the adoption of proven planning methods, management techniques and technologies that have been used at other locations in North America and Europe. Component 1 will assist in the upgrading of technologies, analytical approaches and decision-making tools for biological monitoring, ecological assessments and fisheries management measures in coastal and open sea waters. Through the Coordination Centers, this will include standardization of data collection methods; laboratory equipment; and the techniques necessary for quality assurance. Demonstration activities will support coastal habitat and stream restoration. The planning methods and technology used in Component 2 include development of environmental management and business plans for farms that are used in many countries in the region and simple, low-cost, well-tested practices for nutrient recycling structures, which have been used in demonstration programs in the recipient countries. Monitoring equipment for in-stream measurements will be established in the demonstration watersheds and coordinated with Component 1 coastal waters monitoring and assessment activities. The PIP/PPP will outline the technical specifications for equipment and small-scale civil works, and Terms of Reference for consulting services, to reduce technical risks during Project implementation.

4. Institutional:

HELCOM, which became operational in 1980, will serve as the Executing Agency for the Project. It will undertake implementation activities in full cooperation with IBSFC and ICES. The Components will be managed as follows: (i) Component 1 - HELCOM will have an agreement with ICES which will coordinate this component; (ii) Component 2 - HELCOM will have an agreement with SLU to coordinate agricultural activities and with WWF to coordinate coastal zone management activities; (iii) Component 3 - will be coordinated by HELCOM in cooperation with IBSFC, ICES, SLU and WWF; and (iv) Component 4 - will be coordinated by HELCOM. The World Bank will approve staff appointments and any major changes in staffing.

HELCOM will, with agreement from the Bank, contract a regional firm with significant experience in procurement and disbursement to provide these services for GEF funds included under the Project. This approach will significantly reduce both the costs to HELCOM and the risks associated with problems with Bank procurement and disbursement procedures. If appropriate, the consultant may also provide procurement and disbursement services for activities funded by other parties. The institutional arrangements and experience of the potential regional consultants are such that the institutional arrangements are sufficient and create limited possibility of procurement risks.

A Bank LACI assessment was conducted in May 2000 to review HELCOM’s financial management system. The LACI concluded that HELCOM is an organization with a high standard of accountability that meets Bank standards. HELCOM can be anticipated to manage the GEF funds and coordinate effectively with cooperating donor organizations. HELCOM specialist staff have received formal financial management, procurement and disbursement training from the Bank at headquarters and Project funding will be provided for additional training as required. In addition, informal linkages have been developed between HELCOM staff and the Bank concerning these issues.

5. Environmental Assessment:

Environmental Category [ ] A [X] B [ ] C

5.1 Summarize the steps undertaken for environmental assessment and environmental management plan (EMP) preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. The Project will support a series of complementary measures to improve environmental management in agriculture, the coastal zone and open sea environment. It will focus on supporting measures to reduce non-point source pollution from agriculture; improve coastal zone management; and adopt an integrated approach to the management of marine resources. The overall environmental screening category for the Project is “B” and a “freestanding” Environmental Management Plan (EMP) is being prepared as an element of the design process. A World Bank Environmental Data Sheet has been prepared. The Project components have been categorized as follows: (i) Component 1 - environmental screening category “B” due to focus on sustainable management of living marine resources; (ii) Component 2 - environmental screening category “B” due to actions for improved management of agricultural and coastal resources; (iii) Component 3 - environmental screening category “C” since the focus is on institutional strengthening and capacity building; and (iv) Component 4 - environmental screening category “C” since the focus is only on Project management, reporting and evaluation measures. The EMP and PIP/PPP will specify mitigation and monitoring measures that will be in place to minimize impacts and include specific measures for Component 1, which include application of new monitoring, assessment and management measures; and for Component 2, which include adoption of guidelines for design construction of manure pads, slurry tanks and the use of their contents, and guidelines for nutrient retention and wetland restoration. Preparation of the Project has been based on regional, national and local level consultations that are reviewed in Annex 5. The EMP will be made available in the InfoShop and recipient countries prior to the appraisal.

5.2 What are the main features of the EMP and are they adequate? The EMP will include specific design measures, construction supervision methods and monitoring actions to minimize and/or avoid the limited potential adverse impacts associated with activities included in Components 1 and 2. The primary focus of the EMP will be on issues related to the construction of small-scale civil works for on-farm nutrient management and installation of monitoring stations. To minimize impacts from land disturbance during short-term construction, mitigation measures will be in place and include (i) adopting guidelines for design and construction of manure pads, slurry tanks, and other nutrient recycling structures, and (ii) design and construction of in-stream monitoring stations and mitigation measures to reduce construction impacts. Activities for coastal zone management and wetland restoration demonstrations will be subject to proper management plans that will require formal review and approval by national and/or local authorities as appropriate. These procedures will be outlined in the EMP.

5.3 For Category A and B projects, timeline and status of EA: An Environmental Management Plan is being prepared as part of the Project design process and will be made available in the InfoShop, recipient countries and at Bank Resident Missions prior to the appraisal. Guidelines for mitigation measures for Component 2 will also be included in the PIP/PPP.

5.4 How have stakeholders been consulted at the stage of (i) environmental screening and (ii) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms of consultation that were used and which groups were consulted? Development of the Project has involved a broad based consultation process that has included a regional meeting to review transboundary water management issues in the Baltic Sea region resulting in the Vilnius Recommendations, regional workshops, and national and local level meetings during which the environmental aspects of the Project have been reviewed. For Component 1 discussion with counterpart stakeholders concluded that there are only limited environmental impacts associated with the operation and maintenance of scientific equipment, use of chemicals in certified laboratories and a need to collect live specimens for certain types of biological monitoring. For Component 2, farmers and advisory organizations already involved in the BAAP demonstration projects understand the environmental issues associated with small-scale civil works for on-farm improvements and monitoring stations and are engaged with local authorities and with the farm communities.

5.5 What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? The Project supports an extensive program of interventions to monitor and evaluate its impacts in agricultural and coastal zones and the open sea environment. This information will be made available to the public through HELCOM, IBSFC, ICES and national and local governments. A full set of indicators has been developed for the Project and these evaluate specific environmental trends. Specific actions will be included in Components 1 and 2 to monitor the implementation of the EMP. An evaluation and monitoring plan and schedule will be included in the PIP/PPP.

6. Social: (Detailed in Annex 5)

While there has been no systematic social assessment during Project preparation, active engagement of local stakeholders during preparation has been positive. In preparing Component 1 a consensus among the stakeholders confirmed that the Baltic Sea fisheries and water quality have deteriorated. Any effort for sustainable fisheries will benefit the fisheries and coastal communities, and improve businesses related to the fisheries sector. The Project will support efforts to find solutions to problems and conflicts between recreational and commercial fisheries, fisherman and fisheries managers, and for transboundary issues. For Component 2, evaluations during the pilot demonstration projects showed positive social benefits. Participating farm families noted increases in farm productivity, reduction of odor, and subsequent environmental improvements from improved manure storage. The coastal zone management activities are based on management plans that have been developed under the leadership of WWF as part of the HELCOM sponsored PITF Working Group on Coastal Lagoons and Wetlands. The activities will directly involve coastal fishing communities through small-scale investments and build local community capacity for sustainable environmental management. The community will benefit from the Project’s efforts to improve understanding of ecosystem value.

Building on the approach used in the Rural Environmental Protection Project in Poland, the Project includes a systematic social assessment to evaluate the social impacts from the component activities and outreach program, to provide potential modifications to the Project design as needed. This work will be coordinated by a social scientist from the Bank and will be undertaken by local social scientists in order to transfer skills in social assessment to the cooperating countries. The findings of these activities will allow national and local governments, as well as beneficiary communities to have an improved understanding of the social dimensions of these environmental management interventions. Terms of Reference (TOR) for the social assessment are included in the PIP/PPP.

6.1 Summarize key social issues relevant to the project objectives, and specify the project’s social development outcomes: Currently the social welfare system in the recipient countries provides little support to the farming, coastal and fishing communities, which have suffered significantly during the period of economic transition. The Project will support sustainable economic growth in agricultural, coastal and fishing populations by providing them with opportunities to increase their incomes directly through more efficient use of these resources. In agriculture the new approaches supported by the Project will reduce the need for use of fertilizers and increase productivity of fields and improve efficiency of water use. In coastal areas, Project supported planning and management activities will reduce problems caused by poor planning, increase efficiency of resource use, create employment in small scale local enterprises and stimulate both international and domestic tourism. The activities for fisheries management should diversify economic opportunities for fishermen and allow for more stable income from more stable fishery resources. Coastal zone management activities will strengthen community capacity by involving local people in community driven activities, and improve the local standard of living for the farmer and fishing communities. The long-term benefits, a sustainable ecosystem, will benefit the entire coastal community and business sector.

6.2 Participatory approach: How are key stakeholders participating in the project? The Project engages a range of stakeholders and beneficiaries in the preparation and implementation process. Many of these parties have previously been involved in a number of activities related to environmental management at the regional level under the JCP and/or national level activities associated with government programs. The parties include:

· Cooperating international bodies—HELCOM, IBSFC, ICES;

· National and local governments;

· Farming, coastal and fishing communities;

· Agricultural extension services;

· Local community based organizations and nongovernmental organizations;

· Public and private sector enterprises; and

· International partners.

Local technical and fisheries institutions, which participate in HELCOM/IBSFC/ICES activities, are familiar with current living marine resource management issues and these institutions have been actively engaged in defining Project activities for Component 1. Local rural communities, who have been involved in the BAAP project, provided insights on lessons learned and recommendations on Project modifications. Local BAAP extension services are actively engaged in the farm communities, and can provide insights on Project implementation. These extension services coordinate training programs, workshops and community outreach activities and provide technical assistance for environmental investments. The communities have been receptive to the activities, and are willing participants when resources are available. The coastal communities where the demonstration activities are proposed have already participated in locally based coastal zone planning and management studies undertaken in the context of the JCP.

Representatives of NEFCO, Sweden, United States (NOAA) and WWF have been participated in the design of the Project and various preparation missions. The team has consulted with experts from the European Union, Denmark, Finland, Germany, Norway, Poland, Sweden, United States and Coalition Clean Baltic concerning various aspects of the Project.

6.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations? Elements of the Project will be implemented under the coordination of the WWF, which has been actively working in the recipient countries for a number of years. It has successfully managed similar activities under Bank funded projects in Estonia, Latvia and Lithuania. These activities have been designed and will be undertaken in cooperation with local communities and nongovernmental organizations. In addition, the WWF will coordinate a capacity building activity for these same local counterpart groups as an element of Component 3. In Component 2, the Agricultural Advisory Services (AAS) and Farm Interest Organizations (FIO) will work with the farming communities during Project implementation and it is anticipated that these activities will continue after the Project is completed. The detailed design and implementation of the majority of the coastal zone management activities included in Component 2 will be undertaken by and/or involve coastal communities and local NGOs

6.4 What institutional arrangements have been provided to ensure the project achieves its social development outcome. The close association of the Project activities with HELCOM, IBSFC and ICES programs, ensures that local stakeholders can make significant contributions to meet Project objectives. Individually, each of these bodies provides an institutional framework within which the Project can work, and mechanisms will be made available to promote coordination and cooperation among the institutions and local stakeholders. A reporting, monitoring and evaluation system will be established under the supervision of HELCOM. On a local level, for Component 1 an institutional network will be established for local stakeholders. For Component 2, the LIUs will work directly with the FIO, AAS, and farming community. In addition, the Project includes a systematic social assessment to evaluate social impacts from the component activities and outreach program, to provide potential modifications to the Project design as needed. From the efforts within Component 3, local and regional capacity will be strengthened and the BSRP Steering Group will continue to operate in its capacity after the Project is completed.

6.5 How will the project monitor performance in terms of social development outcomes? HELCOM is responsible for overall Project implementation and will monitor Project performance in terms of social development outcomes. The ongoing social assessment process will also be used to monitor performance in terms of social development outcomes and provide a mechanism for making mid-Project adjustments to maximize these benefits. An evaluation and monitoring plan and schedule will be included in the PIP/PPP.

7. Safeguard Policies:

Safeguard polices are an effort to improve the Bank’s current policies and ensure greater compliance, and establish minimum standards to comply with operations. The safeguard policies that apply are identified below. The Project requires preparation of an Environmental Management Plan (EMP) consistent with the requirements of the OP 4.01, “Environmental Assessment.” The EMP will be prepared prior to the appraisal and be made available at the offices of the InfoShop, in the cooperating countries and at the Bank’s Resident Missions in the five recipient countries.

7.1 Do any of the following safeguard policies apply to the project?

Policy	Applicability
[x] Environmental Assessment (OP 4.01, BP 4.01, GP 4.01)	Yes
[ ] Natural Habitats (OP 4.04, BP 4.04, GP 4.04)	No
[ ] Forestry (OP 4.36, GP 4.36)	No
[ ] Pest Management (OP 4.09)	No
[ ] Cultural Property (OPN 11.03)	No
[ ] Indigenous People (OD 4.20)	No
[ ] Involuntary Resettlement (OD 4.30)	No
[ ] Safety of Dams (OP 4.37, BP 4.37)	No
[ ] Projects in International Waters (OP 7.50, BP 7.50, GP 7.50)	No
[ ] Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)	No

7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies. To ensure compliance with the applicable safeguard policies, an Environmental Management Plan will be prepared and implemented to address the impacts identified in the environment section (E.5. above). The provisions of the environmental management plan will be included in the PIP/PPP.

F: Sustainability And Risks

1. Sustainability:

The Project will support a series of activities designed to promote the sustainable use of land, coastal and open sea resources through an ecosystem based approach to management. These activities support what is a long-term process for restoration of the ecological balance of the Baltic Sea, which is the goal of the JCP. Since these actions are management focused, with investments being used to support management objectives, the sustainability of the Project’s interventions will rest upon the willingness and ability of parties at the regional, national and local level to adopt new approaches to environmental management, which are more preventive than curative in nature. The Project has been designed to accelerate the rate at which new management approaches are adopted and put into use in the Baltic Sea region; while the transition costs for these new approaches is significant, over the medium and long term these interventions should be institutionally, technically and financially sustainable by the three cooperating international bodies and the participating countries. In the case of the accession countries, some of these costs may be assumed by the various programs of the European Union.

2. Critical Risks:

The Project is designed to minimize the technical, economic, financial, social, environmental and institutional risks. Text in the “Risk” column is based on the Critical Assumptions from the fourth column of Annex 1.

Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), or N (Negligible or Low Risk)

3. Possible Controversial Aspects:

By minimizing the risks, it is anticipated that the Project will not have any social, ecological, institutional, or economic controversies. The proposed activities have formally been given high priority by HELCOM, the European Union, national authorities of the recipient countries, and by international and local NGOs. Some proposals related to the management of fishery resources could potentially be controversial at the national or local levels. This will be carefully monitored by HELCOM, IBSFC and ICES to identify issues when and if they arise and actions will be taken to address these issues.

Type of Risk: S

Rating: M

Types of Risk S (Social), E (Ecological), P (pollution), G (Governance), M (Management capacity), O (other)

Risk Rating – H (High), S (Sustainable Risk), M (Modest Risk), and N (Negligible or Low Risk)

G: Main Loan Conditions

1. Effectiveness Conditions:

Key HELCOM management staff, Component Coordinators and Deputy Component Coordinators appointed as full or part-time Project staff.

Required supplemental grant financing for the Project formally arranged with donors.

2. Conditions of Board Presentation:

The line of credit from NEFCO has been approved by its Board.

Sources of required supplemental grant financing for Project have been identified with specific donors.

3. Conditions of Negotiations:

A Project Implementation and Procurement Plan (PIP/PPP), satisfactory to the Bank, has been adopted.

4. Other Covenants [classify according to covenant types used in the Legal Agreements].

HELCOM will carry out the Project in accordance with the requirements of the Project Implementation and Procurement Plan.

HELCOM will maintain the PMU with staff and resources under terms of reference satisfactory to the Bank until completion of the Project.

HELCOM will convene regular meetings of the BSSG until completion of the Project, with terms of reference and composition satisfactory to the Bank.

HELCOM will establish and maintain a financial management system in accordance with accounting standards acceptable to the Bank, consistently applied, and carry out an agreed action plan for strengthening the financial management system within six months of Project initiation.

HELCOM will be responsible for standard reporting and supervise the achievements of the component benchmarks and performance triggers for the three phases.

H: Readiness for Implementation

1. [NO] The engineering design documents for the first year’s activities are complete and ready for the start of Project implementation.

These documents are under preparation and will be available at the time of Project appraisal.

2. [NO] The procurement documents for the first year’s activities are complete and ready for the start of Project implementation.

These documents are under preparation and will be available at the time of Project appraisal.

3. [NO] The Project Implementation and Procurement Plan is under preparation.

The draft Project Implementation and Procurement Plan will be available at the time of Project appraisal.

4. The following items are lacking and are discussed under loan conditions. N/A

I: Compliance With Bank Policies

1. This Project complies with all applicable Bank policies.

2. There are no exceptions to Bank policies and the Project is recommended for approval.

Task Team Leader/Task Manager: Stephen F. Lintner

Sector Manager/Director: Kevin M. Cleaver

Country Manager/Director: Michael F. Carter

Estonia, Latvia, and Lithuania

Country Manager/Director: Julian F. Schweitzer

Russian FederationWorld Bank User

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01/30/01 3:06 PM

Annex 1

BALTIC SEA REGIONAL PROJECT

Project Design Summary

Annex 2

BALTIC SEA REGIONAL PROJECT

Detailed Project Description

A. OVERVIEW

1. Globally Important Region. The Baltic Sea ecosystem is a semi-enclosed water body connected with the North Sea by narrow and shallow sounds that limit water exchange. Natural fluctuations are characteristic of the Baltic Sea ecosystem; the water is largely regulated by the sporadic inflows of saline and oxygen-rich North Sea water and intermediate stagnation periods. Contaminants and nutrients enter the Baltic Sea via river run‑off, through atmospheric deposition; and from human activities at sea. It is estimated that renewal of the water of the Baltic Sea takes about 25‑30 years. Although the Baltic Sea ecosystem provides goods and services to 80 million people inhabiting its shores and drainage basin, its full social and economic benefits are not currently being realized. Contaminants, especially persistent chemicals and other pollutants, remain in the Baltic Sea for a long time. Transboundary threats to sustainable economic development include: (i) degradation of water quality from point and non‑point sources of pollution; (ii) local degradation of the coastal zone from poor planning and land use practices; (iii) reduced productivity from eutrophication and harmful algal blooms in coastal and marine waters; (iv) unsustainable use of fisheries; and (v) diseases in marine life associated with pollution and emerging problems with introduced “alien” species.

2. Implementation of the JCP. The proposed Baltic Sea Regional Project will support implementation of the Joint Comprehensive Environmental Action Program for the Baltic Sea (JCP), which was prepared under the coordination of the Helsinki Commission by a high-level task force comprised of representatives of cooperating countries, international financial organizations and non-government organizations. The JCP, as adopted in 1992, and strengthened and updated in 1998, constitutes the “Strategic Action Plan” for the Baltic Sea region. The proposed Project will introduce ecosystem-based assessment and management of the environment and resources of the Baltic Sea. It will serve as a mechanism for managing the common resources of the Baltic Sea ecosystem through strengthened cooperation between three international bodies—HELCOM, IBSFC, and ICES—and the recipient countries. The Project will provide linkages with ongoing programs in the region and implement priority actions that address transboundary environmental issues, to achieve sustainable production of biological resources, conservation of living marine resources, and control of non-point source pollution from agriculture and other contaminants threatening the health of the ecosystem.

3. Recipient Countries and Cooperating Parties. The recipient countries include the eastern riparian countries of the Baltic Sea drainage basin—Estonia, Latvia, Lithuaniaand the Russian Federation. The cooperating parties include three specialized institutions—HELCOM, IBSFC and ICES—complemented by the European Union (EU), Denmark, Finland, Germany, Norway, Sweden, United States, NEFCO, UNDP, World Bank, and WWF. Preparation of the Project has been coordinated with two GEF supported activities, the Rural Environmental Protection Project in Poland and the Global International Waters Assessment (GIWA). The Project preparation process has also involved the participation of the Secretariat of Baltic 21.

4. Project Goals and Objectives. Project design is based on the Large Marine Ecosystem Concept (LME) concept and targets cooperative management of land, coastal and marine transboundary issues. Its objective is to facilitate the restoration of sustainable ecosystems, improve coastal zone management and reduce agricultural non-point source pollution through the introduction of ecosystem-based approaches for land, coastal and marine environmental management. The long-term goal of the JCP is to support the “restoration of the ecological balance” of the Baltic Sea through a phased program of actions. Consistent with JCP priorities, measures will also be taken to improve environmental management at the regional, national and local level by strengthening assessment and monitoring, and by supporting environmentally sound agriculture, coastal management, and fishery practices.

5. Approach. The LME[9] concept provides a framework for an ecosystem-based approach for sustainable management. The ecosystem-based management approach provides an additional tool to improve degraded conditions in the Baltic Sea. This approach recognizes civil society, economics, and the land, coastal and marine environments as an integrated system. Figure A illustrates the Project design and integrated approach. The Project design is comprehensive, addressing JCP objectives, threats to the Baltic Sea and transboundary issues through land, coastal and marine-based activities (see Annex on Transboundary Analysis).

6. Project Components. The Project has four components (summarized in Attachment A of this Annex). The Project has a total budget of US$40.0 million and will be implemented over a five-year period from 2001 to 2006. The components and component activities include:

· Component 1–Large Marine Ecosystem Management Activities (US$17.7 million)

à Activity 1 - Strengthening Institutional and Technical Capacity,

à Activity 2 - Coordinated Monitoring Surveys in the Eastern Baltic Sea,

à Activity 3 - Cooperative Local and Regional Ecosystem Evaluations and Assessments, and

à Activity 4 - Demonstration Activities.

· Component 2 Land and Coastal Management Activities (US$18.3 million)

à Activity 1 - Agricultural Interventions,

à Activity 2 - Monitoring and Assessment of Non-Point Source Pollution,

à Activity 3 – Land-Based Coastal Zone Management,

à Activity 4 - Agro-Environmental and Rural Policies, and

à Activity 5 - Regional Network.

· Component 3-Institutional Strengthening and Regional Capacity Building (US$1.0 million)

à Activity 1 - Regional Capacity Building, and

à Activity 2 - Regional Socioeconomic Assessment.

· Component 4-Project Management (US$3.0 million)

à Activity 1 - Project Management.

7. Component Phases. A phased approach is being pursued in order to support the Applied Lending Program (APL) process. The phased funding and performance indicators are summarized in Attachment B of this Annex. The project will be implemented over a 5-year period that includes the following phases:

· Phase 1. Introduction of the Ecosystem Approach (2001-2002). Establishment of the regional framework for introduction of the ecosystem approach; mobilization of partners in management of coastal and open sea marine resources; and initial activities for land and coastal management.

· Phase 2. Demonstration of the Ecosystem Approach (2003-2004). Undertaking cooperative activities for assessment and management of coastal and open sea marine resources; expansion of activities for land and coastal management; and joint activities for linkage of land, coastal and open sea management programs.

· Phase 3. Application of the Ecosystem Approach (2004-2006). Identification of next steps by the cooperating parties for expanded application of the ecosystem approach for land, coastal and open sea management; completion of field based management and demonstration activities; and preparation of evaluation and assessment studies.

The performance indicators for these phases are summarized in Annex 1. Performance indicators of progress towards achieving the program purpose, and performance triggers to move from one phase to the next will be tracked through a monitoring and evaluation system. This system is detailed in the Project Implementation Plan and Project Procurement Plan (PIP/PPP).

B. PROJECT MANAGEMENT

Project Management and Administration

8. Cooperating International Bodies. Responsibility for Project management and implementation will rest with HELCOM in coordination with IBSFC and ICES. Though each institution has a distinct operational mandate, their statutes call for cooperation and coordination with other bodies. The primary roles of these three bodies are described briefly below.

· Helsinki Commission (HELCOM). HELCOM, located in Helsinki, is the governing body of the Helsinki Convention (1974, 1992), which has as its mandate to protect the Baltic Sea marine environment. The Commission meets annually, with ministerial level representation. Decisions taken by the Helsinki Commission, which are reached unanimously, are regarded as recommendations to the Governments concerned. The implementation of the JCP is coordinated by the HELCOM Program Implementation Task Force (PITF), which is comprised of representatives of the EU, countries in the drainage basin, international financial institutions, and nongovernmental organizations (NGOs).

· International Baltic Sea Fishery Commission (IBSFC). IBSFC, based in Warsaw, was established pursuant to Article V of the Convention on Fishing and Conservation of the Living Resources in the Baltic Sea and the Belts (Gdansk Convention, 1973). IBSFC’s primary responsibilities are to coordinate management of the living resources in the Convention area by collecting, aggregating, analyzing and disseminating statistical data. It also recommends regulatory measures and promotes enforcement schemes. Each year IBSFC establishes the “Total Allowable Catches (TACs)” for commercial stocks in the Baltic and provides the Contracting Parties with recommendations to be implemented in their respective fishery zones during the next calendar year.

· International Council for Exploration of the Sea (ICES). ICES, based in Copenhagen, currently operates under the terms of its 1964 Convention. It is the oldest intergovernmental organization in the world concerned with marine and fisheries science. Since its establishment in Copenhagen in 1902, ICES has been a leading scientific forum for the exchange of information and ideas on the sea and its living resources, and for the promotion and coordination of marine research by scientists within its member countries. Since the 1970s, a major area of ICES work as an intergovernmental marine science organization is to maintain an international science program and to provide information and advice to Member Country governments and international commissions (including HELCOM, IBSFC and the European Commission) for the protection of the marine environment and for fisheries conservation.

Each institution has expanded its mandate to incorporate ecosystem considerations in its work. The Project’s objective of ecosystem-based management of Baltic Sea resources provides an opportunity for the three organizations to cooperatively apply ecosystem-based management and assessment methodologies for the Baltic Sea.

project management

9. Project Management. The institutional arrangements are based on a decentralized approach that combines regional and national level coordination with local level implementation. Primary responsibility for Project management will rest with HELCOM, which will serve as the executing agency for the Project and will undertake this work in full coordination with IBSFC and ICES. A Project Management Unit (PMU) will be established in HELCOM headquarters in Helsinki, staffed by a Project Manager and Financial Management Specialist. An independent consultant will assist this staff by supporting procurement and disbursement actions. The current BSRP Core Group[10], which has supported preparation of the Project, will be replaced by the Baltic Sea Steering Group (BSSG) that will provide broad-based support for the implementation process. The BSSG will consist of members from HELCOM, IBSFC; and ICES, senior level representatives of the recipient countries; Baltic 21, UNDP, World Bank and WWF. The Steering Group will not compete with any of the existing HELCOM or ICES Regional Working Groups, but cooperate to facilitate regional capacity building for a coordinated ecosystem-based management approach for the Baltic Sea ecosystem. Figure B illustrates the Project organization and management structure. The PIP/PPP provides TORs and details of the administrative and Project management arrangements.

10. Component Management. The following arrangements will be used for management of the components included under the Project:

· Component 1 – Large Marine Ecosystem Management Activities. Component 1 will be implemented under the supervision of ICES, working closely with IBSFC and HELCOM. ICES will contract a Component 1 Coordinator (C1C), who will be responsible for overall management of Component 1 and will supervise the implementation of Project-supported activities. The Assistant Coordinator for Component 1 (AC1) will support the work of the C1C; he or she will operate at the local level and be responsible for day-to-day Project management and implementation. The AC1 will work directly with the Local Project Managers (LPM) located at the Coordination Centers. The Coordination Centers will coordinate and supervise implementation of component activities in terms of ecosystem health, productivity and fisheries. The LPMs will be contracted from established institutes in each recipient country that engage in ICES activities. They will be responsible for day-to-day implementation in their respective countries. The PIP/PPP provides TORs for the C1C, AC1, and LPMs.

· Component 2 - Land and Coastal Management Activities. Component 2 will be implemented under the supervision of HELCOM, in coordination with IBSFC, ICES, and WWF.

à Agricultural Activities. The Swedish University of Agricultural Sciences (SLU) will manage agricultural activities under this component on behalf of HELCOM. The SLU will contract a Component 2 Coordinator (C2C), who will be responsible for overall management of Component 2 and will work with existing field structures established under the Swedish supported BAAP project and the Bank and GEF supported Rural Environmental Protection Project in Poland. Local Implementation Units (LIUs) will operate in each country, and will be responsible for day-to-day Project management and implementation. The LIUs will advise regional groups and organizations, and will work closely with local counterparts and farmers. The LIUs will be staffed with a unit manager, technical specialists, and agricultural advisors. The PIP/PPP provides TORs for the C2C and the LIUs.

à Coastal Zone Management Activities. The coastal zone management activities under Component 2, in cooperation with Component 1, will be managed by the WWF, which will provide a coordinator to work with the Area Task Teams that were established in the demonstration areas during the HELCOM PITF MLW supported planning and management studies. The studies will serve as the basis for implementation of these activities, which will be coordinated by local governments, community-based organizations and NGOs. The PIP/PPP will provide TORs for the coordinator and local counterparts.

· Component 3 - Institutional Strengthening and Regional Capacity Building. This component will be managed by HELCOM in cooperation with IBSFC and ICES. The work of the BSSG, which will review and disseminate information and management tools developed under the Project, will be an element of this component.

· Component 4 - Project Management. Component 4 will provide support for Project management by HELCOM and the cooperating parties. This includes support for the PMU at HELCOM and the various administrative services required for Project reporting, procurement, disbursement and financial management. It will also encompass support for the independent financial audits required by the Bank. HELCOM will retain the services of a qualified firm, with significant experience in Bank procedures, to assist with procurement and disbursement actions. The firm will undertake preparation and review of bid documents for civil works and equipment, and terms of reference for services; facilitate evaluations; and support HELCOM in negotiations. It will also provide basic training concerning procurement and disbursement procedures to Project personnel in the early phase of the Project and provide additional training as appropriate.

11. Project Implementation Plan (PIP) and Project Procurement Plan (PPP). The PIP/PPP, prepared by HELCOM, IBSFC, ICES, and cooperating countries, describes in detail the Project implementation and procurement process. The PIP includes a description of the major activities, terms of reference and technical specifications, implementation schedule and procurement plan, together with the monitoring and evaluation plan. As part of the PIP, there is a PPP for procurement of goods, works and services in accordance with “Guidelines for Procurement under IBRD Loans and IDA Credits”. A similar procurement plan will be prepared for activities to be undertaken by UNDP with GEF support. Project activities not financed by the GEF will be procured in accordance with regulations of the concerned Governments or co-financing institutions. Procurement will follow the Project procurement identified in the PIP/PPP and will be linked with the overall implementation schedule. Bank experience has shown that PIPs and PPPs are an efficient mechanism for learning from experience, providing guidance, and maintaining flexibility during Project implementation.

12. Key Elements of the PIP/PPP. The PIP/PPP includes the following key elements:

· For Component 1, the PIP/PPP:

à Identifies the strategy for establishing the technical Coordination Centers,

à Describes methods for coordinating the monitoring and assessment process and upgrading monitoring and assessment capacity,

à Provides technical specifications for equipment and goods,

à Presents criteria for management tools for sustainable fisheries,

à Outlines requirements for demonstration activities, and

à Includes TORs for all technical assistance and services.

· For Component 2, the PIP/PPP:

à Describes requirements for eligible agricultural interventions and demonstration activities,

à Outlines investment support needs and farm credit conditions,

à Provides criteria for watershed monitoring and assessment network,

à Includes coastal zone management activity criteria, and

à Presents technical specifications for equipment, goods and deliverables, TORs for technical assistance and services.

· For Component 3, the PIP/PPP:

à Provides a work plan for institutional strengthening and regional capacity building activities, and

à Includes technical specifications for services and training and deliverables.

· For Component 4, the PIP/PPP:

à Includes TORs for all levels of Project management responsibilities, audits, and social assessment, and

à Provides technical specifications for equipment and goods required for the PMU.

· For the overall Project, the PIP:

à Provides an overview of procedures that will be used for procurement,

à Describes the applicable procedures of the World Bank and UNDP,

à Where appropriate, notes the applicable procedures of co-financiers,

à Reviews the projected procurement packages, and

à Presents a procurement schedule that is linked with the overall implementation schedule.

13. Changes in the PIP/PPP. The PIP/PPP can be modified by HELCOM during Project implementation, in agreement with UNDP and the World Bank. In addition, during the life of the Project, the composition and responsibilities of the various Project management units may require adjustment. At any time, the PIP/PPP can be revised by HELCOM to reflect these administrative changes in agreement with the UNDP and World Bank.

14. Project Monitoring and Evaluation. HELCOM will report to the Bank and be responsible for ensuring that all GEF funded activities are carried out in compliance with Project design and contracts. The Project will comply with the required monitoring and evaluation procedures as required for the Mid-Term Review and Implementation Completion Report. The evaluation will rely on both qualitative and quantitative criteria using Bank guidelines, “Monitoring and Evaluation of Program Impacts.” Resources have been set aside to support the conduct of both these evaluations by independent reviewers. The Mid-Term Review will provide suggestions on possible improvement of the implementation plan and steps that could be taken to ensure achievement of Project goals in the remainder of the implementation period. The Mid-Term review will be conducted during the second half of the second year of implementation and the Implementation Completion Report will be completed no later than four months prior to closure of the Project. The PIP/PPP will detail the process for these reviews.

C. PROJECT COMPONENT 1: LARGE MARINE ECOSYSTEM MANAGEMENT ACTIVITIES

15. Introduction. The prevailing coastal and open sea water management issues in the Baltic Sea are ecosystem impacts from eutrophication and over fishing. Successful management of these issues requires strengthened institutional and technical coordination of information, resources and management activities at the regional and local levels. While threats to the system and other transboundary issues have been identified, current resource management policies and practices are not holistic and ecosystem-based. As part of their commitment to HELCOM, the recipient countries, except Lithuania, participate in collecting data through the HELCOM-Cooperative Monitoring in the Baltic Marine Environment (COMBINE) network. However, the recipient countries need to strengthen their institutional and technical capacity, and improve standards for quality assurance to meet their commitments under the Helsinki Convention. Current monitoring and assessment practices are not complete in the eastern Baltic Sea and provide inadequate information for comprehensive ecosystem management of Baltic Sea resources.

16. An Ecosystem-Based Approach. To address these issues and meet national obligations under the Helsinki Convention, Component 1 was designed within an LME context with an ecosystem-based approach to monitoring, assessment, and management of the Baltic Sea resources. The component’s primary objective is to introduce the principles and demonstrate the application of the LME concept to Baltic Sea coastal and open sea resources. Component 1 activities are interdependent and will be used jointly to overcome short-term sector-by-sector attempts to manage resources and environments. This approach will increase the emphasis placed on the multiple interactions between resource use, human interventions, and environmental variability. The component will introduce jointly planned and implemented multi-national monitoring surveys that facilitate local cooperation and coordination and use of innovative methodologies for assessing the changing state of the ecosystem. It will support implementation of actions that consider whole ecosystem effects and optimize social and economic benefits for the Baltic Sea community of stakeholders. In coordination with the other Project components, Component 1 will: (i) establish local and regional administrative and organizational mechanisms, through the Coordination Centers, for cooperative monitoring and assessment activities, (ii) develop management tools through modeling and assessment to provide proposals for ecosystem-based management of land, coastal zones and open sea waters, and (iii) support cooperating countries to move toward compliance with international agreements, regional priorities and national policies, including the Helsinki Convention, Baltic 21, and EU environmental and water management directives (Russian Federation excluded).

17. Participating Institutions. The participating institutions in Component 1 generally include the technical institutes who have been engaged in the work of ICES within the Baltic Sea Region. They will serve as the national Coordination Centers and Lead Laboratories for this component. The participating local institutions include: (i) Estonia: Estonian Marine Institute, Tallinn; (ii) Latvia: Latvian Fisheries Research Institute, Riga; (iii) Lithuania: Institute of Ecology, Vilnius; and (iv) Russian Federation: AtlantNIRO, Kaliningrad. Other participating institutions in the region include: (i) Denmark: Danish Institute for Fisheries Research, Copenhagen; (ii) Finland: Finnish Institute for Fisheries Research, Helsinki; (iii) Germany: Baltic Fisheries Research Institute, Rostock; and (iv) Sweden: Swedish Institute for Marine Fisheries Research, Lysekil.

18. Primary Areas of Focus. The Project will support activities in the coastal near shore environment of the Eastern Baltic Sea and in selected adjacent sections of the open sea environment. In general, the coastal near shore activities and monitoring network will correlate with land-based coastal and associated demonstration activities supported under Component 2, and noted on maps IBRD 31062 and IBRD 31063. The planned open sea monitoring will include the current ICES network; this involves activities in ICES Subdivisions 25, 26, 28, 29S and 32. These areas include the Baltic Proper, the sea east of the island of Bornholm, and the Gulf of Finland. The economic zones of the recipient countries are part of these Subdivisions.

19. Component 1 – Management. Management of Component 1 will be as follows:

· Role of ICES and CIC. As the coordinator for Component 1, ICES will be responsible for implementing, managing and reporting on component activities to HELCOM and the BSSG. ICES will supervise C1C and AC1. The CIC together with the AC1 will be responsible for supervising component coordination and implementation. The Coordinator will work directly with HELCOM’s Project Manager. The C1C will be a member of the BSSG.

· Role of the AC1. The AC1 will work locally and assist in day-to-day Project management and supervise implementation. The AC1 will serve as the LIU and work closely with ICES, HELCOM and the LPMs at the Coordination Centers. In addition to daily responsibilities, the AC1 will assist the LPMs in developing and preparing standardized analytical and monitoring reports.

· Role of the LPM and Coordination Center. The LPM will be contracted from institutes in each recipient country that engage in ICES activities. Depending upon specialization, the institutes will become technical Coordination Centers for ecosystem health, productivity, and fisheries information. In addition, a GIS-Data Coordination Center will synthesize the data information for assessment and modeling purposes. The LPM will be responsible for day-to-day implementation at the national level. In addition, the LPM will compile results from Project activities and report them to the AC1 and C1C. The LPM will work closely with the AC1 in preparing bidding documents, carrying out evaluations, and drafting contracts. Representatives from the LPMs will also participate in selected ICES and HELCOM meetings relevant to the Project.

20. Component 1 – Activities. Component 1 has a primary goal to develop technical and local capacity in the eastern Baltic countries, and through joint monitoring and assessment efforts and demonstration activities provide incentives to improve the socioeconomic well being of targeted communities. The approach to this component is to strengthen local institutional and technical capacities, compile and evaluate information through integrated assessments, and facilitate identification and application of proposed ecosystem-based management tools. Demonstration activities will illustrate a range of possible cost-effective measures to improve management of the coastal ecosystem while building capacity of coastal communities. The demonstration activities and the collection and evaluation of ecosystem parameters will provide building blocks to better understand the Baltic Sea ecosystem process and impacts of human activities on the eastern region of the sea. This process will also provide proposed strategies to promote economic incentives and improve regional land, coastal and open sea ecosystem management practices.

· Activity 1 - Strengthening Institutional and Technical Capacity. Activity 1 will establish the institutional framework for undertaking component supported activities to strengthen institutional and technical capacity. It will support the following activities:

à Sub-activity 1(a) Strengthened Institutional Capacity of Coordination Centers. The Coordination Centers are fundamental to implementing Component 1 activities, and for linkages with other component activities. The Centers, organized at technical institutes currently involved in ICES efforts, will coordinate joint efforts and implement component activities and sub-activities. The Centers will include a Fisheries Coordination Center, Productivity Parameters Coordination Center, Environmental Health Parameters Coordination Center, and a GIS-Data Coordination Center.

à Sub-activity 1(b) Regional Training and Workshops to Strengthen Technical Capacity. Training and workshops will strengthen technical capacity and will coordinate and link the activities under the component with technical aspects of other regional programs.

à Sub-activity 1(c) Coordination of Coastal-Near Shore Activities. This will include planning and coordination of coastal monitoring surveys in the eastern Baltic Sea to fill the gaps for fisheries and environmental parameters, as mandated by work programs of HELCOM and ICES. This will include collection of data on additional key ecosystem indicators including important productivity parameters (phyto- and zooplankton, phytobenthos). Trawlers will be used to extend the surveys to shallower coastal waters where marine research vessels cannot go but whose information is needed for a comprehensive ecosystem-based management for the region.

à Sub-activity 1(d) Coordination of Open Sea Activities. This will include planning and coordination of open sea monitoring surveys that will calibrate between vessels (for regional efficiency and cost-benefits) and use existing research vessels for multi-national joint scientific surveys particularly for the eastern Baltic Sea. This activity will expand the geographic coverage of open sea activities in the eastern Baltic Sea to reinforce the current ICES monitoring network and fill gaps in both fisheries and environmental parameters, as mandated by ICES and HELCOM, to include additional ecosystem indicators and productivity parameters (phyto- and zooplankton, phytobenthos).

· Activity 2 - Coordinated Monitoring Surveys in the Eastern Baltic Sea. Activity 2 will be planned in Phase 1 and fully commence in Phase 2 of the BSRP program, to include procurement of necessary technical equipment for coastal and open sea monitoring and assessment surveys and execution of the surveys as coordinated and planned during Activity 1. It will include:

à Sub-activity 2(a) Coastal Near Shore Monitoring Surveys. Coastal fish, productivity and ecosystem health parameters will be monitored and data collected as required by the HELCOM/COMBINE monitoring program. Data will be collected based on ICES standards.

à Sub-activity 2(b) Joint Open Sea Monitoring Surveys. The joint open sea surveys will parallel efforts in the coastal waters, but will include a multi-national technical team to conduct combined monitoring of fish, productivity and ecosystem health parameters from research vessels. The proposed open sea surveys will take place annually, as required and supervised by ICES. The surveys to be supported by the component will include Abundance Surveys - BITS (Baltic International Trawl Survey) for demersal (bottom) fish, in March-April, and October November, and the Baltic International Acoustic Survey (BIAS) for pelagic fish.

à Sub-activity 2(c) Data Collection from Commercial Fishing Vessels. Data from commercial fishing vessels will be obtained from landings and logbooks, and landings statistics from commercial fishing vessels will be collected in accordance with accepted technical standards. Data will be collected based on ICES standards.

à Sub-activity 2(d) Monitoring of Biological Effects of Contaminants. The risk of toxic impacts is less evident in open sea fish compared to the stationary coastal species, which are more exposed to local sources of pesticides, heavy metals and other substances. The biological effects of contaminants will be monitored according to accepted technical standards, and findings integrated into the regional assessments in Activity 3.

· Activity 3 - Cooperative Local and Regional Ecosystem Evaluations and Assessments. Activity 3 will commence in Phase 2, continue through Phase 3 and will be carried on by the cooperating regional bodies and national governments after the Project is completed. Emphasis will be given to coordinating information from Component 1 and Component 2 and to providing opportunities to expand beyond the current ICES assessment process for joint coordinated assessments. This activity will enhance local assessment capabilities through access to improved technical resources and capacity building measures. It will provide a forum for regional coordination, cooperation and advice on application of ecosystem-based management tools.

à Sub-activity 3(a) Evaluation and Assessment of Component 1 Information. This activity will evaluate and assess the data collected in monitoring surveys under Component 1, Activity 2. The assessments will investigate innovative methodologies and models to optimize cost-effective strategies. The assessments will be used to formulate advice for IBSFC and HELCOM, and propose ecosystem-based management tools.

à Sub-activity 3(b) Assessment of Biological Effects of Contaminants. The information collected from monitoring surveys, coupled with fish population monitoring data, will be evaluated to determine the biological effects of contaminants on fisheries. Contaminant problems in different regions will be discussed, and knowledge gaps will be identified. In addition, the socioeconomic impacts of contaminants on local and regional fisheries will be evaluated.

à Sub-activity 3(c) Preparation of Ecosystem-Based Management Proposals and Plans (in coordination with Component 2). This activity will use innovative methodologies for land, coastal and open sea assessments to promote sustainable ecosystem-based management tools to improve the economic benefits from living marine resources. The coordinated joint assessment effort will support local authorities’ decision-making capacity for integrated coastal resource management.

· Activity 4 - Demonstration Activities. Demonstration activities will illustrate a range of possible cost-effective measures to improve and restore the coastal ecosystem while building local capacity of coastal communities. The demonstration activities and collection and evaluation of ecosystem parameters will provide the building blocks to better understand the Baltic Sea ecosystem process and impacts of human activities on the eastern region of the sea. Preparation for demonstration activities will begin during Phase 1 and the activities will continue through Phases 2 and 3.

à Sub-activity 4(a) Coastal Spawning Habitat Restoration. ICES will undertake this activity in cooperation with WWF. The activity will support field assessments of fish recruitment and will target coastal areas for restoration programs to promote fish spawning. It will be carried out in cooperation with local authorities and fishermen. Site selection criteria will include optimal recruitment possibilities, ecological value and environmental sensitivity.

à Sub-activity 4(b) Salmon River Restoration. In coordination with Component 2, sites will coincide with proposed coastal zone management activities and recommendations in the Salmon Action Plan (SAP) of the IBSFC. Segments of selected rivers will be restored to promote natural spawning and long-term economic sustainability of salmon recruitment.

à Sub-activity 4(c) Multi-Marine Environmental Disturbances (MMED) Predictive Tools for Management. Multiple ecological disturbances are particularly important when they affect human health and certain economic sectors, especially in coastal areas, such as fishery, tourism, and recreation. Existing information and data will be applied to the HHED (Health, Ecological and Economic Dimensions of Global Change) model, a historical time series analysis, which will reconstruct critical time-series suitable for tracking changes in the health of the ecosystem and provide a cost-effective predictive management tool for ecosystem management.

à Sub-activity 4(d) Land-Coastal Interactions – Berze-Lielupe Basin/Gulf of Riga Case Study. This activity is linked with sub-activity 2(e) of Component 2 in stream monitoring. The demonstration activity will correlate, using simple existing models, land-coastal-open water interactions in the eastern Baltic Sea to assess and better understand these interactions. This will provide predictive tools for ecosystem-based management, which can serve as illustrative tools for decision makers. Efforts will also be linked with sub-activity 4(c) above.

à Sub-activity 4(e) Joint Activities ICZM - Vistula Lagoon. This activity will support and link into the WWF-Coastal Zone Management activities for the Vistula Lagoon detailed in Component 2, sub-activity 3(d).

à Sub-activity 4(f) Joint Activities ICZM - Kursiu/Curonian Lagoon. This activity will support and link into the WWF-Coastal Zone Management activities for the Kursiu/Curonian Lagoon detailed in Component 2, sub-activity 3(c).

à Sub-activity 4(g) Joint Activities ICZM – Väinameri/Matsalu Bay. This activity will support and link into the WWF-Coastal Zone Management activities for the Väinameri/Matsalu Bay detailed in Component 2, sub-activity 3(b).

à Sub-activity 4(h) Socioeconomic Assessment of Local Fisheries. A socioeconomic overview of local coastal fisheries and fishing communities will identify priorities for future actions. Outcomes from this assessment will be linked to the social assessment (Component 4) and regional socioeconomic assessment (Component 3).

à Sub-activity 4(i) Promotion of Community Outreach and Public Awareness. Each Component 1 activity will have elements of community outreach and public awareness specific to the activity, however this sub-activity (4(i)) will have the flexibility to target communities and develop and provide information as needed.

21. Summary of Expected Outcomes. Component outcomes will introduce to HELCOM, IBSFC, ICES and their member countries the benefits and cost-effectiveness of a joint coordinated monitoring and assessment process for the eastern Baltic Sea. The BSRP will provide opportunities for the three international bodies and the five recipient countries to close information gaps, facilitate a better understanding of the need for a sustained regional monitoring and assessment program in the coastal and open sea waters, and allow for initial implementation of improved management of the living marine resources of the Baltic Sea. The component will strengthen the ability of participating parties to cooperate and provide linkages between science-based assessments and ecosystem-wide management practices for improving the health and long term sustainability of the ecosystem and its renewable biological resources, including fish and fisheries.

D. PROJECT COMPONENT 2: LAND AND COASTAL MANAGEMENT ACTIVITIES

22. Introduction. Addressing land-based agricultural inputs to coastal and open sea waters and improving coastal zone management are critical for management of the Baltic Sea ecosystem. The JCP highlights management of agriculture inputs and coastal areas of the Baltic as priority issues. Since 1992, a number of field-based demonstration activities, through the Swedish supported BAAP program, have been undertaken in recipient countries along the eastern and southern portion of the Baltic Sea drainage basin. These activities have been complemented by additional activities at the national level supported by the EU, Denmark, Finland, Norway, and the United States. The environmental and economic benefits of these activities have provided a basis for preparing and implementing projects that would eventually support long-term measures to incrementally reduce non-point source agricultural pollution to the coastal and marine environment. This component is intended to be a basis for developing future national programs with environmentally responsible practices. Component 2 activities will be coordinated with the Bank and GEF supported Poland Rural Environmental Protection Project.

23. The agricultural element of the component will (i) test administrative and organizational mechanisms (regional and local) and provide advice and support to the farming community; (ii) assess farmers’ interest in and willingness to pay for improving their environmental management practices; (iii) assist farmers to lower both the risk and barriers that currently hinder adoption of new practices; and (iv) provide support for small-scale environmentally responsible agricultural investments. The coastal zone management element of the component will (i) focus on the role that can be played by local communities in sustainable management of coastal resources; (ii) link activities in the demonstration watershed to measures being taken on the coast; (iii) support implementation of previously prepared management plans; and (iv) assist local communities to overcome barriers to adoption of new planning and management methods in these sensitive areas.

24. Component 2 – Management. Management of Component 2 will be as follows:

· Role of HELCOM/SLU and WWF. The Swedish Agricultural University (SLU), as the overall coordinator for Component 2, will be responsible for implementing, managing and reporting on component activities. HELCOM/SLU will contract the Component Coordinator (C2C), based in SLU, to work closely with HELCOM’s Project Manager. The C2C will also work closely with and supervise local LIUs. In addition, WWF will appoint a specialist who will work closely with the C2C and local counterparts and serve as coordinator for the coastal zone management activities included in the component.

· Role of the LIU. The LIU is the on-site implementing group in each recipient country for agriculture and environment activities. Project activities will integrate the present BAAP implementing structure and other existing organizations, such as national and local level Agricultural Advisory Services (AAS) and Farm Interest Organizations (FIO). The LIU will benefit from short-term international and local technical expertise as necessary, particularly for technical assistance and training. LIU staff will comprise experts with a national perspective and agricultural extension agents working in Project areas. The LIU will work closely with the C2C in preparing bidding documents, carrying out evaluations, and drafting contracts. Interested farmers will present expressions of interest through local extension services to the LIU. Representatives from the LIU will also participate in selected ICES and HELCOM meetings related to the Project.

· Coastal Zone Management Activities. The activities will be implemented by representatives of the Area Task Teams established in the demonstration areas during the HELCOM PITF MLW supported planning and management studies. These studies will serve as the basis for implementation of the activities, which will be coordinated by local governments, community-based organizations and NGOs. In locations where Area Task Teams do not currently exist, the WWF will work with national and local authorities to facilitate their establishment.

25. Component 2 – Activities. Component 2 aims to significantly increase the prevalence of environmentally responsible agricultural practices among eligible farms and organizations in the targeted demonstration watersheds and to undertake a series of demonstration coastal zone management activities in priority areas linked with the activities for agriculture. The field-level activities are based on River Basin Modules including Agricultural Demonstration Watersheds and Agro-Environmental Task Areas. The Agro-Environmental Task Areas are selected based on agricultural production intensity and risk to the environment. Agricultural production in these areas has a major impact on local and/or distant water bodies and ecosystems (see Table A). Component activities will demonstrate effective mechanisms for improving recycling and retention of nutrients in transboundary waters and strengthening decision support for water management from inland agricultural areas to coastal areas. The demonstration activities for integrated coastal zone management in priority areas are linked with the activities for reduction of non-point source pollution from agriculture (see Table B).

26. Sites for Field Level Activities. Proposed demonstration watersheds have been selected, using criteria from the BAAP demonstration projects, in important agricultural areas with substantial effects on coastal and marine ecosystems. The demonstration field level activities are within the priority watershed supported by the local government, and listed below:

· Activity 1 - Agricultural Interventions. This activity will expand upon BAAP supported investments in environmentally responsible practices and target the farming community, agricultural advisory organizations and local authorities, using national Codes of Good Agricultural Practices as the guiding tool. The Codes are one of the major environmental commitments undertaken by the countries in their accession to the environmentally responsible agricultural practices (agro-environmental) schemes of the EU. This activity seeks to significantly increase environmental awareness and use of environmentally responsible practices in agriculture and demonstrate effective mechanisms for improving recycling and retention of nutrients.

à Sub-activity 1(a) Local Agro-Environmental Capacity Building. Farmers in the watersheds will be invited to participate in education and training activities to improve sustainable farm management. Training activities will provide farmers with potential investment support through grants from GEF funding combined with credits through cooperation with NEFCO. This activity will promote agricultural training programs, training farmers in sustainable practices. Critical to this effort is a communication and public relations outreach program.

à Sub-activity 1(b) Demonstrating Cost-Effective Nutrient Recycling and Retention Technologies. A select number of on-farm, agro-environmental demonstration practices will be established, including construction and restoration of wetlands for nutrient retention, construction of a naturally based purification system, and manure retention ponds.

à Sub-activity 1(c) On-Farm Environmental Investments. Agro-environmental practices will be promoted, potential on-farm environmental investments will be identified and farmer eligibility for grants and/or loans will be assessed, and management plans prepared. Eligible on-farm investments will be permanently installed for nutrient re-circulation; such investments include manure pads and slurry storage etc, equipment for manure and urine spreading and technology for seeding and soil preparation. The GEF grant and/or NEFCO credit will be complemented by in-kind contributions in materials and labor by the farmer or agricultural company. The size of the GEF supported grant is limited to a maximum of US$10,000. The credit line to eventually be established by NEFCO parallel to the BSRP will support environmental investments up to US$200,000. With the assistance of the LIU, AAS, and extension services, this effort will combine environmental concerns and business development into a farm management plan that will form the basis for technical support, training and small-scale on-farm investments. The investments in environmentally responsible practices will also assist in upgrading the responsibilities of the extension services and authorities on a nationwide scale to meet requirements of the EU Nitrate Directive.

· Activity 2 - Monitoring and Assessment of Non-Point Source Pollution. This activity will investigate nutrient loads from agriculture and aims to fill gaps in national monitoring programs and assist in meeting the country’s commitment to EU and Helsinki Convention obligations. The activity is essential for preparation of joint ecosystem-based assessments of land-based and marine activities. It will provide sustainable land and coastal management tools to be incorporated in regional management of the ecosystem. It will establish an in-stream network to monitor and assess outputs from agricultural watersheds and assess innovative methodologies for non-point source pollution retention. Design of the monitoring system will be coordinated with the Rural Environmental Protection Project in Poland to ensure comparability of data sets, quality assurance measures and planned applications for management measures. Efforts will be linked with monitoring and assessment activities in Component 1.

à Sub-activity 2(a) Catchment Measurement Programs. The catchment measurement programs will measure loads of nutrients to surface waters from representative agricultural areas, and leaching of nutrients to shallow groundwater in representative agricultural areas. The catchment measurement program will provide background data on nutrient losses from representative agricultural areas, in order to support national authorities in their development of sustainable agricultural production systems and to meet the data requirement for reporting to various regional and international organizations including the EU, HELCOM and OECD.

à Sub-activity 2(b) Effects of Specific Demonstration Activities. Specific demonstration activities will show governments and farmers the efficiency of various nutrient reduction measures. Efforts will include monitoring of plot demonstration activities concerning crop rotation systems and optimal fertilizer use, and monitoring of natural and constructed wetlands and other hydrologically manipulated systems that retain nutrient runoff from non-point sources.

à Sub-activity 2(c) Contamination of Drinking Water in Shallow Farm Wells. This sub-activity will assess, at selected sites, the extent and causes of contamination of drinking water in farm wells. This will include monitoring contamination of drinking water in farm wells and contamination of surface and groundwater at local “hot spots” to determine the trends in the area.

à Sub-activity 2(d) Modeling of Nutrient Loads. A comprehensive series of actions for training personnel and upgrading modeling capacity would be supported under this sub-activity. These are considered to be an important contribution to regional capacity building in management of agricultural pollution. The actions comprise training courses and transfer of knowledge and methodology, collection of data, modeling, and establishment of a multi-parameter data set to validate and test the modeling. The modeling approach will be linked to ongoing activities at SLU and SMHI in Sweden, and will be carried out under supervision from SLU.

à Sub-activity 2(e) Multi-Scale Monitoring Approach in the Berze-Lielupe Basin/Gulf of Riga. This sub-activity will be coordinated with Component 1. It will include development of a monitoring site in the Berze tributary of the Lielupe River Basin to demonstrate retention and nutrient transformation processes, and to establish an “empirical link” between Components 1 and 2. The monitoring set-up will cover field scale (Berze field station); small catchment scale (Berze small catchment); a medium sized river basin (Berze River); and strategically selected sites in the Lielupe River.

· Activity 3 - Land-Based Coastal Zone Management. The integrated coastal zone management (ICZM) activities will focus on practical measures to assist local communities in improving their management of coastal zones. Activities will include involvement of local communities, NGOs, local decision-makers and businesses. WWF has acted as lead party responsible for elaborating ICZM plans for the six target areas under the activities of the HELCOM Working Group on the Management of Coastal Lagoons and Wetlands (HELCOM MLW)). These management plans are the framework for implementing this activity, and are the basis for the sub-activities. The existing MLW networks are composed of local authorities, local users of natural resources (fisheries, farms, etc.) as well as national experts. This activity will be coordinated with Component 1, to establish administrative structures for coastal zone management in the selected areas. The sub-activities will contribute to balanced and sustainable development of the area by means of cross-sector integration. They will include environmentally based targeted efforts to build local capacity of the fishing community and support small-scale investments. Such efforts encompass investigating feasible opportunities for recreational tourism, constructing fish bypasses on rivers, and restoring spawning habitats. A social assessment process will be used to provide guidance to optimize local community involvement and benefits so that local communities use natural and economic resources more efficiently, improve their livelihood, and conserve biodiversity. An outreach program will expand these activities to other coastal communities. Some preliminary activities will commence during Phase 1, and continue through Phases 2 and 3.

à Sub-activity 3(a): ICZM Väinameri/Matsalu and Pärnu Bay/Kihnu Island. In coordination with Component 1 and through local capacity building and training, this will build and/or restore three small wastewater treatment systems using ecological techniques on the island of Kihnu, restore Lake Prästevik-Voormsi and promote small-scale tourism investments. A demonstration project and investments for maintenance of semi-natural grassland will be initiated.

à Sub-activity 3(b) ICZM Lielupe/Gulf of Riga. The activity will establish a local small business incubator in Mesrags, develop and distribute a bi-annual local newsletter, and train fifteen local guides. In coordination with Component 1, a socioeconomic benefits program for local farmers and fishermen will be developed and implemented.

à Sub activity 3(c) ICZM Kursiu/Curonian Lagoon. The activity will support development of recreational facilities, wetland restoration and preparation of meadow management plans, which will review division of responsibilities for nature management as they pertain to transboundary concerns. A cross-border protected area is being established to ensure protected status for flooded forest on the Russian side, for which educational activities will include workshops at the local and national level, using the Lithuanian Visitor Center Facilities. A Visitor Information Center on the Russian side will be established. A public information program will be developed and information material and websites prepared.

à Sub-activity 3(d) ICZM Vistula Lagoon/Kaliningrad Lagoon. This will include measures to help restore the environmental balance of the Vistula Lagoon/Kaliningrad Lagoon and adjacent land areas. Activities will focus on feasible low cost efforts to strengthen stakeholder involvement and optimize use of resources to meet the needs of the population in accordance with principles of sustainable development. To this end, an indicator-based system for ICZM evaluation will be developed. A pre-feasibility study of selected small catchment areas will identify cost-effective measures to ensure clean up of polluted waters discharging to the Vistula Lagoon, and a pilot river tributary will be restored.

à Sub-activity 3(e) Regional Network (BaltWet) This activity will make an effort to continue and strengthen regional networking for integrated planning and management of coastal lagoons and wetlands, as well as freshwater ecosystems. BaltWet takes its name from MedWet—a similar cooperative structure for wetlands in the Mediterranean involving all the riparian countries, under the umbrella of the Barcelona Convention. Baltwet is coordinated with the Ramsar Convention (Convention on Wetlands).

· Activity 4 - Agro-Environmental and Rural Policies. Agro-environmental and rural policies are under development in the region, and this activity will link local field-level activities of the BSRP with national authorities and decision-makers. These activities will commence during Phase 2, and through a series of workshops combine field-level activities under the Project with development of agro-environment and rural policies.

· Activity 5 - Regional Network. To increase the exchange of experience between countries and individuals and achieve added value, a Regional Network will communicate progress and results through an open and participatory process. Regional Network activities will seek to increase communication, thus increasing Project sustainability. Several initiatives in this direction have been taken in the Baltic Sea region and this activity will incrementally support these initiatives, improving coordination and sustainability on a regional basis.

à Sub-activity 5(a) Establishment of a Regional Database for Ongoing Monitoring Programs in the Baltic Sea Region. This activity will establish a regional database/catalogue of field and catchment scale demonstration and monitoring activities and establish commonly agreed routines for quality assurance of field measurements and monitoring. Efforts will coordinate with the Component 1 GIS-Data Coordination Center to further establish a common framework for reporting of nutrient inputs from diffuse sources to the Baltic Sea.

à Sub-activity 5(b) BAAP Regional Network. A Regional Network for the BAAP is already established with an operational Secretariat at the Lithuanian Water Management Institute. One task will be to strengthen interactive computer-based communication between the different project teams.

à Sub-activity 5(c) Incremental Coordination of Existing Initiatives. This effort will focus on coordinating with existing networks and regional programs, and launch a website for regional Internet communication.

27. Summary of Expected Outcomes. The main outcomes of Component 2 will lie in country institutional capacity to control and manage non-point source pollution from agriculture, improve coastal zone management practices at the local level, and reduce gaps in terms of commitments to HELCOM and the EU. The outcomes will also address the farming community’s need to improve socioeconomic standards and provide tools that contribute to farm sustainability. Project implementation will achieve sector-oriented outcomes related to management of non-point source pollution on the farm, national and regional level, and management of the coastal zone in the demonstration areas. At Project completion, countries will have upgraded their monitoring and demonstration capacity for catchment loads, adopted more sustainable agricultural practices and improved their capacity to manage the coastal zone.

E. PROJECT COMPONENT 3: INSTITUTIONAL STRENGTHENING AND REGIONAL CAPACITY BUILDING

28. Introduction. Important for the Project’s success is strengthened local and regional decision-making and management capacity, both to improve management and to better understand and ameliorate socioeconomic conditions in the eastern Baltic. The aim of Component 3 is to facilitate strengthening of regional, national and local institutions through capacity building efforts to enable these institutions to coordinate and apply a comprehensive ecosystem-based management strategy to the Baltic Sea.

29. Component 3 – Management. This component will be managed and implemented by HELCOM in cooperation with IBSFC and ICES. BSSG review and dissemination of information and management tools developed under the Project will be an element of this component.

30. Component 3 – Activities.

· Activity 1 - Regional Capacity Building. This activity, through institutional capacity building efforts and participatory meetings, will address regional administrative, socioeconomic, and technical matters as they pertain to management of Baltic Sea resources, and will enable recipient countries to contribute to strengthening local and regional institutions. This will also include a special program to support training activities for community-based groups and local NGOs. A regional public outreach program will increase awareness of the Project’s benefits through multi-media information, including pamphlets, information guides, and local radio and TV broadcasts. This activity will commence in Phase 1 and continue through Phases 2 and 3.

à Sub activity 1(a) Regional Coordination. This activity will prepare a coordination strategy and informal network and focus on facilitating regional coordination and cooperation between HELCOM, IBSFC, and ICES. In addition, efforts will be made to coordinate with national officials from the recipient countries, delegates of the EU and regional and local stakeholders.

à Sub activity 1(b) Baltic Sea Steering Group. The BSSG will be established and operationalized to facilitate strengthening of the regional decision-making capacity. This activity will support coordination and cooperation among HELCOM, IBSFC and ICES and the regional stakeholders to achieve a more integrated approach to ecosystem-based management.

à Sub-activity 1(c) Regional Public Information and Outreach. The regional public information and outreach program, in cooperation with locally based public awareness and outreach programs, will educate and inform the public, stakeholders, and government officials on Project progress and outcomes.

· Activity 2 - Regional Socioeconomic Assessment.

à Sub-activity 2(a) Improved Valuation of Ecosystem Goods and Services. The assessment process will include evaluation of the socioeconomic implications of reduced eutrophication on ecosystem resources. The value of ecosystem goods and services will be determined from outputs from the scientific assessment, and various modeling efforts. Assessment outcomes and suggestions will be synthesized in a practical and realistic context so they can be understood by individual fishermen and farmers. The information will be used as a tool to inform and educate the range of stakeholders on ecosystem values. The activity will link with similar socioeconomic and scientific assessments in the region, to better understand the overall social and economic value of Baltic Sea resources.

31. Summary of Expected Outcomes. The anticipated outcome from this component is increased awareness among all stakeholders of the value of the Baltic Sea ecosystem goods and services and the importance of appropriate management tools for ecosystem-based management at the regional, national and local level.

F. PROJECT COMPONENT 4: PROJECT MANAGEMENT

32. Introduction. The objective of Component 4 is to successfully implement the BSRP to achieve the stated development objective. Project management includes administrative, management, and implementation responsibilities. Project management structure and responsibilities are detailed in the PIP/PPP.

33. Component 4 – Management. This component will be managed by HELCOM in cooperation with IBSFC and ICES.

34. Component 4 – Activities.

· Activity 1 - Project Management. Component 4 will provide support for Project management by HELCOM and the cooperating parties responsible for implementation of the various Components and Activities. This includes support for the PMU at HELCOM and the various administrative services required for Project reporting, procurement, disbursement and financial management. It will also encompass support for the independent financial audits required by the Bank. HELCOM will retain the services of a qualified firm, with significant experience in Bank procedures, to assist with procurement and disbursement actions. The firm will undertake preparation and review of bid documents for civil works and equipment, and terms of reference for services; facilitate evaluations; and support HELCOM in negotiations. It will also provide basic training concerning procurement and disbursement procedures to Project personnel in the early phase of the Project and provide additional training as appropriate.

35. Summary of Expected Outcomes. The anticipated outcome from this component is the development of an effective management structure that will be able to successfully support all stages of Project implementation.

36. Reporting and Auditing. The Project will comply with the “ Guidelines for Financial Reporting and Auditing of Projects Financed by the World Bank.” The Bank together with HELCOM will agree upon reporting requirements for Project management reports (PMR). The Project will be consistent with the requirements of the World Bank, including the provisions of the Loan Administration Change Initiative (LACI). HELCOM will report to the Bank and be responsible for ensuring that all GEF funded activities are carried out in compliance with Project design and contracts.

Figure A. Schematic of GEF - Baltic Sea Regional Project

tributaries

Zone

Geographic Setting

Jurisdiction

A

Farm

Local & National

farms

river

B

Rivers

Local & National

C

Coastal Zone: Land and Water Interface

National and International

A

B

C

D

D

Open-Sea

International

Land-based Watershed

Coastal Zone

Open Sea

(farms)

(river)

(near-shore)

(off-shore)

Footnotes to Integrated Actions

% Concentration(s)

1. construct environmentally friendly agricultural practices on individual farms aim to reduce non-point source (nutrient) run-off at demonstration farms in watershed 2. prepare farm investment and management plans for small scale farm investments 3. restore select upstream wetland for nutrient retention to correspond with coastal and salmon fisheries activities 4. restore select coastal wetlands to improve nutrient retention 5. restore coastal habitats for fish spawning and recruitment 6. engage coastal communities to build local capacity and improve economic welfare through targeted activities 7. integrate river-coastal-open sea activities by restoring select salmon rivers to and investigate potential for environmental tourism development 8. monitor and assess in-stream data to evaluate effects of nutrient reduction strategies 9. monitor and assess the impacts of nutrients and contaminants on coastal fisheries and habitats 10. conduct joint and integrated off-shore monitoring surveys to evaluate changes in species composition and biodiversity 11a. strengthen technical and institutional capacity of Agricultural Advisory Services (AAS) established under the BAAP program 11b. strengthen technical and coordination capacity of the Coordination Centers 12. develop and provide economic incentives for the fishing, farming and coastal communities 13. strengthen local and regional capacity to support improvements to meet the obligation of the European Union, 14. develop and recommend ecosystem based management tools for a sustainable Baltic Sea ecosystem

Distance/time

Integrated Component Actions

Land-Based

River

Coastal

Open Sea

1 Environmentally responsible agricultural practices

3 Upland wetland restoration for nutrient retention

4 Coastal wetland restoration 5 Coastal waters habitat restoration 6 Community based coastal demonstration activities

2 Farm investments

7 Salmon river restoration

Monitoring and assessment of ecosystem parameters

8 Collect and evaluate in-stream environmental health parameters

9 Collect and evaluate parameters environmental health, productivity, and coastal fish stock

10 Collect and evaluate parameters environmental health, productivity, and open sea fish stock

11a AAS-Centers of Expertise for sustainable agriculture

11b Technical Coordination Centers for ecosystem parameters

12 Socio\economic incentives and development

13 Regional and local capacity building

14 Management tools for the eastern Baltic Sea

Figure B. Baltic Sea Regional Project - Organizational Framework

World Bank (Implementing Agency) in cooperation with UNDP

BALTIC SEA REGIONAL PROJECT INTERNATIONAL COORDINATING BODIES

ICES

HELCOM (Executing Agency)

IBSFC

|

Recommendations and Management Tools for Decision Making

|

[INPUT]

|

Baltic Sea Steering Group

COMPONENT 1 Large Marine Ecosystem Management Activities ICES C1C & AC1 Coordination Centers Latvia–LPM Estonia-LPM Lithuania-LPM Russia-LPM

| | | | |

COMPONENT 2 Land and Coastal Management Activities HELCOM/SLU C2C & LIUs Latvia-LIU Estonia-LIU Lithuania-LIU Russia-LIU

COMPONENT 3 Institutional Strengthening & Regional Capacity Building

Land, Coastal, Open Sea Activities

[OUTPUT]

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Coordination with Relevant Regional Initiatives in the Baltic Sea[11]

|

Recommendations and Management Tools for Decision Making

Future Coordinated Regional Management of the Baltic Sea

Attachment B: GEF Phased Funding (US$ million) and Component Activity Output Performance Indicators

Component Activities	Sub-activities	Annex 1[12] Output Performance Indicators for Phasing	GEF Sub-totals & Totals	GEF Financing Phases and Project Year Implementing Agency and Funding Distribution
				Phase 1	Phase 2	Phase 3
				PY 1	PY2&3	PY4&5
Component 1–Large Marine Ecosystem Activities GEF subtotal			7.2	2.5	3.5	1.2
Activity 1 Strengthening Institutional and Technical Capacity	1(a) Strengthened Institutional Capacity of Coordination Centers 1(b) Regional Training and Workshops to Strengthen Technical Capacity 1(c) Coordinate Coastal-Near Shore Activities, 1(d) Coordinate Open Sea Activities	§ Phase 1: establish institutional framework for Component coordinated activities (1.1, 1.2) strengthened institutional and capacity (1.5, 1.6, 2.3) § Phase 2: strengthened technical capacity continues extends to second phase (2.4) § Phase 3: mechanisms are established for institutional sustainability (1.7)	2.7	2.00 UNDP (1.00) World Bank (1.00)	0.33 UNDP (0.33) World Bank (0.0)	0.33 UNDP (0.33) World Bank (0.0)
Activity 2 Coordinated Monitoring Surveys in the Eastern Baltic Sea	2(a) Conduct Coastal Near-shore Monitoring Surveys 2(b) Conduct Joint Open Sea Monitoring Surveys 2(c) Collect Data from Commercial Fishing Vessel 2(d) Monitor Biological Effects of Contaminants	§ Phase 1: no GEF funding § Phase 2: Conduct open sea and coastal monitoring surveys (1.3), collect and report data (1.4), implicit is continued, sustainable operations § Phase 3: no GEF funding	3.1	0.50 World Bank (0.50)	2.60 World Bank (2.70)	0.0 World Bank (0.0)
Activity 3 Cooperative Local and Regional Evaluations and Assessments	3(a) Evaluate and Assess Component 1 Information 3 (b) Assess Biological Effects of Contaminants	§ Phase 1: no GEF funding § Phase 2: no GEF funding § Phase 3: evaluations and assessments provide ecosystem-based management tools are prepared (2.6)	0.4	0.0 World Bank (0.0)	0.10 World Bank (0.10)	0.34 World Bank (0.34)
Activity 4 Demonstration Activities	4(a) Coastal Spawning Habitat Restoration 4(b) Salmon River Restoration 4(c) Multi-Marine Environmental Disturbances (MMED) Predictive Tools for Management 4(d) Land-Coastal Interaction - Lielupe River-Riga Bay (w/C2) 4(e) Joint Activities Coastal Zone Management - Vistula Lagoon 4(f) Joint Activities Coastal Zone Management – Curonian Lagoon 4(g) Joint Activities Coastal Zone Management – Väinamera/ Matsalu Bay 4(h) Socio-economic Assessment of Local Fisheries) 4(i) Promote Community Outreach and Public Awareness	§ Phase 1:no GEF funding § Phase 2: CZM activities are coordinated with Component 2 (6.1), socioeconomic assessment of local fisheries (2.5), demonstration activities commence (6.2, 6.3), § Phase 3: coastal zone management and demonstration activities continue through Phase 3 (6.1,6.2, 6.3)	1.0	0.0 World Bank (0.0)	0.50 World Bank (0.50)	0.50 World Bank (0.50)
Component 2 Land And Coastal Management Activities GEF subtotal			7.3	2.5	3.5	1.3
Activity 1 Agricultural Interventions	1(a) Local agro-environmental capacity building 1(b) Demonstrating cost-effective nutrient recycling and retention technologies 1(c) On-Farm Environmental Investments	§ Phase 1: demonstration sites are selected (3.1, 4.1), outreach program (5.1, 5.4) and small-scale farm investments commence (5.2), and farm practices are put in place (5.3) § Phase 2: environmentally responsible practices are implemented (4.2, 4.3, 4.4) and services expanded (5.4) § Phase 3: investments continue (5.3)	5.4	2.35 World Bank (2.40)	2.75 World Bank (2.80)	0.30 World Bank (0.30)
Activity 2 Monitoring and Assessment of Non-Point Source Pollution	2(a) Catchment measurement programs 2(b) Effects of specific demonstration activities 2(c) Contamination of drinking water in farm wells 2(d) Modeling of nutrient loads 2(e) Multi-scale monitoring approach in the Berze-Lielupe basin – Gulf of Riga	§ Phase 1: in-stream monitoring networks planned (3.2) § Phase 2: monitoring network operationalized (3.2) § Phase 3: monitoring continues through phase (3.2)	0.7	0.10 World Bank (0.10)	0.40 World Bank (0.40)	0.20 World Bank (0.20)
Activity 3 Land-Based Coastal Zone Management	3(a) ICZM Väinameri/Matsalu and Pärnu Bay/Kihnu Island 3(b) ICZM Lielupe/Riga Bay 3c) ICZM Curonian 3(d) ICZM Vistula Lagoon 3(e) Regional Network (BaltWet)	§ Phase 1: no GEF funding § Phase 2: CZM activities are coordinated with Component 1 (6.1), § Phase 3: CZM activities develop mechanisms for sustainability (6.1)	1.0	0.00 World Bank (0.00)	0.25 World Bank (0.25)	0.75 World Bank (0.75)
Activity 4 Agro-Environmental and Rural Policies	Activity tasks will evaluate benefits of agri-environmental practices, seminar on agri-environmental schemes and measures, seminar on rural policies and coastal zone management	§ Phase 1: no GEF Funding § Phase 2: seminar on agri-environmental schemes will take place (5.5) § Phase 3: seminar on rural policies and coastal zone management (5.5)	0.1	0.00 World Bank (0.00)	0.05 World Bank (0.05)	0.05 World Bank (0.05)
Activity 5 Regional Network	5(a) Establish a regional database for on-going monitoring programs in the Baltic Sea Region 5(b) Virtual research and Education Network 5(c) BAAP Regional Network 5(d) Incremental co-ordination of existing initiatives	§ Phase 1: coordination f agriculture sector regional initiatives and activities (7.4) § Phase 2: develop and implement coordination mechanism (7.4) § Phase 3: no GEF funding	0.1	0.05 World Bank (0.05)	0.05 World Bank (0.05)	0.00 World Bank (0.00)
Component 3-Institutional Capacity Building GEF subtotal			0.5	0.0	0.25	0.25
Activity 1 Regional Capacity Building	1(a) Regional Coordination 1(b) Baltic Sea Steering Group 1(c) Regional Public Information and Outreach	§ Phase 1: no GEF Funding § Phase 2: Baltic Sea Steering Group commences responsibilities (2.2) regional and local coordination (7.1), and public outreach program commences (7.2) § Phase 3: evaluations and assessments completed (2.1)	0.4	0.00 UNDP (0.00)	0.20 UNDP (0.20)	0.20 UNDP (0.20)
Activity 2 Regional Socioeconomic Assessments	2(a) Improved Valuation of Ecosystem Goods and Services	§ Phase 1: no GEF funding § Phase 2: socio-economic assessment commences § Phase 3: socioeconomic value of ecosystem assessed (7.3)	0.1	0.00 UNDP (0.00)	0.05 UNDP (0.05)	0.05 UNDP (0.05)
Component 4-Project Management		GEF subtotal	3.0	0.50	1.75	0.75
Activity 1 Project Management	1(a) Project Management 1(b) Social Assessment	§ Phase 1: project management structure organized (8.1, 8.2) § Phase 2: project management continues, with a mid-term reviews (8.3) and social assessment completed (8.4) § Phase 3: project management continues	3.0	0.50 World Bank (0.50)	1.75 World Bank (1.75)	0.75 World Bank (0.75)
		UNDP: GEF subtotal	2.2	1.0	0.6	0.6
		World Bank: GEF subtotal	15.8	4.5	8.4	2.9
		GEF TOTAL	18.0	5.50	9.00	3.50

Annex 3

BALTIC SEA REGIONAL PROJECT

Incremental Cost Analysis

A. Overview

1. The recipient countries are committed to achieving the Baltic Sea Joint Comprehensive Action Program (JCP) objective of “restoration of the Baltic Sea ecosystem.” The GEF Alternative will contribute to realizing this objective through the identified regional and global outputs, outlined in Annex 1, at a total incremental cost of US$18 million for regional, national and local targeted land, coastal, or open sea activities which address transboundary water management issues.

B. Regional Context And Broad Development Objective

2. Regional Context. Though the recipient countries strive to meet their obligations to the Helsinki Convention and the Gdansk Convention, threats to the Baltic Sea and transboundary issues continue to present major regional challenges. Individual country activities are unable to address regional and transboundary concerns. These shared concerns and threats provide justification for the proposed integrated approach of regional cooperation and linkages for ecosystem-based management.

3. Development Objective. To achieve the JCP goal and development objective of the proposed Project, the GEF Alternative will support introduction and implementation of ecosystem-based management practices. The introduced practices will improve the land, coastal and open sea environments of the Baltic Sea ecosystem through targeted activities that reduce impacts from non-point source pollution and improve coastal zone management while increasing sustainable biological productivity in coastal and open sea areas. GEF funding will address the transboundary issues and help remove institutional, financial and technical needs, and knowledge barriers that currently limit ecosystem-based management practices in the region.

4. Bank Strategy. The World Bank has an established commitment to support improved environmental management in the Baltic Sea region. Since 1990, it has worked closely with HELCOM and the countries of the drainage basin in development and implementation of the JCP. In this context, it has supported a series of environment projects to address priorities established under this strategic action program in Estonia, Latvia, Lithuania and the Russian Federation.

C. Baseline Scenario

5. Baseline Scenario. The Baseline Scenario describes the course of future activities by the countries in the absence of GEF support. On the national level the recipient countries will continue to attempt to meet their obligations to the Helsinki Convention. Each recipient country has the basic capacity to meet this responsibility; however, broader regional environmental goals will be difficult to achieve. Policy decisions are often made on incomplete information. Over fishing continues from uncoordinated activities and coastal areas are degraded due to poor planning and management practices at the national and local level. Except for localized benefits gained in control of non-point source pollution with BAAP and the Rural Environmental Protection Project in Poland, this defines the current situation.

6. The Baseline Scenario thus implies continued (i) impact from agricultural non-point sources pollution, contributing to excessive loads of nutrients and increased widespread eutrophication; (ii) continued management issues in the coastal zone; (iii) deterioration of the open sea ecosystem; and (iv) reduced biodiversity from over fishing, and loss of economically important fish stock. The recipient countries would continue to manage common resources in a limited capacity, without standardized procedures for collecting data, monitoring and assessments. Transboundary issues would not be effectively addressed. The long-term global implication will be an as-is condition, with continued degradation of a significant international water body and its associated biodiversity in a shared coastal and open sea environment. It is anticipated that there could be some contribution from donor countries, however these funds could not replace GEF’s capacity to provide incremental funds for activities the recipient countries otherwise could not cover. Nor could individual donor funding for transboundary activities attain the regional scale necessary to address transboundary issues in a comprehensive manner. Finally, the Baseline Scenario would not assist the progress of Estonia, Latvia and Lithuania to move into compliance with EU environmental directives as part of the accession process. This would especially be the case with regard to the Nitrates Directive, which specifically addresses pollution from agriculture.

7. Importance of International Assistance. Without international assistance the recipient countries are unlikely to address these issues comprehensively in the next few years. This Project provides a timely opportunity to maintain the momentum initiated in the region for EU accession. Given the existing institutional infrastructure and donor sources, the Project has a high probability of success. The GEF can provide a unique source of funds to upgrade the capacity of the recipient countries to link with other regional activities. Not implementing the proposed Project will disrupt the progress achieved to date and delay a valuable opportunity to proceed with potential investments in the region. Identification and dissemination of lessons learned will also be delayed, an important loss for other regional international water initiatives.

D. Global Environmental Objective

8. Global Environmental and Benefits. The GEF funding supports global environmental benefits by removing barriers for transboundary management of international waters. This Project is consistent with the GEF global environmental objective for GEF-OP-9, “Integrated Land and Water Multiple Focal Area Operational Program.” It also overlaps with the principles of GEF-OP-2, “Coastal, Marine and Freshwater Ecosystems,” which promotes conservation and sustainable use of biological diversity of coastal and open sea resources under threat. The Project focuses on preventive measures to address threats rather than remedial, highly capital intensive measures. To achieve the global environmental goal, the Project will implement mechanisms for ecosystem-based management within the agriculture, coastal management and fisheries sectors. The GEF Alternative would accelerate, coordinate and expand field-tested technologies and approaches and link them with an information outreach program. It would demonstrate and disseminate the benefits of improved environmental management practices. In addition, the Alternative is designed to speed the development of a model that could be replicated, with adjustment for local conditions, in other basins such as the Black Sea and Danube River Basin. The proposed activities would assist in internalizing costs (that in GEF terms are incremental), which over the long term will provide social and economic benefits to farmers, coastal communities and fishermen, and overall global environmental benefits. Links with the work of the GEF partners, HELCOM, IBSFC and ICES, international financial institutions, donors and nongovernmental organizations will assist in sharing and replication of successful practices within the region.

E. GEF Alternative - The Baltic Sea Regional Project

9. GEF Alternative. The GEF Alternative would supplement the Baseline Scenario by establishing a coordinated regional structure for ecosystem-based management of living marine resources, and funding activities at geographically targeted sites to address priority transboundary issues, reduce non-point source pollution and improve coastal zone management. Collaboration between HELCOM, IBSFC and ICES constitutes the institutional framework; the three international bodies are jointly responsible for coordinating and implementing the proposed activities. The Project would provide an opportunity for the recipient countries to strengthen management and technical capacity necessary for managing the common resources of the Baltic Sea ecosystem. A significant aspect of this Project is to link activities undertaken on the land, in the coastal zone and the open sea environment. Specifically, Component 1 is designed to meet a regional need for an integrated, sustainable coastal and open sea management program that could not be accomplished effectively under the Baseline Scenario. To address non-point source pollution impacts on the coastal and open sea environment, Component 2 builds on and expands the successful BAAP pilot demonstrations in the region; the GEF supported Rural Environmental Protection Project in Poland; and the work of the WWF-coordinated HELCOM PITF Working Group on Management of Coastal Lagoons and Wetlands. Component 3 is designed to strengthen local and regional capacity to synthesize the outputs from the activities and advance ecosystem-based management in the Baltic Sea region.

10. Without support from the GEF, the participating countries would not be able, given current economic conditions and institutional structures, to address the priority issues in an effective, comprehensive and cooperative manner. Assistance is necessary to prevent disruption in the progress achieved to date. The support of GEF and other donors in the Project would buy down the risks and costs to farmers, coastal communities and fishermen by adopting ecosystem-based management techniques. GEF resources would reduce the threshold for national governments to proceed with individual country projects and lower the risks and costs that uncoordinated duplication represents. The GEF Alternative would overcome the risks inherent under the Baseline Scenario. It would engage local, national and regional stakeholders and build on the lessons learned, providing linkages to regional rural and environment sector activities that involve several international and local partners,[13] and include projects supported by the Bank[14] and other donors[15] in the region.

F. System Boundary

11. The Project implementation period is five years. All the benefits will be achieved during this period, however, the Project is designed so that benefits are sustainable and accrue beyond this time boundary. The Project engages the recipient and participating countries in the Baltic Sea drainage basin, which defines the geographic boundary. The issues to be addressed within the Project boundaries are defined by the three components: living marine resources management activities; land and coastal management activities; and institutional strengthening and capacity building. The Project design takes into consideration and when appropriate provides linkages with other projects in the region, to maximize a regional and holistic approach to ecosystem-based management.

G. Domestic and International Benefits

12. The GEF Alternative’s domestic and international objective is to improve regional capacity for ecosystem-based management, through land, coastal, open sea and institutional activities. The domestic and regional benefits will:

§ Provide opportunities for an integrated and holistic approach to local and regional decision-making for ecosystem-based management,

§ Increase recipient country ability to cooperate in watershed management;

§ Provide opportunities to invest in environmentally responsible management practices to reduce non-point source pollution;

§ Provide cleaner surface water and groundwater, and improved farm productivity;

§ Enhance incomes of farmers through more efficient practices and reduced use of inputs;

§ Demonstrate the benefits of coastal zone management as a tool at the national and local level;

§ Improve resource use in the coastal zone through new management measures;

§ Provide the opportunity for increased income and employment for coastal communities;

§ Increase recipient country cooperation and coordination capacity to improve monitoring and assessments for coastal and open sea waters;

§ Increase local capacity to evaluate ecosystem interactions and conduct multi-species fish stock assessments;

§ Improve ecosystem-management capacity of the three international bodies to manage critical habitats for biodiversity enhancement of the LME;

§ Support stabilization and increase in fishing incomes through adoption of sustainable fishery management practices;

§ Increase public awareness and adoption of improved farm environmental management; and

§ Develop a replicable model for addressing this important transboundary issue and dissemination of lessons learned from Project implementation.

H. Costs

13. Baseline vs. GEF Alternative. The difference between the cost of the Baseline Scenario (US$22.0 million) and the cost of the GEF Alternative (US$40.0 million) is US$18.0 million. This represents the incremental cost of achieving environmental benefits through a comprehensive environmental management structure and adoption of environmentally responsible practices by farmers. Support from the farming and fishing communities in the five recipient countries would be in the form of in-kind labor and services and use of facilities and equipment. Discussions are ongoing with interested partners regarding finalization of co-financing arrangements. The following partners are anticipated to contribute to co-financing: European Union, Denmark, Finland, Norway, Sweden, United States, NEFCO and WWF.

14. Cost of the GEF Alternative. The GEF Alternative exceeds baseline activities in the countries in that an effort has been made to identify all significant incremental costs. The Project design takes into account both the indirect costs as well as the effects on local economies that an improved state of the Baltic Sea and better social and economic welfare of the farming, coastal and fishing communities will have. The Project covers the incremental costs of transboundary actions and offsets the economic burden of the GEF Alternative activities on the countries.

I. Incremental Cost Matrix

15. The incremental cost matrix in Table A shows the costs to achieve the stated domestic and global environmental benefits associated with the baseline activities and the proposed GEF Alternative. The incremental cost of US$18 million is the difference between the Baseline Scenario and the GEF Alternative.

Table A. Incremental Cost Analysis[16]

Component	Cost Category	US$ million	Domestic Benefit	Global Benefit
Component 1 Large Marine Ecosystem Management Activities	Baseline	10.3	· Increased cooperation and coordination to improve monitoring and assessment capacity of recipient countries · Increased local capacity to evaluate ecosystem interactions and conduct multi-species assessment.	· Integrated and holistic approach to regional decision making capacity for ecosystem-based management. · Improved ecosystem increase capacity of the three international institutions to manage critical habitats for biodiversity enhancement of the LME.
	With GEF Alternative	17.7
	Incremental Cost	7.4
Component 2 Land and Coastal Management Activities	Baseline	10.7	· Through environmental investments, to reduce downstream nutrient pollution, increased awareness for environmental protection while increasing the socioeconomic welfare of the farming communities · Through demonstration sites, improved local capacity to implement monitoring network, and establish nutrient retention practices. · Improved coastal zone management resulting in better use of resources and increased incomes and employment opportunities for coastal communities.	· Increased coverage of nutrient storage in the Baltic Sea watershed to reduce non-point source pollution from agricultural sources. Increased regional awareness of the benefits of environmental investments. · The pilot demonstrations will provide tools for improved land based management of non-point source pollution to international transboundary waters. · Increased regional understanding of the importance and significance of coastal zone management practices
	With GEF Alternative	18.3
	Incremental Cost	7.6
Component 3 Institutional Strengthening and Regional Capacity Building	Baseline	0.5	· Strengthened local governance and ecosystem-based management capacity. · Local awareness of environmental issues and better management practices · Strengthened regional governance and ecosystem-based management capacity for the Baltic Sea.	· Increased international awareness of the Baltic Sea.
	With GEF Alternative	1.0
	Incremental Cost	0.5
Component 4 Project Management	Baseline	0.5	· Improved local Project implementation capacity	· Increased capacity of international organization to manage the regional Baltic Sea resources.
	With GEF Alternative	3.0
	Incremental Cost	2.5
TOTALS	Baseline	22.0
	With GEF Alternative	40.0
	Incremental Cost	18.0

Annex 4

BALTIC SEA REGIONAL PROJECT

STAP Technical Review

Date: September 11, 2000

To: Stephen Lintner, Senior Environmental Advisor, ENV, World Bank

From: Richard Kenchington

RAC Marine Pty Ltd, PO Box 588, Jamison, ACT 2614, Australia

Subject: STAP Review: GEF-Baltic Regional Project.

This review addresses the terms of reference set out in your Memorandum of 22 August 2000.

1 The project directly addresses clearly defined needs in the context of the International Waters Convention. It addresses the urgency of regional issues in a marine ecosystem that is shared by and impacted by the activities of several nations. It builds on existing capacity of HELCOM and other regional mechanisms for collaborative action. It also builds on the critical opportunity provided by the need and economic incentive to meet the requirements of EU directives.

2 The project objectives are valid, challenging and well focused. The proposed activities address very difficult and important issues in the areas of fisheries, pollution and catchment management and the development of long term economic opportunities for coastal people. The project builds on a decade of work with HELCOM and it appears that the proposed activities are likely to be broadly supported and to be effective in addressing the issues.

3 The approach of the project is logical and appropriate. The greatest challenge in implementation will lie in achieving ongoing integration of the scientific and monitoring programs and outputs with the information inputs required to address the immediate and longer-term needs of management.

4 The document provides sufficient strategic information for implementation. The Annexes and the preparation of table E[17] indicate that the issues of detail and coordination have been considered and are available for the implementation team.

5 I have little direct knowledge of regional or country priorities but the document has addressed and discussed priorities in a way that indicates that there has been substantial consideration, which is reflected in the proposal.

6 The document is well presented and well argued. It clearly articulates the reasons and the urgency for the project to be undertaken. The issue of incremental costs is particularly well addressed and present arguments that apply to many shared coastal and shallow sea areas. It argues clearly and appropriately that investment to halt and reverse otherwise inevitable decline of environmental conditions and ecosystem-based productivity is as valid as technological investment to prevent future damage.

7 The activity descriptions present adequate information on what is intended to be accomplished.

8 Again, my ability to comment is limited by my lack of experience in the Baltic but the figures and relative allocations appear reasonable, consistent and are clearly presented.

9 The project involves achieving social, economic and attitudinal changes in long established practices of agricultural and fishing communities. Such changes take time. This project builds upon a decade of work between the World Bank and HELCOM that has achieved significant and growing community recognition of the problems and of the need for the changes proposed. The proposal as presented should advance the objectives by delivering substance and results to address the needs and demonstrate benefits to participating communities. The ultimate demonstration of success will be the demonstration through ongoing and subsequent local and regional investment that the environmentally sustainable technologies and practices demonstrated are being incorporated of into normal economic activity in the catchments and coastal areas of the Baltic. In the light of the reports of attitudinal change in the past decade the prospects appear good.

10 I consider this should be seen as a priority issue for GEF. This is clearly a project that addresses international waters and biodiversity priorities of the GEF, the priority issues of Chapters 17 and 36 of Agenda 21. Also, having regard to the long history of human settlement and use of the coastal and catchments of the Baltic, it addresses the issues of Chapter 26 of Agenda 21. This is not only an important project for its Region; it has important implications for addressing similar urgent needs in other coastal and shallow marine ecosystems in the world.

11 Some comments on the professional challenges for fisheries managers, scientists and community managers are attached separately. They reflect issues that may have been considered in project development and in my view need to be addressed in initiation and throughout implementation of a project that I recommend urgently for support.

R A Kenchington

Attachment to STAP Review of GEF Baltic Sea Regional Project

Issues for implementation

1) The project is logical, well described and achievable. Its implementation presents several important professional style and disciplinary challenges of approach and demands for an ongoing high level of inter-disciplinary collaboration between scientists, fisheries managers and community leaders and managers.

2) From the perspective of managing a large marine ecosystem the following issues should be addressed in implementation:

a) The objectives of, and information collected in, research and monitoring programs must directly address the clearly identified concerns and time scales important to managers as well of those of ecological research:

i) Short and long term management needs should be clearly identified and addressed issues include:

(1) Recruitment variability of fisheries target species;

(2) interactions of apparently ‘natural’ and apparently anthropogenic causes of variations;

(3) impacts of fishing methods on non-target species and the ecological processes which sustain the ecosystem and fisheries of the Baltic;

(4) understanding the interaction between investment cycles and fish stocks;

(5) understanding the social and economic factors and potential to resolve competition between commercial and recreational competition for fish stocks.

b) It is important to ensure the best possible data is available on catch, effort and location of catch for the fisheries. Given the cultural tradition of all fishers to obfuscate such information I would advocate a feasibility study of the use of vessel monitoring systems and audited community catch reporting.

c) There is a disturbing lack, anywhere in the world, of fisheries management schemes capable of demonstrating sustainability with respect to stocks and to the environments and ecological communities that sustain them. I would advocate the adoption of a goal and the development of robust performance criteria that may be able to establish sustainability in one or more of the Baltic fisheries.

d) In the absence of robustly demonstrable sustainability of fisheries I would advocate the application of the precautionary principle through the establishment of reference sites, refugia or marine protected areas to provide area from which it may be possible for recruitment and migration to restore area damaged by over fishing.

e) In any case, I would advocate the pursuit of marine protected areas representative of all major habitat types in the Baltic large marine ecosystem as a matter of conservation importance. This issue is not directly addressed in the project proposal. It is possible that it is being addressed elsewhere but it is important conceptually to the concept of sustainable management of the Baltic Sea.

R A Kenchington

World Bank Response to

STAP Review of GEF Baltic Sea Regional Project:

The Project preparation team is pleased with the STAP Reviewer’s positive response to the project objective and project design, and appreciates the issues the Reviewer identifies for consideration during Project implementation. The following provides an overview of the Project approach and how the issues would be addressed. Reference is made to the Large Marine Ecosystem (LME) workshop was held 11-14 July in Riga, Latvia, for which the workshop reports are available on file, or responses refer to proposed activities identified in Annex 2 Table C[18] of the PAD document.

1) Issue: Recruitment variability of fisheries target species.

Response: The Riga workshop report elaborates on the participants’ discussions on fishery issues and identifies proposed target species ranging from sprat and herring to cod, and Component 1 Activity 1.2 (c) will provide an opportunity to address recruitment variability during the proposed multi-species stock assessment activity.

2) Issue: Interactions of apparently ‘natural’ and apparently anthropogenic causes of variations:

Response: This issue can be addressed within Component 1 Activity 1.1 elements, which include modeling the carrying capacity modeling efforts to assess and evaluate fishery ecosystem interactions and to better understand environmental effects into fish stock assessment. It is anticipated that this information will contribute to a better understanding of the interaction of natural and/or anthropogenic causes of species variations.

3) Issue: Impacts of fishing methods on non-target species and the ecological processes which sustain the ecosystem and fisheries of the Baltic;

Response: As part of the Riga workshop participants provided a baseline review on the status of fishing vessels, data quality, and data needs. Though not specifically articulated in the PAD document, the intent of Component 1 Activity 1.2 fishing methods will be evaluated and cost-effective methods to collect sustainable and reliable fisheries statistics will be developed.

4) Issue: Understanding the interaction between investment cycles and fish stocks;

Response: This issue can be addressed in an integrated approach within Component 1 Activity 1.2, which will conduct multi-fish stock assessments, and relevant data will be coordinated with Component 3 Activity 3.1 in assessing the value of ecosystem goods and services.

5) Issue: Understanding the social and economic factors and potential to resolve competition between commercial and recreational competition for fish stocks.

Response: This issue can be addressed in Component 1.2, which will target support for improvements in, and provide recommendation for national and international ecosystem strategies for problems and conflicts in transboundary coastal fisheries, this includes conflicts between commercial and recreational fisheries. Elements from the output of this effort will be considered in the proposed socioeconomic assessment.

General response to other comments: The project design was developed within the context of LME and in developing the Project Implementation Plan this fall, there will be an opportunity to further develop project indicators and long-term performance criteria for sustainable fisheries management practices. Though not specifically stated in the PAD, an anticipated outcome from the Project activities will be recommendations for environmentally responsible practices for sustainable management of Baltic Sea resources, and this would include recommending sites for conservation and protection of ecologically significant coastal and marine waters.

Annex 5

BALTIC SEA REGIONAL PROJECT

Public Participation Summary

1. Participatory Approach. Experience from a number of regional GEF projects has demonstrated the importance of broad based stakeholder participation for successful project development and implementation. This is especially critical given the Project’s long-term goal for regional engagement for ecosystem-based monitoring, assessment, and management. The Project preparation process engaged regional, national and local stakeholders to identify the key issues within the context of the Project, and design activities to support improved social, economic and environmental conditions in the Baltic Sea region.

2. Social Issues in the Baltic Sea Region. There are two major social issues inherently addressed in the Project design. First, the current social welfare system in the recipient countries provides little support to the farming, coastal and fishing communities. The economic welfare of these communities has in turn suffered the greatest during the period of economic transition. Subsequently, this affected other sectors such as local businesses and local labor. A second issue is attributed to the deteriorated state of the Baltic Sea ecosystem. Impacts from pollution, degradation of coastal areas and over fishing have increasing effects on the regional economy, including the potential development of coastal tourism. Decreased quality of fish stock results in reduced incomes in the fishing community, while conflicts between commercial fisheries and subsistence fishing and between fisherman and fisheries management have increased transboundary tensions between countries.

3. Project Stakeholders. The primary stakeholders and beneficiaries include (i) national and local governments, and agricultural, coastal and fishing communities in the participating countries; (ii) local sector interests (businesses, fisheries, agriculture, tourism, shipping), and (iii) community based organizations and local nongovernmental organizations. Secondary stakeholders include (i) regional partners and cooperating bodies: HELCOM, IBSFC, ICES; and (ii) international partners: EU, other member governments of HELCOM, cooperating international financial institutions (NEFCO, World Bank), UNDP, and regional nongovernmental organizations. The Project reflects the lessons learned from stakeholder engagement in the Baltic Sea in the work of HELCOM, as well as previous Bank supported projects, donor supported demonstration projects;[19] and technical assessments done by the three cooperating international bodies.

4. The stakeholders have been actively involved in the project preparation process. The Project Coordinator has engaged the recipient country participants through workshops and meetings, and individual consultations. The Baltic Sea Regional Project Core Group has actively incorporated representatives from regional programs and initiatives in meetings, collaborated with technical specialists from the region, helped integrate the land, coastal and open sea principles in the project design.

5. Experience from the JCP. The Project builds on these lessons and the JCP priority activities, which have a broad-based commitment from the wide range of stakeholders in the region. There have been numerous regional meetings whose recommendations provided the parameters and criteria for transboundary cooperation. Noteworthy among these are the Vilnius Recommendations, which are the outcome of a Project related regional meeting on the management of transboundary waters. These recommendations have provided the basis for the Project design that promotes an integrated approach towards watershed, coastal and marine environments. They included an evaluation of lessons learned from regional cooperation to date in the Baltic Sea region, and noted the importance of a spirit of cooperation for managing transboundary waters and formation of broad based regional partnerships for successful program development and operation.

6. Component 1 – Large Marine Ecosystem Management Activities - Participation. During Project preparation, the Core Group Coordinator individually met with recipient country technical specialists who are responsible for reporting to ICES and HELCOM. These specialists are familiar with the issues in the region, and knowledgeable on fisheries matters in the Baltic Sea. During the Component 1 LME Workshop (Riga, July 11-14) the individual Country Proposals were transformed into an integrated regional ecosystem-based approach to coastal and open sea management. The proposed activities will facilitate strengthened cooperation between the local and regional decision-makers on resource management issues. WWF met with local coastal and fishing communities who shared their views and concerns about the current state of coastal management and fisheries and their effects on their livelihood and welfare.

7. Component 2 - Land and Coastal Management Activities - Participation. The Project’s agricultural activities build on the institutional and technical work undertaken by the Swedish supported BAAP program, and coordinate with the GEF supported Rural Environmental Protection Project in Poland. Farmers in the selected demonstration watersheds have been consulted concerning Project activities that build upon those demonstrated earlier under the first phase of BAAP. The approach to be used in the Project is based on the BAAP model and is interactive and very participatory with local farm communities, authorities and the agricultural education system in the region. Through individual consultation, participating farmers and the extension services involved in the BAAP project provided their perspective and their recommendations were incorporated into the Project design. Local BAAP extension services currently engaged in the farm communities also provided institutional and implementation recommendations.

8. Within the Project design two NGOs, the Agriculture Advisory Services (AAS), and Farmers Interest Organizations (FIO)s, will interact directly with the farmers, and launch the educational programs on a national level with the purpose of disseminating the Project message to a broader public. The programs will be interactive, providing information to the farming community while gaining experience from the lessons learned. This will be a participatory monitoring approach as part of a social assessment, to learn best methods and determine impact. The AAS and FIOs will also provide input for the design of the credit line under development by NEFCO. The Project will support local institutional strengthening of the AAS and FIOs to continue providing technical assistance after the Project is complete. Farms located within the coastal zone will be engaged in the coastal zone management activities, implemented jointly with Component 1.

9. The WWF will coordinate a series of locally based management demonstration activities for coastal zone management. These activities will be based on previously developed management plans that were prepared with the active participation of national, country and local governments, community organizations and local nongovernmental organizations. To address local social and economic issues, the Project will provide opportunities for agricultural, coastal and fishing communities to benefit from small-scale investments, and strengthen the capacity of the local fishing associations to contribute to the decision-making process. The communities’ input has been considered in the coastal zone management activities and adapted to link with other activities to meet Project objectives. Pilot coastal zone management activities will involve stakeholder involvement in sustainable community development and environmental conservation, and support small-scale investments to improve the local standard of living for these communities. This effort will include the involvement of the local decision makers, community organizations, local nongovernmental organizations, and the business community, with support from WWF.

10. Component 3- Institutional Strengthening and Regional Capacity Building - Participation. Component 3 will facilitate the strengthening of local and regional institutions and build capacity for a holistic approach to ecosystem-based management of the Baltic Sea resources. The valuation of ecosystem goods and services will be a useful tool for local and regional decision-makers, the business community, and other stakeholders to understand the implications of management decisions and practices. The WWF will also be involved in Project implementation and will conduct a training program for community stakeholders and local nongovernmental organizations. The Project budget includes funds for a systematic social assessment to evaluate the social impacts from the component activities and outreach program, to provide potential modifications to the Project design as needed.

11. Institutional Arrangements and Monitoring and Evaluation. The WWF, a member of the BSRP Core Group, has been engaged in the region and its interest and involvement will ensure the Project is successfully implemented and achieves the projected social benefits. For component specific activities, the activity Coordinator, and Local Project Managers will be involved with the fishing and farming community. They will be responsible for daily implementation and monitoring and evaluation, and will report to the BSRP Steering Committee. HELCOM will have overall monitoring responsibility of the Project. The social assessment will be included as part of the monitoring and evaluation process.

12. Outcomes and Indicators. While there has been no systematic social assessment during Project preparation, active engagement of local stakeholders during preparation has been positive. A social assessment process will be conducted during Project implementation, at a time when it will be easier to gauge the progress of implementation and adapt activities for optimal results. The Project will facilitate the strengthening of regional, national and local capacity. It supports efforts to find solutions to problems and conflicts between recreation and commercial fisheries, fisherman and fisheries managers, and transboundary issues. Participating BAAP farm families noted increases in farm productivity and income, improved drinking water quality, and subsequent environmental improvements from improved manure storage. Though the Project’s basic objective is to improve the Baltic Sea ecosystem, it is implicit that this will improve the social and economic welfare in the region because it will be done through activities that directly engage and benefit people in the area and help protect their long-term interests. A summary of the key socially oriented performance indicators, detailed in Annex 1, includes (i) strengthened regional, national, and local institutional and technical capacity, (ii) improved economic welfare and standard of living, and increased satisfaction within the agriculture and fishing communities, (iii) increased awareness of environmental issues related to coastal and open sea issues, and (iv) increased satisfaction rates among participating rural and coastal communities.

Annex 6

BALTIC SEA REGIONAL PROJECT

Transboundary Analysis

Introduction

1. Baltic Sea Environment. The Baltic Sea is the largest body of brackish water in the world. It has thirteen major watersheds and a very narrow and shallow linkage with the North Sea. This restricted linkage contributes to infrequent flushing of the Baltic Sea’s waters. During this century, major inflows of replenishing saline water have occurred approximately every 11 years but have recently been less frequent. The last major inflow of saline water took place in 1976. The bottom water can remain stagnant for long periods. Thus there is a distinct layering of water characterized by surface waters of low salinity and a warm top layer and deep water with higher salinity. As late as 1950 the Baltic Sea was still regarded as environmentally “healthy;” its ecological deterioration has been caused in recent years by an increase of point source industrial and non-point source agricultural pollutants, degradation of the coastal zone and non-sustainable use of living marine resources. The natural vulnerabilities have been seriously aggravated by anthropogenic causes of environmental change and degradation. These problems of the Baltic Sea are transboundary in nature, and difficult to address on an individual country basis.

2. Strategic Action Program. The need to address the management of agricultural inputs into international waters, improve coastal zone management and adopt sustainable management of living marine resources has been highlighted in the “Baltic Sea Joint Comprehensive Environmental Action Program (JCP)” which was prepared under the coordination of the Helsinki Commission by a broad based task force. The JCP was adopted as the strategic action program for the region by the Ministers of Environment in 1992 and was updated and strengthened in 1998. HELCOM prepares assessments of transboundary trends and impacts in the form of Pollution Load Compilations and Periodic Assessments which support implementation of the JCP. The JCP recognizes the need to use an ecosystem-based management approach that recognizes the freshwater, coastal and marine resources as a management continuum. This Project responds to the need to address regional transboundary issues and to establish a coordinated approach to ecosystem-based management, in order to alleviate burdens from anthropogenic impacts and meet the objectives of the JCP.

3. Vilnius Recommendations. As a contribution to the JCP and to support Project preparation, the Government of Germany and World Bank jointly sponsored an International Round Table on “Transboundary Water Management of the Baltic Sea Region” which resulted in the “Vilnius Recommendations.” These recommendations—reflecting the views and experience of regional organizations, national and local governments, international financial institutions and nongovernmental organizations—emphasized the need for sustained preventive and curative actions to achieve environmental improvements in both the short and long term. They noted the importance of cooperating at the regional, national and local levels to address the diversity of transboundary water management problems in the Baltic Sea region.

Transboundary Issues

4. Living Marine Resources Management. The Baltic Sea and its catchment area have a range of ecotones and biological diversity. The brackish waters of the Baltic Sea contain a mixture of marine and freshwater species. The coastal areas serve as spawning, nursery, and feeding areas for several species of fish. Baltic 21 statistics have indicated that the fishery industry contributes significantly to regional and local economy, and sustenance fishing is critical to the social and economic welfare of the coastal communities in the eastern Baltic. Major coastal and marine transboundary issues prevail due to current land, coastal and marine practices; they include: (i) changes in the productivity of the near coastal and offshore waters from eutrophication; (ii) unsustainable condition of fish stock yields; and (iii) degraded condition of coastal water quality from pollution, harmful algal blooms, multiple ecological disturbances, and contaminant loading.

5. Coastal Zone Management. The coastal zone of the Baltic Sea is physically diverse, of high economic importance and is under a range of development pressures. These areas include a number of important shared water bodies in the eastern Baltic Sea that include the Gulf of Finland, Gulf of Riga, Kursiu Lagoon, Vistula Lagoon/Kaliningrad Lagoon and Oder/Odra Lagoon. Studies by HELCOM, Baltic 21, national governments, VASAB 2010 and WWF have emphasized the importance of development and implementation of integrated management plans for these areas. Important coastal zone management issues include: (i) rapid changes in land use in urban and industrial areas associated with economic growth and restructuring; (ii) pressure for incremental development activities, especially related to tourism and recreation; (iii) direct and indirect degradation of coastal lagoons and wetlands from waterborne pollution, filling, and drainage; and (iv) conversion and destruction of fragile coastal habitats.

6. Land Management. Agriculture is the largest anthropogenic source of non-point source nutrient input to the Baltic Sea. HELCOM estimates that non-point source pollution from agriculture contributes 30-35 percent of the current nitrogen, and 10-15 percent of the current phosphorus loading entering the Baltic Sea, as well as pesticide residues. Within the Baltic Sea catchment area, approximately 40 percent of the land is in agriculture. In addition, the agricultural sector is traditionally conservative and it is often difficult to introduce innovative, environmentally responsible practices if the benefit is not immediately visible to the farmer. This has been a particular problem in the countries in economic transition in the eastern and southern portions of the Baltic Sea drainage basin, where the restructured agriculture sector has had to address a diversity of issues beyond environmental management. Reports by HELCOM and Baltic 21 have identified and reported on priority areas where poor agricultural practices have contributed to environmental degradation which include: (i) increased eutrophication from improper storage and application of animal waste and poor agricultural land management practices contributing to non-point source nutrient run-off to local tributaries, and (ii) lack of understanding, resources, and capacity to utilize environmentally responsible agriculture practices. Table A identifies the regional threats and issues from non-point source pollution and a transboundary analysis.

7. Eutrophication. HELCOM has identified eutrophication from non-point source nutrients and organic matter as a top priority transboundary water problem. It is caused by excessive growth of biomass stimulated by the large influx of nitrogen and phosphorus compounds. The common symptoms of eutrophication are increased plant biomass in the form of algae, oxygen deficiency in water bodies, formation of hydrogen sulfide and remineralization of the biomass. These processes disrupt the balance of freshwater, coastal and open sea ecosystems and cause changes in their structure and function. Impacts associated with eutrophication in Baltic coastal and open sea waters include: (i) a shift in the composition of marine vegetation in many coastal areas, (ii) repeated large scale algal blooms, (iii) disrupted reproductive cycles of some fish species, (iv) declines and shifts of the fish communities—decreases in abundance of commercially more important fish species in some fish stocks and increases in others, (v) an overall change in species composition, and (vi) a restriction of the depth range for the vegetation zone.

8. Algal Blooms. Toxic algal blooms have been found in the entire Baltic Sea. The large-scale blooms have been attributed to the high nutrient load in the Baltic Sea, with exceptionally sunny weather serving as an effective catalyst for starting the blooms. For example, there were massive blue-green algal blooms in the summer of 1997, and according to studies by the Finnish Institute for Marine Research, the surface accumulations of blue-green algae during this period were the most extensive ever recorded in the whole Baltic Sea area. Large amounts of blue-green algal biomass drifted ashore. In Helsinki, these blue-green algal blooms forced the city to close many of its beaches for most of the swimming season. Several cases of cyano-bacterial toxicosis were reported in humans and animals in Finland. This event caused widespread demands from politicians and the public for intensified action to reduce nutrient loading to the Baltic Sea from all types of sources to avoid such large-scale transboundary impacts.

9. Social and Economic Issues. There are a number of factors that impact local and regional social and economic conditions due to changes in ecosystem health, productivity, and biodiversity. The changing species composition, over fishing and poor management of fish stocks are generally the main causes for depleted viable fish stock in the Baltic Sea. This depletion, together with reduced market value for fish caught impacts the fishing community, primarily in countries in economic transition, where fishery infrastructure is less developed, and fishing may be the sole source of income. Where recreational use of the sea is popular, eutrophication and poor hygienic conditions cause unpleasant consequences in coastal waters and beaches. Summer algal blooms have periodically necessitated the closing of many bathing beaches throughout the region with an adverse affect on their recreational use and tourist value.

Transboundary Challenges

10. Adoption of an Integrated Approach to Management. The objective of the JCP is the restoration of the ecological balance of the Baltic Sea. This requires undertaking on a long-term basis a series of complementary actions to improve the management of transboundary land, coastal and open sea resources. The Project addresses this concern by supporting three cooperating international bodies—HELCOM, IBSFC and ICES—to work with the recipient countries to adopt and apply an ecosystem-based approach to environmental management. This approach involves a range of interventions that address technical, socio-economic and management issues that are central to improving the management of shared resources between countries. Table B evaluates these threats and issues within the context of the LME framework.

11. Challenges in Integrated Management of Coastal and Open sea Waters. The countries in the Baltic Sea region vary in their economic, technical and political capacities. There is a disparity in local regional management of shared living marine resources. Effective management regimes include a coordinated implementation of coastal and open sea ecosystem-based management practices, and incentives for responsible fishing that maintain fishing at a level consistent with productive fisheries. The proposed Project will upgrade local capacity by introducing innovative methodologies for monitoring and assessment of living resources in coastal and open sea waters. An outcome will be the introduction and implementation of ecosystem-based regional, national and local management of these shared resources.

12. Challenges in Coastal Management Activities. The effective management of coastal areas requires a commitment to cooperation by a wide range of stakeholders, recognition that management will occur at various levels and a willingness to use participatory approaches. Demonstration activities provide an opportunity to make coastal zone management an integral part of the planning process used by the cooperating countries. All actions will be taken in areas that are shared transboundary waters and common activities will be used to transfer experience between the demonstration areas. The Project will support expanded cooperation between national and local governments, demonstrate low cost activities that can be replicated elsewhere and involve community based organizations and local nongovernmental organizations.

13. Challenges in Land Management Activities. As opposed to point source pollution, which can be targeted for remediation, non-point pollution is caused by a large number of dispersed sources and requires a regional approach. The proposed Project, through demonstration activities, will test mechanisms and use lessons learned from the BAAP pilot activities to provide farmers with incentives and the level of support needed to effectively implement environmentally responsible practices to reduce non-point source pollution from agriculture to the coastal and open sea waters of the Baltic Sea. Successful implementation of the demonstration activities can then be expanded to other watersheds, and the Code of Good Agricultural Practices can be promoted on both a local and national level.

Table A: Threats from Non-Point Source Pollution[20]
Regions of the Baltic Sea	Salinity and Oxygen	Nutrients	Plankton and bottom fauna
Baltic Proper	- Eutrophication led to repeated oxygen depletion, areas of insufficient oxygen[21] conditions for macrofauna in the last 25 years, in central Baltic Proper - Temperature increases in the deep layers	- Present estimates indicate that the total nutrient supply to the Baltic Sea (and the Sound) is about 730,000 tons nitrogen and 50,000 tons of phosphorus per year. - High concentrations of nitrogen and phosphorus affect oxygen conditions in deep sections of central Baltic proper	- Data suggest that phytoplankton primary production has doubled in the last 25 years from the Baltic Proper to the Kattegat. - Phytoplankton production has increased the biomass and subsequent sedimentation; decomposed algae decreases oxygen levels.
Eastern Gotland Basin	- Water stagnation in deepest areas have decreased oxygen and increased hydrogen sulfide levels.
Bothnian Sea	- In late summers of the 1980s, eutrophication led to repeated oxygen depletion
Gulf of Bothnia and Bothnia Bay	- Water is exchanged through Åland Sea; the inflows are low-salinity and low-density surface waters from the Baltic Proper.	- High phosphate levels have remained the same since 1978
Kattegat	- In the 1980s, eutrophication led to repeated oxygen depletion	- Regionally high levels of phosphorus and nitrogen	- Intense algal blooms indicate increasing eutrophication occur more frequently.
Gulf of Riga		- Regionally high levels of phosphorus and nitrogen
Gulf of Finland			- Intense algal blooms indicating increasing eutrophication occur more frequently
The Sound			- Intense algal blooms indicating increasing eutrophication occur more frequently
Belt Sea			- Intense algal blooms indicating increasing eutrophication occur more frequently

Table B: Overview of Transboundary Issues in the Baltic Sea Ecosystem
LME Module and Transboundary Issues	Causes	Impact	Uncertain Risks	Transboundary Issues	Solutions
Productivity - Harmful eutrophication and algal blooms - Environmentally insensitive agriculture practices - Changing state of ecosystem	- Nutrient loading in coastal waters from anthropogenic land and marine activities - Changes in living resource biodiversity - Introduction of exotic species	- Public health concerns - Poisoning and mortality of human consumers of marine organisms - Decreased recreational use of marine and coastal waters	- Increase of incidences of algal blooms - Continued impacts from anthropogenic sources - Expansion of exotic species	- Agricultural watersheds cross national boundaries - Occurrence of algal blooms in coastal and open sea waters - Migration of species across national boundaries	- Develop a coordinated monitoring, assessment and reporting system - Improve capacity to monitor - Improve land-based management activities
Ecosystem Health - Deterioration of coastal and open sea waters - “Hot Spot” pollution from point and non-point source pollution - Degradation of coastal lagoons and wetlands	- Inputs from point and non-point sources (agriculture, industry, municipalities) - Lack of policies and enforcement for point source discharges - Weak coastal zone planning	- Public health concerns - Ecosystem health and resilience - Changes in species dominance - Decreased area of wetlands due to conversion in watersheds and coastal areas - Reduced functioning of coastal lagoons/wetlands as filters	- Cause-effect relationship - Continued degradation of water quality - Continued degradation of watersheds, coastal lagoons and wetlands - Future stress caused by future demands for land and water	- Impacts from transboundary pollutants - Reduced ability to use water resources due to quality problems - Decline in aquatic habitats and species in watersheds, coastal and open sea areas	- Implement management practices to reduce pollution inputs -Establish regional network for assessment and reporting - Understand the impacts of pollution on health - Develop management tools to reduce impacts
Fish/Fisheries - Non-optimal harvesting of living resources (e.g. over fishing, dumping of by-catch) - Reduction of economically valuable fish stock (cod) - Threats to vulnerable species - Vulnerability of spawning habitats	- Fishing over capacity - Non-sustainable utilization of living resources - Reduction of prey through over fishing - Competition for space and prey - Lack of collaborative monitoring, assessment, and management	- Ecosystem dynamic change - High by-catch and undersize catch - Fisheries impacting productivity cycle - Pressure on selected habitats from fishing practices -Threats to biodiversity - Opportunities for exotic species	- Irreversible ecosystem change - Collapse of commercially important stocks - Stability of key habitats and their ability to respond to stress - Expansion of exotic species	- Most harvested open sea living resources extend beyond national borders - Coordination with EU on fishery issues - Effective ways to share and manage common resources - Conservation of key areas of coastal and open sea habitat	- Agree on cooperative joint surveys of coastal and open sea stock - Establish a regional forum for ecosystem and stock assessments - Develop tools for ecosystem-based management of living open sea resources
Socioeconomic - Continued exhaustive fishing practices - Reduced used of coastal and open sea waters, affecting local income	-Continued over fishing -Changes in open sea productivity -Eutrophication and pollution impacts farming coastal communities, and living open sea resources	-Variable and uncertain market -Loss of fish and shellfish markets - Threats to recreational fishing - Decrease in coastal tourism	- Loss of national revenues - Decrease in tourism - Unemployment increase in the fishing sector - Lower standard of living	- Regional, national and local impacts from these problems - Reduced access to resources - Reduced opportunities for income growth and employment	- Understand the value of the ecosystem - Develop tools for increasing farmer and fisherman incomes - Strengthen local and regional capacity for management
Management - Lack of harmonized cooperation between the three international bodies (HELCOM/IBSFC/ICES) - Unequal distribution of capacity in the Baltic Sea region - Lack of local capacity to monitor and assess environmental variability	- The three international bodies have different mandates -Limited inter country exchange - Limited research and laboratory capacity - Low salaries - Lack of knowledge of decision makers concerning ecosystem issues and management	- Inconsistent management of Baltic resources - Imbalances within the region - Limited cooperation between institutions - Inadequately informed decision makers - Limited public understanding of issues and complex choices	- Degradation of watersheds, coastal areas and marine resources due to inconsistent management - Commitment to support ecosystem management - Level of political will to make changes in resource management - Uncertainty over future economic conditions	- Information needs to be coordinated between countries in the Baltic Sea region - Measures need to be taken to harmonize monitoring, assessment and management between regional bodies, national governments and local governments - Partnerships are needed to share knowledge and experience across borders	- Strengthen institutional capacities of the three international bodies - Organize training and partnerships - Upgrade equipment and monitoring and assessment practices - Create institutional framework and network for cooperation and management - Improve information for policy makers and the public

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