The Priority Environmental Investment Programme for SEE (PEIP) BACKGROUND DOCUMENT NR: 4. Country name: BOSNIA I HERZEGOVINA

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1 The Priority Environmental Investment Programme for SEE (PEIP) Analytical Report on progress on developing and implementing environmental investment projects in the SEE. BACKGROUND DOCUMENT NR: 4 Country name: BOSNIA I HERZEGOVINA Timescale: Progress until June Introduction The purpose of the analytical report is to present major developments in the countries on creating conditions for implementation of environmental investment projects. It also attempts to track and explain progress on financing these projects. The document is constantly evolving and through it the PEIP team is trying to map drivers and barriers for environmental investments in the SEE countries. It is hoped that eventually it would help countries, IFIs, the EC and other relevant beneficiaries to understand better the underlying factors for accelerating environmental investments in the region. This document accompanies the updates lists of project (background document 5). This version of the report is prepared for the Regional Meeting of the PEIP on th June Progress on financing priority projects from PEIP list The updated list of priority investment projects contains eight projects. Out of the eight projects five are in the water sector, two are air projects and one is waste related. Since November 2007 no progress with the current projects on the PEIP list can be outlined. New projects It is intended that new projects are added to the list at the next update based on the Public Investment Programme of Bosnia and Hercegovina that was recently adopted. It contains 57 priority environmental projects without secured financing. The Programme is attached to the analytical report (Annex 1). Based on the PIP it is intended that new projects are added to the PEIP list for the next update. Germany, Italy, Sweden, United Kingdom, EBRD, EIB, World Bank, Canada, Japan, Norway, Switzerland and USAID support the approximation of Bosnia i Hercegovina to the EU acquis including in the enviromental sector. 2. Legislative framework Progress can be reported on the legislative framework in the water sector with the adoption of the Water Law (FBiH 2006, RS 2006), and implementation started in The abovementioned laws are in accordance with Water Framework Directive. The new Water Laws also envisage higher involvement of the local government units in project identification and preparation activities.

2 Regarding FBiH Law implementation, former Public Water Companies in Sarajevo and Mostar are re-registered as Water Agencies. RS Water Law foresees the establishment of two Agencies in Bijeljina and Trebinje. The Agencies are yet to be established, i.e. Water Directorate still operates in Bijeljina. Preparation of the State Environmental Law started. Working group for law preparation is established and consists of representatives of the entities and state representatives. Deadline for First Draft of the Law is end of October The Environmental Law will define the establishment of the BiH Environment Agency. 3. Strategies and programmes Public Investment Programme of Bosnia and Herzegovina (PIP) is a strategic three-year rolling document, and it consists of prioritized projects, based on the needs of Bosnia and Herzegovina, for which the financial assets have been or need to be secured in the future period. Only projects included in PIP can be considered national priority and eligible for financing. Preparation of strategies and bylaws for adoption is under procedure in both entities. Republika Srpska currently prepares Nature Protection Strategy. The Strategy is in the phase of the pre-draft. RS has focused its activities in preparation and adoption of the strategic document, i.e. Nature Protection Strategy with Action Plan and Air Protection Strategy. Federation of BiH has completed the preparation of the Federal Stategy for Enviroment Protection. The Strategy consists of four separate strategies i.e. Nature Protection, Air Protection, Waste Management and Water Protection (to be prepared separatly) Strategy. The Strategy is in the procedure of adoption by the Federal Governement and Parlament. It is expected that Strategy will be adopted by the end of this year. 4. Organisational structures One of the main objectives of the continuation of the EU funded project Water Quality Management at River Basin Level in Bosnia and Herzegovina (September September 2008) is to increase availability of environmental investment projects for IFI financing. This is expected to be achieved through improved project preparation capacities of BiH authorities and improved cooperation with IFIs. The envisaged establishment of Project Preparation Unit is in line with this objective. 5. Financing mechanisms BiH, as a potential candidate country, will benefit from the first two components of EU IPA Programme, the Transition Assistance and Institution Building as well as the Cross-Border Cooperation. Under IPA Component II, BiH is participating in the cross border programmes, that include the enviroment component, as follows: Cross-border cooperation between IPA countries: Croatia, Serbia, Montenegro and Bosnia and Herzegovina. One of the focus areas for support under IPA is protection of the enviroment and promotion of sustainable management of natural resources. Projects from BiH can obtain funds from EU funded transnational programme South-East Europe. Directorate of European Integration of BiH presented Programming of IPA 2008 Component I (Transitional Assistance and Institutional Building) to Donor Community and Civil Society in May 2008.

3 6. Relevant projects Several recent or planned technical assistance projects aimed at supporting identification, prioritization and preparation of environmental investment projects. Since January 2006 relevant EU BiH CARDS Projects are as follows: Water Quality Management at River Basin Level in Bosnia and Herzegovina (completed) Additional Services to the Support to Water Quality Management in BiH (current). Other relevant projects: Waste Recycling Pilot Project in BiH (completed). Goals of the project: (a) to help develop a sustainable solid waste management in the region through the definition of economically sustainable pilot recycling activities; and (b) to initiate secondary legislation and regulations on economic instruments supporting the recycling industry in BiH including finalization of bankable documents for all investment projects. Support to Environmental Field Inspection (completed) Goals of the project: to increase the capacity of all authorities involved in environmental management at local level. BiH is receiving assistance for infrastructure environmental investments by IFIs. For example, key focus of KfW activities in BiH is the upgrade of the water supply and sewage network. Currently up to 36 MEUR has been allocated to the sector. Besides the financing of infrastructure investments the programmes also concentrate on management of financial aspects of water utilities. Rehabilitation of Water and Sewage Systems in BiH is one of the biggest water supply projects in BiH with an amount of 14 MEUR. The programme which started in 2006 includes municipalities in both entities: Bihac, Derventa, Kakanj and Konstanica. Planned activities of KfW include the project on construction of the WWTP Bihac and water supply rehabilitation project in Banja Luka. In the water supply sector EBRD a major project with EBRD involvement is the preparation of Plava voda regional water supply system. 7. Key challenges for the next 6 months The following key challenges were identified for the next six months: First Draft of the State Environmental Law preparation; Follow up the activities for Entities Strategies adoption; Capacity building of the responsible institutions; Development of the Water Management plan and harmonization of all planned documents with the EU directives; Increasing investments in environmental projects. 8. Other relevant developments Attached to analytical report (Annex 2) is a table with the identified 23 projects based on the results of the EC CARDS project Water Quality Management at River Basin Level. However, the process of development of these 23 projects into bankable investments is currently in an initial stage.

4 Annex 1 Public Investment Programme of BiH BOSNIA AND HERZEGOVINA Candidate Projects of High priority from the Public Investment Programme of BiH without secured funding sources No. Location Project Title Value in KM* 1 RS Construction of facilities for flood protection 8,500,000 2 RS Rehabilitation and construction of the irrigation systems in RS 15,000,000 3 RS River stream regulation in RS 13,300,000 4 RS Water supply to municipalities in RS 29,500,000 5 RS Construction of sewage systems in RS municipalities 42,000,000 6 RS Sewage system Biјеljinа (2 and 3 phase) 30,000,000 7 RS Support to the establishment of regional sanitary landfills 8,000,000 8 RS Collection, treatment and disposal of wastewater in Bаnjа Luka 20,000,000 9 RS Prојеct of water suppy of rural border area Мrkоnjić Grаd 640,000 Preparation of information-documentation basis on territory and environmental 10 RS protection 1,000,000 Rehabilitation of lead and zinc mine landfill for mining waste material disposal Srеbrеnicа 1,500, RS 12 FBiH NEAP - Water supply system Dubrave-Čapljina II ohase / HN Canton 10,000, FBiH Water supply system Trebižat-Prćavci-Zvirovići, Čapljina II phase / HN Canton 3,500, FBiH Waterworks "Šanica" Jablanica, II phase / HN Canton 2,950, FBiH Rehabilitation of the regional waterworks Gabela - Neum / HN Canton 1,200, FBiH Wastewater collection and treatment of municipalities Čitluk and Međugorje / HN Canton 5,000, FBiH NEAP-Construction of sewage system and wastewater treatment plant for Konjic - II phase / HN Canton 17,600, FBiH Collector of waste and rain waters in Neum / HN Canton 4,000, FBiH Reconstruction of facilities for flood protection at the territory of Posavski Canton (Phase I) 5,000, FBiH Medical waste disposal / SA Canton 3,100, FBiH Rehabilitation of collector intrnovo and construction of sewage system network in Turovi and Tošići / SA Canton 746, FBiH Project of reconstruction of distributive water supply network in the water supply system of Sarajevo / SA Canton 6,230, FBiH NEAP-Revitalisation of central waste water treatment facilities, Ilidža / SA Canton 77,060, FBiH System od remote management and controlling of central heating (II and III phase) / SA Canton 3,000,000 Plant for combined production of cca 5MW heat and 5 MW of electric power, Novi Grad / SA Canton 6,500, FBiH 26 FBiH Warmification of Vitez / SB Canton 2,200, FBiH Reconstruction of Travnik heating station / SB Canton 2,210, FBiH Construction of water supply system for Kruščica, Vitez / SB Canton 338, FBiH Water supply system "Gorčevica Han Bila" ( I phase ), Travnik / SB Canton 1,800, FBiH Water supply system "Gorčevica Han Bila" ( II faza ), Travnik / SB Canton 2,500, FBiH Water supply system Nova Bila - Trebišnjica, Travnik / SB Canton 2,521, FBiH Rekonstrukcija korita Rijeke Bile-Mehurići,Travnik / SB Canton 1,500, FBiH Inter-municipal waterwork Fojnica - Kiseljak / SB Canton 13,459, FBiH Reconstruction and extension of water supply in Novi Travnik / SB Canton 250, FBiH Reconstruction and extension of water supply in Novi Travnik / SB Canton 256,456

5 36 FBiH Water suply system of Teočak municipality / TZ Canton 1,225, FBiH Plant for conditioning of drinking water in Kalesija Municipality / TZ Canton 1,440, FBiH Regulation of Jala river at the section Slavinovići-Simin Han, Tuzla II phase / TZ Canton 3,326, FBiH Regulation of Solina river in Tuzla - II phase/ TZ Canton 3,326, FBiH Regulation of Jala river at the territory Lukavac / TZ Canton 5,482, FBiH Regulation of Drinjača river in Kladanj / TZ Canton 2,850, FBiH I phase of the ecological protection of Modrac accumulation -water supply source / TZ Canton 15,998, FBiH Warmification of Srebrenik - II phase /TZK 4,000, FBiH Construction of new tapped line of warm water for heat energy supply to Tuzla / TZ Canton 10,000, FBiH Construction of collectors for feacal sewage system Slavinovići - G. Tuzla / TZ Canton 5,000, FBiH River bed reconstruction of Sana river, Sanski Most / UNS Canton 4,000, FBiH Water supply Studenci of Ljubuški municipality / ZH Canton 5,700, FBiH Sanitary landfill for the Westherzegovina Canton, Ljubuški / ZH Canton 2,400, FBiH Additional water volume for the population from "Plava voda" Zenica / ZD Canton 39,000, FBiH Sewage system construction in Vareš / ZD Canton 3,000, FBiH Babina rijeka river basin protection (II phase), Zenica / ZD Canton 6,300, FBiH Sewage system of municipality Misurići - Maglaj / ZD Canton 1,500, FBiH central heating of town Maglaj / ZD Canton 10,452, FBiH Sewage system of the settlement Novi Šeher, Maglaj / ZD Canton 1,000, FBiH River stream regulation of Bistrica river in Livno / HB Canton 1,720, BD River stream regulation at the territory of Brčko district BiH 16,700, BD Sanitary landfill of Brčko district BiH 22,400,000 * 1 EUR =1,95583 KM Total for Bosnia and Herzegovina 509,182,831 Projects' data are available in the PIS form, which is a part of the Public Investment Programme

6 Annex 2 List of 23 priority agglomeration, WQM Programme of Measures Agglomera tion No RANK Agglomeratio n Aglomeracija Ukupan zbir 'RV Total 1 1 Sarajevo 4.83 Naselja koja sačinjavaju aglomeraciju 'Settlements Recipient Ilidža, Lukavica, Novi Grad, Novo Sarajevo, Centar, Hadžići Bosna Opština Municipali ty 2 2 Međugorje 4.54 Čitluk ENTITET Entity KANTON Canton Qmin PE WWTP Investment Cost Unit UWWTP Investme nt Costs Potential for reduction of BOD (m3/s) mil. Euro Euro/PE (mg/l) Kanton Kanton Živinice 4.51 Živinice Donje, Živinice Gornje, Živinice, Ðurđevik Spreča Živinice 4 4 Čitluk 4.51 Lukoč Čitluk 5 5 Banovići 4.43 Litva Banovići 6 6 Grude 4.41 Kanal Grude Kanton Kanton Kanton Kanton Nevesinje 4.39 Zalomka Nevesinje RS Banja Luka 4.29 Trn, Banja Luka Vrbas Banja Luka; Laktaši RS Sokolac 4.28 Sokolačk i potok Sokolac RS Livno 4.27 Bistrica Livno Kanton Gacko 4.27 Mušnica Gacko RS

7 Agglomera tion No RANK Agglomeratio n Aglomeracija Ukupan zbir 'RV Total Naselja koja sačinjavaju aglomeraciju 'Settlements Recipient Opština Municipali ty ENTITET Entity KANTON Canton Qmin PE WWTP Investment Cost Unit UWWTP Investme nt Costs Potential for reduction of BOD (m3/s) mil. Euro Euro/PE (mg/l) Tuzla 4.19 Jala Tuzla Kanton Pale 4.19 Miljacka Pale RS Posušje 4.16 Ričina Posušje Kanton Mrkonjić Grad 4.04 Crna rijeka Mrkonjić Grad RS Tomislavgra d 4.00 Šujica Tomislavg rad Kanton Bosanski Petrovac 3.76 Japaga Bosanski Petrovac Kanton Mostar 3.73 Mostar, Cim, Ilići, Rodoč Neretva Mostar Kanton Prijedor Bijeljina 3.56 Prijedor, Hambarine, Gomjenica Sana Prijedor RS Meliorat Bijeljina, Velika ion Obarska channel Bijeljina RS Derventa 3.33 Ukrina Derventa RS Bužim 3.26 Bužim, Lubarda, Mrazovac Glinica Bužim Zenica 3.15 Bosna Zenica Kanton Kanton