PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB1030 Project Name. WATER RESOURCE MANAGEMENT PROJECT Region

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1 PROJECT INFORMATION DOCUMENT (PID) CONCEPT STAGE Report No.: AB1030 Project Name WATER RESOURCE MANAGEMENT PROJECT Region EUROPE AND CENTRAL ASIA Sector Irrigation and drainage (100%) Project ID P Borrower(s) REPUBLIC OF SERBIA Implementing Agency MINISTRY OF AGRICULTURE, FORESTRY AND WATER MANAGEMENT Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Safeguard Classification [ ] S 1 [X] S 2 [ ] S 3 [ ] S F [ ] TBD (to be determined) Date PID Prepared August 4, 2004 Estimated Date of December 22, 2004 Appraisal Authorization Estimated Date of Board March 29, 2005 Approval 1. Key development issues and rationale for Bank involvement The Republic of Serbia (ROS) has a population of about 10 million, of which some 50% live in rural areas, and 17% derive their living from agriculture and associated industries. The ROS has three major land forms the plain areas in Vojvodina and the flood plains of the Danube, Sava and Drina rivers; the Morava valley in its main stream and two southern arms; and the mountainous areas which cover most of the country south of the Sava and Danube. The water resources of ROS in addition to rainfall are dominated by the river inflows from upstream riparian sources estimated at 85% of available water. The balance is derived from the River Morava from within the country. Due to seasonal variations there are some 160 storage dams, some of which have hydro-electric generation facilities. The rivers are subject to extreme flows which cause damaging floods along the adjacent lands In the Vojvodina region a vast and complex system of canals and associated structures and pumping stations has been developed, which serves transportation, drainage, water supply for municipalities, industry and agriculture, and fisheries. This is the Danube-Tisa-Danube Hydro system (DTD). Agriculture accounts for 21% of GDP and 26% of exports. The agriculturally suitable land amounts to some 5.15 million ha, of which some 4.28 million ha are classified as arable. About 62% of the nation s arable land lies in Vojvodina. In general the Vojvodina region mainly produces field crops such as wheat, maize, sugar beet and other industrial crops, with limited grasslands, vegetables and plantations. In the upland areas of Central Serbia, the major field crops are maize and wheat, but significantly higher proportions of grasslands, vegetables and plantations occur. Livestock production is also more widespread in the upland areas. Nationwide some 81% of arable land is privately owned, a much higher percentage than other former socialist countries. The remainder is under Kombinats (collective farms), large private estates, or the government. Some 50% of farms are between 1 ha and 5 ha, with only 4.5% of holdings over 1,000 ha.

2 The key issues facing water resources management in ROS can be summarized as follows: Flood Control: Large areas of the country, especially adjacent to the large rivers on the flood plains, are subject to flood damage. It is estimated that this covers some 1.57 million ha over the whole country, of which 1.45 million ha occur in Vojvodina and the plains east of Belgrade, with the balance in Central Serbia. Over the country, this implies that about 30% of agricultural land is vulnerable. To meet this hazard, some 3,434 km of flood amelioration levees and 30 flood control reservoirs were constructed. Even this large initiative permits the more extreme floods to cause damage. Crop losses due to flooding range from marginal to complete, depending on the inundation period. Due to lack of maintenance on the levees, dams, and their appurtenant structures, the system requires rehabilitation. Some gaps require to be filled, and on the older levees heightening is required to meet more stringent protection criteria. There are no constraints which would inhibit the immediate reinstatement and improvement of flood protection facilities. Indeed, without attention to these, it would be pointless to invest in irrigation and drainage improvements in the areas prone to flooding. Thus work in this sub-sector is of the highest priority, and would realise rapid and substantial benefits. Drainage: Over the country some 2.67 million ha of agricultural land, representing about 52% of the total, are affected by poor drainage. In Vojvodina specifically, due to its level terrain some 1.61 million ha are affected, representing about 90% of agricultural lands. To address the drainage and waterlogging threat, some 2.08 million ha nationwide have been provided with drainage facilities over 400 drainage areas, and incorporating 210 pumping stations and 22,600 km of drainage channels. Over ha are equipped with tile sub-drainage. This coverage is planned to be extended up to 2.46 million ha. Due to neglect caused principally by lack of funds during the period of disintegration of the FRY, the drainage channels have generally deteriorated by siltation and weed growth, and the associated structures and pumping stations have also deteriorated. Widespread rehabilitation is required. It is estimated that for field crops, which would be most affected, correction of defective drainage would result in crop yield increases of between 20% and 30%. Irrigation: Under the former FRY irrigation development had achieved a coverage in Serbia of some 120,000 ha in 288 schemes. This represents only about 3% of the arable land of the country. The majority of schemes (198) covering some 90,278 ha were in Vojvodina, with the balance located in Central Serbia, mainly in the Drina-Save enclave near Belgrade, and in the Morava valley. Today, due to various factors outlined below, only about 35,000 ha are actually fully utilized, with a further 47,000 ha partially functional. Schemes have ceased to function optimally or totally due variously to lack of maintenance, breakdown in management, disaggregation and privatisation, disincentive due to lack of markets etc. In Central Serbia in the valleys, with their more sloping terrain, and smaller private farms, a combination of sprinkler, drip and surface methods is practised.

3 Preliminary crop water analysis indicates that wheat and certain other early maturing crops would give acceptable yields in most years without irrigation. In the lower rainfall areas and on the lighter soils, however, yields in most years would be significantly improved with supplemental irrigation later in the summer for the longer duration crops. However any irrigation development should be based on careful analysis in order to prioritise area selection and scheduling. Institutional Set up: All agricultural and hydraulic activities fall under the Ministry of Agriculture, Forestry, and Water Management (MAFWM). The Directorate for Water (DfW) under MAFWM controls most hydraulic operations through two Public Water Companies, the Vojvodinevode Company for Vojvodina specifically, and the Serbiavode Company for the remainder of the country. MAFWM and its subordinate Departments and Directorates are supported by long established technical institutes and the universities. These agencies at present suffer from diminished professional staff due to migration, and equipment and facilities also require modernization and rehabilitation. Also, there is a need to reorganize the sector and introduce a more participatory and integrated approach to water management. Rationale for Bank Involvement. At the request of the GOS, the Bank has looked at the above issues facing water resources management in ROS and concluded that during the past decade of unrest the agricultural water sector has seriously deteriorated, and its reinstatement and improvement are necessary in order to permit Serbian agriculture to function optimally again to meet national needs. The project would both initiate and significantly contribute to agricultural regeneration, and would assist in improving economic conditions in rural areas. The project as such will be in line with the Transitional Support Strategy (TSS) for Serbia and Montenegro which was updated and approved by the World Bank Board on March 16, 2004 (IDA / R ). The proposed project would help support two of the GOS s four Near and Medium Term Reform Agenda goals as contained in the TSS: (i) stimulating near-term growth and creating the basis for a sustainable supply response; and (ii) improving governance and building effective institutions. 2. Proposed objectives In order to address the above issues of water resources management in ROS, the project s main objectives are: (a) to reduce the risk of damage to land, crops, property and infrastructure from flooding; (b) to increase agricultural productivity through support to high priority rehabilitation of drainage and irrigation infrastructure; and (c) to improve water resources management and strengthen the associated water resource management institutions and policies. The above objectives are in accordance with the recommendations of current policy studies, as agreed by MAFWM, notably those of the Policy Advisory Unit under the EU funded European Agency for Reconstruction (EAR). Key performance indicators would be: (a) areas protected against flooding and waterlogging, and number of farmers benefiting; (b) increase in crop production resulting from (a); (c) the results of studies of irrigation requirements and constraints, and the development of a strategy and program for irrigation rehabilitation and

4 development; (d) the formulation of a strategy and program for development in the areas of flood control, drainage, and irrigation; (e) the development of environmental reclamation and protection mitigation plans; and (f) finalizing the draft legislation on aspects of the agricultural water sector, especially regarding WUAs. 3. Preliminary description The project size is about US$ 30 million consisting of a $25 million credit and a $5 million borrower contribution. The project has a five year implementation period. The land benefiting from improved drainage is about 350,000 ha, with 200,000 inhabitants benefiting from improved flood protection. The returns to the economy, from increased agricultural productivity, increased incomes and associated fiscal benefits, and reduced losses from flooding, would be substantial. The main components would include: Component 1. Rehabilitation and Improvement of Water Resources Infrastructure. The rehabilitation and improvement works would include: (a) restitution of the flood control defenses and the upgrading of the flood forecasting facilities; (b) restitution of the drainage facilities; and (c) a construction of pilot minor irrigation systems. Component 2. Technical Assistance This component would include: (a) a study for requirements and constraints for future irrigation sub-sector development, and the initiation of measures to remove these constraints, including a feasibility study of priority areas and for a pilot minor irrigation system; (b) institutional reform, capacity building, and improved water sector management; (c) upgrading of the flood forecasting and warning system; and (d) training. Component 3. Equipment and Vehicles This would include provision of equipment for flood forecasting and warning system, O&M and office equipment and vehicles. 4. Safeguard policies that might apply The following three Safeguard Policies are to apply: (i) Environmental Assessment (OP 4.01); (ii) Safety of Dams (OP 4.37); (iii) Projects on International Waterways (OP 7.50). The safeguard policy on Environmental Assessment (OP/BP 4.01) will apply for this project. Environmental and social assessments will be conducted during project preparation, which will confirm the applicability of these and other safeguard policies. The EA will look at all environmental issues related to this project specially the soil and water pollution in areas of intervention. A link will be established with a proposed GEF-funded Danube River Enterprise Pollution Protection Project. It is expected that the Environmental Management Plan (EMP) will include two parts: a specific one focusing on the northern region where most of the investment for flood and drainage rehabilitation works will be located; and a generic one for pilot irrigation sub-projects, which will be located in the southern part of the country and will be selected on the basis of the demand of farmers.

5 The safeguard policy on Natural Habitat (OP 4.04) remains to be determined. Although no loss or degradation of critical natural habitats are expected, this will be confirmed as part of the EA- EMP (specific part). There is such a low probability for the irrigation activities to trigger the Involuntary Resettlement safeguard policy (OP4.12), that it is unlikely the project will present land acquisition or resettlement issues. There are plentiful choices for pilot areas; they will be selected to avoid land acquisition. A dam safety safeguard policy (OP 4.37) will apply for this project. A dam safety analysis will be carried out, focusing specifically in catchment areas where investments are planned (e.g. 80% of the financing in the northern part of the country, and part of the remaining funding in any smaller pilot areas in the South.) At this time we do not expect to finance flood protection and drainage sub-projects in such a widespread nature as to require analysis of all dams in the country; only in focused areas. Although no impacts on cultural property (OP 4.11) are expected, the possibility of chance finds during rehabilitation works can not be ruled out. Cultural property OP will be covered as part of the EA. Procedures to deal with chance finds will be spelled out in the EMP. The project area involves the Danube River Basin, an international waterway. Therefore, the meeting endorsed LEGEN recommendation that the safeguards policy on Projects on International Waterways (OP 7.50) be triggered, and notification of riparian be done. Serbia is a member of the International Commission for Protection of the Danube River (ICPDR) and this could facilitate the riparian notification process. However, an understanding was reached that further discussions with LEGEN would take place exploring possibilities for this project to benefit from an exception to OP 7.50, given the fact that project implementation will not adversely affect either the quantity or the quality of the water flows to downstream riparians, since most of the intervention will consist of rehabilitation and improvement of flood control and drainage structures. 5. Tentative financing Source: ($m.) BORROWER/RECIPIENT 5 INTERNATIONAL DEVELOPMENT ASSOCIATION 25 Total Contact point Mr. Usaid I. El-Hanbali Title: Sr Water Resources Engineer/Task Team Leader Tel: (202) Fax: (202) Uelhanbali@worldbank.org In Borrower s Country:

6 Mr. Nikola Marjanovic Director Water Directorate Ministry of Agriculture, Forestry and Water Management 2A Bulevar Umetnosti, New Belgrade Republic of Serbia Tel:( ) ( )