Document of The World Bank Report No: ICR00003613 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-74640 IDA-43260) ON A CREDIT IN THE AMOUNT OF SDR 6.6 MILLION (US$10.0 MILLION EQUIVALENT) AND A LOAN IN THE AMOUNT OF EUR 24.3 MILLION (US$33.0 MILLION EQUIVALENT) TO THE REPUBLIC OF SERBIA FOR A BOR REGIONAL DEVELOPMENT PROJECT December 11, 2015 Environment & Natural Resources Global Practice Europe and Central Asia CURRENCY EQUIVALENTS (Exchange Rate Effective October 22, 2015) Currency Unit = Serbian Dinar (RSD) 1.00 RSD = US$ 0.00925 USD US$ 1.00 = 108.080 RSD FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ALMP Active Labor LIU Local Implementation OP Operational Policy Market Program Unit BI Business Incubator LIUA Local Implementation PA Privatization Unit for Component A Agency CAS Country Assistance LIUB Local Implementation PAD Project Appraisal Strategy for Component B Document EA Environmental LSC Local Steering PDO Project Assessment Committee Development Objective ECA Europe and Central M&E Monitoring and PIT Project Asia Evaluation Implementation Team EDC Export MEDEP Ministry of Energy, PMU Project Development Development and Management Unit Canada Environmental Protection EIA Environmental MEM Ministry of Energy and PSC Project Steering Impact Assessment Mining Committee EMP Environmental MEP Ministry of PSD Private Sector Management Plan Environmental Development Protection EPP Employment MERD Ministry of Economy QAG Quality Assurance Promotion Project and Regional Group Development FA Financing MFI Microfinance Institution RF Results Framework Agreement GOS Government of the MOF Ministry of Finance RTB Rudarsko- Republic of Serbia Bor Topionicarski Basen Bor IBRD International Bank MOLESP Ministry of Labor, SCD Systematic Country for Reconstruction Employment and Social Diagnostic and Development Policies ICR Implementation MTR Mid-Term Review SME Small and Medium Completion and Enterprises Results Report IDA International NBS National Bank of Serbia SOE State-Owned Development Enterprise Association ISR Implementation NES National Employment TA Technical Status & Results Service Assistance Report LA Loan Agreement OBS Opportunity Bank Serbia TDF Tailing Disposal Facility WBG World Bank Group ii Senior Global Practice Director: Paula Caballero Practice Manager: Kulsum Ahmed Project Team Leader: Nikola Ille ICR Team Leader: Sudha Bala Krishnan iii SERBIA BOR REGIONAL DEVELOPMENT PROJECT CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design ............................................... 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 7 3. Assessment of Outcomes .......................................................................................... 14 4. Assessment of Risk to Development Outcome......................................................... 19 5. Assessment of Bank and Borrower Performance ..................................................... 19 6. Lessons Learned ....................................................................................................... 21 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 22 Annex 1. Project Costs and Financing .......................................................................... 23 Annex 2. Outputs by Component ................................................................................. 24 Annex 3. Economic and Financial Analysis ................................................................. 28 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 29 Annex 5. Beneficiary Survey Results ........................................................................... 31 Annex 6. Stakeholder Workshop Report and Results................................................... 32 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 33 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 34 Annex 9. List of Supporting Documents ...................................................................... 35 MAP iv A. Basic Information Bor Regional Country: Serbia Project Name: Development Project IBRD-74640,IDA- Project ID: P092999 L/C/TF Number(s): 43260 ICR Date: December 11, 2015 ICR Type: Core ICR REPUBLIC OF Lending Instrument: SIL Borrower: SERBIA Original Total USD 43.00M Disbursed Amount: USD 9.71M Commitment: Restructured Amount: USD 10.44M Environmental Category: A Implementing Agencies: (ORIGINAL PROJECT) Ministry of Environmental Protection (MEP) and Ministry of Energy and Mining (MEM) for Component A; and, Ministry of Economy and Regional Development (MERD) for Component B; (RESTRUCTURED PROJECT) Ministry of Energy, Development and Environmental Protection (MEDEP). Cofinanciers and Other External Partners: B. Key Dates Restructured/Actual Process Date Process Original Date Date(s) Concept Review: 05/19/2005 Effectiveness: 12/16/2008 12/16/2008 11/05/2010; 09/25/12; Appraisal: 04/16/2007 Restructuring(s): 12/27/2012; 3/25/2013 Approval: 06/20/2007 Mid-term Review: 01/16/2012 01/16/2012 Closing: 09/30/2012 05/18/2015 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Highly Unsatisfactory Risk to Development Outcome: High Bank Performance: Unsatisfactory Borrower Performance: Highly Unsatisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Unsatisfactory Government: Unsatisfactory Implementing Quality of Supervision: Unsatisfactory Highly Unsatisfactory Agency/Agencies: Overall Bank Overall Borrower Unsatisfactory Highly Unsatisfactory Performance: Performance: v C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes time (Yes/No): Supervision (QSA): DO rating before Unsatisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General industry and trade sector 5 5 General public administration sector 12 12 Other Mining and Extractive Industries 50 50 Other social services 22 22 SME Finance 11 11 Theme Code (as % of total Bank financing) Improving labor markets 22 22 Micro, Small and Medium Enterprise support 22 22 Pollution management and environmental health 22 22 Regional integration 11 11 State-owned enterprise restructuring and privatization 23 23 E. Bank Staff Positions At ICR At Approval Vice President: Cyril E Muller Shigeo Katsu Country Director: Ellen A. Goldstein Orsalia Kalantzopoulos Practice Kulsum Ahmed Gerardo M. Corrochano Manager/Manager: Project Team Leader: Nikola Ille Alexander Pankov Sudha Bala Krishnan (Team ICR Team: leader) Angela Elzir ICR Primary Author: Sudha Bala Krishnan vi F. Results Framework Analysis Project Development Objectives (PDO) (from Project Appraisal Document) The development objective of the Project is to support the GOS' efforts to revive the depressed Bor region through: (i) dealing with urgent environmental and social legacy issues arising from mining sector restructuring; and (ii) fostering new sources of economic growth and job creation in the region. Restructured Project Development Objectives (as approved by Original approving authority) The development objective of the Project is to support the GOS in addressing the structural hazard of the river water collector of the Veliki Krivelj tailings disposal facility, which is one of the most urgent environmental legacy issues of the mining sector in the Bor region. (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Improved environmental conditions in the areas associated with past and present Indicator 1 : mining operations Value None quantitative or 0 Qualitative) Date achieved 12/16/2008 09/30/2012 05/18/2015 Not achieved. Original target values missing from Project Appraisal Document (PAD). GOS decision in Nov 2012 to cancel remediation works led to Level 1 Comments Restructuring (03/25/2013) in order to proceed with the collector work only. (incl. % This indicator was formally revised during the Level 1 Restructuring achievement) (03/25/2013) to “Elimination of environmental risks related to poor state and possible failure of the Veliki Krivelj tailings facility’s collector for Kriveljska River discharge” Elimination of environmental risks related to poor state and possible failure of Indicator 2 : the Veliki Krivelj tailings facility’s collector for Kriveljska River discharge Safe Existing alternative Value collector in provided None quantitative or need of and river Qualitative) replacement water rerouted Date achieved 03/25/2013 09/30/2015 05/18/2015 Not achieved. This indicator was added during the Level 1 Restructuring Comments (03/25/2013). The contract for the Veliki Krivelj Collector was signed in Jan (incl. % 2013. Works were not conducted and funds were therefore not disbursed and achievement) cancelled at project closure. Indicator 3 : Improved capacity to monitor environmental conditions vii Value No monitoring of soil, Monitoring quantitative or groundwater, and river according to the None Qualitative) sediments program Date achieved 12/16/2008 09/30/2012 05/18/2015 Comments Indicator dropped following the Level 1 Restructuring (03/25/2013). Not (incl. % achieved. achievement) Number of jobs created/supported by the Project (via ALMPs, business Indicator 4 : incubators, microfinance) Value quantitative or 0 3850 886 Qualitative) Date achieved 12/16/2008 09/30/2012 03/31/2013 Indicator dropped following the Level 1 Restructuring (03/25/2013). Partially Comments achieved as of 9/30/12 prior to discontinuation of activities. 886 jobs refer to the (incl. % cumulative result of activities under the socio-economic component (23% of the achievement) target value achieved with 46% of allocated resources for related activities disbursed). (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Restructured approval Completion or Target Values documents) Target Years Indicator 1 : Progress in remediation works of environmental trouble spots Works completed, Value maintenance No remediation (quantitative No work undertaken program fully works undertaken or Qualitative) operational Date achieved 12/16/2008 09/30/2012 03/31/2013 Comments Not achieved. Indicator dropped during the Level 1 Restructuring (03/25/2013), (incl. % resulting from the GOS decision not to carry out remediation works due to achievement) potential investors’ interest in redeveloping the sites for commercial purposes. Indicator 2 : Rehabilitation of Veliki Krivelj river by-pass / collector Value Existing collector in need 2400m completed 2400m No civil works (quantitative of replacement completed implemented or Qualitative) Date achieved 12/16/2008 09/30/2012 03/31/2013 05/18/2015 Comments Not achieved. After the contract for the Veliki Krivelj Collector was signed in (incl. % January 2013, GOS never issued a notice to mobilize the Contractor. achievement) Establishment of environmental monitoring program for: (i) safety of tailings Indicator 3 : deposit facilities; and (ii) soil, groundwater and river sediment contamination Value (quantitative Not available Not available or Qualitative) Date achieved Not available viii This intermediate outcome indicator appears in Annex 3 of the PAD under the Comments Results Framework table. It is missing from the Arrangements for Results (incl. % Monitoring table that follows, and did not have any target value nor a data achievement) collection and reporting plan noted. Number of beneficiaries from employment support services offered under the Indicator 4 : Project, and placement of beneficiaries in jobs. Value 8680 beneficiaries (quantitative 0 and 0 and 1064 job 4844/886 or Qualitative) placements Date achieved 12/16/2008 09/30/2012 03/31/2013 Indicator dropped during the Level 1 Restructuring (03/25/2013). Partially achieved (56% of beneficiaries and 83% placement of beneficiaries in jobs). 4844 people benefited from employment support services, based on Job search Comments assistance (3467) + Off the job training (535) + Public works (842), which is 56% (incl. % of the target value achieved; 886 individuals tracked as having found jobs (83% achievement) of the target value) is based on 36 jobs tracked as part of the job search assistance activity, 8 as part of the off-the-job training activity, and 842 as part of public works. Indicator 4a : Job search assistance (# of beneficiaries / job placement) Value (quantitative 0/0 5400/540 3467/36 or Qualitative) Date achieved 12/16/2008 09/30/2012 03/31/2013 Indicator dropped following the Level 1 Restructuring (03/25/2013). Activities Comments ended on October 1, 2012 and were not extended. Partial achievement with 64% (incl. % of the target value for beneficiaries, though less than 7% of the target was achieved achievement) for job placement. Indicator 4b : Off-the-job training (# of beneficiaries / job placement) Value (quantitative 0/0 1000/300 535/8 or Qualitative) Date achieved 12/16/2008 09/30/2012 03/31/2013 Comments Indicator dropped during the Level 1 Restructuring (03/25/2013). Activities ended (incl. % on October 1, 2012 and were not extended. Partial achievement with 2.5% of the achievement) target having found jobs. Indicator 4c : On-the-job training (# of beneficiaries / job placement) Value (quantitative 0/0 280/224 0/0 or Qualitative) Date achieved 12/16/2008 09/30/2012 03/31/2013 Indicator dropped following the Level 1 Restructuring (03/25/2013). Activities Comments ended on October 1, 2012 and were not extended. 0 results were achieved due to (incl. % an array of factors including from a weak, underdeveloped private sector with achievement) limited capacity, as well as limited implementation capacity locally to support. Indicator 4d : Temporary employment - public works (# of beneficiaries) Value (quantitative 0 2000 842 or Qualitative) ix Date achieved 12/16/2008 09/30/2012 03/31/2013 Comments Indicator dropped following the Level 1 Restructuring (03/25/2013). Activities (incl. % ended on 10/01/2012 and were not extended. 842 people (42% of the target value) achievement) participated in the public works program. Indicator 5 : Number of beneficiaries (tenants) from business incubation services Value Business Incubator (quantitative 10 40 in Majdanpek or Qualitative) constructed Date achieved 12/16/2008 09/30/2012 03/31/2013 Indicator dropped following the Level 1 Restructuring (03/25/2013). Activities ended on October 1, 2012 and were not extended. The expansion of the existing Comments Business Incubator (BI) in Bor was dropped as an adequate location was not (incl. % identified. The reconstruction of the BI in Majdanpek was completed. At the time achievement) of project closure, registration, tenant selection, and equipment were still pending. Data was not collected by the LIUB or Bank team as a follow-up to understand if these pending activities did indeed proceed. Indicator 6 : Number of loans disbursed in microfinance program Value (quantitative 0 1000 74 or Qualitative) Date achieved 12/16/2008 09/30/2012 03/31/2013 Comments Indicator dropped following the Level 1 Restructuring (03/25/2013). Activities (incl. % ended on October 1, 2012 and were not extended. 74 loans had been disbursed, or achievement) 7.4% of the target value. Indicator 7 : Total disbursed amount in microfinance program Value (quantitative 0 2,500,000 (USD) 660,000 (USD) or Qualitative) Date achieved 12/16/2008 09/30/2012 03/31/2013 Indicator dropped following the Level 1 Restructuring (03/25/2013). Activities Comments ended on 10/01/2012 and were not extended. EUR 500,000 was disbursed via 74 (incl. % loans. USD conversion of actual value at completion is based on exchange rate in achievement) Sept 2012, which was EUR 2.5 million as available funding for the product, and therefore 26.4% of disbursed. Indicator 8 : Repayment rates in the microfinance program Value (quantitative 0 97% 95.4% or Qualitative) Date achieved 12/16/2008 09/30/2012 03/31/2013 Comments Indicator dropped following the Level 1 Restructuring (03/25/2013). Activities (incl. % ended on October 1, 2012 and were not extended. As reported by Opportunity achievement) Bank Serbia, the repayment rate was 95.4% and in line with the target level. x G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 02/14/2008 Satisfactory Satisfactory 0.00 2 02/17/2009 Satisfactory Satisfactory 0.00 3 02/05/2010 Unsatisfactory Unsatisfactory 0.39 4 09/01/2010 Unsatisfactory Unsatisfactory 0.73 5 01/11/2011 Unsatisfactory Unsatisfactory 0.90 6 03/27/2011 Moderately Satisfactory Moderately Satisfactory 1.85 7 11/10/2011 Moderately Satisfactory Moderately Satisfactory 5.09 Moderately Moderately 8 03/21/2012 7.15 Unsatisfactory Unsatisfactory Moderately Moderately 9 03/31/2013 9.08 Unsatisfactory Unsatisfactory Moderately Moderately 10 06/08/2013 9.08 Unsatisfactory Unsatisfactory 11 12/08/2013 Unsatisfactory Unsatisfactory 9.77 Moderately Moderately 12 06/01/2014 9.77 Unsatisfactory Unsatisfactory 13 11/29/2014 Unsatisfactory Unsatisfactory 9.77 14 04/20/2015 Unsatisfactory Unsatisfactory 9.77 H. Restructuring (if any) Board ISR Ratings at Amount Restructuring Approved Restructuring Disbursed at Reason for Restructuring & Key Date(s) PDO Restructuring Changes Made DO IP Change in USD millions A Level 2 Restructuring was approved to amend the Financing Agreement (FA) No. 11/05/2010 N U U 0.73 4326-YA to cover operating costs of the two Local Implementation Units (LIU) out of the loan proceeds. A Level 2 Restructuring was approved to extend the closing 09/25/2012 N MU MU 8.85 date from 09/30/2012 to 12/31/2012 to process a Level 1 restructuring. A Level 2 Restructuring was 12/27/2012 N MU MU 9.00 approved to extend the closing date, for the second time, from xi Board ISR Ratings at Amount Restructuring Approved Restructuring Disbursed at Reason for Restructuring & Key Date(s) PDO Restructuring Changes Made DO IP Change in USD millions 12/31/2012 to 03/31/2013 to process a Level 1 restructuring. A Level 1 Restructuring was approved to: (a) extend, for a third time, the closing date from 03/31/2013 to 09/30/2015 to allow for completion of activities under Project Part 1 (Component A from PAD) and Project Part 3 (Component C from PAD); (b) reallocate to Project Part 1 the remaining 03/25/2013 Y MU MU 9.08 Loan proceeds from Project Part 2 (Component B from PAD) that would not continue. Key changes to note: (a) PDO revision to reflect the Restructured scope of work; and (b) Results Framework (RF) amendment, in line with the Restructured PDO and scope of activities. If PDO and/or Key Outcome Targets were formally Restructured (approved by the Original approving body) enter ratings below: Outcome Ratings Against Original PDO/Targets Highly Unsatisfactory Against Formally Restructured PDO/Targets Highly Unsatisfactory Overall (weighted) rating Highly Unsatisfactory xii I. Disbursement Profile xiii 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. Country Context. An upper-middle income country with a population of 7.1 million, Serbia is an open economy that has undergone a remarkable period of political and economic change since the early 2000s. After a lost decade marred by conflicts and sanctions, Serbia has progressed steadily towards a modern market economy. The authorities have shown commitment to the divestiture of state- and socially-owned enterprise sector, including the resolution of large loss-making industrial conglomerates. However, partially as a result of frequent political changes and slow process of real sector restructuring, poverty and unemployment remain a major problem for Serbia, exacerbated by the economic and financial crisis since 2009. The country’s poor economic performance led to a decrease in real-term earnings and was accompanied by deterioration in social protection and health services. 2. Regional and Sector Context. The Bor region (total area of 3,507 km sq) is located in the eastern part of Serbia and has a population of approximately 124,000 (2011 census). The regional economy has been historically dominated by mining activities. Rudarsko-Topionicarski Basen Bor (RTB Bor), the Mining and Smelting Company Bor, is a state-owned enterprise (SOE) located in Eastern Serbia’s Bor region. The copper mine, which is one of Europe’s largest, has long been a serious environmental hot spot with consequences for the entire region. Local air pollution, particularly sulfur dioxide emissions, caused by the copper smelter was one of the main reasons to categorize RTB Bor as one of Europe’s environmental hot spots, in addition to other hazards linked to flotation tailings, open-pit waste dumps, and mining and processing waste waters. In addition, the possibility of the Veliki Krivelj tailing dam failure and the collector located in the Kriveljska River breaking was recognized by the Serbian Government as imminent1, where contamination of heavy metals, such as copper and nickel, could reach the Danube River and other tributaries, and lead to an international environmental disaster.2 Further, the RTB Bor mine, with its low ore grades and high production costs largely from overstaffing, was a loss-making enterprise – even during copper price booms. With more than US$ 500 million of debt while being a vital source of employment in the impoverished region, the Government of the Republic of Serbia (GOS) recognized the urgent need to 1 The replacement of the Veliki Krivelj collector (a 2.5 km concrete main pipe with a diameter of 3 meters) that rests at the bottom of the mine tailings facility, which had been constructed on top of it, was considered the most pressing environmental concern of the original project interventions. The collector, carrying much more weight from the material above than what it was designed for, was in very poor condition. Collapse of the collector would block the river discharge and immediately jeopardize the stability of the massive mine tailings disposal facilities constructed in the Kriveljska River valley. The full replacement of the collector with a bypass tunnel in hard-rock around the tailings disposal facility was considered the only viable solution to eliminate this high risk. 2 World Bank Project Appraisal Document P092999, Report No. 39894-YF, 2007; “Environmental Performance Reviews: Yugoslavia,” United Nations Economic Commission for Europe. Committee on Environmental Policy, UN Publications, 2003. 1 revive RTB Bor and the region. The specific needs to be addressed included boosting environmental protections (and mitigating the resulting public health impacts) while stimulating socio-economic development that would improve Serbia’s prospects at European Union (EU) accession. 3. Government Strategy. GOS had a legal obligation of assuming past environmental liabilities, and recognized that identifying investors for RTB Bor’s assets would require addressing the critical issue of heavy pollution with direct health impacts linked to the copper smelter. Acting in close cooperation with the World Bank (the Bank), GOS prepared and adopted a time-bound Action Plan3 for restructuring RTB Bor in June 2005, to prepare a transparent tender (as a market test) for saleable core assets, planned for mid-2006, as a pre-cursor to the potential Bor Regional Development Project (the Project). In parallel, discussions with the Bank were focused on reducing the risks of an international environmental disaster related to the tailings pond facility, with the aim of containing the most serious pollution issues and paving the way for complete remediation in the long term. While the Bank could finance resolution of the legacy issues, it could not play a financing role in part of the (ongoing) mining/production operations. Rather, it was agreed that resolution of the issues related to the copper smelter was the responsibility of GOS and it would be made a covenant in the Loan/Financing Agreements. The Project was contingent on ensuring that the RTB Bor’s Core Assets are brought in line with Serbian environmental norms, in a manner satisfactory to the Bank. At the same time, complementary socio-economic efforts were to be developed as part of a holistic approach to a regional development strategy, through development of labor redeployment programs for redundant workers in the event of RTB Bor’s privatization, employment services to promote re-skilling of current and former RTB Bor workers, and business development services to support the private sector’s growth in Bor. 4. Rationale for Bank involvement. The Bank brought a degree of additionality to GOS through technical assistance (TA) not readily available, drawing upon TA to GOS under previous works. Support to GOS leading up to the Project was intended to lay a strong foundation for restructuring the mining sector. Under the Privatization and Restructuring of Banks and Enterprises TA Project (P077732), the Bank financed the retainer fee of qualified advisors to assist the Privatization Agency (PA) with implementing the tender for the core assets of RTB Bor. Further, results of the Bank’s 2003-06 Employment Promotion Project (P069374) were meant to inform the design of the socio- economic component through labor redeployment and cost-effective employment services. The Bank team also planned to leverage experience from other operations in managing environmental legacy issues in mining sector. The critical task of ensuring coordinated efforts across a diverse array of stakeholders (public and private) and consulting local communities was also an area in which the Bank leveraged its safeguard policies to 3 Government of Serbia’s ‘Action Plan for the Restructuring/Privatization of RTB Bor GROUP d.o.o. and Subsidiaries, as cited in “Technical Paper, “RTB Bor Labor and Welfare Impact Study,” December 2005. 2 mitigate the negative consequences of RTB Bor’s restructuring, which was the anticipated option to be pursued by GOS to resolve the urgent environmental and social legacy issues. 5. Higher level objectives to which the Project contributes. The Country Assistance Strategy (CAS) for FY05-07 was explicitly focused on supporting GOS’s priorities for a more efficient public sector, empowered private sector, and reduced poverty with improved social protections. The Bank-financed project aligned well within this structural reform agenda: reducing subsidies while improving fiscal discipline, mitigating environmental hazards safely and efficiently, and resolving supply and demand issues in the labor market through renewed non-mining private sector activities. At the sub-national level, these activities were all within the scope of work to improve socio-economic outcomes in Bor. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 6. The development objective of the project is to support the GOS' efforts to revive the depressed Bor region through: (i) dealing with urgent environmental and social legacy issues arising from mining sector restructuring; and (ii) fostering new sources of economic growth and job creation in the region. 7. The key indicators supporting the PDO according to the main text in the Project Appraisal Document (PAD) were:  Improved environmental conditions in the areas associated with past and present mining operations;  Improved capacity to monitor environmental conditions;  Number of jobs created/supported under the Project 8. The Project Appraisal Document (PAD) Section III. Implementation, C. Monitoring and Evaluation of Outcomes/Results, notes performance indicators that will be monitored include “number and area of closed and remediated environmental trouble spots” and “number of jobs created/supported by private sector development services.” These metrics differ in wording than those listed in Annex 3: Results Framework and Monitoring. For the purpose of assessing project results, this Implementation Completion and Results Report (ICR) refers to only Annex 3 of the PAD. 1.3 Restructured PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 9. The development objective of the project is to support the GOS in addressing the structural hazard of the river water collector of the Veliki Krivelj tailings disposal facility, which is one of the most urgent environmental legacy issues of the mining sector in the Bor region. 10. The key indicator linked to the Restructured PDO was:  Elimination of environmental risks related to poor state and possible failure of the Veliki Krivelj tailings facility’s collector for Kriveljska River discharge. 3 11. The PDO was restructured with the Level 1 Restructuring (03/25/2013) in response to a GOS request to cancel the remediation works due to potential investors’ interest in redeveloping the mining tailings facilities for commercial purposes. This reflected GOS’ intention to proceed only with construction of the tunnel under the Veliki Krivelj tailings facility, which was not part of the original project design and was the sole investment planned under the restructured project. 1.4 Main Beneficiaries 12. Component A was intended to benefit the local communities in the Bor region through resolution of the most pressing environmental problems. The ongoing risk from the dam and river water collector collapse, which would affect communities living downstream in the Danube water basin, meant those populations potentially affected would also benefit from the Project. The environmental issues in the RTB Bor mining area included air emissions (including dust emissions), and water pollution from copper smelting with devastating public health impacts. Component B activities were intended to benefit: (i) registered unemployed persons who were eligible for participating in training and public works programs; and (ii) small and medium enterprises (SMEs) and individual entrepreneurs that were potential beneficiaries of microfinance and business incubation services aimed at supporting private sector development (PSD). The PAD notes that the problem of finding employment with a narrow skills set in a weak business environment is not limited to former RTB Bor employees, and that was the rationale for allowing all registered unemployed in the region to be eligible for participation in Bank-financed activities. 1.5 Original Components 13. The Project design comprised of three components. Component A: Environmental Management and Remediation (US$30.9 million equivalent allocated from the Credit/Loan) The primary goals of this Component were the following:  strengthening the capacity of the GOS to manage the historic environmental liabilities remaining the responsibility of the state following the restructuring of RTB Bor assets;  strengthening the capacity of the GOS to monitor the compliance of new operator(s) of RTB Bor mining and smelting assets with the Serbian environmental norms; and,  remediation of the most pressing environmental problems remaining within state responsibility, as identified by the Environmental Assessment (EA) of RTB Bor operations, undertaken in 2006. Component A consisted of two subcomponents:  1(a) Management of Environmental Liabilities (US$4.4 million equivalent from the Loan): the objective of this sub-component was to provide TA to the GOS in the monitoring and management of environmental liabilities that would remain with the GOS following the resolution of issues in respect to core assets of RTB Bor;  1(b) Remediation of Urgent Environmental Hazards (US$16.5 million equivalent from the Loan/US$10 million equivalent from the Credit): the aim of this sub- 4 component was to mitigate the high environmental risks associated with the areas of environmental liabilities that would remain under the responsibility of the state following the resolution of issues in respect to core assets of RTB Bor. Component B: Socio-Economic Regeneration (US$10.56 million equivalent allocated from the Loan) The primary goals of this Component were the following:  support the improved labor redeployment programs and employment services aimed at RTB Bor redundant workers and the general population of the Bor region; and, promote the development of the private sector in the region. Component B consisted of two subcomponents:  2(a) Labor Redeployment and Employment Support (US$5.04 million equivalent): this sub-component aimed to support, through provision of consultants, training, and goods, a range of active labor market programs (ALMPs) targeting both the workers displaced by the decline in mining activities, and the general population in the region  2(b) Private Sector Development (US$5.52 million equivalent): this sub- component aimed at fostering private sector based sources of economic growth and employment creation in the region in order to compensate for the relative decline of the mining industry. Component C: Project Implementation and Evaluation (US$1.14 million equivalent allocated from the Loan) A third, cross-cutting component, Project Implementation and Evaluation Component, supported the following activities:  (i) Project Management Unit (PMU). The Project financed the salaries and operational costs of a qualified PMU established at the PA.  (ii) Impact Monitoring and Evaluation (M&E). Third-party assessments to be undertaken at mid-term and at the end of the Project, focusing on the gross outcome of activities supported under the Socio-Economic Regeneration component. 1.6 Revised Components 14. In order to achieve the PDO of the Restructured Project, the following changes were made to planned components:  Part 1(a) ‘Management of Environmental Liabilities’ was dropped. Activities that were initially envisaged for monitoring of environmental performance and pollution levels in the Bor area were not implemented. The other activities related to monitoring of works under the Project were implemented under Project Part 3.  Part 1(b) ‘Remediation of Urgent Environmental Hazards’ became Project Part 1 (as a consequence, Part 1 no longer had sub-parts). Under this Restructured Project Part 1, the only works to be implemented was the construction of a tunnel to replace the old collector in the Kriveljska River to by-pass the mining tailings disposal facilities in its valley. Other works, initially envisaged under the Project such as remediation of tailing disposal facilities and waste disposal areas, were dropped. 5  All activities under Part 2 ‘Socio-Economic Regeneration’ were discontinued.  All arrangements that were dedicated to the implementation of Project Part 2 were discontinued, such as the Local Steering Committee and the Local Implementation Unit (LIU) for Project Part 2.  Part 3 ‘Project Implementation Support’ remained, but supported the Restructured implementation arrangements where the Ministry of Energy, Development and Environmental Protection (MEDEP) assumed all responsibilities for project implementation from the existing PMU, currently under the Privatization Agency (PA), and the current LIU for Project Part 1. In addition, located in Bor, the Project Implementation Team (PIT) had a team of specialists in a LIU to supervise implementation of project works. Table 1. Snapshot of Original and Restructured Project Components and Costs Original Restructured Original Project Restructured Project Project Costs Project Costs Component / Activity Component / Activity (US$ million) (US$ million) Component A: Part 1: Remediation of Environmental Urgent Environmental 30.90 18.45 Management & Hazards Remediation Component B: Socio- Part 2: Socio-Economic 10.56 4.88 Economic Regeneration Regeneration Component C: Project Part 3: Project Implementation and 1.14 2.09 Management Evaluation Unallocated 0.40 0.002 Total 43.00 25.42 15. Cancelled activities were reflected in partial cancellation of the IBRD loan (US$17.58 million equivalent). 1.7 Other significant changes 16. Restructurings. In November 2010, an amendment was made to the Financing Agreement (FA) to include expenditures by the LIUs as part of the definition of Incremental Operating Costs. This change made the LIUs eligible to cover their operating costs out of the loan proceeds. 17. The Project’s Closing Date was extended twice by three months each time, from September 30, 2012 to March 31, 2013, or six months in total. The main objective of these two Level 2 restructurings was to allow sufficient time for processing the GOS-requested changes to project components / activities, which required a Level 1 Restructuring. In September 2012, US$4.6 million (10.7 percent of total project cost) was disbursed, and in December 2012 US$9 million (21 percent of total project cost) was disbursed. 18. The Board-approved Level 1 Restructuring was approved in March 2013 to reflect GOS requests to: (a) extend the closing date to 09/30/2015 to allow for completion 6 of activities under Components A and C, (b) reallocate to Component A the remaining Loan proceeds from Component B (which was cancelled); and (c) simplify the implementation arrangements of the Project and reduce the Project Steering Committee (PSC) to comprise of representatives of MEDEP and the Ministry of Natural Resources, Mining and Spatial Planning. At this stage, US $9.1 million (21 percent of total project cost) was disbursed. The Restructured financing plan included a reduction in the IBRD loan from US$33 million to US$15.42 million, with the difference of US$17.58 million cancelled, and the IDA credit of US$10 million unchanged. The PDO and indicators were restructured accordingly (see Section 3.2). 19. Early closure. The Project closed on May 18, 2015, instead of September 30, 2015 at the request of GOS in a letter dated January 30, 2015. The letter from the Minister of Finance requesting cancellation of the unused amount of funds followed a letter from the Bank dated November 25, 2014 in which the Project closing date extension was denied. The commitment charges on the total amount of the IDA credit cancelled ceased to accrue on February 6, 2015, of which 0 percent IDA funds were utilized. The commitment charges on the total amount of the IBRD loan cancelled ceased to accrue on May 18, 2015, and the loan was closed on the same date. GOS returned the remaining unspent funds, and on June 12, 2015, the Bank issued the final cancellation letter to GOS confirming Project closure. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 20. Project preparation and effectiveness. The project experienced significant delays between Concept Review in May 2005, Approval in June 2007, and effectiveness in December 2008. The long period between Concept and Approval can be partially explained by the Bank’s efforts to work with GOS during this period on successful privatization as the preferred option for resolving the issue of continuing pollution. Political issues, such as the resulting changes from the 2007 elections, since Board approval and signing of the FA and Loan Agreement (LA), contributed to delays until effectiveness. The Effectiveness Date specified in the IBRD LA and IDA FA was December 24, 2007, which was 150 days after signing of the said Agreements, but extensions for the Effectiveness deadline were sought by the Minister of Finance and granted by the Bank in January and March 2008 due to political changes affecting the National Assembly. Therefore, the project did not come effective until December 2008, 18 months after approval, which was mostly spent waiting for parliamentary ratification4 (September 2008). 21. Soundness of background analysis. The Project intended to draw upon Bank experience in Serbia through prior operations on mono-industrial restructuring in Europe’s transition economies, but it remains unclear how design was based on these experiences and lessons. Some questions remain answered: For example, how were the challenges with implementation of a multi-sectoral, multi-Ministerial operation resolved in other similar works? What would happen to planned training and public works activities 4 Republic of Serbia: Bor Regional Development Ratification Law, Official Gazette, No. 83, 10 Sep 2008. 7 for unemployed workers if the privatization did not proceed? How were employability- focused activities matched with jobs in which those skills would be of use without firm demand? How were Active Labor Market Programs (ALMPs) linked to local skills in demand to examine sustainability? Beyond SME development, were there efforts to attract local investors, foreign investments, and growth in new sectors? The PAD notes these issues in the context of mining restructuring in Romania and coal reforms in Poland, Russia, and Ukraine, but at that time the hard lessons of rolling out environmental and socio- economic activities in parallel with an array of stakeholders in Government involved perhaps had not yet been learnt. 22. Assessment of the project design. The complex design of the Project, involving multiple Ministries across multiple levels, combined with insufficient ownership of activities resulting in inadequate attention to necessary arrangements on the ground, hampered the ability to deliver results. In hindsight, it is clear that the multiple anchors across different Ministries was built into the design of two distinct sectoral areas of work without sufficient ownership at an overarching level to ensure line Ministries responsible for the two components would deliver on implementation in Bor. Convening meetings where all four Ministries, among others, could attend, and making timely decisions on the Project are some of the issues with the PSC discussed in Section 2.2. The relatively ‘small’ Project during a time of frequent political and economic changes meant that ex-ante further thought was needed as to the issues in Bor with rolling out a complex set of actions in parallel envisaged at the design stage. 23. Assessment of risks. The mitigation measures to political- and implementation- related risks were insufficient, despite the Substantial risk rating noted at the time of appraisal. The primary risk to the entire Project’s success was political, in terms of GOS’ commitment to proceed with the politically-charged and technically challenging work of restructuring RTB Bor, including the possibility of privatization. Within this context, there was an economic risk to the success of privatization due to dependence on market conditions. The implementation arrangements included risks in that the PSC included too many players across too many levels, which essentially rendered effective, timely decision- making towards progress not possible. Similarly, the coordination at the Local Steering Committee (LSC) level across the LIUs was consistently lacking throughout the Project. At the same time, the PMU was inadequately staffed with the right technical expertise to address capacity gaps among Ministerial staff and at the local level. The specifics as to how the Project would tackle these issues were not identified. 24. Adequacy of stakeholder commitment. The degree of buy-in to the Project since design was insufficient in Bor and Belgrade across GOS authorities in various Ministries, private sector groups including RTB Bor, civil society including employees and unemployed people in Bor and Majdanpek – as evidenced by the lack of ownership to ensure implementation of activities on the ground. While the relevance of the Project was and remains High, and discussed in Section 3, the specific ways in which design was informed by stakeholder consultations, and evidence of GOS commitment, could have been articulated and understood more explicitly in the PAD on Component A activities. In support of Component B, the main evidence in support of a stakeholder consultation was 8 the 2005 Labor and Welfare Impact study commissioned by the Ministry of Labor, Employment and Social Policies (MOLESP) to understand social impacts of restructuring RTB Bor. Over 1,250 current and former employees were interviewed to assess coping strategies, concerns and perceptions, and interest / likely take-up in various labor market programs. Consultations among the private sector were mentioned through engagements with local business associations and periodic enterprise surveys, but these are aspirational as described at the design stage without evidence of how design was informed based on actual needs. 2.2 Implementation 25. Political changes. Serbia held national elections in 2007 and 2012, and the resulting change in Government led to approval, effectiveness, and implementation delays. In 2007, government changes and a slow parliamentary ratification process meant the Project became effective only in December 2008. In 2012, restructuring within GOS affected the implementation arrangements and the implementing agency of the Project changed as part of the Level 1 Restructuring, through decisions to disband the PMU under the PA and to replace it instead with a PIT under MEDEP. 26. Financial crisis. The 2008 global financial crisis significantly affected the implementation of activities under Component B. The activities ongoing or planned experienced low demand throughout this period. As the prospects for resolution of RTB Bor assets through privatization faded, the local landscape changed due to economic pressures in Bor affecting an already weak and underdeveloped private sector. As a result, microfinance services provision with Opportunity Bank Serbia (OBS) and business incubators in Bor and Majdanpek could not be fully implemented due to limited local demand in light of challenging market conditions. 27. Suspension of disbursements. A partial suspension of disbursements occurred following the failure to meet an implementation covenant. The covenant5, “resolution of RTB Bor’s core assets,” was based on bringing the assets (especially the smelting complex) in an environmentally sustainable manner satisfactory to the Bank. Rather than postponing processing of the Project and making it conditional on successful privatization, the Bank proceeded on the basis of the implementation covenant mentioned. As three privatization attempts ultimately failed and market conditions changed during this period as a result of international economic crisis, including declining copper prices, GOS advised the Bank it would invest its own funds in the modernization of the smelter. While the Project had been effective as of December 2008, disbursements were partially suspended in 2010 due to the covenant not having been met at that time. The suspension came into effect in February 2010 and was lifted in mid-December 2010 after GOS decided to pursue resolution of RTB Bor’s assets through investments in new copper smelting technology 5 FA Schedule 2, Section I.B.6: “Not later than twelve months after the Effective Date of this Agreement, the Recipient shall have successfully completed the resolution of RTB Bor’s Core Assets, in a manner satisfactory to the Association.” 9 and entered into financing arrangements with Export Development Canada (EDC). At that time, only 3 percent of the IBRD loan had been disbursed and no disbursement from the IDA credit was made. 28. Implementation arrangements. The complex institutional structure for implementation combined with insufficient ownership, commitment, and accountability at the line Ministry level affected the implementing agencies’ ability to proceed with Project activities. As noted in the PAD, the implementation arrangements reflected a wide range of activities, their complex technical nature, and large numbers of stakeholders at the local and national levels, where there was a lack of ownership for the Project as a whole. Convening meetings across Ministries and across national and local levels to make timely decisions on implementation, such procurement decisions, proved challenging, and reflected a failure of strong leadership in support of delivering Project activities. Further, the limited technical capacity and understanding of Project activities delayed the microfinance work, for example, as authorities raised questions regarding rate caps and state-owned bank participation. Implementation arrangements adversely affected progress due to the lack of coordination between structures responsible for Components A and B, whereas Project design mentioned linkages between these components. The tables below illustrate the structure of the Original and Restructured Projects: Table 2. Implementation Arrangements of the Original Project. 10 Table 3. Implementation Arrangements of the Restructured Project. 29. The existing PMU and LIUA under the Original Project were merged into the PIT and its LIU under the Restructured Project. The budget allocation for the Restructured Project Part 3, Project Management, increased nearly 84 percent during the Level 1 Restructuring. The increase was partially due to the inclusion of construction works supervision activities to be conducted by engineers and environmental specialists as part of Part 3 and to cover operating costs of the extension from March 31, 2013 to September 30, 2015. 30. Quality Assurance Group (QAG) Europe and Central Asia (ECA) Disbursements Learning Review (December 2009). The QAG report highlighted issues related to client capacity, technical expertise for coordinating Component A, and ownership as staff changed. At the same time, the report noted a positive aspect of the Project in that the Bank team regularly attempted to follow up with authorities through educating members of the PSC during times of turnover on technical issues, procurement packages, and other issues. 31. Mid-Term Review (MTR) Mission (January 2012). The MTR reviewed options for extension, restructuring, and cancellation, due to the slow progress, insufficient capacity, and inadequate coordination amongst the implementing parties. Within the context of delays over the three years since the Project became effective (2008-12), the MTR could have been conducted earlier, rather than nine months ahead of the scheduled closing date in September 2012. Further, the MTR notes the lack of detailed information from GOS, since the last Bank mission nearly a year prior to the MTR, on progress with the planned investment on the smelter upgrade (for which GOS obtained a loan from EDC). As a result of the mission, strengthening implementation was advised, as Component B activities were discontinued and the refocused Component A remediation works in Bor were increasingly dependent on Belgrade institutions being coordinated to avoid further delays due to communication and operational issues. 32. Risk management. The QAG review noted in 2009, well before the MTR (2012) and Level 1 Restructuring (March 2013) that risk mitigation measures at the time were inadequate. The Bank team noted in the December 2013 Implementation Status & 11 Results (ISR) Report that Project delays were exacerbated by insufficient capacity to implement and inadequate coordination among the implementing agencies. Further, it was noted that responsiveness among Project Coordinators that were slowly realizing the complexities of implementation could have been greater. The issues in project coordination, including procurement and financial management, were evidenced by contract expirations of staff engaged in the Project without replacements. Similarly, selection of the works supervisor in Bor did not progress due to the one year time lapse, which meant reinitiating the process would be needed. By the final ISR in April 2015, the Project team had increased the overall risk rating to High, due to insufficient action from GOS with regards to both implementation and communication with Bank staff on the status of various activities. Given the continuously noted risks, in hindsight it is worth noting that the Bank, including management, and GOS needed earlier and frequent discussions on achievement of the PDO and level of effort involved as the work plan arrangements at the time were not working. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization Rating: Negligible 33. Design. The Original PDO of reviving the Bor region was ambitious and required, a solid M&E plan to capture expected development results which was lacking. The theory of change is implicit linking Components A and B to improved environmental conditions, an improved employment situation, and a reduction in state subsidies, as noted in the PAD but not reflected in the RF. 34. Selection of key PDO indicators were not linked explicitly to the expected outcomes of Component A in terms of tracking improved environment conditions. Component B results were to be captured by placement of training and employment program participants in jobs and the jobs created / supported by the project, presumably from the PSD work. However, the microfinance-focused indicators were not linked to economic performance of SMEs and/or entrepreneurs, which may have been a proxy for firm growth and prospects for increased labor demand. 35. Further, the intermediate outcome indicators were not all SMART (specific, measurable, achievable, relevant and time-bound), lacked baseline data where applicable, and could have included indicators measuring relevant impact of intermediate objectives. For example, understanding if program participants report improvements in their knowledge and skills, and ultimately found jobs in fields relevant to their training could have shed light on effectiveness. Indicators selected, such as jobs created, were, as noted, in some cases overly ambitious to expect such result by completion. While others, such as the microfinance portfolio results of Opportunity Bank Serbia (OBS) were not attributable to the Bor project, but rather based on the entire OBS portfolio, as noted throughout ISRs. Inadequate robustness in measurement of outcomes led to measures of success of the Bank-supported efforts towards PSD that could have been more meaningful. 36. The ex-ante plan to capture impacts among beneficiaries based on longer-term environmental and social results is a positive aspect of M&E plan to note, as the PAD states an impact evaluation with supporting employer surveys was planned. In addition, Client 12 capacity-building support on data collection and tracking systems was noted. Unfortunately, none of these activities materialized due to implementation changes. 37. Implementation and Utilization. As part of the Level 1 Restructuring, M&E efforts were discontinued, and the extent to which data collected under the Project was utilized is unknown – especially at the beneficiary level amongst those that participated in training and employment programs that did in fact achieve some results prior to discontinuation of Component B under the restructuring. Due to the fact that no data was tracked following the September 30, 2012 discontinuation of labor redeployment, employment services, and business development programs, and now follow-up was planned for on data collected previously, it is unclear if program participants found trainings relevant in terms of skills and if employers that hired any program participants reported improvements in job performance. Under Component A, the lack of implementation progress resulted in no results data being reported. 38. Taking into account the issues with design, implementation, and utilization, the overall M&E quality is assessed as Negligible. 2.4 Safeguard and Fiduciary Compliance 39. The Project’s compliance with the Bank’s safeguards policies were reviewed at entry to ensure that all potential issues had been taken into account in the design. It was concluded that the safeguards triggered were the Environmental Assessment (EA) (Operational Policy (OP) 4.01), Safety of Dams (OP 4.37), and Projects on International Waterways (OP 7.50). Although the safeguards review were performed regularly and communication with the Client was regular to ensure compliance, Overall Safeguard Compliance experienced issues related to independent audits required to ensure safety of dams in Veliki Krivelj tailing facility. Since no activities or work were reported on the dams, the rating remained the same throughout the project until closure. 40. The environmental category was categorized as “A” – full assessment due to possible impacts. The comprehensive EA was undertaken according to Bank requirements to include all existing facilities and operations of RTB Bor’s copper mining and processing facilities. The EA, Environmental Management Plan (EMP), and executive summary completed in 2006 prior to Project approval were discussed extensively during local and national level consultations, following a thorough review by safeguard specialists. The final documents were all made publicly available in country and through the WB InfoShop as required. 41. Delays in procurement processes, at times without a clear rationale or explanation, certainly contributed to Project implementation delays, due to lack of technical capacity. Nevertheless, the implementation of activities partially or fully completed was rated Satisfactory at the point of the MTR and throughout the ISRs. The Bank procurement team reviewed a sample of contracts at the MTR mission and found the results in line with Bank policies and procedures, including a noticeable improvement in how contracts were recorded and processed, compared with earlier reviews. Greater coordination support was needed for the PMU, as concluded by the team at the time, to avoid delays with 13 administration and payments. However, the May 2013 project risk assessment notes a Substantial rating, which reflected the fact that severe procurement delays consistently affected the timeline implementation of Project activities. These problems persisted and contributed to preventable delays throughout the remainder of Project until closure, which is reflected in the overall assessment of Moderately Unsatisfactory. 42. Financial management of the Project by the PMU was overall Satisfactory. At the time of appraisal, the financial management risk was well analyzed, with appropriate mitigation measures, and rated Moderate. The complex implementation arrangements contributed to the rating, and the team insisted on a robust system of internal controls and procedures to be validated regularly with external audits of financial reporting. The Project used a suitable, automated accounting system, and staff in the PMU responsible for these functions prepared accounts and reports in a satisfactory manner. In November 2015, the Bank team confirmed that final disbursement figures remain an estimate, pending combined Audit Reports for 2013 and 2014. 2.5 Post-completion Operation / Next Phase 43. As the Project did not meet the Original or Restructured PDO, the activities set out originally were executed to varying degrees – if at all. The civil works on the collector had not started by the time of Project completion as GOS had not yet issued a notice to mobilize to the Contractor, despite a contract signed over two years prior. Correspondence with GOS throughout 2014 dealt with delayed progress and the fact that an extension would once again be needed to ensure the collector was completed before Project closure. However, the already extended, significantly reduced scope, and Unsatisfactory status of the Project at the time led Bank management to deny the extension request. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Original Project Rating of Relevance of Objectives, Design and Implementation: Modest 44. Relevance of Objective. The PDO of the Project prior to the Level 1 Restructuring remains highly relevant for the Bor region and broader Serbian development context as at the time of design and today. The April 2015 WBG Systematic Country Diagnostic for Serbia notes that country priorities with highest impact on poverty and prosperity include SOE reform by privatizing commercially oriented enterprises; business climate reform conducive to private sector-led growth and jobs; and strengthening labor market institutions to mitigate negative consequences of SOE reforms. The aim of reviving the depressed Bor region through dealing with environmental, social, and economic (PSD) issues was commendable, particularly with the context of GOS and WBG priorities. To date, the risk of environmental disaster in the region remains high. The relevance of the original PDO is rated Modest. 45. Relevance of Design and Implementation. The Original intention of drawing upon similar regional development work elsewhere in the region where the Bank had been 14 working to reform depressed mining regions through multi-sectoral solutions is noted in the PAD. However, these projects did not adequately inform design based on work in Romania, Bulgaria, Poland, etc. The interventions selected within Components A and B are relevant as possible solutions to mitigate environmental and social consequences of mining sector restructuring, but selection of specific activities required in-depth participatory processes in order to understand needs, as well as political will and action. Tackling all the issues faced in the region at once led to a complex design that was overly ambitious. Component A was conditional on the Government’s action to ensure that RTB Bor’s core assets are brought in line with Serbian environmental norms, which proved to be much harder than anticipated. The low demand for Component B activities combined with changing political economy conditions continually raised the question throughout implementation of the Bank’s continued involvement in the Project. The decision to drop all but the environmental remediation activities was correct, in hindsight, but occurred late into the life of the Project. Given the overly ambitious level of the PDO that reflected higher level results unlikely to be achieved within the Project timeframe, and the delay in making critical changes in design renders the Project’s relevance of design and implementation Modest. 46. Overall of Relevance of Objectives, Design and Implementation of the original project is rated Modest. Restructured Project Rating of Relevance of Objectives, Design and Implementation: Substantial 47. Relevance of Objective. Following the Level 1 Restructuring, the reduced scope of work of the Original Project is reflected in the Restructured PDO, which focused on supporting GOS in remediation works only. Specifically, elimination of environmental risks related to the state of the Veliki Krivelj tailings facility through rehabilitation of the collector. The poor condition of the collector, which carried more weight than intended, required regular repairs to maintain its integrity. Its collapse would block the river discharge and immediately threaten the stability of massive nearby disposal facilities. Replacing the collector was considered the only viable solution to eliminate this very high risk situation of contamination in the Danube. The relevance of the restructured PDO is rated High. 48. Relevance of Design and Implementation. The Restructured Project’s remediation activities were prepared with the aim of mitigating future environmental hazards, and implementation arrangements simplified to include one construction activity – collector, with the construction contract signed and fully under authorities of one implementing ministry. However, the Restructured Project did not progress due to no activities having been undertaken on construction of the collector, although a contract was signed in January 2013, which is detailed in the correspondence from the Bank to GOS dated 07/15/2013. Ultimately, the GOS requested cancellation of the Project nearly six months ahead of the planned closing date. To that end, within a context of high environmental risks that persist to date in Bor, the relevance of design is Substantial, while relevance of implementation is 15 rated Modest. Therefore, overall of Relevance of Objectives, Design and Implementation of the restructured project is rated Substantial. 3.2 Achievement of Project Development Objectives Original Project Rating: Negligible Restructured Project Rating: Negligible 49. The achievement of the Original Project PDO is assessed based on intended outcomes presented in Section 2.1. Using these to measure achievement, the Project has not achieved its intended outcomes and PDO. The PDO indicators and results below illustrate the shortcomings, and further details are provided in Annex 2. 50. The project achieved results on some of the PDO indicators related primarily to socio-economic activities. In most cases, however, the lack of take-up and changing market conditions affected achievement of intended development results. More can be done in the future to refine and improve local participation in decision-making of labor redeployment, employment support, and PSD-oriented activities, in addition to ongoing environmental management and remediation works. Overall, the targets for all PDO indicators having been minimally or not all achieved justifies the rating for Achievement of Objectives as Negligible. 51. Assessed against the Restructured Project’s PDO, the only result achieved was the signing of the contract for the rehabilitation of the Veliki Krivelj river by-pass/collector, though the contract was signed two months prior (January 2013) to the Level 1 Restructuring (March 2013). However, no civil works were undertaken, and the PDO indicator of elimination of environmental risks related to the collector was not achieved. Therefore, as is the case with the Original set of planned Project activities, the key result was not achieved and the rating is Negligible. 52. This ICR concludes minimal outputs and outcomes were achieved under the Project before and after the Level 1 Restructuring, and therefore PDOs were not met. The attribution of results achieved is possible in some cases, such as the beneficiaries of employment services financed by the Project. However, results of the microfinance activities relate to OBS’ entire portfolio for reporting purposes, and are specifically not attributable to the Project as noted throughout ISRs. The issues with the M&E framework in terms of being output-oriented and insufficiently robust indicators are noted. Table 4. Summary of Original Project PDO Indicators and Results Achieved.6 PDO INDICATOR RESULTS Improved environmental In terms of Management of state environmental liabilities in a conditions in the areas technically sound manner and Progress in remediation of environmental trouble spots, the Environmental Impact 6 Source: World Bank Project Appraisal Document (May 25, 2007) and Restructuring Paper (March 11, 2013) 16 associated with past and Assessment (EIA) and Environmental Management Plan (EMP) present mining operations completed in 2012. GOS signed the contract in January 2013 for implementation of civil works to replace the Veliki Krivelj collector. Works were not implemented due to lack of a notice for the contractor to mobilize. Improved capacity to Activities that were initially envisaged for monitoring of monitor environmental environmental performance and pollution levels were not conditions implemented. Under the Level 1 Restructuring (03/25/2013), activities related to monitoring of works were transferred to Project Implementation Support (Project Part 3) where a team of technical specialists were intended to supervise construction of a tunnel to replace the old collector. The civil works nor related monitoring activities were not implemented. Number of jobs 886 individuals tracked as having found jobs (23% of the target created/supported under the value) is based on 36 jobs tracked as part of the job search Project assistance activity, 8 as part of the off-the-job training activity, and 842 as part of public works. 3.3 Efficiency Original Project Rating: Negligible Restructured Project Rating: Negligible 53. It is reasonable to conclude that the costs of Original or Restructured Projects were not commensurate with the minimal results achieved. It is unclear, however, that there were alternative ways to achieve objectives that may have been less costly. For example, the various options to Component B activities considered at the time of approval, from shutting RTB Bor down completely, to full severance packages, to physical relocation of workers, would have all been more expensive if implementation was feasible. The PAD cites the non-quantifiable nature of various factors in the Project in terms of direct and indirect benefits as the justification for the lack of economic and financial analysis. However, the direct and indirect risks of environmental hazards persist in the Bor region. In terms of achievement of Original and Restructured Project PDOs, overall efficiency for the Original and Restructured Projects is rated Negligible. 3.4 Justification of Overall Outcome Rating Original Project Rating: Highly Unsatisfactory Restructured Project Rating: Highly Unsatisfactory 54. The Original Project rating reflects an overall rating of modest for relevance of objectives, design, and implementation (Section 3.1), a negligible rating for achievement of PDO (Section 3.2), and a negligible rating for efficiency (Section 3.3). The Restructured Project rating reflects an overall rating of substantial for relevance of objectives, design, and implementation (Section 3.1), a negligible rating for achievement of PDO (Section 3.2), and a negligible rating for efficiency (Section 3.3). 55. The overall outcome rating for before and after the Level 1 Restructuring reflects a weighted assessment of Original and Restructured PDOs in proportion to the share of actual 17 loan/credit disbursements made before and after the revisions. The table confirms the overall outcome rating for the Original and Restructured Projects as Highly Unsatisfactory. Table 5. Evaluation of Project with Formally Restructured Objectives. Against Against Overall Comments Original Restructured PDOs PDOs 1. Rating Highly Highly Unsatisfactory Unsatisfactory 2. Rating value 1.0 1.0 3. Weight (% 21% 79% The total loan/credit funds disbursed approved for the Project decreased before/after from US$43 million to US$25.42 PDO change) million during the Level 1 Restructuring (03/25/2013). The difference was cancelled.7 4. Weighted 0.21 0.79 1.00 value (2 x 3) 5. Final rating Highly Unsatisfactory (rounded) 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 56. The need for poverty alleviation measures in Bor cannot be disputed at the time of Project design and implementation. However, the results for those who participated in employment support services cannot be disaggregated by age, gender, or income status. Therefore, positive or negative impacts on poverty, gender, or social status cannot be determined. (b) Institutional Change/Strengthening 57. The capacity of the PIT was improved during the implementation of the Project especially in fiduciary aspects (procurement and financial management). However, since the majority of Project activities were not implemented, any institutional development and impact on longer-term capacity would not be attributable to the Project. (c) Other Unintended Outcomes and Impacts (positive or negative) 58. No unintended outcomes or impacts were identified, given the minimal implementation achieved under the Project. However, the level of awareness has been raised on possible environmental emergencies, such as the structural hazard of the river water collector of the Veliki Krivelj tailings disposal facility, which persist in the region. 7 The cancellation of funds during the Level 1 Restructuring leads the denominator values in Row 3 (Weight) of Table 5 to differ. Under the Original Project, US$ 9.08 million out of US$43 million (21%) was disbursed, and under the Restructured Project US$ 9.77 million out of US$ 25.42 million (38%) was disbursed. The weights, therefore, do not equal 100%, but do not affect the final outcome rating of Highly Unsatisfactory, which remains unchanged even if the weight values sum to 1.00. 18 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 59. A stakeholder workshop and/or survey among beneficiaries was not intended as part of the ICR preparation due to the fact that key stakeholders and program participants can no longer be traced after the main programs and activities of Component B were discontinued in 2012. Component A activities under the Original Project or Part 1 Remediation works under the Restructured Project did not materialize. 4. Assessment of Risk to Development Outcome Rating: High 60. Although the overall high risk posed by the political and institutional context as identified in the PAD was accurate and some mitigation measures as described were put in place, the effectiveness of those mitigation measures remained hampered by institutional and implementation challenges. Regardless, the risk for development outcomes remains given the regional context (which continues to pose environmental and socio-economic challenges) and institutional arrangement challenges to ensure adequate capacity and inter- governmental coordination for implementation. Neither the closing date extensions nor reduced scope of work under the Level 1 Restructuring enabled the implementing agencies to proceed with environmental activities that had been planned. Employment programs were not sustainable due to the temporary nature of the jobs under public works. Similarly, the business incubator and microfinance program did not achieve enough progress to achieve development results due to lack of demand. At the time of closing, there were no follow-up activities being planned related to any Project activity. Taking all these factors into account, the risk to the sustainability of the development outcomes achieved by the project is assessed as High. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Unsatisfactory 61. The Project was prepared to respond to GOS needs of revitalizing Bor, given the environmental and social legacy issues that persisted in the region. Within this context, three important limitations must be noted with respect to the Quality at Entry. First, the PDO, as articulated, did not reflect achievable results within the Project implementation period. Second, the multi-sectoral approach to regional development centered on sectoral reforms did not sufficiently take into account lessons, including learning from failure, of similar projects in the region. In addition, there is little evidence to confirm that adequate consultations took place during Project preparation. Given these limitations, Ensuring Quality at Entry is rated Unsatisfactory. (b) Quality of Supervision Rating: Unsatisfactory 19 62. The 2009 QAG report notes the Bank team followed up diligently with authorities to build the capacity of members of the PSC on various policies and procedures for the Project, and that Bank management and staff persisted to turn around Project delays. Specifically, the Bank team identified problems on time, but greater candor and more explicit flagging of major issues in the Aides Memoires and ISRs would have been more useful in terms of raising red flags for resolution. The performance ratings in ISRs were accurately assessed by the Bank team, in line with internal guidelines, and careful, consistent attention was provided to monitoring critical aspects of the Project by respective Specialists who were part of the team, including environmental and social safeguards, procurement, and financial management. Overall, the implementation difficulties were overwhelming, which required Bank management to be significantly more proactive in responding to political developments and changes in Government. The option of restructuring or cancelling the Project was on the table for most of the life of the project, but action was not taken until much later. Dealing with the difficult and politically sensitive issue of cancellation was not easy, and assessing feasibility of early closure needed careful consideration as part of ongoing supervision throughout the Project. Within this context, Quality of Supervision is rated Unsatisfactory. (c) Justification of Rating for Overall Bank Performance Rating: Unsatisfactory 63. Overall Bank performance is rated Unsatisfactory based on the ratings of Unsatisfactory for both Quality at Entry and Quality of Supervision. 5.2 Borrower Performance (a) Government Performance Rating: Unsatisfactory 64. The early delays in effectiveness plagued the Project throughout implementation, whereby the necessary legal steps were consistently behind the Project timeline to meet the covenant related to RTB Bor’s core assets. To some extent, the delays were related to Government reshuffles during elections and lagging capacity resulting from turnover, as Serbia grappled with political transitions. GOS performance (Prime Ministry, line Ministries, municipalities at the local level) is assessed as Unsatisfactory, given the lack of results achieved under the Original or Restructured Project. (b) Implementing Agency or Agencies Performance Rating: Highly Unsatisfactory 65. The insufficient coordination, weak capacity, and slow administration process contributed to implementation challenges. As noted, the changes in implementing agencies further hampered supervision as the counterparts, reporting lines, and accountability also changed over time. These changes in implementation arrangements, coupled with the lack of a strong owning unit accountable for progress, contributed to shortcomings in supervision. 66. While the main PMU was knowledgeable in the implementation of Bank projects, inadequate environmental technical expertise was an important obstacle to progress on Component A (Original Project) / Part 1 (Restructured Project), and overall insufficient 20 attention to build capacity in the implementing agencies is noted. Delays in fiduciary processes, including procurement and financial management, caused severe delays in the implementation of Project activities. The last unsolvable issue was the inability of the Project to implement one single works contract that was critical in avoiding a potential environmental disaster. The Implementing Agency performance is, therefore, rated as Highly Unsatisfactory. (c) Justification of Rating for Overall Borrower Performance Rating: Highly Unsatisfactory 67. Overall Borrower performance is rated Highly Unsatisfactory based on the ratings of Unsatisfactory for Government Performance and Highly Unsatisfactory for Implementing Agency Performance. 6. Lessons Learned 68. The experience of the Project highlights key lessons relevant for future operations in terms of: (i) complexity without ownership; (ii) sequencing arrangements; (iii) implementation incentives; and (vi) learning from failure. 69. Projects, particularly those that have a complicated programmatic design, without strong ownership in Government suffer during implementation. The complex design of the Project with an ambitious PDO was jeopardized due to varied and waning ownership throughout implementation, which compromised the ability to achieve progress in a timely, satisfactory manner. Changes in implementation arrangements during times of GOS restructuring aggravated commitment of the Ministries in terms of ‘pulling’ progress, as opposed to the Bank team ‘pushing.’ A strong anchor in GOS may have strengthened the ability of the Project to deliver on at least some of the critical aspects of the environmental or socio-economic components, even if not both at once due to the complexities noted. 70. Sequencing activities may improve likelihood of achieving PDOs. The complex Project design, combined with low implementation capacity, was hampered by a dated implementation covenant related to resolution of RTB Bor’s assets. The design of redeployment and employment services was partially dependent on resolution of the Bor assets, including through potential privatization. While the resolution did occur, though through reinvestment in RTB Bor’s assets by GOS, privatization in the end did not occur. The design of socio-economic activities, therefore, likely needed to have been reassessed earlier in terms of relevance and needs. A phased approach to implementation may have strengthened at least partial achievement of either component as the challenge of implementing both in parallel became increasingly apparent. 71. Incentives cannot be overlooked in risk management across multiple levels. First, while the risk of the lack of coordination was identified at appraisal through the creation of a PSC, incentives across Ministries in the PSC to collaborate on a cross-sectoral Project were lacking. Implementation arrangements were inconsistent with the PDO where Components A and B were complementary, as the national and local levels as well as LIUs 21 (A and B) were insufficiently collaborative without sufficient motivations. Giving greater consideration to working within existing channels in Government that are working well together could provide insights for future multi-faceted operations requiring cross-agency collaboration. Where these channels do not already exist, there needs to be a clear and strong commitment to put them in place to ensure ownership of Project activities, with supporting incentives for the various ministries and other Project champions to use them. 72. Recognizing an opportunity for learning from failure is part of ensuring quality of supervision. The Project did not take advantage of a learning opportunity from activities that had achieved results but were not continued after the Level 1 Restructuring. Not carrying out evaluative efforts to extract lessons for future, similar operations was a mistake – especially at the beneficiary level amongst those that participated in training and employment programs. As noted under Section 2.3 on M&E, it remains unclear, due to the lack of data utilization, the quality and relevance of the Bank-financed training programs. Questions remain on if participants reported improved skills, found employment relevant to their training, and if employers reported improved skills and job performance amongst those participants in training and employment services. Similar questions persist regarding the PSD-related activities on business incubation and microfinance. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 73. The borrower was informed of its legal obligation to prepare a completion report, however, no report was received by the time this ICR was submitted for approval. (b) Cofinanciers (c) Other partners and stakeholders N/A 22 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Appraisal Actual/Latest Estimate Percentage of Component/Activities Estimate (USD (USD Appraisal millions)8 millions) Part 1 - Environmental Management and Remediation (Original title), was renamed to: 30.9 3.30 11% Part 1- Remediation of Urgent Environmental Hazards (after restructuring) Part 2 - Socio-Economic Regeneration 10.56 4.10 39% Part 3 – Project Management 1.14 0.83 73% Unallocated 0.4 0 0 Front-end fee 0 0 0 Total 43 8.23 19% (b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) Borrower 0.00 0.00 .00 International Bank for Reconstruction 33.00 9.79 29% and Development (IBRD) International Development 10.00 0.65 6.5% Association (IDA) Total 43.00 10.44 24% 8 Actual expenditures in EUR converted to USD using the exchange rate as of Project Closure, May 18, 2015, where EUR=1.1416 USD 23 Annex 2. Outputs by Component9 (a) Original Project (06/20/2007) ACTIVITY OUTPUT COMPONENT A – ENVIRONMENTAL MANAGEMENT & REMEDIATION A.1 Management of Environmental Liabilities Technical assistance to the qualified local Environmental Assessment of RTB Bor entity in managing liabilities on behalf of Operations and Environmental Management GOS, including the supervision of the design, Plan, August 2006. construction, and maintenance of remediation works financed. Signed design contracts for the remediation works and construction of the Veliki Krivelj collector by GOS, September 2011. Environmental Impact Assessment (EIA) and Environmental Management Plan (EMP) for the collector and environmental remediation works completed, March-April 2012. Support for monitoring environmental No monitoring plan was prepared due to the performance (e.g. soil, groundwater, river cancellation of environmental remediation sediment) for pollution levels through works. provision of equipment and training, in order to complement existing efforts by authorities of water and air (quality and emissions) monitoring. A.2 Remediation of Urgent Environmental Hazards Financial assistance for the design, Signed contract for implementation of civil construction, and maintenance contract to works to replace the Veliki Krivelj collector, undertake closure and remediation of at least January 2013. two tailings disposal facilities at Bor; and containment and remediation measures to reduce wastewater discharge. Support to tailings ponds remediation works, Works on remediation were cancelled due the including: dam stability, water management, GOS request, November 2012. tailings pond closure, and post-construction monitoring. Special attention to focus on rehabilitation of Works on remediation were cancelled due the the Veliki Krivelj collector with severe GOS request, November 2012. structural problems and contributing to ongoing environmental risks. COMPONENT B – SOCIO-ECONOMIC REGENERATION B.1 Labor Redeployment and Employment Support Job search assistance programs, including The Project targeted 5400 redundant or vocational and social counseling; provision of former RTB employees to benefit from such labor market information; aptitude/interest programs, with 10% being placed into jobs. assessments; job club programs; conducting The results achieved from 2011-12 prior to 9 Source: World Bank Implementation Status & Results Reports 24 ACTIVITY OUTPUT vacancy and job fairs; and strengthening labor cancellation (03/25/2013) were 3467 exchange and placement services. beneficiaries (64% of the target) of the programs, with 36 participants having found jobs as tracked by the LIU. Off-the-job education and training services, The Project targeted 1000 participants in such including short-term vocational courses for training programs with 30% being placed into unskilled and semiskilled workers; short-term jobs linked to their courses. By the time this technical courses for more skilled workers in work was cancelled, 535 people (53.5% of the high-demanded fields of study (e.g., computer target) benefited from this activity, of which 8 training, language training, accounting, had found job placements. Approximately environmental monitoring and remediation); 60% of the budget allocated to this work was and short-term upgrading of current skills. utilized. On-the-job training services (employer The Project targeted 280 participants for on- incentive scheme), covering the costs of the-job training, of which 0 results were classroom training and/or apprenticeship in achieved as the activity was never order to provide financial incentives to implemented prior to management decision to employers in the region to expand their discontinue all activities under Component B, businesses through the retraining and the March 2013. hiring of unemployed workers. Temporary employment programs (public The Project targeted 2000 participants to works (PW)) to assist local communities with benefit from PW, the result was 842 people environmental cleanup, refurbishment of (42% of the target) gaining temporary public infrastructure, provision of assistance employment. and support to social agencies (e.g., schools, retirement homes, clinics). Strengthening the institutional capacity of the The 2012 Aide Memoire notes that local regional branches of the National branches of NES received needed technical Employment Service (NES) through provision support, including client relationship of training, equipment, and technical advice. management support. In the NES, 30 employment relations counselors were trained and, and 14 private sector beneficiaries were reported. B.2 Private Sector Development Provision of business development services The 2012 Aide Memoire notes that BDS work (BDS) – consulting and training - to did not progress due to low demand. individual entrepreneurs and new enterprises to facilitate successful business establishment and sustainable growth. Assistance to local communities with Bor: The existing BI in Bor was to be expanded establishing and operating business incubation as part of the Project, but this did not (BI) facilities (managed workspace centers) materialize as the Client and local authorities for small firms and individual entrepreneurs. did not identify a location. Apart from a single training offered to potential future users of business incubators in 2010, no other activities were implemented. 25 ACTIVITY OUTPUT Majdanpek: Civil works on the future location of the Business Incubator in Majdanpek were completed in July 2012. The ISR in March 2013 states tenants were in the process of being selected, but follow-up validation was not possible. Line(s) of credit to qualified microfinance OBS disbursed 20% of allocated funds (EUR institutions (MFIs) to improve the access to 500,000 out of available EUR 2.5 million) finance of firms and entrepreneurs operating with the number of loans at 2% (74) of the in the region. target level and repayment rate of 95% (close to target of 97%). COMPONENT C – PROJECT IMPLEMENTATION SUPPORT Finance the salaries and operational costs of a An inter-ministerial Project Steering qualified Project Management Unit (PMU) Committee (PSC) was established with key established at the Privatization Agency (PA). stakeholders (Ministry of Economy and Regional Development (MERD), Ministry of Environmental Protection (MEP), Ministry of Energy and Mining (MEM), Ministry of Finance (MOF), National Bank of Serbia (NBS), National Employment Service (NES), SME Development Agency, and the Privatization Agency (PA). A Local Steering Committee (LSC) was established with representatives of municipalities, regional offices of NES, NGOS, and business groups oversaw implementation on the ground. The PMU was based in the PA in Belgrade and responsible for organizing monitoring and reporting to the Bank, and supported by two Local Implementation Units (LIUs) for Components A (LIUA) and B (LIUB). Third-party assessments will be undertaken at Slow implementation progress that resulted in a mid-term and at the end of the Project, lack of significant achievements of the PDO focusing on the gross outcome of activities led to cancellation of the planned evaluation supported under the Socio-Economic work as part of Component B, March 2013. Regeneration component. (b) Restructured Project (03/25/2013) ACTIVITY OUTPUT PART 1 – REMEDIATION OF URGENT ENVIRONMENTAL HAZARDS Construction of a tunnel to replace the old No physical progress was reported on the collector in the Kriveljska River to by-pass construction of the collector. The contract was the mining tailings disposal facilities in its signed in January 2013, but the contractor did valley. not receive an official notice to mobilize. No progress was reported on selection of the works supervisor, due to the lack of final evaluation by 26 the implementing agency of received expressions of interest. Ultimately, the implementing agency concluded it could not proceed with commencement of civil works on the collector, and proceeded with cancellation of Project funds and closure. PART 2 – SOCIO-ECONOMIC REGENERATION As noted under the Original Project, this During the Level 1 Restructuring, all activities Component was designed to contribute to were discontinued due to issues with changed one of the project objectives of “fostering market conditions, lower than expected demand new sources of economic growth and job for certain activities, and limited local capacity creation in the region” through labor to implement. redeployment, employment support, and private sector development. PART 3 – PROJECT MANAGEMENT The Restructured Project reduced the scope In the December 2013 ISR, the Bank noted lack of work of the Original Project of implementation progress on lack of considerably, and a much simpler functional PIT, and lack of supervisor selected institutional arrangement was planned for for the civil works, among other issues not support accordingly. Implementation implemented by the Borrower. As a result of support was to be provided by a Project the elections of May 2014, the Project moved Implementation Team (PIT) under MEDEP, from the Ministry of Energy and Environmental which took over responsibilities of the Protection into the newly created Ministry of existing PMU under the PA and LIUA. A Agriculture and Environmental Protection. LIU was to be created with a team of Subsequently, by decision of GOS in September specialists to supervise implementation of 2014, the Project moved again to the Ministry project works. Further, an International of Mining and Energy. In the end, only a new Technical Advisor in the field of mining PSC was created and met in November 2014 to rehabilitation projects was to be hired discuss the Project status and timeline. A throughout the duration of the Project. closing date extension was requested to commence works on construction of the collector. The Bank responded it could not favorably consider any request for extension, given the lack of positive implementation progress. 27 Annex 3. Economic and Financial Analysis A formal economic and financial analysis was not carried out at appraisal due to the non- quantifiable nature of many factors. Due to the limited progress in implementation on- the-ground, no ex-post economic and financial analysis was carried out for the ICR. 28 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Csaba Feher Consultant ECSHD - HIS Michael Gascoyne Senior Resource Management Officer BPSGP Itzhak Goldberg Consultant GMFDR Nikola Ille Senior Environmental Specialist GENDR Arben Maho Procurement Specialist GGODR Alexander Pankov Lead Specialist GFMDR Gennady Pilch Lead Counsel LEGOP Branko Radulovic Consultant GFM03 Michael C. Stanley Lead Mining Specialist GEEDR Fatiha Amar Program Assistant GWADR Aleksandar Crnomarkovic Sr Financial Management Specialist GGODR Michael Gascoyne Senior Resource Management Officer BPSGP Arvo Kuddo Senior Labor Economist GSPDR Arben Maho Procurement Specialist GGODR Andrej Popovic Senior Financial Sector Spec. GFMDR Frank Van Woerden Lead Environmental Engineer GENDR Gentian Keri Procurement Specialist GGODR Helen Z. Shahriari Safeguards Specialist GSURR Josephine A. Kida Team Member ECSSD Jose M. Martinez Senior Procurement Specialist ECSO2 Jasna Vukoje Program Assistant ECCYU Wolfhart Pohl Senior Environmental Specialist (adviser) AFTSG Mohamed Ihsan Ajwad Senior Economist ECSH4 Plamen Stoyanov Kirov Senior Procurement Specialist GGODR Ignacio Jarguel Senior Counsel LEGLE (b) Staff Time and Cost Stage of Project Cycle Staff Time and Cost (Bank Budget Only) No. of staff weeks USD Thousands (including travel and consultant costs) Lending FY05 24.08 88.19 FY06 49.59 192.42 FY07 43.81 215.42 Total: 117.48 496.03 Supervision/ICR FY07 0.23 12.06 FY08 17.31 46.525 FY09 23.88 112.453 FY10 34.48 116.432 29 Stage of Project Cycle Staff Time and Cost (Bank Budget Only) No. of staff weeks USD Thousands (including travel and consultant costs) FY11 32.4 110.822 FY12 21.52 114.5 FY13 16.61 81.983 FY14 8.51 24.202 FY15 5.46 19.055 FY16 1.58 6.296 Total: 161.98 644.328 30 Annex 5. Beneficiary Survey Results A Bank management decision was taken to conduct a desk review for this ICR. A beneficiary survey was not possible at the time of writing. 31 Annex 6. Stakeholder Workshop Report and Results N/A 32 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR The borrower was informed of its legal obligation to prepare a completion report, however, no report was received by the time this ICR was submitted for approval. 33 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders 34 Annex 9. List of Supporting Documents “Environmental Performance Reviews: Yugoslavia,” United Nations Economic Commission for Europe. Committee on Environmental Policy, UN Publications, 2003. Loan Agreement (May 2007) and amendments Technical Paper, “RTB Bor Labor and Welfare Impact Study,” December 2005 Quality Assurance Group (QAG) Europe and Central Asia (ECA) Disbursements Learning Review (December 2009) World Bank Aides Memoires, Implementation Status & Results Reports for the Project, 2010-13 World Bank Human Development Sector Unit, “Serbia: Labor Market Assessment,” Sept 2006 World Bank Project Appraisal Document, BOR REGIONAL DEVELOPMENT PROJECT, May 2007 World Bank Restructuring Papers, IBRD and IDA, 2010-13 World Bank Group – Serbia and Montenegro Country Assistance Strategy (CAS) for FY05-07 World Bank Group – Serbia Partnership Program Snapshot, April 2015 35 MAP The Map’s unit policy is to provide no maps for Serbia as per agreed practice. 36