Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00004491 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-75490, IBRD-82740) ON A LOAN IN THE AMOUNT OF USD29.5 MILLION AND AN ADDITIONAL FINANCING LOAN IN THE AMOUNT OF USD47.1 MILLION TO THE REPUBLIC OF AZERBAIJAN FOR THE ARP II-INTEGRATED SOLID WASTE MANAGEMENT PROJECT FEBRUARY 28, 2019 Social, Urban, Rural And Resilience Global Practice Europe And Central Asia Region CURRENCY EQUIVALENTS (Exchange Rate Effective February 20, 2019) Currency Unit = New Azerbaijani Manat (AZN) AZN 1.0= US$ 0.59 US$ 1 = AZN 1.70 FISCAL YEAR July 1 - June 30 Regional Vice President: Cyril E. Muller Country Director: Mercy Miyang Tembon Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager: David N. Sislen Task Team Leader(s): Kremena M. Ionkova ICR Main Contributor: Silpa Kaza ABBREVIATIONS AND ACRONYMS AF Additional Financing ARP Absheron Rehabilitation Program CPF Country Partnership Framework CPS Country Partnership Strategy EBRD European Bank for Reconstruction and Development EIA Environmental Impact Assessment ESIA Environmental Social Impact Assessment ESP Environmental State Program FM Financial Management GHG Greenhouse Gas ha hectares IBRD International Bank for Reconstruction and Development IFRs Interim Financial Reports ISR Implementation Status Report ISWMP Integrated Solid Waste Management Project M&E Monitoring and Evaluation MED Ministry of Economic Development MoE Ministry of Economy NSWMP National Solid Waste Management Project O&M Operations and Maintenance PAD Project Appraisal Document PAP Project Affected Persons PDO Project Development Objective PMT Project Management Team SWM Solid Waste Management SWMC Solid Waste Management Company TA Technical Assistance TTL Task Team Leader USD United States Dollar VAT Value-added Tax TABLE OF CONTENTS DATA SHEET ......................................................................................................................... 1 I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 5 A. CONTEXT AT APPRAISAL .........................................................................................................5 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) .......................................9 II. OUTCOME .................................................................................................................... 12 A. RELEVANCE OF PDOs ............................................................................................................12 B. ACHIEVEMENT OF PDOs (EFFICACY) ......................................................................................13 C. EFFICIENCY ...........................................................................................................................17 D. JUSTIFICATION OF OVERALL OUTCOME RATING ....................................................................17 E. OTHER OUTCOMES AND IMPACTS (IF ANY)............................................................................18 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 20 A. KEY FACTORS DURING PREPARATION ...................................................................................20 B. KEY FACTORS DURING IMPLEMENTATION .............................................................................20 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 21 A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................21 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE .....................................................21 C. BANK PERFORMANCE ...........................................................................................................22 D. RISK TO DEVELOPMENT OUTCOME .......................................................................................23 V. LESSONS AND RECOMMENDATIONS ............................................................................. 23 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 25 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 39 ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 41 ANNEX 4. EFFICIENCY ANALYSIS ........................................................................................... 42 ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 48 ANNEX 6. CLIMATE CHANGE ANNEX .................................................................................... 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name P110679 ARP/II-Integrated Solid Waste Management Country Financing Instrument Azerbaijan Investment Project Financing Original EA Category Revised EA Category Partial Assessment (B) Partial Assessment (B) Related Projects Relationship Project Approval Product Line Additional Financing P144279-AZ Integrated 27-Jun-2013 IBRD/IDA Solid Waste Management Project (AF) Organizations Borrower Implementing Agency Government of Azerbaijan/Ministry of Finance Ministry of Economy and Industry Project Development Objective (PDO) Original PDO The overall project objective is to support the reform of the Greater Baku solid waste collection and disposal operations into an effective and sustainable system in the fields of (i) data collection and strategic planning, (ii) buildup of operational, management and communication capabilities of the responsible agency, (iii) the rollout of collection services, and (iv) the improvement of environmental conditions at the existing waste disposal sites. Page 1 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) PDO as stated in the legal agreement The objective of the project is to support the reform of the Greater Baku solid waste collection and disposal operations into an effective and sustainable system. FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 29,500,000 29,500,000 29,500,000 IBRD-75490 47,100,000 47,100,000 47,100,000 IBRD-82740 Total 76,600,000 76,600,000 76,600,000 Non-World Bank Financing 0 0 0 Borrower/Recipient 12,000,000 0 0 Total 12,000,000 0 0 Total Project Cost 88,600,000 76,600,000 76,600,000 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 17-Jun-2008 31-Jul-2009 29-Jun-2012 30-Sep-2013 31-Aug-2018 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 10-Jan-2014 23.89 Additional Financing Change in Project Development Objectives Change in Results Framework Change in Components and Cost Change in Loan Closing Date(s) Change in Implementation Schedule 06-Jun-2016 66.76 Change in Loan Closing Date(s) 14-Nov-2017 75.42 Change in Loan Closing Date(s) Page 2 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) KEY RATINGS Outcome Bank Performance M&E Quality Highly Satisfactory Satisfactory Substantial RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 11-Jun-2009 Satisfactory Moderately Unsatisfactory 0 02 21-Jan-2010 Satisfactory Moderately Satisfactory .50 03 29-Jun-2010 Satisfactory Moderately Satisfactory .92 04 26-Jan-2011 Satisfactory Satisfactory 3.15 05 11-Nov-2011 Satisfactory Satisfactory 5.17 06 13-Jun-2012 Satisfactory Moderately Satisfactory 6.98 07 26-Dec-2012 Moderately Satisfactory Moderately Satisfactory 15.91 08 22-Jul-2013 Moderately Satisfactory Moderately Satisfactory 21.05 09 23-Dec-2013 Moderately Satisfactory Moderately Satisfactory 23.89 10 28-May-2014 Satisfactory Satisfactory 26.98 11 23-Nov-2014 Satisfactory Satisfactory 29.93 12 29-May-2015 Satisfactory Satisfactory 41.26 13 12-Nov-2015 Satisfactory Satisfactory 57.28 14 17-May-2016 Satisfactory Satisfactory 66.55 15 02-Aug-2016 Satisfactory Satisfactory 67.78 16 22-Dec-2016 Satisfactory Satisfactory 72.44 17 01-Jun-2017 Satisfactory Satisfactory 74.84 18 17-Nov-2017 Satisfactory Satisfactory 75.42 19 29-Apr-2018 Satisfactory Satisfactory 76.41 20 20-Aug-2018 Satisfactory Satisfactory 76.41 Page 3 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) SECTORS AND THEMES Sectors Major Sector/Sector (%) Water, Sanitation and Waste Management 100 Waste Management 100 Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Urban and Rural Development 60 Urban Development 60 Urban Infrastructure and Service Delivery 60 Environment and Natural Resource Management 39 Environmental Health and Pollution Management 39 Air quality management 13 Water Pollution 13 Soil Pollution 13 ADM STAFF Role At Approval At ICR Regional Vice President: Shigeo Katsu Cyril E Muller Country Director: D-M Dowsett-Coirolo Mercy Miyang Tembon Senior Global Practice Director: Peter D. Thomson Ede Jorge Ijjasz-Vasquez Practice Manager: Wael Zakout David N. Sislen Task Team Leader(s): Aniruddha Dasgupta Kremena M. Ionkova ICR Contributing Author: Silpa Kaza Page 4 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL Context Country Context. In 2008, the Government of Azerbaijan requested the World Bank to help to implement the Environmental State Program (ESP), an ambitious response to the development challenges facing the Absheron Peninsula that surrounds the capital city of Baku—tackling critical environmental risks while liberating land needed for the rapid economic and demographic growth of this essential urban area. At the time, Azerbaijan had a strong economic resurgence from oil wealth, creating the foundation for improving living conditions. Simultaneously, the country faced rapid urban growth with a large migration to the Absheron Peninsula and its two main cities, Baku and Sumgayit. This drastic increase in population in search of opportunities combined with economic growth led to a strong demand for land. However, land had been managed ineffectively with little information on ownership and/or land use for the Absheron Peninsula, with much land in Baku contaminated or ringed for former oil fields. As a result, urban growth extended across the Absheron Peninsula, often lacking access to basic infrastructure, and informal settlements grew in heavily polluted areas. The land was heavily polluted from nearly 150 years of oil production which contaminated 30,000 hectares, with 15,000 hectares being a primary environmental concern. The ESP, instituted by the September 28, 2006 Presidential Decree (no. 1697), formed the basis of the proactive response by the Government to these challenges. It detailed 65 activities and 30 governmental or public stakeholders. The comprehensive plan involved clean-up/remediation, hazardous and non-hazardous waste management, and forward- looking environmental management through renovating facilities and improving laws and regulations. The Decree made the Cabinet of Ministers responsible for overall coordination and supervision, and demonstrated high-level commitment that motivated key ministries and agencies. The Government requested support from the World Bank for an Absheron Rehabilitation Program (ARP), a programmatic series of Specific Investment Loans covering multiple sectors, with solid waste management being one of the primary sectors. Sector Context. Poorly managed solid waste was a noticeable environmental issue, with the smoke from the Balakhani landfill, the main dumpsite for Greater Baku, being visible from far away. Outside the central city, informal dumpsites were numerous, especially in the new settlements where service coverage and quality were inadequate. Both Balakhani and the informal dumpsites posed health risks to residents and waste pickers. The rapid population growth across the Peninsula exacerbated the solid waste problems. The primary challenges for solid waste management (SWM), and collection in particular, were lack of coverage, lack of service quality and lack of safe disposal options. Strategic Context. The Government of Azerbaijan took significant steps to respond to the SWM challenges by clarifying institutional roles and responsibilities to consolidate and enhance quality of services under the Ministry of Economic Development (MED), initiated development of a comprehensive SWM Strategic Plan 1, investing significantly in the SWM sector mainly through collection trucks, and establishing a new joint stock Solid Waste Management Company 2 (SWMC) to own and manage all assets related to solid waste management in Greater Baku and implement the Strategic Plan. The ESP also launched an ambitious agenda to change the current practice of SWM throughout the country, with particular 1 The SWM Strategic Plan was the Greater Baku Solid Waste Management Strategy that was finished under the Project and incorporated into the National Solid Waste Management Strategy, also completed under the Project and approved by the President November 1, 2018. 2 The SWMC, Tamiz Shahar, was established during the project and began operations from March 2009. Page 5 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) initial emphasis on Greater Baku. It was envisioned that the project focus mainly on closure of the Balakhani site would be complemented by greenfield SWM disposal infrastructure investments by the Government which would be determined by the SWM Strategic Plan under development. The Government’s commitment and focused action provided a solid foundation for the subsequent World Bank loans. Rationale for Bank support. The environmental benefits, climate change benefits, health benefits, and improved living conditions anticipated from the ESP were aligned with the World Bank’s strategic development priorities. The World Bank’s global knowledge and experience in SWM across technical, institutional, financing, and operational aspects were paramount for the Project given that this would be Azerbaijan’s first experience in several of the proposed investments. The World Bank could engage in a long-term dialogue while addressing short-term needs through the project. Additionally, the convening power of the World Bank assisted the Government to adopt far reaching policy sector development goals. Alignment with the Country Partnership Strategy. The broader ARP with the World Bank and the Integrated Solid Waste Management Project (ISWMP) supported two pillars of the FY07-10 Country Partnership Strategy (CPS): (a) Improving Environmental Management and Furthering the Climate Change Agenda (Pillar IV) and (b) Supporting Sustainable Growth of the Non-oil Economy (Pillar II). Theory of Change (Results Chain) The higher-level outcomes for the Project were (i) improved environmental conditions at the existing waste disposal sites, (ii) improved health conditions, (iii) improved livelihood conditions, and (iv) improved environment for private sector participation. The Results Chain below depicts the links between the Project’s activities, outputs and outcomes: Page 6 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Page 7 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Project Development Objectives (PDOs) The objective of the Project was to support the reform of the Greater Baku solid waste collection and disposal operations into an effective and sustainable system. The PAD further clarifies this will be achieved through (i) data collection and strategic planning, (ii) buildup of operational, management and communication capabilities of the responsible agency, (iii) the rollout of collection services, and (iv) the improvement of environmental conditions at the existing waste disposal sites. Key Expected Outcomes and Outcome Indicators The key expected outcomes were improved collection and disposal operations to provide more access to services and higher quality services. The aim of the interventions was to improve environmental conditions of the existing waste disposal sites while also building capacity regarding operations, management, communication, and data collection and planning. The Outcome Indicators from the original Project to measure these anticipated outcomes were as follows:  Environmental control measures in place at operational disposal sites for water management; coverage of dump area surface to reduce fires; and limited access to sites.  Increased percentage of population served by the formal solid waste management system.  Increased number of households that pay for garbage collection.  Improved disposal management systems as evidenced by number of informal dumps closed.  Adequate collection of measured data for waste collection and disposal. Components The ARP II: Integrated Solid Waste Management Project included (i) a major component to support the institutional transition process, (ii) investments in waste collection equipment to improve urgently the level of collection services, and (iii) investments to rehabilitate the existing waste disposal sites to meet acceptable environmental and health standards. The underlying goal of the Project was to support the financial, operational and legal restructuring of the solid waste sector for Greater Baku. The Project investments focused mainly on urgent needs related to waste collection and disposal but also began addressing longer term needs such as capacity building and strategic planning. Component A: Institutional reform, capacity building and project management (Estimated Allocation 3: USD 7.66 million, Actual Allocation 4: USD 10.23 million). Component A supported (i) the completion of strategic planning for SWM in Greater Baku; (ii) the legal, financial and organizational corporatization and establishment; (iii) the operationalization of the Strategic Plan; and (iv) capacity building of the new joint stock SWMC, to be called Tamiz Shahar. The SWMC consolidated the current fragmented waste collection and disposal systems under the new entity. The MED began undertaking the first phase of the strategic planning exercise prior to the Project. A number of required activities for the reform process were planned as part of the Project and ran in parallel with the establishment of the SWMC under the following four sub-components: • Sub-component A1: Analytical Work and Action/Implementation Plan for Sector Restructuring and Establishment of the SWMC. • Sub-component A2: Capacity Building of the New SWMC. • Sub-component A3: Public Awareness and Outreach. • Sub-component A4: Project Management. Component B: Balakhani Landfill Rehabilitation and Management (Estimated Allocation: USD 12.64 million, Actual Allocation: USD 54.28 million). Component B aimed to upgrade operations at the current site and address the 3 The estimated allocation for all components is for the total project including both the IBRD loan and the Borrower co-financing 4 The actual allocation for all components includes the total project cost for the original loan and the additional financing Page 8 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) negative environmental impacts from site operations including the closure of inactive areas. This component financed equipment (weighbridges, bulldozers, etc.) and civil works (fencing, waste coverage, drainage control, internal roads, etc.) to control environmental impacts and improve site-use effectiveness while other solid waste management options were developed. The investments included measures to prepare the site for continuation of disposal activities in an operationally and environmentally sound manner for at least another five years. Works and purchase of equipment occurred in parallel with arrangements for staffing and funding of site management, as laid out in the Strategic Plan prepared under Component A. Component C: Closure and Management of Other Dumps (Estimated Allocation: USD 7.55 million, Actual Allocation: USD 14.96million). Component C financed closure and cleanup of the informal dumps and improved management (or closure of) formal sites identified in the Strategic Plan. These activities aimed to minimize the negative environmental effects associated with the informal dumping. It was envisaged that all wild dumps would be removed, and the extracted waste transported to the Balakhani site or other formal waste dumps. It had not been determined whether the formal dump sites in Garadagh and Azizbeyov would be closed under the Project or would undergo rehabilitation investments for continuation of operations or be converted to transfer stations. Component D: Urgent Collection Equipment for Under-served Baku Districts (Estimated Allocation: USD 5.90 million, Actual Allocation: USD 6.40 million). Component D focused on increasing service quality and availability throughout the region, including areas that lacked effective collection, by financing urgently needed trucks, containers and bins to improve solid waste collection coverage and service efficiency in the most acutely underserved areas of Greater Baku. The equipment procurement was complemented by a focus on (i) improving fee collection; (ii) assuring the operational structure was in place to manage and maintain the equipment; and (iii) assuring sustainable mechanisms were in place to fund the operation and servicing of the equipment. The equipment rollout plan was an important component of the Strategic Plan prepared under Component A. Component E: Technical Preparation of Post-Project Investments (Estimated Allocation: USD 2.24 million, Actual Allocation: USD 7.56 million). Component E financed feasibility studies and environmental impact assessments needed to develop landfill capacity and introduce transfer stations to maintain an effective enhanced collection system. The contingencies for the Original Loan had an estimated allocation of USD 5.63 million and the actual allocation was USD 3.67 million. B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) Revised PDOs and Outcome Targets The PDO with the Additional Financing (AF) loan approved on June 27, 2013 was revised to improve the PDO clarity. These changes were non-material and, in substance the PDO remains relevant and the revisions did not affect the original results chain. The revised PDO is to support (i) improving solid waste disposal management; (ii) increasing waste collection coverage; and (iii) enhancing waste data information and financial management capacity in the Greater Baku area. Revised PDO Indicators The revised PDO Indicators (i) reflected additional activities; (ii) clarified and reduced the broad number of intermediate outcome indicators; and (iii) included the Bank’s core sector indicators that were introduced after approval of the original loan. The revised Results Framework also clarified baseline and target values based on the updated information that has become available as a result of analytical activities implement under the original project. In addition, few indicators in the original Results Framework were simplified based on the experience with monitoring and evaluation under ISWMP to date. Page 9 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Table 1: Revised PDO Indicators PDO Indicator Original Changes with AF Revised target target Environmental control measures in place at control Dropped; this indicator is identical to the -- operational disposal sites for water management; measures in intermediate outcome indicator and was coverage of dump area surface to reduce fires; place replaced with a new core indicator (see limited access to sites. below) Increased % of population served by the formal 60 percent Revised (core indicator): Number of 2,700,000 solid waste management system. reduction of people in urban areas provided with un-served access to regular solid waste collection households under the project Increased number of households that pay for 80 percent Revised for clarity: Increased number of 1,800,000 garbage collection. reduction in waste generators that pay for waste households not collection billed Improved disposal management systems as 60 percent Revised (core indicator): Contaminated 154.18 ha evidenced by: Number of informal dumps closed reduction of land managed or dump sites closed under or 50 sites informal the project (ha)* dumps Adequate collection of measured data for waste Monthly data Revised for clarity: Number of waste 6 collection and disposal reports facilities providing regular information to the waste data information system -- -- New (core indicator): Industrial and 9,700,000 municipal waste disposal capacity created under the project (tons) *The AF stated the indicator in terms of hectares for a target corresponding to 50 dump sites. In the Project Implementation Status Reports (ISRs) from December 2012 onwards, the result reported for the indicator was the hectares of contaminated land managed or dump sites closed under the Project. In the comments section of ISRs, both the number of sites closed and the hectares managed was included. Revised Components No additional components were introduced, and composition of the components remains the same as at the Project’s appraisal. The AF loan financed additional activities under Component B “Balakhani Landfill Rehabilitation and Management”, Component E “Technical Preparation of Post-Project Investments”, and Component A “Institutional Reform, Capacity Building and Project Management”, as follows: Component B was allocated most of the AF funds for (i) the full remediation and closure of the old waste disposal parts of the site; (ii) installation of water and leachate controls; (iii) opening of new waste cells at the existing site; and (iv) introduction of a methane gas capture system. Component E was revised to explicitly include financing of (i) feasibility studies for regional waste management systems and regional landfills outside the Greater Baku area; (ii) preparation of a National Solid Waste Management Strategy and Implementation Roll-out Plan; and (iii) preparation of a national legal framework to support improving SWM sector performance. Component A was allocated funds to cover additional expenses for project management required by the Project Management Team (PMT). Page 10 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Table 2: Revised cost estimates and funds allocation by component (USD million) from AF Original Loan Allocation at Additional Financing Total time of AF Estimated Component Total estimate IBRD loan Total estimate IBRD loan Allocation (incl. VAT) (incl. VAT) (incl. VAT) A: Institutional reform, capacity 8.11 6.87 2.12 1.80 10.23 building and project management B: Balakhani Landfill upgrading and 6.14 5.20 48.14 40.80 54.28 management C: Closure and management of other 14.96 12.68 0.00 0.00 14.96 dumps D: Urgent collection equipment for 5 6.40 0.00 0.00 0.00 6.40 outer Baku districts E: Technical preparation of post- 2.25 1.91 5.31 4.50 7.56 project investments Total baseline costs 37.86 26.66 55.57 47.10 93.43 Contingencies 3.64 2.84 0.03 0.00 3.67 TOTAL 41.50 29.50 55.60 47.10 97.10 Other Changes Original Project. The Project closing date was extended by three years from September 30, 2013 to September 30, 2016 in order to match the closing date of the AF loan, approved June 27, 2013. This extension allowed sufficient implementation time for completion of the tendering process and seeking approvals from the relevant Government authorities, including the Ministry of Emergency, and the completion of the associated works for rehabilitation of the Balakhani site. Additional Financing Loan. As mentioned above, the AF loan of USD 47.1 million was approved by the Bank on June 27, 2013 as part of the restructuring of the Original Project, to revise the PDO, scale up the Project activities, and revise key performance indicators. The Original Project envisaged closing the Balakhani dump fully due to the significant negative environmental impacts; however, the sound environmental management and impressive works under the Original Project were so successful that the Government decided to rehabilitate it for sanitary disposal for another 20 years and requested AF. The AF was mainly for full rehabilitation of the Balakhani landfill for long-term waste disposal rather than closure as originally anticipated. The AF also expanded beyond Greater Baku for broader national SWM support. The Project name was changed from “Absheron Rehabilitation Program II: Integrated Solid Waste Management Project” to “Integrated Solid Waste Management Project”. The key performance indicators were reviewed and the Results Framework was adjusted to 1) reflect additional activities, 2) clarify and reduce the broad number of intermediate outcome indicators, and 3) include the Bank’s core sector indicators at the time of the AF. Consistency of the AF with the Country Partnership Strategy. The AF to the ISWMP was laid out in the Azerbaijan CPS Progress Report FY11-14 (Report Number: 776829-AZ) 5 and was fully consistent with the CPS Strategic Objectives to (i) build a competitive non-oil economy; and (ii) improve municipal and rural services (CPS FY11-14; Report Number: 56246- AZ). The Project contributed directly to Outcome 2 “Improved reliability of solid waste management services” under the CPS Results Area 4 “Strengthening Municipal and Rural Services”. 5 Discussed at the Board on May 28, 2013 Page 11 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Additional Financing Time Extensions. There were also two Project restructurings on June 6, 2016 and November 14, 2017 to extend the AF loan closing date from September 30, 2016 to March 30, 2018 and then again to August 30, 2018. The first extension of the AF closing date allowed for completion of works and operationalizing of facilities that were slowed down due to unfavorable weather conditions and permitting delays. More time was also required for finalization of the preparation of the National Solid Waste Management Strategy and finalization of the review of both the Strategy preparation and the legal framework by the Government. The second extension of the AF closing date was necessary to enable completion of the second phase of rehabilitation of the Balakhani landfill, the review of the legal framework governing the SWM sector, and the development of a national solid waste strategy and national investment plan including preparatory studies, some of which may be included in future Bank investments. Rationale for Changes and Their Implication on the Original Theory of Change The above described changes did not affect the Theory of Change and the originally expected Project outcomes. The additional activities allowed for greater systemic achievements. II. OUTCOME A. RELEVANCE OF PDOs The PDO formulation was modified with the AF and restructuring of the ISWMP in order to provide greater clarity and did not change the specific objective of the Project. The AF allowed for scaling up the Project activities within the existing components. As such, the revised PDO introduced at the time of AF processing will be evaluated for the entire Project activities without a split rating 6. Assessment of Relevance of PDOs and Rating Relevance Rating: High The Project directly helped to address the challenge identified by the Systematic Country Diagnostic published June 3, 2015 of inadequate access to basic infrastructure and services which is impeding inclusive growth and asset accumulation. The Project is included in the Country Partnership Framework (CPF) for FY16-20 and contributes to objectives (i) strengthening governance through better management of public resources, delivery of services, and institutions, including a more transparent and rules-based relationship between the public and the private sectors, and (iii) contributing to improved human development outcomes and increased prosperity through better access to water and sanitation, improved quality of the environment, and other health infrastructure and services, that have proven impact on health and social welfare outcomes. Outcome 2 of the CPF is the “improved reliability of solid waste management services” and two primary indicators are focused on solid waste management outcomes from the ISWMP project. Strategic Context. At the time of AF, the Government based its decision on the impressive achievements in improving management of the Balakhani site since 2009 which took away the need to merely close the site and the Greater Baku SWM Strategy. The Government decided to construct a sanitary landfill at Balakhani given the success in management to optimize the system, minimize costs, generate economies of scale, and minimize negative environmental impact. The Government made their own investments in related infrastructure, especially for construction and operation of a materials recovery facility and waste-to-energy incineration plant in addition to closing of dumpsites, to enhance the project’s impact. They 6 ICR Guidance states “if the project became overall more ambitious, generally a split rating should not be applied regardless of whether project funding increased (say through Additional Financing), decreased (say through cancellation), or remained the same— unless good reasons can be presented as to why a split rating makes sense in a specific case. Generally, when they became ambitious, the operation can be assessed based on revised outcomes and outcome targets.” Page 12 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) provided further leadership and commitment in terms of policy. There are relevant State Programs and a National Solid Waste Management Strategy to address solid waste management. The original project was designed to assist the Government to implement strategic priorities within its ESP instituted in 2006. The Government is currently implementing the third State Program of Social and Economic Development of Regions for 2014-2018, which aims to reduce regional inequalities and provide households in all rayon centers with reliable basic services, including solid waste collection. Finally, the National Solid Waste Management Strategy, developed through the Project, was endorsed by the President and Cabinet on November 1, 2018. A Presidential Decree was approved to implement the first phase of the Strategy to implement regional solid waste management across the country and legal reform addressing financial sustainability among other aspects. The proposed follow on Project, the National Solid Waste Management Project (NSWMP) will provide technical assistance towards implementation of the national strategy. B. ACHIEVEMENT OF PDOs (EFFICACY) Overall Achievement of the PDO. The Efficacy Rating is Substantial. The modified PDO can be unpacked to three specific outcomes: (i) improving solid waste disposal management (ii) increasing waste collection coverage, and (iii) enhancing waste data information and financial management capacity in the Greater Baku area. These outcomes are linked with the following PDO indicators as of the AF: Outcome PDO Indicator Achievement Improving solid waste Contaminated land managed or dump sites 132 dumpsites closed covering 199 ha, far disposal management closed under the project exceeding the target of 50 sites covering 154.18 ha Industrial and municipal waste disposal 9.7M tonnes capacity created as targeted capacity created under the project Increasing waste Number of people in urban areas provided 2,774,416 people reached, exceeding the collection with access to regular solid waste target of 2.7M people collection under the project Number of female beneficiaries in urban 1,414,952 females reached, exceeding the areas provided with access to regular solid target of 1.35M people waste collection under the project Enhancing waste data Number of waste facilities providing 6 facilities regularly provide information information and regular information to the waste data on waste flows and financial information financial management information system about payments to the waste data capacity in the Greater information system, as targeted Baku area Increased number of waste generators that 2,500,486 estimated to pay, exceeding the pay for waste collection target of 1.8M people Page 13 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Assessment of Achievement of Each Objective/Outcome Objective 1: Improving solid waste disposal management Objective 1 measures the improvement in solid waste disposal management by considering both the capacity for improved management and also the prevention of poor management causing environmental damage. The Project measures this with two PDO indicators: PDO Indicator 6: Industrial and municipal waste disposal capacity created under the Project (tonnes) Baseline Target Achievement 0 9.7M tonnes capacity 9.7M tonnes capacity created as targeted, fulfilling the target by 100% PDO Indicator 6 measures the landfill capacity developed during the project. The rehabilitation of Balakhani Landfill was completed, and the landfill was built for a 20-year lifespan. This was due to the AF and additional Bank support requested by the Government after successful results in the Original Project. During the Project, an additional 56,000 tonnes were deposited in three new cells. PDO Indicator 3: Contaminated land managed or dump sites closed under the Project (number) Baseline Target Achievement 66 dump sites 50 dump sites or 132 dumpsites or 199 ha closed, exceeding the target by 164% 154.18 ha Because of the risk of continued use and further contamination from existing dump sites, the Project included activities to simultaneously close sites once the Balakhani Landfill was operational. While the Project targeted closure of 50 dump sites covering 154.18 ha, there were 132 dump sites closed, corresponding to 199 ha. Objective 2: Increasing waste collection coverage Objective 2 measures the increase in waste collection coverage and quality by estimating the number of people in urban areas that received solid waste collection services regularly as well as female beneficiaries specifically in urban areas. This provides information on the quantity of waste leaving the communities and expected to be disposed of in a safe, environmentally-sound manner. PDO Indicator 3: Number of people in urban areas provided with access to regular solid waste collection under the Project Baseline Target Achievement 1,973,000 2,700,000 people 2,774,416 people, exceeding the target by 2.8% PDO Indicator 5: Number of female beneficiaries in urban areas provided with access to regular solid waste collection under the Project Baseline Target Achievement 986,500 1,350,000 females 1,414,952 females, exceeding the target by 4.8% Page 14 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Due to the expansion of coverage area and supporting infrastructure, the two PDO indicators found that waste collection services cover 79% of the current population in urban areas under the Project, up from 60% of the total population in 2008. In addition to expansion of the waste collection services, they are now being provided service regularly which helps enforce the social contract between citizens and the Government. 6,345 new bins were deployed throughout Baku's outer regions and 1973 new collection points were created to provide supporting infrastructure for coverage expansion. Objective 3: Enhancing waste data information and financial management capacity in the Greater Baku area Objective 3 intended to create data and financial systems to have measured data on the management of waste and its financing. Understanding this data allows for improved waste management by learning how the overall waste management system could be adapted to be more sustainable. This could include knowing the best facility to send the waste to or seeing the flow of payments. PDO Indicator 1: Number of waste facilities providing regular information to the waste data information system Baseline Target Achievement 0 6 6 facilities are providing regular information, target achieved For waste data information, the Project installed and operationalized four weighbridges at the Balakhani Landfill, the Materials Recovery Facility, the Waste-to-Energy facility, and the Industrial EcoPark 7. The weighbridges calculate the weight of the truck and waste entering and exiting each facility to estimate the flow of waste which is clearly documented in addition to the truck’s information and the fees collected for dumping. The Project also installed a waste information system in Tamiz Shahar to consolidate and analyze data and in the Baku Executive Power for information about waste generators and the service area. The Project resulted in these 6 facilities providing regular waste management data and allowed for Tamiz Shahar to optimize operations and streamline which trucks went to which facility. It also helped them understand the quantity of waste making it to the treatment and disposal facilities versus the estimated amount being lost either before or after collection. This data was used for preparation of the proposed Azerbaijan NSWMP and for supporting the future design of the Baku waste management system. PDO Indicator 2: Increased number of waste generators that pay for waste collection Baseline Target Achievement 1,315,000 1,800,000 2,500,486 estimated to pay, exceeding target by 39 percent The increase in collection coverage from 1.97 million people to the target of 2.7 million people, as reported under PDO indicator Number of people in urban areas provided with access to regular solid waste collection under the Project, discussed above, was supposed to bring in new customers, hence increasing the number of people paying into the service. While 730,000 more people were covered by waste collection, the number of additional people paying exceeded that by another 384,070. The Project did numerous studies to understand how much money was collected, how, and by whom. Based on these, the Bank team now believes the baseline of those not paying was not correct and it is likely more people were paying than was reported for the baseline. However, it does not impact the achieved results, with the number of people currently paying for waste collection far exceeding the target value. Page 15 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) The studies on waste generators and payments for waste collection conducted during the Project were utilized to analyze the overall fiscal impact of various tariff scenarios. The analytic work was coupled with many years of strong policy dialogue with the Government regarding financial sustainability. The financial analysis was incorporated through the Project into the Strategic Plan for Greater Baku and eventually the National Solid Waste Management Strategy, ultimately resulting in inclusion of an increase of tariff and joint billing with electricity services in the approved Presidential Decree. This is expected to increase the payment collection and implement higher tariffs simultaneously to allow for the financial sustainability of the waste management sector. It is expected to be implemented in 2019 and supported under the proposed second project. Justification of Overall Efficacy Rating The efficacy rating for this Project is Substantial. The PDO achievements have met or exceeded the targets and the PDO has been delivered. However, illegal dumping of a portion of the waste still occurs and full financial sustainability remains to be met. The Project was requested to address an urgent environmental crisis but Project activities and the PDO under both the Original Project and AF investments led to the transformation of the solid waste management sector in Azerbaijan. While the original intention was to close the Balakhani Landfill site due to the significant environmental liabilities, the work ultimately led to its rehabilitation and new construction to serve the Baku area for an additional 20 years. The physical infrastructure is now in place to collect, treat and dispose of municipal solid waste through a combination of project and Government investments. The Project built the capacity of the PMT at the Ministry of Economic Development, the waste pickers living and/or working at the Balakhani site, and Tamiz Shahar, leading to sustainable operational capacity and strong Government knowledge of and advocacy for the sector. The early capacity building of both the PMT and Tamiz Shahar led to effective project implementation and the request from the Government for AF. The PMT did not have previous experience with Bank-financed projects and the Project invested in developing capacity for relevant functions. Tamiz Shahar’s capacity grew such that the Government requested they also operate the materials recovery facility and waste- to-energy facility. The waste pickers received trainings and compensation, including housing if appropriate, and were offered employment with Tamiz Shahar at the materials recovery facility. Some accepted employment with benefits and some preferred to continue working at the landfill but under environmentally-sound, safe and secure conditions. The Project developed the National Solid Waste Management Strategy which was endorsed and approved by the President. The first phase of implementation covering 2018-2022 was approved through a Presidential Decree, leading to legal reform for sustainable operational and financial growth in the sector nationally. A significant aspect of the Presidential Decree is a household tariff that will be jointly billed with electricity services to improve payment recovery. This is foundational for the financial sustainability of the waste management sector and a critical achievement to be implemented in 2019. It is expected to be supported under the proposed NSWMP. 7The Industrial EcoPark consists of companies using recyclables from the materials recovery facility based on provided tax privileges from the Government. Page 16 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) C. EFFICIENCY Assessment of Efficiency and Rating The Efficiency rating is High. The amount of the AF exceeded the original loan amount and no cost overruns were experienced excluding one case due to devaluation of the currency 8. There was a time extension for the original Project to close with the AF to provide sufficient time for Government processes and completion of works. Subsequently, there were two extensions for the AF in order to allow sufficient time for comments on strategic documents including the legal framework and strategy by government agencies. The project has an Economic Net Present Value (ENPV) of $85 million and an Economic Internal Rate of Return (EIRR) of 20%, which represent a significant economic efficiency. An economic analysis was undertaken for the Project based on the available data. At the PAD and AF stages, no IRR was calculated for economic or financial returns. The positive economic returns are driven by the benefits of improved land value of surrounding areas, avoided GHG emissions and avoided leachate pollution. The sensitivity analysis suggests that even with very conservative shadow price values for leachate and CO2 pollutants, and without attributing land price improvements of the surrounding areas, the project remains economically viable. The operation is likely to have higher economic returns because of benefits that cannot be numerically approximated such as improved health outcomes due to reduced fires at the landfill, improved health outcomes for scavengers, and improved welfare of households who started to receive waste collection services. In terms of the financial analysis, Tamiz Shahar is subsidized for the waste management services they provide. However, there is an agreed roadmap to improve the financial sustainability of the sector by improving the tariff revenue collected. This approach included in the National Solid Waste Management Strategy was approved by the President on November 1, 2018 and the implementation will be supported under the second SWM project by the Bank. D. JUSTIFICATION OF OVERALL OUTCOME RATING The Overall Outcome Rating is Satisfactory. The Project exceeded its overall objective in an economically efficient manner; however, the system still strives to address sustainability in terms of use and financing. A split rating is not warranted, since the PDO and the Project outcome indicators were not changed in substance with AF loan and corresponding restructuring of the original project, while they were just better clarified and streamlined, only expanding within the original scope and overall Project structure. The Project invested US$76.6 million total for the rehabilitation and upgrading of the Balakhani Landfill from an unprotected dump site to a sanitary landfill designed for 20 years with 9.7 million cubic meters of additional capacity. Additionally, 199 ha of wild dumps were closed and rehabilitated, and secondary collection equipment was supplied primarily to five outer districts of Baku increasing collection coverage of the population. Technical assistance was provided to improve the solid waste management system in Baku, build capacity for Tamiz Shahar, support the preparation of the National Solid Waste Management Strategy and the review of the legal framework governing the sector, and prepare feasibility studies and environmental impact assessments for future national investments. The Greater Baku Solid Waste Management Strategy supported through the original Project was incorporated into the Greater Baku Regional Development Plan which the World Bank’s National Water Supply and Sanitation Project, implemented 2007-2016, financed the preparation of. The approval of the Greater Baku Solid Waste Management Strategy was postponed with the 8The major civil works contract for the rehabilitation and extension of Balakhani landfill was in the local currency with much of the equipment imported from abroad. The client and team agreed to amend the contract based on the price adjustment clause to prevent any damages to contractor’s ability to deliver the contractual scope resulting from sharp devaluation of local currency. Page 17 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) AF and aspects were incorporated into the National Solid Waste Management Strategy. The most important achievement of the Project was that it provided a platform for policy dialogue and a comprehensive overarching sector reform program that has been embraced by the Government. While the Project began as a series of investments and built the foundation for an integrated SWM system, the Project truly evolved into a program that led to unanticipated sector reform with strong Government support. The Government’s commitment to the Project remained strong throughout preparation and continued with high-level support throughout implementation. Not only did the Government comply with Bank safeguards and fiduciary requirements, but the Government was forward-thinking and developed a vision for the sector through the Project and broader engagement. Regardless of the macroeconomic situation, the Government prioritized SWM through the Ministry of Economy implementing the work to address an institutional gap, by engaging in high-level policy dialogue, working closely with the Bank strategically, and eventually having the President approve the National Solid Waste Management Strategy on November 1, 2018. E. OTHER OUTCOMES AND IMPACTS (IF ANY) Gender According to the World Bank’s World Development Indicators, 50.2% of the population in Azerbaijan was female in 2017 and according to the baseline data, 50.5% of the population receiving regular waste collection services under the project in 2008 was female. At the closing of the Project, 51% of the population receiving regular waste collection services under the Project was female. 428,452 females were positively impacted by the project through regular waste collection services. Institutional Strengthening The Project benefited tremendously from institutional strengthening and capacity building of the various stakeholders involved, through the activities supported by the Project. Because of the early emphasis on capacity building, the Project was able to progress effectively, attracted the AF to scale up the original operation as well as, ultimately, the approval of the National Solid Waste Management Strategy and the Presidential Decree for the Ministry of Economy (formerly Ministry of Economic Development at Appraisal and Ministry of Economy and Industry at AF) to implement the first phase of the Strategy for 2018-2022. The Project was instrumental to the establishment and capacity building of Tamiz Shahar. The Project financed numerous technical study tours, knowledge exchange with regional utilities, and studies on improved technical and financial performance of the sector. Because of the capacity built under the Project, Tamiz Shahar expanded their operations beyond the Project to a materials recovery facility and a waste-to-energy incineration plant. They are committed to building and operating two transfer stations in the Greater Baku Area. The PMT received capacity building early in the Project and went from being a substantially risky implementation unit without prior experience with a Bank-financed project at the time of the Project appraisal to a well-performing implementation unit in all functions. The capacity built under the Project also led to broader professional impact with the PMT staff securing well-regarded, high-level positions in the Government and private sector after the Project closure. The Government received support for their legal framework for the solid waste sector and the National Solid Waste Management Strategy. This led to approval of the strategy and a Presidential Decree mandating implementation of the strategy. Page 18 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Mobilizing Private Sector Financing The Project led to significant progress in additional financing and private sector engagement. First, the Project supported creation of a new joint SWMC, Tamiz Shahar, which received significant capacity building through the Project. This led to strong operation of the rehabilitated landfill as well as further investments in a sorting facility and waste-to- energy incineration plant, both operated by Tamiz Shahar. After the Project closing, the Government committed to invest in two transfer stations for Tamiz Shahar to operate for further development of Baku regional waste management. The separation of recyclables from the sorting facility led to creation of a recycling market and the Industrial EcoPark for the private sector. 14 companies are now situated in the Industrial EcoPark near Balakhani Landfill buying the recyclables to manufacture products. The resulting private sector development is due to the cascading effect of the Project investments. Poverty Reduction and Shared Prosperity No specific poverty reduction and shared prosperity outcomes were detailed in the PAD or the AF Project Paper; however, these outcomes were observed: • Increased waste collection coverage for urban areas under the Project. • Closure of 132 dumpsites improved land value of surrounding areas and improved conditions for associated health risks from poorly managed waste. • Rehabilitation and upgrading of Balakhani Landfill improved land value of surrounding areas and improved conditions for health and environmental risks, including pollution of the air, water, and soil. • Impoverished waste pickers previously scavenging recyclables at the Balakhani site were offered employment by the Government and many accepted. Those who declined and selected to continue working on the landfill site directly were provided with trainings, safety gear, and safe environmental working conditions. Those previously living at the site were offered housing in Baku. Other Unintended Outcomes and Impacts Provision of the AF was not initially envisioned but the original Project, and the AF allowed for scaling up the results of the original Project and had unintended positive outcomes for the solid waste management sector development in Azerbaijan. The Greater Baku Solid Waste Management Strategy developed under the original Project led to some of the additional investments under AF. The AF provided Technical Assistance (TA) support for the National Solid Waste Management Strategy and legal framework, and because of strong Government leadership and commitment, this led to an approved Presidential Decree to further transform the sector across the country. The Project investments had an indirect effect of further investments in the sector. Because of the construction of Balakhani Landfill, the Government invested in a materials recovery facility, waste-to-energy incineration plant, and finally created the Industrial EcoPark for companies manufacturing products out of recyclables. The TA for capacity building also led to substantial professional growth of the PMT staff, allowing them to lead strong implementation of the project and find impactful employment after project closing. The trainings Tamiz Shahar received also allowed them to move towards providing full treatment and disposal services for Greater Baku. Finally, donor complimentary activities were facilitated by the Project and the outputs of studies from the Asian Development Bank and KfW were utilized for analytical sector work and incorporated into the National Solid Waste Management Strategy. Page 19 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING PREPARATION During preparation, the driving force behind the Project was the urgency to close the Balakhani dumpsite and collect waste from outer districts of Baku to address the short term needs and prevent further environmental damage. In addition to the environmental situation, the key factors driving the Project were political will and commitment to the Environmental State Program. The Ministry of Economy – an implementing agency for the Project at the client’s side - was committed to mitigate the environmental degradation due to poor solid waste management while also considering the sector longer term. This included advocating across the Government, creating a joint solid waste management company, procuring collection trucks, and investing in building capacity of the PMT and the company, Tamiz Shahar, to ensure readiness for implementation. The strong Government leadership and commitment was complemented by an experienced Bank-team ready to provide technical and policy support, building on the years of support to the Government. The project allowed for short-term needs to be addressed while also planning longer term. The project completed the Greater Baku SWM Strategy started by the Government to create a long-term plan. There was also coordination with other donors to leverage the total financing effectively. EBRD carried out a pre-feasibility study of the sector prior to Appraisal which the Project design benefited from. B. KEY FACTORS DURING IMPLEMENTATION Key factors that affected implementation are 1) a PMT with built capacity, 2) continued policy dialogue, 3) Government request for more funds and support, and 4) strong donor coordination. Factors subject to government control. While the PMT was initially a substantial risk at Appraisal due to lack of previous experience with Bank-financed projects, there was a strong emphasis on building the capacity of the PMT and this investment resulted in effective implementation of the project technically and in terms of processes. While the Balakhani landfill site was being rehabilitated and prepared for closure, the Government and Bank-team continued broader policy dialogue for the sector. The dialogue focused on both short and long-term needs and opened the door to sector reform beyond the rehabilitation and closure of the Balakhani landfill site. Due to technical recommendations from the Greater Baku SWM Strategy completed under the project, land constraints, and successful results with the Balakhani site environmentally and socially, the Government requested the World Bank to provide the AF loan for upgrading of the Balakhani site to a sanitary landfill and for further sector development support. Initially the Government had envisioned that the Balakhani site closure would be complemented by greenfield infrastructure investments but due to the Greater Baku SWM Strategy findings, it was decided that the sanitary landfill would be built at Balakhani. This request led to a time extension of the original project and restructuring through AF. Factors subject to World Bank control. One of the results of the strong policy dialogue, in addition to the AF and approval of the National Solid Waste Management Strategy, was that the Government financed data collection and analysis and the Bank secured grant funding from the Public Private Infrastructure Advisory Facility to support analysis and policy recommendations for improving solid waste management infrastructure, service levels, and financial sustainability through options of increased private sector participation. The strong donor coordination also allowed for complementary activities. Parallel studies by the Asian Development Bank and KfW were utilized for the sector analytical work preceding the development of the National Solid Waste Management Strategy which was later incorporated into the strategy. Page 20 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION (M&E) Rating: Substantial M&E Design The original M&E Design and Results Framework were adjusted during the AF for clarification purposes, additional activities and alignment with the World Bank’s core sector indicators at the time of AF. The modified design more clearly captured the results of the project. The PDO and intermediate indicators were clearly aligned with the Project’s objectives. The only shortcoming is a potentially miscalculated baseline at Appraisal for the number of users invoiced for waste management services (which the Bank team believes was higher than indicated). The original M&E Results Framework was designed with the information available at Appraisal which was heavily qualitative. During the project, with the development of the Greater Baku SWM Strategy, the indicators could be clarified and assigned quantitative, measurable baseline and target values for the AF. The M&E design for data collection and accuracy of data was successful and maintained for AF. M&E Implementation M&E was implemented well with regular data collection throughout the Project life. The PMT collected high quality data and tracked progress effectively. The Bank supervision activities supported verification of the data as appropriate and the waste information systems installed under the Project provided further support for some indicators. The metric assessing number of user invoiced for waste management services was studied further to accurately track the number and establish processes for sustained tracking. M&E Utilization The M&E was utilized to assess progress of the Project and also partially as inputs for designing the National Solid Waste Management Strategy. Because of the modifications at the time of the AF processing, the M&E framework was enabled to better track results. The waste information systems were critical for management purposes and the daily operations of the entire system today, not only for the Balakhani Landfill, but also the materials recovery facility and waste-to-energy facility. Justification of Overall Rating of Quality of M&E The quality of M&E is Substantial. The minor shortcomings which did not affect Project results or progress are mentioned above. Overall, the M&E arrangements was completed effectively in a timely fashion. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE Environmental safeguards. The project triggered OP 4.01 (Environmental Assessment) since the Project financed rehabilitation of the Balakhani Landfill and was compliant with OP 4.01 throughout its life. The project was classified as Category ‘B’ and complied with the Environmental Management Plan for rehabilitation of landfills, protecting worker health and safety, reducing fire and smoke generation, and reducing potential groundwater and surface water Page 21 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) contamination. The Environmental Safeguards rating was Satisfactory and had a low risk rating for the duration of the project. Procurement. The Procurement Risk Rating at the time of Appraisal was Substantial due to lack of experience in the PMT, but at AF, no major risks were identified. However, nearly all ISRs had a Procurement Rating of Satisfactory and the procurement capacity of the PMT grew significantly with project support. The most challenging situation was the depreciation of the currency which affected contracts, including the largest one for the Balakhani Landfill. However, the risk was mitigated with a price adjustment clause included in the landfill contract. Some contracts had to be reissued but ultimately the intended scope was delivered, and contracts were managed effectively. Social safeguards. The project triggered OP 4.12 (Involuntary Resettlement) which was addressed effectively during the project life with full compliance with OP 4.12 and the Resettlement Action Plan. The Social Safeguards rating was Satisfactory and had a low risk rating for the duration of the project. There were 144 PAPs according to a survey in 2011, including 6 families living by the site. Those living by the site were offered apartments in Baku and those with affected livelihoods were offering employment. Most continued employment either safely at the landfill, or with Tamiz Shahar in the sorting facility with benefits, including pension. They received trainings and all employees and registered waste pickers received helmets, gloves, and other clothing to ensure safety. Security staff controlled access to the landfill site to ensure safe practices. The commitment of the Government to address social safeguards is indicated by the 30 individual meetings that Tamiz Shahar held with waste pickers from September 2014 to February 2015, the routine monitoring of all individuals, and the annual reports on progress. In 2014 the project received the World Bank’s Europe and Central Asia Vice-Presidential Award in recognition for the accomplished results and as an example of good practice in solid waste management, particularly for the approach taken by Government in engaging with the waste pickers at Balakhani landfill. The Government worked with waste pickers individually to build capacity, offer employment with benefits, compensate those living on the Balakhani site with improved housing, and provide safe working conditions. Fiduciary compliance. The Financial management (FM) risk at Project Appraisal was rated Substantial before mitigation measures and moderate after the implementation of the agreed mitigation measures. While the Ministry of Economic Development did not have prior experience with Bank-financed projects, the capacity building support provided through the project led to successful fiduciary compliance. The FM performance rating was Satisfactory throughout the life of the project which was carried in accordance with project design and the Legal Agreement. The project complied with the FM covenant requiring a financial management system acceptable to the Bank to be in place, and had acceptable and timely submission of quarterly IFRs and annual project audited financial statements. C. BANK PERFORMANCE Rating: Satisfactory Quality at Entry The PDO was well-aligned with the component designs and the Results Framework. The Project design was informed by prior analytical work, from the previous project and the longstanding dialogue with the Government to support implementation of the solid waste management aspects of the Environmental State Program. The Bank engaged effectively to design the Project targeting the urgent situation and TA for long-term sectoral support, including the completion of the Greater Baku SWM Strategy. The Bank emphasized the importance of integrated planning from the beginning which the Government acted on and built a strong foundation for the sector. Bringing an integrated approach into the project design was critical for the overall success of the project and sector. Page 22 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Quality of Supervision The quality of the Bank team’s performance during supervision was consistent, strong technically, and ready for adapting the project. In addition to supervising and providing support to resolve any challenges, the Bank also brought additional resources and sector experience to allow for a broader policy dialogue. The Bank team identified and supported the critical aspects to improve for sector transformation and sustainability through the lifetime of the project. The Bank team undertook regular missions and raised issues of concerns in a timely manner for prompt resolution. The Bank was proactive in technical support, capacity building, and broader engagement opportunities. Despite having four TTLs over the lifetime of the project, the project supervision, restructurings and dialogue continued consistently, resulting in a request for another solid waste management loan to target national SWM development, which is under advanced preparation and ready for appraisal. Justification of Overall Rating of Bank Performance The overall rating of Bank performance is Satisfactory because of the need to provide minor adjustments to the PDO and indicators with the restructuring. D. RISK TO DEVELOPMENT OUTCOME While the sector evolved drastically through the Project with the strong partnership between the World Bank and the Government and the project objectives were achieved or even exceed, some shortcomings still remain, although these are expected to be addressed in the short- to medium-term. There is a misalignment between the quantity of waste collected and the quantity of waste received for disposal. There is illegal dumping of waste that remains a challenge and the main deterrent to bringing waste to Balakhani is the longer distance. To that end, the Government has included construction of two transfer stations in its SWM Strategy to reduce the transportation needed for primary collection. The detailed designs for the two transfer stations were developed under the Project and approved by relevant authorities. The Government must still consider how to incentivize transport of waste to the transfer stations for the waste currently being dumped if that continues to be a challenge. Another concern is that of financial sustainability due to the high dependence on government subsidy. This will be addressed by the Government through the Presidential Decree. In addition, the technical aspects of the new tariff collection scheme have also been worked out with TA under the project and are nearly ready for the rollout to be supported under the proposed second project under preparation. The Bank should keep an active dialogue in the sector to support the Government with implementation of these critical activities. V. LESSONS AND RECOMMENDATIONS Strong government leadership and commitment were essential for steady and systemic transformation. Because the Government was willing to engage on a broader policy dialogue, create an enabling institutional structure, advocate for the sector, and develop their own vision for the sector, solid waste management in Greater Baku has been transformed and the path is set for SWM to develop more broadly within the country. The technical investments and capacity building are critical but the Government’s leadership, commitment, and pro-active nature, in addition to their vision, are necessary for sustained improvement and forward-looking development of the sector. Broadening the solid waste management dialogue beyond environmental issues to financial sustainability allowed for holistic sector engagement. The SWM dialogue with the Government was initially driven by environmental issues; Page 23 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) however, by broadening the dialogue over time to include financial sustainability, the Bank team was able to support the Government in thinking beyond the waste sector technically. The continuous, long exchange on financial sustainability led to engagement more holistically from multiple other angles including in terms of policy, planning and strategy, institutional aspects, technical design, and environmental and social aspects. The project became more of a program rather than a project because of the systematic approach addressing solid waste management more broadly. It is showcased globally as a very successful approach to reform the sector. The project’s significant achievements need to be followed up with continuous engagement from the Bank as the Government scales sector development nationally. hence the proposed new project. Short- and long-term objectives can be designed and implemented simultaneously and can lead to stronger sector development. Often governments seek to address short-term objectives without thinking of the longer-term needs. In Azerbaijan, the Government was willing to address both short and long-term objectives by engaging with the Bank for both immediate needs of rehabilitating the Balakhani site and increasing waste collection as well as for a broader policy dialogue. This willingness to engage beyond the short-term needs led to a broader policy dialogue which led to the AF as well as sector reform. Early capacity building of the PMT and facility operator led to strong implementation. The project was designed to build capacity of the PMT and facility operator early and this significantly affected the progress of the project as well as subsequent investments by the Government. Because of the PMT’s developed capacity, the project implementation was effective. Tamiz Shahar, the new joint Solid Waste Management Company, also received significant capacity building support through the project including through study tours in other countries. Because of the strong talent development in Tamiz Shahar, the Government invested in a materials recovery facility and waste-to-energy facility which they now operate. Tamiz Shahar currently operates all waste facilities located at Balakhani, collects a portion of the waste generated, and provides additional services including data management and system optimization. They are anticipated to further provide waste collection services for the Greater Baku Area. Revamping of the solid waste management sector takes time. Even with all the Government support, approved National SWM Strategy, capacity building, and infrastructure investments, it will take time to develop and sustain the SWM sector. It is important for the Bank to have a follow-up engagement as Government implements the National SWM Strategy and scales up successes to date nationally. Working with waste pickers beyond resettlement and compensation, to meet individual needs, can lead to safer and secure livelihoods. In addition to physical resettlement and compensation through a special state agency, the project developed a comprehensive livelihood restoration plan providing options for the waste pickers and families residing by the Balakhani site. The Government offered apartments in Baku for those being relocated from the Balakhani site. They also offered full-time employment with benefits at the materials recovery facility for those affected, in addition to trainings and safer, more secure conditions at the Balakhani Landfill. The project established a robust baseline of waste-pickers, their assets, and incomes, and consistently monitored them, including primary information from interviews and discussions with PAPs in each report. The process and results are showcased as global best practices. . Page 24 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: Improve solid waste disposal management Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Contaminated land managed Hectare(Ha) 203.52 0.00 154.18 199.00 or dump sites closed under the project 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 Comments (achievements against targets): 132 dump sites were closed corresponding to 199 ha. In addition, 5 sites corresponding to 18 ha were additionally cleaned due to contamination. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Industrial and municipal Metric ton 0.00 0.00 9700000.00 9700000.00 waste disposal capacity created under the project 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 Comments (achievements against targets): Rehabilitation of Balakhani landfill serving greater Baku area was completed under the project. An additional 56,000 tonnes were deposited in three new cells and the landfill was designed for a 20 year lifespan under the business-as-usual scenario. Page 25 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Objective/Outcome: Increase waste collection coverage Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of people in urban Number 1973000.00 0.00 2700000.00 2774416.00 areas provided with access to regular solid waste collection 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 under the project Comments (achievements against targets): The target was exceeded. Coverage increased to cover 79% of the project population. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of female Number 986500.00 0.00 1350000.00 1414952.00 beneficiaries in urban areas provided with access to 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 regular solid waste collection under the project Comments (achievements against targets): The target was exceeded. Objective/Outcome: Enhance waste data information and financial management capacity in the Greater Baku area Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of waste facilities Number 0.00 0.00 6.00 6.00 Page 26 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) providing regular information 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 to the waste data information system Comments (achievements against targets): Target has been achieved. Six facilities provide regular information to the waste data information system including four weighbridges installed and operational, the waste information system at Tamiz Shahar, and information derived from the Baku Executive Power. In addition, two more weighbridges have been designed (final designs approved) under the project and are planned to be constructed by Tamiz Shahar. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Increased number of waste Number 1315000.00 0.00 1800000.00 2500486.00 generators that pay for waste collection 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 Comments (achievements against targets): 71% of the population is paying for waste collection services (World Bank housing diagnostic survey, 2015). The total population of Baku is estimated at 3,511,920 according to Collection Program Design Report prepared by AIM Texas. The indicator is expected to improve further after the waste fee is added to the electricity bill for joint billing which is expected to take place by the end of 2019. The team believes the baseline underestimated the number of payers at the time; however, it is clear that the project activities increased the number of old and new population covered. The increase in population served is 801,416 people while the increase in waste generators paying is 1,185,486 people. A.2 Intermediate Results Indicators Component: Component A: Institutional Reform, Capacity Building and Project Management Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Formally Revised Completion Page 27 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Target Number of qualified staff Yes/No N Y Y Y employed according to anually updated staffing plan 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 covering (a) solid waste mgmt operations; (b) fin. mgmt; (c) budgeting, O&M, and M&E. Comments (achievements against targets): Tamiz Shahar developed a staffing plan reflecting key identified functions including solid waste management and financial management, among others, and have successfully performed the associated functions. 42 Tamiz Shahar employees have participated in local and foreign trainings associated with the Project. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Operational plan for service Yes/No N Y Y Y delivery and financial mgmt improvements updated 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 regularly Comments (achievements against targets): Tamiz Shahar developed an operational plan including an action plan for its administrative and financial management functions as well as for the technical services that it provides. This includes a comprehensive operations manual developed as a design component of the rehabilitation and expansion of the Balakhani landfill. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Increased number of waste Number 1315000.00 0.00 2000000.00 2528582.00 Page 28 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) generators invoiced 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 Comments (achievements against targets): 72% of the population is billed (World Bank Housing Diagnostic Survey, 2015) and the total population of Baku estimated at 3,511,920 (according to the Collection Program Design Report prepared by AIM Texas). The indicator is expected to improve after the waste fee is added to the electricity bill. Component: Component B: Balakhani Landfill Upgrading and Management Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Landfill gas collection system Yes/No N Y Y Y operational at Balakhani 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 Comments (achievements against targets): During the rehabilitation and expansion work at the Balakhani landfill supported by the Project, an active gas collection and treatment system (combined heat and power unit) was installed. This system was to manage landfill gas generated because of waste decomposition from both the original waste that existed at the site and the new waste placed after completion of landfill construction. The landfill gas generated from the existing waste is collected and transported to an energy recovery system that treats the gas through combustion before emission. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Leachate/runoff water mgmt Yes/No N Y Y Y system operational at Balakhani 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 Comments (achievements against targets): The construction of the leachate capture trenches (totaling 2675 m) and all leachate collection Page 29 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) manholes (15) was completed. The construction of the landfill leachate collection system was completed. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Dumping surface area Yes/No N Y Y Y covered monthly to reduce fires and exposure to waste 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 Comments (achievements against targets): The waste is covered and compacted regularly. Any fires that may be derived the delivery vehicle (i.e. spontaneous combustion from hot loads) are immediately extinguished. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Full registration of waste Yes/No N Y Y Y received at the Balakhani landfill 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 Comments (achievements against targets): All waste loads entering Balakhani are now weighed and registered in the landfill computer database and the waste information system at Tamiz Shahar. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Limited access to the Yes/No N Y Y Y Balakhani landfill to reduce presence of unauthorized 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 individuals and animals Page 30 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Comments (achievements against targets): Access has been and is strictly controlled and managed. Component: Component C: Closure and Management of Other Dumps Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of wild dumps Number 66.00 0.00 50.00 132.00 closed 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 Comments (achievements against targets): The number of dump sites closed far exceeded the target. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Limited access to the Yes/No N Y Y Y facilities (dumps) to reduce presence of unauthorized 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 individuals and animals Comments (achievements against targets): Vehicular access to all informal dump sites remediated and closed by the Project has been eliminated to prevent access by unauthorized individuals. All waste remaining on any of the sites has been covered thereby eliminating attraction to animals. Component: Component D: Urgent Collection Equipment for 5 Outer Baku Districts Indicator Name Unit of Measure Baseline Original Target Formally Revised Actual Achieved at Page 31 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Target Completion Increased number of bins Number 2430.00 0.00 6000.00 6345.00 and collection points distributed in five outer 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 districts of Baku Comments (achievements against targets): 6,345 new bins were deployed throughout Baku's outer regions and there were 1973 new collection points created in Baku's five outer districts. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Regular solid waste Yes/No N Y Y Y collection in outer Baku districts provided according 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 to collection roll-out plan Comments (achievements against targets): Waste collection improved following the procurement and deployment of collection equipment and bins. Waste is collected 3 times per week in Baku's outer districts. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Share of population in Percentage 30.00 0.00 70.00 68.00 project target areas satisfied with improved solid waste 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 collection services Page 32 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Comments (achievements against targets): Satisfaction level improved substantially from the baseline of 30% of the project population satisfied with improved solid waste collection services in 2012 to 68% in 2018. The final results are based on the third service level and customer satisfaction survey. Component: Component E: Technical Preparation of Post-Project Investments Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion National Waste Mgmt Plan Yes/No N N Y Y developed 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 Comments (achievements against targets): A Solid Waste Management National Strategy and Action Plan was approved by the President under a Presidential Decree. Based on the instructions of the Cabinet of Ministers, the National Solid Waste Management Strategy & Action Plan was merged with the Greater Baku Waste Management Strategy that had previously been prepared as a component of the Project under the original financing. The Cabinet of Ministers then endorsed the Strategy subsequently the President endorsed it. It should be noted that in parallel to the creation of the national strategy, a separate consultancy was engaged through the project for defining the optimum legal framework by which the adopted National Strategy can be implemented. The legal framework report has also been submitted to the government for approval. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of feasibility studies Number 0.00 0.00 8.00 8.00 and environmental impact assessments for new solid 19-May-2008 30-Sep-2013 30-Mar-2018 30-Aug-2018 waste mgmt investments Page 33 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Comments (achievements against targets): All feasibility studies and environmental impact assessments for new solid waste management investments were completed. The feasibility study and environmental impact assessments for the rehabilitation work associated with the Balakhani, Garadagh and Surakhanı landfills were completed. The feasibility study and environment impact assessments for the Shuvalan and Garadagh transfer stations and the new Garadagh landfill were completed. The environmental social impact assessments for the new regional landfills in the Absheron, Shabran and Shamkir regions of Azerbaijan were completed. Page 34 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) B. KEY OUTPUTS BY COMPONENT Project Development Outcome 1: Improve solid waste disposal management 1. Industrial and municipal waste disposal capacity created under the project (tons) Outcome Indicators 2. Contaminated land managed or dump sites closed under the project (ha) 1. Limited access to the Balakhani landfill to reduce presence of unauthorized individuals and animals 2. Leachate / runoff water management system operational at the Balakhani landfill 3. Dumping surface area covered monthly to reduce fires and Intermediate Results Indicators exposure of waste 4. Landfill gas collection system operational at the Balakhani landfill 5. Limited access to the facility to reduce presence of unauthorized individuals and animals 6. Number of wild dumps closed Component B: Improved disposal management and upgrading of the Balakhani Landfill • Rehabilitation and construction of Balakhani Landfill designed for 20-year lifespan. • Leachate/runoff water collection and management system Key Outputs by Component construction (linked to the achievement of the Objective/Outcome 1) • Landfill gas collection and management system construction • Equipment for covering and compaction of site • Restricted access at Balakhani site Component C: Improved management of other dumps and closure of informal solid waste dumps Page 35 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) • 132 dump sites (199 ha) closed and 5 contaminated sites (18 ha) cleaned • Elimination of vehicular access to dumps and informal waste sites • Equipment for covering and compaction of dumps and informal sites Component A: Improvement in the governance, financial management and M&E capacity of the formal solid waste management agency for Greater Baku to be established • Resettlement Action Plan Project Development Outcome 2: Increase waste collection coverage 1. Number of people in urban areas provided with access to regular solid waste collection under the project Outcome Indicators 2. Number of females in urban areas provided with access to regular solid waste collection under the project 1. Increased number of bins/collection points distributed in the five outer Baku districts 2. Regular solid waste collection in outer Baku districts provided Intermediate Results Indicators according to the collection roll-out plan 3. Share of population in project target areas satisfied with improved solid waste collection service Component D: Improved solid waste collection coverage in 5 outer Baku districts Key Outputs by Component • Procurement of collection equipment and bins. 6,345 new bins (linked to the achievement of the Objective/Outcome 2) deployed and 1973 new collection points created in five Baku's outer regions • Procurement of trucks Page 36 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Project Development Outcome 3: Enhance waste data information and financial management capacity in the Greater Baku area 1. Number of waste facilities providing regular information to the Outcome Indicators waste data information system 2. Increased number of waste generators that pay for waste collection 1. Full registration of waste received at the Balakhani landfill 2. Number of qualified staff employed according to annually updated staffing plan covering (a) solid waste management operations; (b) financial management; (c) budgeting, O&M and M&E 3. Operational plan for service delivery and financial management Intermediate Results Indicators improvements updated regularly 4. Increased number of waste generators invoiced 5. Number of feasibility studies and environmental impact assessments for new solid waste management investments carried out 6. National Waste Management Plan developed Component A: Improvement in the governance, financial management and M&E capacity of the formal solid waste management agency for Greater Baku to be established • Greater Baku Solid Waste Management Strategy • Central waste data information system • Creation of Tamiz Shahar Key Outputs by Component • 42 local and foreign trainings for Tamiz Shahar associated with the (linked to the achievement of the Objective/Outcome 2) Project • Trainings and capacity building for PMT • Staffing plan • Operational plans Component B: Improved disposal management and upgrading of the Balakhani Landfill Page 37 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) • Installation of weighbridges and facility waste information systems Component E: Post-project investments identified to develop landfill capacity and introduce transfer stations • 8 project preparation or post-project preparation studies including feasibility studies and EIA/ESIAs • National Solid Waste Management Strategy and • Legal framework to support national SWM sector performance Page 38 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Preparation Supervision/ICR Kremena M. Ionkova Task Team Leader(s) Tanvir Hossain Procurement Specialist(s) Tural Jamalov Financial Management Specialist Delphine Alberta Hamilton Team Member Frank Van Woerden Team Member Gulana Enar Hajiyeva Environmental Specialist Satoshi Ishihara Team Member Sophia V. Georgieva Social Specialist Hadji Huseynov Team Member Page 39 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) B. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY08 28.373 146,898.42 Total 28.37 146,898.42 Supervision/ICR FY09 23.987 78,006.37 FY10 25.133 114,533.25 FY11 29.365 109,182.42 FY12 23.509 89,283.44 FY13 19.785 93,990.27 FY14 22.144 88,668.61 FY15 25.460 120,852.89 FY16 31.545 113,104.59 FY17 18.155 97,603.82 FY18 26.676 175,816.08 FY19 21.123 121,730.43 Total 266.88 1,202,772.17 Page 40 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) ANNEX 3. PROJECT COST BY COMPONENT Amount at Approval Actual at Project Percentage of Approval Components (US$M) Closing (US$M) (US$M) Component A - Institutional reform, capacity building and 0 7.66 0 project management Component B - Balakhani Landfill upgrading and 0 12.64 0 management Component C - Closure and 0 7.55 0 management of other dumps Component D - Urgent collection equipment for 5 0 5.90 0 outer Baku districts Component E - Technical preparation of post-project 0 2.24 0 investments Total 0.00 35.99 0.00 Page 41 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) ANNEX 4. EFFICIENCY ANALYSIS The project has an Economic Net Present Value (ENPV) of USD 85 million and an Economic Internal Rate of Return (EIRR) of 20%, which represent a significant economic efficiency. An economic and financial analysis was undertaken for the Project based on the available data and considering the approach at the PAD and AF stage. The positive economic returns are driven by the benefits of improved surrounding areas, avoided GHG emissions and avoided leachate pollution. The operation is likely to have higher economic returns because of benefits that cannot be numerically approximated such as improved health outcomes due to reduced fires at the landfill, improved health outcomes for scavengers, and improved welfare of households who started to receive waste collection services. This annex provides an overview of the project activities and their respective benefits, discusses the analysis performed at the Appraisal and Additional Financing stages and presents in detail the calculations of each benefit enumerated. It also provides a sensitivity analysis of the estimates and concludes with an overview of the financial efficiency. 1. Overview The analysis covered the improvements in waste management made at the following disposal sites: 1. Balakhani for the Greater Baku area with a size of 43 ha 2. Two large sites Shuvalan and Garadakh ranging from 0.6-1 ha 3. Five medium sites of approximately 0.04 ha 4. 32 small sites The improvements in Balakhani included (i) the full remediation and closure of the old waste disposal parts of the site; (ii) installation of water and leachate management controls; (iii) opening of new waste cells at the existing site; and (iv) introduction of a methane gas capture system. The remaining sites were capped and closed. 2. Appraisal and Additional Financing At Appraisal and the AF stages, the economic analysis discussed the economic benefits of the operation but a cost-benefit estimation and IRR analysis were not carried out. The economic benefits were expected to be quite large, including the benefits of a more efficient operation that integrated sorting, recycling, energy-recovery and final disposal of waste. In addition, it was expected that the operation would reduce the negative environmental impacts related to the need for additional landfill sites in the Greater Baku area. The PAD and the AF papers noted that the central location of the Balakhani disposal site in the Baku region would be a significant economic benefit to the collection and transportation of waste. Any new alternative disposal facility that would have been developed would have been located further away from collection zones and would have a significant impact on the efficiency of collection and transportation of waste. It was also noted that closing wild dumps would free up valuable land in residential areas, allowing it to be used for other purposes or to accommodate transfer stations. The operation was identified as the least-cost option. It was noted that property prices in the Greater Baku area and pressure on available land had increased substantially with an increased population and economic development. New sites for waste disposal would have become more difficult to find, purchase and develop. Expansion of landfill capacity at the Balakhani site was selected as the least-cost option. Page 42 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) Developing additional landfill capacity at alternative green-field sites would at a minimum have an equal cost, although it would likely be more expensive, and include significant negative environmental impacts and a larger environmental foot print. The financial analysis argued that the project is very cost-effective but that the financial sustainability of the sector depends on several important reforms. The design of the investments was subject to a value engineering review and was found to be the most cost-effective approach for creating the required additional landfill capacity and comply with the related EU standards. At appraisal, the financial analysis revealed vastly insufficient tariffs, low collection rates, high arrears and undefined subsidies. Due to wide gaps in basic data, estimates for total revenue before subsidies were very rough. 3. Cost-Benefit Analysis of the Project A cost-benefit analysis was used to evaluate the flow of benefits from this investment. The total costs were USD 82.04 million. The economic and financial benefits accruing from this operation included: 1. Avoided leachate pollution of the improved Balakhani site and the capped sites 2. Avoided GHG emissions due to more efficient waste management operations 3. Decreased disamenities for the surrounding areas 4. Health benefits due to reduced air pollution as fires are decreased 5. Improved welfare for residents of underserved Baku areas provided with collection equipment 6. Spillover of more efficient waste management practices throughout the sector 7. Financial benefits of more efficient operation 8. Economic benefits to the previously informal waste pickers who were hired in the sorting plant as a result of the project. The first three of these benefits were captured numerically in the analysis following the valuation methods in Table 1. The calculation of each benefit is reviewed in the next section. The value of the decreased disamenities for the surrounding areas was estimated at USD 91 million. The carbon benefits have a NPV of USD 59 million and the avoided leachate benefits is about USD 52 million. Table 1. Three of the benefits of the project were quantified using the valuation methods of shadow and hedonic pricing Quantified impacts Type Valuation method 1. Decreased disamenities for the surrounding areas Externality Hedonic price 2. Avoided GHG emissions due to more efficient waste Externality Market price of GHG emissions management operations 3. Avoided leachate pollution of the improved Externality Shadow price of pollutants Balakhani site and the capped sites Using a 6% social discount rate over 20 years, the Economic NPV and IRR of the project are evaluated as USD 85 million and 20% respectively. Table 2. Economic NPV and IRR of the project NPV USD $85,273,788.30 IRR 20% Page 43 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) a. Decreased disamenities for the surrounding areas The estimation of the reduction of visual disamenities, noise and odors follow the hedonic price method, using land value prices. The underlying concept is that the proximity to a waste site causes a decrease in the value of the surrounding properties and, vice-versa, the closing or improvement of an existing site has the opposite effect. The steps to the estimation are as follows: 1. Establish the maximum territorial scope of the effect 2. Obtain the market value of land around the closed or improved site is obtained 3. Obtain the market value of land in similar locales but where the dump site has not been capped or improved 4. Calculate the sum of the improvements across the scope of the effect Market land value prices were obtained and the radius of impact was estimated by the PMU. The territorial scope as advised by the PMU and reference land prices obtained by the PMU from online databases of land prices are presented in Table 3. Table 3. Market land values obtained from online sources Implied land Capped or updated landfill value Comparable existing dump sites Difference sites under the project improvement, in percent Garadakh: 3500 AZN/100 sq Khazar district / Turkan settlement 1500 AZN/100m2 for m, 4 km radius of impact (a 2000 AZN / 100 sqm (Location: N – 40 4 km radius for large 75% large site) 22 17,4 E – 50 14 02,3, Size: 1.0 Ha) sites 5 medium dumpsites: 4000 Khazar district / Bina settlement 2000 2000 AZN/100m2 for AZN/100 sqm, 3-4 km radius AZN/100 sqm (Location: 3-4 km radius for 100% of impact 40°29'49.76"С 50° 5'24.36"В, Size: medium sites 0.04 Ha) Shuvalan: 4500 AZN/100 sqm, Sabunchu district / Ramana settlement 1000 AZN/100m2, 4 4km radius of impact 3500 AZN/100 sqm (Location: N –400 km of radius for large 29% 26’835” E - 490 58’049”, Size: 0.6 Ha) site Small dumpsites (32 sites) 7000 None provided AZN/100 sq. m, 1 km radius of impact Balakhani: 3000 AZN/100 sq. No comparable sites m, 5 km radius of impact, size 43 HA The observed improvement in values is much higher than reference points in the literature of such evaluations. In the literature, the effect ranges between 1.5% to 12.8% of the property value (Brisson I.E and Pearce, 1998). Ideally, the hedonic price model to calculate land improvements should include a wide range of variables including characteristics of the house or land affected, locational/accessibility characteristics, neighborhood characteristics and environmental characteristics, such as proximity to the waste facility and having a direct view of the facility. The coefficients of these latter variables will give an estimate of the marginal impact of the waste facility on real estate prices, controlling for all other variables. Such detailed data is not available for this project. The direct comparison of prices for two sites grossly overestimates the impact of the project as the spot prices obtained for each site represent recent land price offerings, which might be skewed towards the higher end properties. Therefore, the literature average improvement will be used. Page 44 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) To be conservative in the benefit calculations, a 5 percent increase in land values and 1 km radius of impact were used for estimating this benefit. The levels of land values appear consistent and reliable except for the small dumpsites which appear to be an outlier. The 32 small dumpsites closed were in various rural locations and a reliable estimate could not be obtained. In the interest of being conservative in our estimates, the impact of the closure of these dumpsites was excluded. Table 4. Estimates of the land value improvements of 5% and 1 km radius, which are used in the economic analysis. Affected area Value added per Total value added, Total value added, Site excluding km2 (AZN), 5% (AZN) (USD) landfill, (km2) improvement Garadakh 3.5 1,750,000.00 6,118,145.99 3,598,909.41 5 medium dumpsites 2.9 2,000,000.00 5,879,584.60 3,458,579.18 Shuvalan 3.4 2,250,000.00 7,686,405.05 4,521,414.74 32 small dumpsites Not estimated Balakhani 90.2 1,500,000.00 135,243,860.26 79,555,211.92 Total 154,927,995.90 91,134,115.25 A conservative estimate of the land value improvements is about US$ 91m. The land value improvement taken very conservatively at 1 km radius and 5% value increase generated about US$91m in 2018. Should the project have no other benefits, the improvements in land values alone generates about 5% IRR and a small negative NPV of US$ -2.9m if the total project costs are taken into account. b. Avoided GHG emissions due to more efficient waste management operations Using the GHG accounting tool CURB, it was estimated that the project avoided about 10 million tCO2 of being emitted into the atmosphere over the next 20 years. To do a GHG accounting for the project, the tool Climate Action for Urban Sustainability (CURB) was used. Using detailed data on the waste operation including waste composition, population growth, recycling rates and gas capture, it was found that the GHG emission reduction was positive because of the shift from open dumping to management of waste in a landfill with landfill gas capture. Around half of generated waste remained disposed through open dumping. The other half is mainly shifted from open burning in the uncontrolled landfill and dumpsite to a mix of formal landfilling, waste to energy, and recycling. Emissions decreased because of landfill gas capture, which prevents the methane generated by waste within landfills from entering the environment. Using the median market price of USD 10/tCO2, the benefits of avoided CO2 are estimated at about USD 2.5 million per year. On the other hand, the social benefits of the avoided GHG are worth about USD 9 million per year. The World Bank has provided estimates for the shadow price of carbon in its guidance note from 2017. The low value estimate is for USD 37 in 2017 and grows to USD 58 in 2037. Using these low estimates and the flow of GHG avoided calculated from CURB, the flow of economic benefits is estimated at about USD 260 million. Evaluating that against the total project costs, the NPV and IRR would be about USD 109 million and 16%, using the social shadow price of carbon. Page 45 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) c. Avoided leachate pollution due to the improved Balakhani site and the capped sites The project prevented the pollution of soil and ground water with leachate by lining the newly constructed landfills. Leachate pollution is formed by water passing through the waste and seeping into the soil and ground water. The cost of that pollution can be very high. We estimate this in three steps: 1. Estimating the quantity of leachate discharge produced following the formula of 0.7 x Footprint of the constructed cell under the Project (m2) x Precipitation level for the city/area (m3/hour) / 1000 (m3/m), 2. Turning the pollution potential of the leachate production into pollution equivalent (PE) 3. Transferring an economic value to the pollution equivalent from other studies The analysis uses a very conservative estimate for the value of avoided leachate of USD 0.5 per pollution equivalent. The analysis discounted the value of avoided leachate pollution from a recent WB study in Bosnia by 50%. This pollution equivalent estimate of USD 0.5/PE is also found in a study of the cost of waste water cleanup. The value of the avoided leachate pollution is about USD 7 million per year with a NPV of this flow of benefit of about USD 52 million. If the total project costs are taken into account and were the project to not get any other benefits than leachate avoidance, the economic NPV and IRR of the project would have been about -USD 1 million and 6%. d. Economic analysis by component Balakhani Landfill rehabilitation (component B) had a very high return to its investment and drives the economic efficiency of the project. The closures of other dumps under Co C had lower returns. Table 5. NPV and IRR of Components B and C Component B Component C NPV USD $224,093,503 $704,987 IRR 45% 7% e. Sensitivity Analysis The sensitivity analysis employs alternative shadow prices for the leachate and CO2 pollutants. In the economic analysis, two shadow prices are used: first, the shadow price of avoided leachate pollution of USD 50/m3, and second, the market price of CO2 avoided of USD 10/tCO2. Both of these shadow prices are conservative. First, the value of avoided leachate pollution depends largely on the country circumstances, waste composition and the proximity of the landfill to water sources. In the literature, the value of avoided leachate pollution can range from USD 20 to USD 60 per m3 (Bosnia Waste Management ICR 2018, Study of waste water cleanup costs 9). Reducing the shadow price of avoided leachate by 50% changes the ENPV and EIRR down to USD 59 million and 17%. Second, CO2 carries a larger shadow price than its current market price. The World Bank estimated the shadow price of carbon in its guidance note from 2017. The low value estimate is USD 37/tCO2 in 2017 and grows to USD 58 in 2037 (while the current median market price is USD 10/tCO2). The ENPV and EIRR using the low estimates for the social 9 Ibid Page 46 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) CO2 price increase significantly to USD 213 million and 27%. This sensitivity analysis confirms that even with these very conservative pollutant prices, the project is economically viable. Should the social valuation of avoided pollution be increased, the value of this project will also increase. The sensitivity analysis also looks at the sensitivity of the estimates to land value improvements, which reflect the reduction in disamenities for the surrounding areas. The average value in the literature of land price improvement is 5%. The observed market price increase was much higher than that, as discussed in section 3a of this annex. Nevertheless, taking a value improvement of 2.5% still produces very significant economic returns. Even if we take only 1 percent increase in land values due to the project, the ENPV and EIRR are still very significant at USD 44 million and 12%. The positive economic value and return of the project do not depend on including land value improvements. Attributing land value improvements to the project is not driving the economic efficiency of the project. To conclude, the economic analysis uses very conservative estimates for the shadow prices of pollutants and confirms that the project is economically viable even if no land value improvements are attributed to the project. The operation is likely to have higher economic returns because of benefits that cannot be numerically approximated such as improved health outcomes due to reduced fires at the landfill, improved health outcomes for scavengers, and improved welfare of households who started to receive waste collection services. Table 6. Sensitivity analysis and corresponding estimates Scenario Key variable ENPV EIRR (USD million) 50% lower value for avoided leachate USD 26/m3 for avoided leachate 59 17% pollution Social price of CO2 USD 41 per tCO2 avoided 213 27% 50% lower land value improvement 2.5% improvement in land values in 60 15% 1 km radius 80% lower land value improvement 1% improvement in land values in 1 44 12% km radius No land value improvement 0% improvement in land values 34 11% 4. Financial analysis Financial sustainability will be supported under the second SWM project by the Bank. In terms of the financial analysis, Tamiz Shahar is subsidized for the waste management services they provide. However, there is an agreed roadmap to improve the financial sustainability of the sector by improving the tariff revenue collected. This approach included in the National Solid Waste Management Strategy was approved by the President and the implementation will be supported under the second SWM project by the Bank. Page 47 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS Page 48 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) OFFICIAL TRANSLATION OF LETTER Ministry of Economy of the Republic of Azerbaijan February 12, 2019 #IN-X/O-1878/2019 To: Ms. Saida Bagirli, the World Bank Acting Country Manager for Azerbaijan About comments related to “Implementation Completion and Results Report” Dear Saida khanum, Based on the referral #16/636-09 of the Cabinet of Ministers dated February 4, 2019, concerned officials of the Ministry of Economy reviewed the request for comments related to “Implementation Completion and Results Report” for “Integrated Solid Waste Management Project (ISWMP)” implemented as per the Credit and Additional Financing agreements concluded between the Ministry of Economy and the World Bank within “Absheron Ecological Rehabilitation Program”. Based on the information of the Project Implementation Unit (PIU) established within ISWMP, we have no comments on “Implementation Completion and Results Report” prepared by the World Bank experts. Respectfully, Rufat Mammadov Deputy Minister Page 49 of 50 The World Bank ARP/II-Integrated Solid Waste Management (P110679) ANNEX 6. Climate Change Annex Analysis Boundary: • The analysis covers the Greater Baku area included in the project • The solid waste management activity analyzed is the improved management of waste due to the construction of a landfill with landfill gas capture which subsequently led to investments in a materials recovery facility and waste-to-energy incineration plant by the Government. Methodology: • The CURB Tool was used which follows the International Panel for Climate Change methodologies. Baseline scenario for 2015: • The total waste generated was 1,200,000 tonnes by a population of 3,200,000 people • It is assumed that 50% of the waste was openly burned and 50% was openly dumped prior to the LF • The waste composition assumed is as follows: Waste type Percentage Waste type Percentage Waste type Percentage Paper/Cardboard 18.1% Plastics 10.4% Wood 1.4% Textiles 4.4% Metal 1.5% Rubber and Leather 0.9% Organic Waste 41.7% Glass 6.4% Other 15.2% Project scenario: • It is assumed that waste is no longer openly burned, 41.7% of waste goes to the waste-to-energy incineration plant, 0.6% is recycled, and the waste managed via the Balakhani landfill gradually increases. The waste managed gradually increases until all but 10% of waste is still openly dumped from 2030 onwards. • The landfill gas capture rate of the new landfill is 100%. The incinerator generates electricity. Data sources: • Population growth rates were obtained from the World Population Prospects: The 2015 Revision published by the UN Department of Economic and Social Affairs (UNDESA). • The PMT provided waste composition and disposal data Key assumptions: • The landfill is assumed to have a lifespan of 20 years • Azerbaijan electricity emissions factors from International Energy Agency (2015) were used Results: The emissions reduction is driven by the landfill gas management system and the electricity generation from the waste-to-energy incineration plant. Summary Economic Lifetime (years) 20 Gross Emissions over Economic Lifetime (t co2e) 10,571,174 Net Emissions over Economic Lifetime (t co2e) -10,645,603* Average Annual Emissions (t co2e) 503,389 *Decrease in emissions Page 50 of 50