World Bank approves five operations for Serbia

Report
from World Bank
Published on 20 Jun 2007


Projects support Serbia's Regional Development, Agricultural Competitiveness, Flood Control, Road Rehabilitation and Safety, and Energy Efficiency

Press Release No:2007/450/ECA

WASHINGTON, June 20, 2007 - The World Bank Board of Executive Directors today approved five operations for Serbia in the amount of $192.5 million. The projects will support the development of the Bor region in eastern Serbia, step up the country's agricultural competitiveness, assist with flood protection, improve road condition and safety, and increase energy efficiency in schools and hospitals.

The Bor Regional Development Project (US$43 million) will provide financing and technical assistance at a critical moment in the Government's strategy to reverse the decline of the Bor region (Borski okrug), one of the poorest in Serbia, through the privatization of the traditional mining industry and diversification of the local economy. The project has two main objectives: (i) dealing with urgent environmental and social legacy issues arising from the mining sector restructuring; and (ii) fostering new sources of economic growth and job creation in the region. Direct benefits include improved environmental conditions in the region, a reduction in the number of unemployed people, and growth of the local SME sector. Indirectly, the project will help increase the general level of economic activity in the region, attract additional investments and donor assistance, and reduce the need for state subsidies.

The Project will be financed through a US$10 million IDA credit and a US$33 million IBRD loan. The credit will be provided on concessional terms, with 0% interest and a 20-year maturity, including a 10-year grace period. The IBRD loan will be payable in 17 years, including a 5-year grace period.

"The project aims at fostering private sector based sources of economic growth and employment creation in the region in order to compensate for the relative decline of the mining industry. This will be achieved by provision of labor redeployment programs, business development services, and microfinance credits to local SMEs and entrepreneurs. At the same time, the project will finance remediation of the most pressing environmental hazards associated with past mining operations," said Alexander Pankov, World Bank Private Sector Development Specialist.

The Board of Directors also approved a US$17 million IBRD loan and US$4.5 million Global Environment Facility (GEF) grant for the Transitional Agriculture Reform Project. The project supports Serbia's National Agriculture Strategy to enhance the competitiveness of the country's agricultural products in local and international markets. It will also assist the Government with creating a more efficient and transparent rural development grants program and help the country qualify for and use European Union pre–accession funding. The project's GEF component will focus on preserving biodiversity and promoting sustainable use of natural resources and rural tourism in the Stara Planina area.

"The project supports poverty alleviation and development of a more dynamic private sector in Serbia," said Aleksandar Nacev, head of the World Bank team that supported the design of the project. "It is a key component of a development program for the agriculture sector that includes the ongoing land project, irrigation project, and agriculture pollution reduction project, all of which are designed to promote economically and environmentally sustainable growth in the sector."

Executive Directors further approved additional financing for three ongoing projects in Serbia: Irrigation and Drainage, Transport Rehabilitation, and Energy Efficiency.

Additional financing of US$50 million will be provided to the Irrigation and Drainage Rehabilitation Project (IDRP), which will support the implementation of priority flood protection works along the banks of the Danube and Sava rivers. This will allow for a significant expansion of flood protection activities, thus reducing the risk from flooding to life, land, crops, property, and infrastructure.

Both the Government of Serbia and the World Bank concluded that given the damages to infrastructure and agricultural land during the severe floods of 2005 and 2006, flood protection will have to be given a higher priority than in the past. Accordingly, the Government of Serbia has requested urgent additional support from the World Bank to scale up flood protection works under the on-going IDRP with the goal of significantly reducing the impact of floods in priority areas in Serbia in the future.

The largest single basin effort covered by the additional financing will be the Tisza River, which cuts through Vojvodine southward to the Danube, and which suffered most severely in 2006. A significant effort will also be mounted along the Tamis, also coming from the north, which suffered worst in 2005. Among the smaller rivers, the Velike Morava south of the Danube will now also be included in the program. Altogether, the additional financing activities could provide mandated protection levels for 500,000 ha of land and 1.8 million people. The additional financing is provided on IBRD terms.

The Transport Rehabilitation Project will receive US$50 million in supplemental financing to support the rehabilitation of an additional 113 kilometers of main and regional roads in Serbia. The project will help improve road safety by incorporating safe road design principles, road safety audits, and eliminating identified accident 'black spots'. It will also support the extension of the very successful performance-based road maintenance contracts for three additional years in the Macva and Kolubara regions.

The project will finance the rehabilitation of an additional 7 sections of the primary road network, which were selected through network analysis: (1) Prokuplje – Mala Plana (M25, 8.3 km; (2) the M3 road between Odzaci and Kula along 23.5 km; (3) the Medjuluzje – Krcevac (M23, 10.4 km) and Krcevac – Topola (M4, 2.64 km); (4) Marcovica (West of Cacak) – Ovcar Banja (M5, 11 km); (5) Kac (East of Novi Sad) – Zabalj (M7, 13.3 km); (6) Kruzni Put – Grocka – Smederevo (regional road R100, along the Danube in the East of Belgrade, 31.9 km); and (7) Valjevo – Pricevici (M4, 12.4 km). The additional financing is provided on IBRD terms.

"The proposed rehabilitation will improve ride quality leading to lower operating cost; it will contribute to increased safety for road users and to lower maintenance costs of the roads," said Martin Humphreys, World Bank Senior Transport Economist.

Under the fifth project approved today, the World Bank will provide US$28 million in additional financing for the Energy Efficiency Project, which will allow the Government to complete the original goal of the project (cost overrun) and scale up energy efficiency improvements to include: rehabilitation of the heat supply system of one large complex of buildings, such as the Nis Clinical Center; lighting in schools; energy efficiency improvements in social buildings, such as orphanages; and energy efficiency improvements in additional schools and hospitals across Serbia.

The additional financing will help Serbia overcome several barriers to the development of the energy efficiency market – in particular the lack of information, lack of coordinated policies, lack of practical examples, and continue the work of bringing together different Government agencies that need to come together to realize the untapped potential of energy efficiency in Serbia. The additional financing will be a blend of an US$18 million IBRD loan and US$10 million concessional IDA credit.

"This project helps Serbia save energy and improve the environment. In the first three schools, which were retrofitted under the project, annual energy consumption was reduced by about 48%. One hospital meanwhile saved 44% of its annual energy consumption," said Varadarajan Atur, World Bank Senior Financial Analyst.

Contacts

In Washington: Vesna Kostic (202) 473 9277, vkostic@worldbank.org

In Belgrade: Mirjana Popovic (381) 30 23 747, mpopovic@worldbank.org