DCN: 2018-KOS-010

Initial Environmental Examinations (IEE)

US Agency for International Development (USAID)

Kosovo

Amendment No. 3 Initial Environmental Examination (IEE)

Program/Project/Activity DataActivity/Project Name: EMPOWER Kosovo

Assistance Objective: A4 – Economic Growth

Program Area: Private Sector Competitiveness

Country(ies) and/or Operating Unit: KOSOVO

Originating Office: Economic Growth Office Date:06/14/2013

PAD Level IEE: Yes No

Supplemental IEE: Yes NoRCE/IEE Amendment: Yes No

DCN of Original RCE/IEE: 2013-KOS-093

DCN of Amendment(s):2013-KOS-104

2015-KOS-036

If Yes, Purpose of Amendment (AMD): Ceiling increase and time extension for Empower Private Sector activity

DCN(s) of All Related EA/IEE/RCE/ER(s):

Implementation Start/End: AMD: Dec 2018- Dec 2020

LOP: September 2013 – December 30, 2020

Funding Amount: AMD$1,500,000 LOP Amount: $28,500,000

Contract/Award Number (if known): AID-167-C-14-00005

IEE Expiration Date (if any): Dec 2018 Reporting due dates (if any): n/a

Recommended Environmental Determination:

Categorical Exclusion: Positive Determination:

Negative Determination: Deferral:

Additional Elements:

Conditions: Local Procurement:

Government to Government: Donor Co-Funded:

Sustainability Analysis (included): Climate Change Vulnerability Analysis (included):

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1. Purpose of Amendment: The purpose of this amendment is to increase the ceiling of IEE for $1,500,000 and extend the timeline of Empower Private Sector activity from December 2018 to December 2020. The activity has a threshold determination of Negative Determination with conditions. There are no new activities in this amendment. All other conditions remain the same. This activity is currently in compliance.

2. Background and Project Description

Empower Kosovo is an integrated approach with two separate activities that seeks to address long-term prospects of sustainable economic development through combining access to credit and more responsive and creative credit instruments with private sector demand in critical areas for competition and employment. This project supports the Mission’s Country Development Cooperation Strategy (CDCS) Development Objective (DO) #2: Increased Investment and Private Sector Employment, Intermediate Result (IR) #2: Increased Competitiveness and Market Linkages in Targeted Private Sector Areas.

2.1 Project Overview: Empower Kosovo project has two separate but related goals: Address long-term prospects of sustainable economic development through combining access to credit

and more responsive and creative credit instruments with private sector demand in critical areas for competition and employment; and

Through support to local NGOs, and other organizations and firms, enhance capacities of the host country organizations to identify, plan, develop, implement, and monitor activities directly funded by USAID using local systems and procedures.Accordingly, the purpose of the Project is two pronged: support sustainable economic development and increase capacities of local entities (NGOs, for profit entities, nonprofit entities, private businesses, service providers etc.) to achieve the above-mentioned goal, resulting in growth-oriented economic activity that provides increased employment opportunities for Kosovo citizens.

Since declaring independence in 2008, Kosovo has continued to make progress in development, both in terms of its economic performance and as a young, multi-ethnic democracy. However, the pace of growth is not nearly enough to have a transformational effect on Kosovo. The International Monetary Fund estimates that Kosovo will need to grow at about 8% per year to halve unemployment within ten years. GDP has been growing at about half that rate, and private investment as a percentage of GDP was essentially unchanged in 2011 from 2007 levels. Unemployment continues to hover at around 45% of the labor force, while labor force participation is the lowest in the region, at about 40%. The large current account deficit (19% of GDP in 2011) is financed primarily through aid and remittances. Indeed, Kosovo is a top ten remittance-receiving country with about 13% of GDP in annual receipts. Both of these streams are highly vulnerable to a continuing economic crisis in Europe.

2.2 Access to finance: The financial sector is stable, although small and not fully developed. There are 9 commercial banks and 17 microfinance institutions, and most commercial banks are foreign owned. Three foreign banks (Pro Credit Bank, Raiffeisen Bank of Kosovo and Nova Ljubljanska Banka) hold approximately 80% of total bank assets. According to

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Kosovo’s Central Bank (CBK) recent quarterly report for December 20121, several factors characterize the banking system:

The performance of the banking system in Kosovo continues to be positive, but with a decline in profitability indicators compared to the previous period. During this period, the ratio of non-performing loans (NPL) to total loans reached to 7.5% from 7.0% in September 2012.

Credit to the private sector in Kosovo is low compared with other countries. Kosovo has a level of domestic savings roughly in line with the peer countries but a much lower level of borrowing. It has limited access to international financial markets; however this is not shown to be a binding constraint as banks have substantial excess liquidity, i.e. deposits and other funds available for lending. Borrowing costs are high compared to other countries, due to higher operational and risk costs of Kosovo banks. Collateral and other conditions for loans are more restrictive than in the comparator countries.

Most Kosovo firms finance investments through their own capital. According to the Riinvest Enterprise Survey of 2011, 74% of firms use own capital and only 20% use banks as a source of investment capital. In that same survey, business representatives identify finance as the major barrier for new enterprises. For new businesses, access to finance might be a major constraint due to high collateral requirement and the (up to 300% of the loan value) and the cost of borrowing is even higher than the average. Many banks are reluctant to provide any financing for startups. While many businesses find it challenging to obtain credit, it is particularly difficult for female-owned businesses and other disadvantaged groups. Often these underserved groups do not have adequate collateral in their name, which precludes many from accessing bank financing.

One of the tools that can be used to expand access to credit for the private sector is partial loan guarantees or partial payout for a non-performing loan. USAID Kosovo has supported several partial loan guarantees through USAID’s Development Credit Authority (DCA).

The country’s first partial loan guarantee was established in 2006 with Raiffeisen Bank - a 10-year and $10 million transaction for lending to agriculture SMEs. The DCA was fully utilized within two years, demonstrating the enormous demand and potential from banking partners and SMEs. In addition to fully utilizing the guarantee, Raiffeisen also began lending to the agriculture sector which it had previously assessed as too risky. Throughout the guarantee, the bank increased its agro-lending staff from zero to sixteen. It is this type of transformation, both within the bank as well as the sector, in which guarantees can affect in an economy. A recent evaluation of this DCA identified some of the following conclusions:

“The DCA project has had an impact on agro-lending that far exceeds the amount of its exposure and its program costs.”

“The DCA project is bringing small-scale agro lending into Kosovo’s financial mainstream.” “Despite the success of the DCA project, there still remains a tremendous unfilled demand for agricultural

credit in the country.” As a result of this success, USAID recently established an additional DCA partial credit guarantee with

six local banks to encourage increased lending to the agricultural sector. This recent DCA provides a combined coverage of $26 million, which is shared among the six participating banks.

While DCA is effective, it is also restricted to a limited time period and a maximum lending ceiling. Once the set time limit and/or lending ceiling is reached, no further loans can be posted under the credit guarantee. Further, since DCA is managed by USAID in Washington, no local capacity/institution is developed to establish and manage future credit guarantee schemes. Consequently, USAID explored the feasibility of a more sustainable, local credit guarantee institution and commissioned the Kosovo Credit Guarantee Facility Feasibility Study in May 2012.

This study concluded that a local credit facility was certainly feasible and would “add to the financial infrastructure of Kosovo in a novel and collaborative manner.” It especially noted the strong interest of the GOK. The impact of the proposed local credit facility was documented as:

1 Quarterly Assessment of the Economy, Q4 2012, Kosovo Central Bank

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47,000 new loans over the first 12 years of operation, which results in a total of 668 million euro in new lending

66,000 new jobs created

The Government and donors will create an umbrella framework through which various projects can be housed. USAID/Kosovo will provide the initial monies and technical assistance to create the facility. It will then give a set amount of capital specifically for loan guarantees in targeted sectors with appropriate targets for women, minorities and under-served groups. Other donors are also ready to contribute capital for loan guarantees. KfW, ADA and UNDP have now completed their own feasibility assessments after USAID using our assessment as a starting point. Each assessment builds upon the previous one and is a remarkable, informal donor sharing.

USAID/Kosovo has drafted a non-binding Memorandum of Understanding for the donors and the Government of Kosovo that commits everyone to the single entity idea, lays out how much each will contribute, and what form the contribution shall take – technical assistance or initial capital. Each donor will then use this document for their own internal discussions, clearances and help move forward their own procurement processes. The target date for signing the Memorandum is end of August 2013. It will be shared with all potential bidders once signed.

2.3 Private sector: Sufficient private sector growth is necessary to address many of the issues mentioned in the previous section. Transformational economic growth, however, remains elusive. Kosovo is simply not seeing the private sector growth predicted to occur under a competitive, free-market economy. Improvements in the regulatory environment that would give space to the private sector to drive growth can only open the door. It is firms – and only firms - that are where sustainable economic growth happens. While other USG efforts will work to address the business environment, there is still a great need for assistance to the private sector itself and its necessary inputs for businesses to take advantage of that open door and step through.

Kosovo will only see transformational economic growth when sufficiently productive private investment and entrepreneurship take place that enhance competitiveness, enable firms to grow, and create wealth in doing so. So what is constraining growth in Kosovo?

The profile of the Kosovo economy still shows characteristics of a developing economy. Over 98 percent of businesses are family owned, micro, small or medium-sized enterprises (SME). The recent UNDP Kosovo Human Development Report 2012 noted that Kosovo’s marketplace is unbalanced. There has been a high emphasis on enterprise creation in an environment already saturated with low value-added tertiary sector firms. To transform this very narrow pattern of growth into a much more dynamic and encompassing private sector, the Report recommends, among other things, a leap in size from small to medium-sized businesses (including access to finance for new and expanding businesses–particularly those run by women and youth).

Private investment has remained at 20-22% of GDP for the past five years, while public investment has increased from 5% to 12% of GDP.

Economic activity has been concentrated mostly in the services sector, which has grown through large remittance inflows and the large international presence in Kosovo. Substantial productive investment in the tradable goods sector has not taken place yet.

The large current account deficit (19% of GDP in 2011) is financed primarily through aid and remittances. Indeed, Kosovo is a top ten remittance-receiving country with about 13% of GDP in annual receipts. Both of these streams are highly vulnerable to a continuing economic crisis in Europe. Although remittances have continued to be high and stable thus far, only about 11% of inward flows are used for investment, with the majority of funds going for current consumption.

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While Kosovo has a very high negative international trade balance (close to 45% of GDP in 2011) exports are projected to increase faster than imports and, as a result, this imbalance should improve at least slightly. Inflation has remained low, due to the adoption of the Euro which has seen limited currency fluctuations and has contributed to relatively sound fiscal policies. The impact of the recent global financial crisis had limited impact on Kosovo’s economy, due to the low level of integration of the local economy with international markets.

Although civil society is only beginning to play a proactive role in advocacy and oversight, Kosovo does have a wide range of civil society organizations (CSOs) and an active media. When citizens do engage around issues, it is primarily through political parties, and citizen- and community-based initiatives. Key issues for citizens and their advocacy groups remain the lack of economic opportunities, and frustration with Government institutions that fail to address immediate needs related to education, job opportunities, public services, and equal access for women, youth, and minorities. Improvements in the conduct of elections notwithstanding, only 17% of Kosovo citizens agree that elections in Kosovo are democratic and, in reaction, there is a decrease in the willingness to vote. The incomplete integration of minorities – especially Kosovo-Serbs – limits achievement of a more inclusive government.

Background and Description of Empower private Sector Activity:

The goal of Empower private Sector Activity is to increase competitiveness and employment in the private sector. The purpose of Empower is to increase competitiveness in growth-ready sectors and facilitate inclusive private sector job-creation.

USAID/Kosovo has received $500,000 in FY 2017 SAAA-ESF-OCO funds to support workforce development programming through Empower, which targets unemployed and economically disenfranchised populations who may be more susceptible to radicalization. Priority interventions which have been repeatedly showcased in the Balkans context as the most effective means at reaching youth vulnerable to violent extremism will be undertaken.

The Empower private Sector activity has two objectives:

1. Increasingly competitive and market oriented SMEs2. Job creating workforce development interventions launched

The CVE-goals fit directly within the existing second objective of the activity: “Job creating workforce development interventions launched.” Under the second objective, Empower currently addresses unemployment by improving economic opportunities for youth and creating jobs by providing workforce development opportunities through on-the-job trainings, internships, and apprenticeships. CVE-related interventions are consistent with activities currently implemented under Empower. With these additional funds, the activity will prioritize skills development directly linked with employer needs and employment opportunities, and will focus efforts in Foreign Terrorist Fighter (FTF) hotspots in Kosovo. Under USAID/Kosovo’s comprehensive approach to CVE, if unemployed youth can successfully enter the workforce, then they will be more resistant to radical recruitment.

An IEE for Empower Kosovo PAD was approved earlier, DCN: 2013 – KOS – 093, amended under DCN:2013-KOS-104 and DCN:2015-KOS-036. This amendment is the third one for the same activities to be implemented under Components 1 and 2 of the Empower Private Sector activity.

Component 1: Increasingly competitive and market-oriented SMEs --Through support to local NGOs, and other organizations and firms, enhance capacities of the host country organizations to identify, plan, develop, implement, and monitor activities directly funded by USAID using local systems and procedures.

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Defined/Illustrative Activities Potential Impacts

1.1 Support SME’s by providing trainings, career opportunities and skill building for employees

No adverse impact anticipated

1.2 Education, technical assistance, or training programs ((internships, entrepreneurships, on- job trainings) ) except to the extent such programs include activities directly affecting the environment

No adverse impact anticipated

1.3 Analyses, studies, academic or research workshops and meetings

No adverse impact anticipated

1.4 Manufacturing/production of industrial facilities enterprises receiving firm-level assistance under

Potential impacts on air, water, land, human health

1.5 Donation of production and processing equipment for Associations and Businesses

Potential impacts on air, water, land, human health

Component 2: Job-creating workforce development interventions launched --Through support to local NGOs, and other organizations and firms, enhance capacities of the host country organizations to identify, plan, develop, implement, and monitor activities directly funded by USAID using local systems and procedures.

Defined/Illustrative Activities Potential Impacts

2.1 Production of promotional and training media material and documentaries

No adverse impact anticipated

2.2 Education, technical assistance, or training programs (internships, entrepreneurships, on- job trainings) except to the extent such programs include activities directly affecting the environment

No adverse impact anticipated

2.3 Analyses, studies, academic or research workshops and

No adverse impact anticipated

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Defined/Illustrative Activities Potential Impacts

meetings

2.4 Business skills training – generic in nature No adverse impact anticipated

2.5 Manufacturing/production of industrial facilities enterprises receiving firm-level assistance

Potential impacts on air, water, land, human health

2.6 Donation of production and processing equipment for Associations and Businesses

Potential impacts on air, water, land, human health

3. Baseline Environmental Information

3.1. Locations Affected and Environmental Context: Kosovo, located in the Central Balkans, covers an area of 10,840 square kilometers, bounded by Serbia to the north and east, Macedonia to the southeast, Albania to the southwest, and Montenegro to the west. Topographically, it is an elevated basin enclosed by mountain ranges and hills. Most of the area of Kosovo consists of two plains divided by a hilly ridge running north to south. The capital, Prishtina, is located in the Kosovo Plain in the east and the Dukagjin Plain is in the west. The Sharr Mountains are a major range that form the southern border and are shared with Serbia and Albania. The Albanian Alps form the western border and are shared with Montenegro and Albania.

Kosovo’s climate is influenced by its proximity to the Adriatic and Aegean Seas as well as the continental European landmass to the north. The overall climate is a modified continental type, with some elements of a sub-Mediterranean climate in the extreme south and an alpine regime in the higher mountains. Winters are cold with an average temperature in January and February of 0 degrees centigrade and with significant accumulation of snow, especially in the mountains. Summers are hot, with extremes of up to 40 degrees. The average annual rainfall in Kosovo is 720 mm but can reach more than 1,000 mm in the mountains. Summer droughts are not uncommon. The varied elevations, climatic influences, and soils within Kosovo provide a wide diversity of microhabitats to which plant and animal species are adapted.

Kosovo contains the upper watersheds of four rivers that flow into three different Seas: the Adriatic, Aegean, and Black. The Iber River flows into the Danube River, making it part of one of Europe’s major river systems. Kosovo provides a catchment for water flowing to neighboring countries, but because of its elevated topography, does not receive water from outside its borders. There is only one major dam in Kosovo that was constructed to generate hydroelectricity, but neighboring countries have constructed dams on rivers downstream of Kosovo. Many stretches of rivers have been severely disrupted by sand and gravel mining and attempts to control river flooding with artifical levees. There are a number of small to medium-sized lakes in Kosovo including some alpine lakes of glacial origin that are of scientific and scenic interest.

Kosovo is exceptionally rich in plant and tree species considering its relatively small area. To date, approximately 1,800 species of vascular plant species have been confirmed through field collection, and botanical experts believe that the actual number is closer to 2,500. This hypothesis cannot be confirmed until a comprehensive floral survey has been conducted. A flora list recently compiled by the Kosovo and Albania Academy of Sciences lists a total of 4,141 vascular plant species found in the combined area of

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the two countries. About 150-200 plant species that grow in Kosovo are found only in the Balkans. (Balkans endemics) and 13 are found only in Kosovo (Kosovo endemics). The last Kosovo endemic plant was found in 1985, but botanists believe that others will be found when field surveys begin again.

The current Protected Area System (PAS) covers slightly less than 5% of Kosovo’s area, including one national park, 38 natural monuments, and 2 protected landscapes, classified according to IUCN protected area designation criteria. The bulk of this area is in Sharr Mountain National Park. A proposed new national park would more than double the PAS area, almost reaching the internationally accepted norm of 10% of land area protected.

Pursuant to 22 CFR 216.3(a)(2)(iii), the Mission has reviewed the potential environmental impacts of this proposed activity, and determined that the Empower Project is not likely to have a significant impact on the environment unless noted otherwise for production and processing elements of project activities, particularly in manufacturing industries. However, the objective of this type of assistance is to provide technical support on cost-effective, environmentally sound production technologies to entrepreneurs.

3.2. Description of Applicable Environmental and Natural Resource Legal Requirements Policies, Laws, and Regulations: Kosovo is adopting laws that are harmonized with EU environmental standards. However, these laws do not have the needed sub-laws, regulations, and policies needed for implementation. Key environmental policy documents include the Kosovo Environmental Strategy 2005-2015, adopted by Government of Kosovo in July 2004, and the Kosovo Environmental Action Plan 2006-2010 (KEAP), the midterm roadmap for implementation of the Environmental Strategy. Many of the 52 priority projects listed Strategy’s annex are being implemented.

The Ministry of Environment and Spatial Planning (MESP) is the lead environmental institution responsible for the preparation and implementation of environmental laws. They are supported by the 30 municipalities. A municipality may exercise responsibility for those environmental matters originating, or likely to originate, within their municipality, if programs can be handled, controlled, prevented, financed, or managed. Municipal responsibilities include establishing standards and ensuring compliance with standards, protection of the environment within the municipality, and establishing measures consistent with sustainable economic development.

The Kosovo Assembly has adopted several laws related to the environment, all of which include use of different economic instruments. The State of Environment Report in Kosovo is published every two years by Kosovo Environmental Protection Agency (KEPA). KEPA collects the environmental data from monitoring institutions, companies, operators and different establishments, publications, reports and other sources. The Report establishes a firm foundation for cooperation and coordination with the European Environmental Agency (EEA) and EIONET2. The European Partnership priorities provide the basic framework for harmonization with EU environmental legislation. Kosovo has made advances in legislation concerning air quality and water quality and the new environmental laws are an important step.

The Fund for Environmental Protection was established in Article 77 of the Law for Environmental Protection. The draft Eco Fund requirement was drafted in 2005 to support financial investments financed by the Kosovo Assembly through revenues from environmental taxes and be used for waste collection and disposal, utilization of biomass, energy efficiency and reduction of CO2 emissions, wastewater treatment plants, monitoring systems and equipment for inspectors, and more.

The Law on Waters (2004/24) was adopted on October 14, 2004. The Kosovo Water Law sets provisions for the development of the Water Management Strategy and Action Plan. The sub-legal act for drafting of the Water Resources Management Plan has been issued. Kosovo’s national policy includes the process of EU integration. One of the challenges is the fulfillment of EU environmental standards and harmonization of national legislation with EU legislation. Kosovo is working to harmonize with EU directives through Frame Directive for Waters (2006/12/EC), Directive for Urban Contaminated Waters (91/271/EEC),

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Directive for Potable Water (98/83/EC), and Directive for Nitrates (91/676/EEC). Apart from the Law on Environmental Protection (2003), the Law on Air Protection (2004) was drafted in accordance with certain EU Directives. The Law categorizes main pollution sources, sets basic air pollution indicators and obligations, and recommends adoption of limits for air discharge according to EU and World Health Organization (WHO) standards. In its harmonization efforts EU directives, Kosovo is working through the Frame Directive for Environmental Air Quality (2006/62/EC), Directive for Value Limits of SO2, NOx, particulate matter) and lead in Environmental Air (99/30/EC), Directive for Benzene and Carbon Monoxide (2000/3/EC), and Directive for Ozone (2002/3/EC) to reach harmonization with EU standards.

The Waste Law was approved by the Assembly on July 22, 2005. This Law was prepared according to relevant EU Directives and the experiences of neighboring countries. The most important document which will need to be approved and enforced is the National and Municipal Waste Management Strategy with Action Plan, where main directions for waste management will be defined and long-term needs in local and national level will be assessed. In trying to harmonize with EU standards, Kosovo is working through Directive for Waste (2006/12/EC), Directive for Hazardous Waste (91/689/EC), Directive for Waste Dumping Sites (99/31/EC), Directive for Waste Incineration (2000/76/EC), and Directive for Hazardous Substances (67/548/EEC).

3.3. Other Applicable Laws and Regulations: Law on Environmental Impact Assessment 2010/03-L-214: Law is approved by Assembly, date

23.09.2010 and promulgated by the Decree of the President of the Republic of Kosovo No. DL-048-2010, Date 14.10.2010

Law on Noise Protection 2007/02-L102: Law is approved by Assembly of Kosovo, date 30 March 2007 and promulgated by UNMIK Regulation no. 2008/15 of date 17 March 2008.

Law on Hunting 2005/02-L53: This Law is applicable together with the UNMIK Regulation no. 2006/41 of 11.08.2006.

Law on Environmental Protection 2009/03-L-025: Law is approved by Assembly, date 26.02. 2009 and promulgated by the Decree of the President of the Republic of Kosovo No. DL-007-2009, date 19.03.2009.

Amendment on the Law No.2003/3 on the Forests of Kosovo 2004/29: Taking into consideration the necessity to change and amend Law No. 2003/3 on the Forests of Kosovo, for the purpose of having a fully applicable law, and given the changes in the Criminal Code of Kosova.

Law on Animal Welfare 2005/02-L10: This Law is applicable together with the UNMIK Regulation no.2005/24 of 09.05.2005.

Law on Nature Conservation 2005/02-L18: This Law is applicable together with the UNMIK Regulation no. 2006/22 of 24.04.2006.

Law on Nature Protection 2010/03-L-233: Law is approved by Assembly, date 30.09.2010 and promulgated by the Decree of the President of the Republic of Kosovo No. DL-054-2010, Date 18.10.2010.

Law on water 2004/24: This Law regulates issues relating to the management, planning, protection and institutional responsibilities in regard to water and Water Resources.

Law on Construction 2004/15: This Law shall determine the main requirements for design, construction, and use of construction materials, professional supervision, as well as procedures for construction permits, use permits and building inspection.

Law on Construction Products 2005/02-L14: This Law is applicable together with the UNMIK Regulation no. 2005/28 of 17.05.2005.

Law on Air Protection 2004/30: The purpose of this Law is to regulate and guarantee the rights of citizens to live in a healthy and clean air environment, whilst protecting human health, fauna, flora and natural and cultural values of the Kosovo’s environment.

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Law on Air Protection from Pollution 2010/03-L-160: Law is approved by Assembly, date 25.02.2010 and promulgated by the Decree of the President of the Republic of Kosovo No. DL-012-2010, date 12.03.2010.

Law on Public Health 2007/02-L78: Law is approved by Assembly of Kosovo, date 22 February 2007 and promulgated by UNMIK Regulation no. 2008/6 of date 08 February 2008.

3.4. Country/Ministry/Municipality Environmental Capacity Analysis: The environment—including environmental issues, problems, and threats to the environment—in Kosovo receives very little attention and is a low priority in the government’s agenda. To its credit, Kosovo is adopting new environmental laws and policies, and government institutions are struggling to plan and implement programs. There are some success stories, but overall, environmental awareness is low and the implementation of programs to address threats and issues is small. However, it is not likely that Empower may have a significant impact on the environment unless noted otherwise for production and processing elements of project activities, particularly in manufacturing. Moreover, the objective of this type of assistance is to provide technical support on cost-effective, environmentally sound production.

3.5. Sustainability Analysis: It is anticipated that many project activities will not have any effect on the environment and human health in Kosovo. However, sustainability from an environmental perspective is a fundamental concern for the project, aiming to contribute for better inclusive sustainable efforts. Implementers will consider the sustainability of all activities, but in particular: all small scale rehabilitation of village roads, infrastructure, village bridges, village-based water supply systems, small scale production equipment, production/processing equipment for agriculture associations, and utilize ERCs and EMMPs..

3.6. Climate Change Vulnerability Analysis: The climate change vulnerability analysis has not been completed, but considerations throughout the project will be given to whether and how the project will affect or be affected by medium, long-term climate change (CC) impacts (changes in rainfall, temperature, length of growing season, land conversion, etc.) and how the project should be adjusted in consideration of climate change vulnerabilities.

4. Analysis of Potential Environmental Impact: The Mission has reviewed the potential environmental impacts of this proposed activity, and determined that the Empower Project is not likely to have a significant impact on the environment unless noted otherwise for manufacturing elements of project activities, or loans given to agriculture sector. However, the objective of this type of assistance is to provide technical support on cost-effective, environmentally sound production/manufacturing technologies to entrepreneurs. It is possible that certain firm-level interventions could result in adverse environmental impacts. To ensure that the goals of the project are met, it is important not just from an environmental standpoint but also from an economic growth standpoint that environmental documents, such as mitigation measures will be provided in order to avoid any potential environmental impact.

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Recommended Environmental Actions

4.1 Recommended Mitigation Measures for Component 1: Increasingly competitive and market-oriented SMEs (Through support to local NGOs, and other organizations and firms, enhance capacities of the host country organizations to identify, plan, develop, implement, and monitor activities directly funded by USAID using local systems and procedures.)

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Defined/Illustrative Activities Potential Impacts Mitigation MeasuresRecommended

Threshold Determination

1.1 Support SME’s by providing trainings, career opportunities and skill building for employees

No adverse impact anticipated NACategorical Exclusion

1.2Education, technical assistance, or training programs (internships, entrepreneurships, on- job trainings) except to the extent such programs include activities directly affecting the environment

No adverse impact anticipated NACategorical Exclusion

1.3 Analyses, studies, academic or research workshops and meetings No adverse impact anticipated NA

Categorical Exclusion

1.4 Manufacturing/production of industrial facilities enterprises receiving firm-level assistance under

Potential impacts on air, water, land, human health

Each site-specific activity that has the potential to result in significant adverse environmental, health, and safety impact requires preparation by the Implementing Partner (IP) of an Environmental Mitigation and Monitoring Plan (EMMP) and then approval the Contracting Officer’s Representative (COR)/Assistance Officer’s Representative (AOR) and the Mission Environmental Officer (MEO) prior to the start of activity

Negative Determination

1.5 Donation of production and processing equipment for Associations and Businesses

Potential impacts on air, water, land, human health Same as 3.1.4 above

Negative Determination

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4.2 Recommended Mitigation Measures for Component 2: Job-creating workforce development interventions launched --Through support to local NGOs, and other organizations and firms, enhance capacities of the host country organizations to identify, plan, develop, implement, and monitor activities directly funded by USAID using local systems and procedures.

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Defined/Illustrative Activities Potential Impacts Mitigation MeasuresRecommended

Threshold Determination

2.1 Production of promotional and training media material and documentaries

No adverse impact anticipated NACategorical Exclusion

2.2 Education, technical assistance, or training programs (internships, entrepreneurships, on- job trainings) except to the extent such programs include activities directly affecting the environment

No adverse impact anticipated NACategorical Exclusion

2.3 Analyses, studies, academic or research workshops and meetings No adverse impact anticipated NA

Categorical Exclusion

2.4 Business skills training – generic in nature No adverse impact anticipated NA

Categorical Exclusion

2.5 Manufacturing/production of industrial facilities enterprises receiving firm-level assistance

Potential impacts on air, water, land, human health

Each site-specific activity that has the potential to result in significant adverse environmental, health, and safety impact requires preparation by the Implementing Partner (IP) of an Environmental Mitigation and Monitoring Plan (EMMP) and then approval the Contracting Officer’s Representative (COR)/Assistance Officer’s Representative (AOR) and the Mission Environmental Officer (MEO) prior to the start of activity

Negative Determination

2.6 Donation of production and processing equipment for Associations and Businesses

Potential impacts on air, water, land, human health Same as 3.2.5 above

Negative Determination

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4.3 Categorical Exclusion Activities: A categorical exclusion is recommended for activities:

1.1;1.2 in Component 1 and activities 2.1, 2.2, and 2.4 in Component 2 under:

22 CFR 216.2(c)(2)(i)6.2(c)(3) Education, technical assistance, or training programs except to the extent such programs include activities directly affecting the environment (such as construction of facilities, etc.) and

and 1.3 in Component 1 and 2.3 in Component 2 under:

22 CFR 216.2(c)(2)(iii) Analyses, studies, academic or research workshops and meetings.

4.4 Negative Determination Activities: Under §216.3(a)(2)(iii), a negative determination with conditions is recommended for activity 1.4 in Component 1 and activities 2.4 and 2.5 in Component 2 that have the potential for adverse impact on the natural or physical environment. Specific terms and conditions are presented below in Section 4.5.

4.5 Conditions for Components 1 and 2:

4.6 For Activities 1.4; 1.5; 1.6; 2.5; 2.6in Component 1 and 2 that Have the Potential to Result in Significant Adverse Environmental, Health, and/or Safety Impact 4.4 apply.

4.6.1 Prior to initiating site-specific activities, the Implementing Partner (IP) shall prepare Environmental Review Checklists (ERCs) with Environmental Mitigation and Monitoring Plans (EMMPs) in the format provided in the Annex 1 of this IEE. The COR/AOR, MEO, and Europe and Eurasia Bureau Environmental Officer (BEO) shall approve the ERCs with EMMP(s) prior to start of site-specific activities. For each site-specific activity, the ERC/EMMP shall be attached to the signed Certification of No Adverse or Significant Effects on the Environment (See ERC Section I) and sent by the implementer to the COR/AOR for his or her records and copied to the Mission Environmental Officer (MEO) and Europe and Eurasia Bureau Environmental Officer (BEO).

4.6.2 After completion of each site-specific activities 2.5 and 2.6 in Component 2, the IP shall sign a Record of Compliance with the EMMP (ERC Annex I ) certifying that the organization met all applicable EMMP conditions and submit it to the COR/AOR. The COR/AOR shall keep the original for the project files and provide a copy to the MEO and BEO.

4.6.3 ERCs/EMMPs shall be captured in annual work plans, and therefore budgeted for and reviewed for adequacy at least annually.

4.7 USAID Monitoring and Reporting:

4.7.1 The AOR/COR, with the support of the MEO, is responsible for monitoring compliance of activities by means of desktop reviews and site visits.

4.7.2 If at any time the project is found to be out of compliance with the IEE, the AOR/COR or MEO shall immediately notify the BEO.

4.7.3 A summary report of Mission’s compliance relative to this IEE shall be sent to the BEO on an annual basis, normally in connection with preparation of the Mission’s annual environmental compliance report required under ADS 203.3.8.5 and 204.3.3.

4.7.4 The BEO or his/her designated representative may conduct site visits or request additional information for compliance monitoring purposes to ensure compliance with this IEE, as necessary.

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4.8 Implementing Partner (IP) Monitoring and Reporting

4.8.1 If an individual activity is found to pose significant adverse environmental effects that have not been identified and addressed in ERCs/EMMPs that have been approved for the project, new ERCs/EMMPs shall be developed to include environmental safeguards for such effects.

4.8.2 IPs shall report on environmental compliance requirements as part of their routine project reporting to USAID.

5. Mandatory Inclusion of Requirements in Solicitations, Awards, Budgets and Workplans

5.1 Appropriate environmental compliance language, including limitations defined in Section 6, shall be incorporated into solicitations and awards for this activity and projects budgets shall provide for adequate funding and human resources to comply with requirements of this IEE.5.2 Solicitations shall include Statements of Work with task(s) for meeting environmental compliance requirements and appropriate evaluation criteria.5.3 Environmental mitigation and monitoring requirements, when available, shall also be included in solicitations and awards.5.4 The IP shall incorporate conditions set forth in this IEE into their annual work plans.5.5 The IP shall ensure annual work plans do not prescribe activities that are defined as limitations, as defined in Section 6. 5.6 The USAID Mission will include an indicator for environmental compliance as part of the project’s performance monitoring plan.

6. Limitations of the IEE: This IEE does not cover activities (and therefore should changes in scope implicate any of the issues/activities listed below, a BEO-approved amendment shall be required), that:

6.1 Normally have a significant effect on the environment under §216.2(d)(1) [See http://www.usaid.gov/our_work/environment/compliance/regulations.html]6.2 Support project preparation, project feasibility studies, engineering design for activities listed in §216.2(d)(1);6.3 Affect endangered species;6.4 Result in wetland or biodiversity degradation or loss;6.5 Support extractive industries (e.g. mining and quarrying);6.6 Promote timber harvesting;6.7 Provide support for regulatory permitting;6.8 Result in privatization of industrial or infrastructure facilities;6.9 Lead to new construction of buildings or other structures; 6.10 Assist the procurement (including payment in kind, donations, guarantees of credit) or use (including handling, transport, fuel for transport, storage, mixing, loading, application, cleanup of spray equipment, and disposal) of pesticides or activities involving procurement, transport, use, storage, or disposal of toxic materials and /or pesticides (cover all insecticides, fungicides, rodenticides, etc. covered under the Federal Insecticide, Fungicide, and Rodenticide Act); and6.11 Procure or use genetically modified organisms.

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7. Revisions

Under §216.3(a)(9), if new information becomes available that indicates that activities covered by the IEE might be considered major and their effect significant, or if additional activities are proposed that might be considered major and their adverse effect significant, this environmental threshold decision will be reviewed and, if necessary, revised by the Mission with concurrence by the BEO. It is the responsibility of the USAID COR/AOR to keep the MEO and BEO informed of any new information or changes in the activity that might require revision of this IEE.

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8. Recommended Environmental Threshold Decision Clearances:

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Approval : __________________________________________Lisa Magno, Acting Mission Director

_____________________Date

Clearance:

Clearance:

___________________________________________Paul Vaca, Acting Deputy Mission Director

___________________________________________Perihan Ymeri-Ustaibo, Mission Environmental Officer

_____________________Date

_____________________Date

Clearance :

Clearance :

___________________________________________Brian Martalus, EGO Director

___________________________________________Flora Arifi, EGO/Activity Manager

_____________________Date

_____________________Date

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Concurrence: ___________________________________________Mark KamiyaE&E Bureau Environmental Officer

____________________Date

Distribution:

IEE File

MEO (to also provide a copy to AOR/COR)

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