ZLa/ 3 70 - IEDocument of

The World Bank

FOR OFFICIAL USE ONLY

Repwt No. P-6524-EE

MEMORANDUM AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO TEE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

IN AN AMOUNT EQUIVALENT TO US$2.0 MILLION

TO

TRE REPUItLIC OF ESTONIA

FOR A

HAAPSALU AND MATSALU BAYS ENVIRONMENT PROJECT

MARCH 21, 1995

This document has a restricted distributioni and may be used by recipients only in the perfonnance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EOUJIVALENTSas of January 16, 1995

Currency Unit = Estonian Kroon (EEK)I EEK = US $0.08

US SI = EEK 12.66US $1 = SEK 13US SI = FIM 4.7

WEIGHTS AND MEASURESMetric System

I metric ton = 1,000 kilograms = 2,205 pounds (Ibs)I kilometer (km) = 1,000 meters (m) = 3,281 feet (ft)I meter (m) = 3.281 feet (ft)I centimeter (cm) = 10 millimeters (mm)I millimeter (mrm) = 0.1 centimeter (cm)I cubic meter (m3 ) 35.3 cubic feet (cu ft)

ABBREVIATIONS AND ACRONYMS

ATT = Area Task Team for Matsalu Bay AreaDM = Deutsch Mark

EMC = Environmental Management ComponentEU (PHARE) = European Union Assistance Program for Central and Eastern

EuropeFSU = Former Soviet Union

GDP = Gross Domestic ProductGOE = Government of Estonia

HELCOM = Baltic Marine Environment Protection Commission (HelsinkiCommission)

HWW = Haapsalu Water WorksIBRD = International Bank for Reconstruction and Development (World

Bank)JCP = Baltic Sea Joint Comprehensive Environmental Action

ProgrammeMOE = Ministry of EnvironmentMOH = Municipality of Haapsalu

PIU = Project Implementation UnitPSC = Project Steering Committee

WWF = World Wide Fund for NatureWWIC = Water and Wastewater Improvement Component

ESTONIAN FISCAL YEAR

January 1 - December 31

FOR OFFICIAL USE ONLY

HAAPSALU AND MATSALU BAYS ENVIRONMENT PROJECT

Loan and Proiect Sununar

Borrower: Republic of Estonia

Beneficiaries: Haapsalu Water Works (HWW)

IBRD Loan Amount: US $2.0 million equivalent

Ternms: Fifteen years, including five years of grace, at the Bank's standard variableinterest rate.

Onlending Terms: Fourteen years, with four years grace, from the Ministry of Finance (MOF)to the Haapsalu Water Works (HWW) and the Municipality of Haapsalu atIBRD variable interest rate plus 1 percent. The onlending currency would bea single foreign denomination chosen by the MOF.

Financing Plan: Local Foreign Total--US $ million -----

IBRD, (loan) 0.73 1.27 2.00BITS, Sweden, (grant) 0.02 1.58 1.60Min. of Environment, Finland, (grant) 0.00 1.02 1.02Min. of Environment, Denmark, (grant) 0.42 0.18 0.60Swedish Env. Protection Agency, (grant) 0.23 0.10 0.33EU (PHARE), (grant) 0.20 0.10 0.30Government of Estonia 2.02 0.24 2.26Municipality of Haapsalu 0.26 0.00 0.26

TOTAL PROJECT COSTS 3.89 4.48 8.37

Estimated Closing Date: June 30, 1999

Poverty Category: N/A

Environment Category: B

Staff Appraisal Report: Report No. 13907 EE

Map: IBRD No. 26164

This document has a restricted distnbution and may be used by recipients only in the performance of their|official duties. Its contents may not otherwise be disclosed without World Bank authorization.

MEMORANDUM AND RECOMMENDATION OF THE PRESIDENTOF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE EXECUTIVE DIRECTORSON A PROPOSED LOAN

TO THE REPUBLIC OF ESTONIAFOR THE HAAPSALU AND MATSALU BAYS ENVIRONMENT PROJECT

1. I submit for your approval the following memorandum and recommendation on a proposedloan to the: Republic of Estonia for the equivalent of US $2.00 million to help finance a project for theenviromnent. The loan would be at the Bank's standard variable interest rate, with a maturity of fifteenyears, including five years of grace.

2. This proposed project would be financed in association with grant financing by theGovermnents of Denmark, Finland, and Sweden, and EU (PHAPn) for a total amount of US $3.85million equivalent.

3. Country/Sector Background. Estonia is a country covering 45,200 kriZ, with a populationof about 1.6 million located on the eastern shore of the Baltic Sea. Ethnic Estonians make upapproximately 62 percent of the population, while ethnic Russians constitute the country's largest minoritywith 30 percent of the population. During the period of Soviet rule, Estonia had a strong economy basedon relatively soplhisticated industries and agriculture, and enjoyed the highest standard of living anongthe republics of the former Soviet Union. Since regaining independence in 1991, Estonia has initiatedmajor political and economic reforms which have brought it from a centrally planned to a transitionalmarket economy. In this process, it has experienced adjustment shocks common to many economies intransition, characterized by a significant decline in productivity and high inflation rates, with the grossdomestic product (GDP) declining sharply as a result of the collapse of trading relations with Russia andother former Soviet Republics.

4. The Govermment of Estonia (GOE) has been pursuing cconomic reform and stabilization,including price and trade liberlization. The liberalization of prices begun in December 1989 marked thefirst step in the country's formal macroeconomic stabilization program. Since then, Estonia has beensuccessful in containing monetary and fiscal deficits. Initially, prices increased sharply as the distortedrelative prices inherited from the Soviet system adjusted to world levels. Tight fiscal discipline helpedassure the success of the currency board scheme under which the new currency, the kroon, wasintroduced in June 1992. The kroon is fully backed by foreign exchange and has remained pegged atEEK 8 per DM since its introduction. Net internatioral reserves increased 20 percent from 1993 to 1994.The annual inflation rate fell from 89 percent in 1993 to 41 percent in 1994 and is projected to declinefurther, to 6 percent in 1998. The estimated per capita income level in 1993 was US $3,040. Outputstarted to recover in the second quarter of 1993, and the Bank projects 5 percent annual real GDP growththrough the end of the decade.

5. The Bank's overall strategy in Estonia is to support the country's efforts to acceleratestructural reforms leading to a full transition to a market4based economy and, at the same time, to supportefficient investments in high priority sectors to facilitate the return to economic growth. To date the Bankhas provided the GOE with a Rehabilitation Loan of US $30 million in October 1992 (Report No. 3525-EE), US $12 million in support of a Highway Maintenance Project in May 1994 (Report No. 3731-EE),US $38.4 million for a District Heating Rehabilitation Project in May 1994 (Report No. 3740-EE), US$10 million for a Financial Institutions Development Project in October 1994 (Report No. 3803-EE) and

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US $18 million for a Health Project in January 1995 (Report No. 3835-EE). Implementation of theseprojects is proceeding satisfactorily.

6. Infrastructure rehabilitation and development is considered one Estonia's priorities forsupport. The recently completed Public Expenditure Review, jointly prepared by the GOE and ;he Bank,highlighted the need to support investments in energy, transport, and environmental services, includingimproved water supply and wastewater treatmnent. The priority given to investments for environmnentalservices was justified by the need to improve the quality and reliability of drinking water and to addressthe water quality problems and health risks created by the discharge of partially treated and untreatedwastewater to water courses and the marine environment. The proposed Project would support theimprovement of water quality and wastewater services in Haapsalu, and demonstrate the application ofa variety of envirornental management methods to support environmentally sound development in thecatchment area of Matsalu Bay.

7. The Project area includes two scenic bays on the Baltic coast of western Estonia - HaapsaluBay to the north which is dominated by the historic town of Haapsalu, and Matsalu Bay to the south,featuring Matsalu State Nature Reserve, a site of international significance for migratory birds. Thesebays are fringed by the islands of Vormsi, Hiiumaa and Saaremaa, which together create a semi-enclosedarea dominated by a variety of terrestrial and marine ecosystems suitable for a range of conservati^n andrecreational uses. In recognition of their regional importance, the Baltic Sea Joint ComprehensiveEnvironmental Action Program prepared by the Helsinki Commission identified actions to address themanagement of wastewater discharges from the Municipality of Haapsalu and management of theecologically critical Matsalu Bay as among the top priority actions to be taken in the context of the BalticSea Environment Program.

8. The city of Haapsalu is located on the westem coast of Estonia, lying on a long and narrowpeninsula that reaches into the sea and divides the Haapsalu Bay into the open Eestlaht and the shallowTagalaht. It occupies an area of approximately 11 lan2 and has a population of about 14,000; non-Estonians make up about 23 percent of the city's population. It is a scenic city dominated by a castle andfeatures extensive districts of historic wooden homes. The city has a major forrner Soviet air base, butmost of the Russian military personnel and their families have left and the air field is currently unused.Haapsalu has no major industries, but has strong potential to reclaim and develop its historical positionas a tourist resort, which was a sumuner spa of the Russian imperial family. In addition, the marineenvironment of Haapsalu contains deposits of curative mud which have economic value, both in thedomestic market as well as for export. The mud is used for medical purposes in the treatment ofrheumatism and nerve diseases in arms and legs. The biologically active substances present in the mudhave also been used in veterinary medicine, cosmetics, and fertilizers. At present, mud is taken only fromone of two deposits closest to town. It is this deposit which stands to benefit most from improvedwastewater treatment. Eco-tourism could be developed in both Haapsalu Bay and the adjacen; MatsaluBay, both of which have rich and diverse wildlife.

9. Matsalu Bay lies approximately 20 km to the south of the city of Haapsalu and drains acatchment of some 3,200 km2 which is mostly agricultural in nature. Only the two small towns of Raplaand Lihula lie in the catchment, along with approximately 10 smaller settlements and former state farms.However, due to the extensive area of the drainage basin, the total population is around 40,000. Theshoreline of Matsalu Bay is exuemely intricate and there are over ten islets in the bay itself. The diversenature of the flora has resulted in the development of a unique variety of habitats, especially for migratingand breeding birds. The area is important for international scientific research, and is the center for the

Estonian bird ringing program. The bay is one of the stopping areas on the Baltic portion of the EastAfrican-European-Arctic flyway for migratory birds and is a critical part of a complex system of coastalwildlife habitats which includes Lake Pape in Latvia and the Nemunas Delta in Lithuania.

10. The Matsalu State Nature Reserve was created in 1957 and covers an area of approximately48,000 hectares including part of Matsalu Bay and the Kasari River delta. The Reserve was designatedas a site of international significance to migratory birds under the Ramsar Convention in 1976. Matsalu'sinternational importance as a stopping point for migratory birds makes it an attractive location for natre-related tourism. The Matsalu State Nature Reserve, with proper investmnents and management, couldbecome a major tourist attraction as well as an important source of revenue for the GOE.

11. The Matsalu wetland is being negatively affected by drainage from the wet meadows of theKasari River, pollution from surrounding cattle fanns, accelerating eutrophication from catchment run-off,and by inadequately controlled sport fishing from motor boats. The main problem is organic enrichmentand eutrophication which results in the expansion of the area of reed beds in the bay (approximately 60hectares annually). This alters sedimentation and habitat distribution, thereby affecting the use of the areaby migrating birds and other species.

12. In response to increasing concem for the environment in and around the Baltic Sea, aregional program, the Baltic Sea Joint Comprehensive Enviromnental Action Programme, was adoptedat a Diplomatic Conference of Ministers of Environment in April 1992. The objective of the Programmeis to restore the ecological balance of the Baltic Sea. In the context of the Helsinki Convention onEnvironmental Protection of the Baltic Sea, which Estonia has signed and ratified, the Progranmme hasidentified a number of pollution 'hot-spots" around the Baltic Sea, including Haapsalu and Matsalu.

13. The city of Haapsalu and Matsalu State Nature Reserve were ranked by the Task Force asa priority 'hot spot" and subsequently by Estonian authorities as a high priority for national and foreigninvestment in environmental protection. This position has been taken repeatedly by the GOE in a varietyof international fora, most recently by the MOE at the May 1994 Bank-sponsored "Public InvestmentConfenmnce" held in Paris. The Task Force also identified the need to undertake actions for coastal zonemanagement and the conservation of coastal lagoons and wetlands as key elements of the long-termprogram which provides for a synergetic input to investments in wastewater management. Conductingsuch activities in the Haapsalu and Matsaitu regions has been strongly supported by the MOE, given itsinterest in promoting the high ecological, tourism, and recreational values of the areas.

14. The proposed Project is intended by the MOE to serve as a "model project" to demonstratecomplementary actions for management of point source pollution from secondary cities, small settlementsand small enterprises, and non-point source pollution from agriculture and rural areas. A principal reasonfor the selection of the Haapsaiu and Matsalu Bays as a project area was to have a range of interventionsconcentrated in a small geographic region which would also have significant short-term impact on areasof high ecological and touristic value. The strategy of the MOE is to have the proposed Project providea technical and management framework for an effective application of fumds from diverse sources tomaximize environmental benefits which would be reduced if funds were used at a variety of separatelocations.

15. Lessons Learned from Previous Bank Operations. This would be the first environmentalproject supported by the Bank in the country. The proposed Project would reflect previous Bank waterand wastewater sector experience, in particular: (a) the need to develop managerially and financially

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autonomous and decentralized water and wastewater utilities; and (b) the benefits of taking an integratedapproach in addressing improvements in water and wastewater services. Given previous regionalexperience with environmental projects in Eastern Europe, project implementation will include theparticipation of a procurement specialist to evaluate procurement issues and conduct training activities forborrower personnel.

16. Rationale for Bank Involvement. Environment is one of the focal areas of the Bank'scountry assistance strategy for Estonia; hence, priority investmnents in the sector together with theproject's intended support to the decentralization process in the country, makes it rank highly in theBank's program of assistance to Estonia. The support of the Bank for the proposed project would providean opportunity to assist the Estonian Government in its efforts to improve national environmental quality,protect the Baltic Sea and demonstrate enviromnental management techniques. In the absence of Bankinvolvement, it is unlikely that the country would be able to mobilize the technical assistance and financialresources required to implement an environmental management project for this environmentally andeconomically important area of the country. The proposed Project would provide a mechanism for theBank to test the feasibility of rapid preparation and implementation of small projects for priorityenvironmental investment activities in the FSU. It would build capacity in the national government toprepare and implement environmental projects. The Project would also expand the range of Bankexperience in supporting the planning and implementation of eco-tourism related activities and investmentsin protected areas, which is a rapidly growing type of activity, given the emphasis on "environmentallysustainable development". This Project is corasistent with the Country Assistance Strategy as discussedby the Board of Directors during the presentation of the Estonia Financial Institutions DevelopmentProject (Report No. 3803-EE) on October 18, 1994.

17. Project Objectives. The proposed Project would: (a) strengthen the MOE's capacity tocoordinate and inplement environmental project; (b) reduce discharge of partially treated or untreatedwastewater to the Baltic Sea; (c) restore and enhance the water quality in Haapsalu and Matsalu Bays;(d) improve water supply and sanitation services in Haapsalu; (e) improve the operational efficiency andmanagement systems of the Haapsalu Water Works (HWW); (f) promote managemnent of point and non-point source pollution from the catchment area of Matsalu Bay; and (g) promote environmentallysustainable management and development of the Matsalu Bay and its catchment area.

18. Program Objective Categories. The proposed Project could contribute to achievement ot theGovrnnment's environmental objectives through reduction of point source poilution in Haapsalu bay,reduction of point and non-point source pollution in the Matsalu Bay catchment area by supporting thedecentralization of enviromnental management responsibilities to county and municipal govermnents. Theproposed Project would also assist the Govermnent's public policy reform by supporting "municipalized"public services, the creation of autonomous utilities, and development of sound financing of theseservices.

19. Proiect Description. The proposed Project would be implemented over four years as anenviromnental management project for the coastal area of western Estonia. It would consist of a Waterand Wastewater Improvement Component (WWIC) and an Environmental Management Component(EMC). The WWIC would consist of: (a) rehabilitation and expansion of the Haapsalu water andwastewater system, including equipment and works along with engineering services; and (b) institutionalstrengthening and training to assist in establishing an autonomous and financially independent water andwastewater utility in Haapsalu. This would include assistance for tariff restructuring/tariff planning andfinancial operations. The EMC would consist of: (a) technical and financial support through the MOE

for the implementation of selected elements of the Management Plan for Matalu State Nature Reserveby coordinating and providing funding for identified investments such as access roads, observationtowers, information boards etc.; (b) design and implementation of a program of cost-effective activitiesto reduce point and non-point source pollution of Matsalu Bry from small settlements and agriculture;and (c) support for planning and management of eco-tourism.

20. Project Implementation. The Project would be implemented under the general supervisionof the Ministry of Environment (MOE). A Project Steering Committee (PSC) iras been established toprovide overall guidance for the proposed project, chaired by a representative of Uane County, consistentwith Estonian decentralization policies. The implementation of the WWIC has been delegated to theHWW. To implement this component, a Project Implementation Unit (PIU) has been established withinthe HWW. The EMC would be coordinated and managed by the MOE with assistance of the Area TaskTeam (ATT) for the Matsalu Bay Area consisting of representatives of the cooperating countygovermnents, Matsalu State Nature Reserve, Tallinn Technical University, Estonian Fund for Nature, andthe World Wide Fund for Nature (WWF). Inplementation of the EMC would be carried out by theMOE, local authorities and WWF.

21. Project Financing. The project cost is estimated at US $8.37 million equivalent (includingtaxes), with a foreign exchange component of US $4.48 equivalent (or 54 percent). The Bank wouldfinance US $2.0 million equivalent (45 percent of the foreign exchange costs and 24 percent of the total).Parallel grant cofinancing by the Governnents of Denmark (US $600,000 equivalent), Finland (US $1.02million equivalent), and Sweden (US $1.93 million equivalent), and the EU (PHARE) (US $300,000equivalent), compriues about 46 percent of the costs. As it is desirable that the PIU becomes operationas soon as possible, up to US $100,000 (or 5 percent of the loan amount) of eligible expendituresincurred for PIU acti, dties starting from March 1, 1995 could be submitted for retroactive financing. Abreakdown of costs and the financing plan are shown in Schedule A. Amounts and methods ofprocurement and of disbursements, and the disbursement schedule are shown in Schedule B. A timetableof key project processing events and the status of Bank Group operations in Estonia are given inSchedules C and D, respectively. A map (No. 26164) is also attached. The Staff Appraisal Report,(Report No. 13907 EE), dated March 15, 1995, is being distributed separately.

22. Agreed Actions. Prior to negotiations, the following conditions were fulfilled: (a) HWWhad prepared an Action Plan which stated the utility's institutional development plan for the near andmedium future; and (b) a Director had been appointed for the PIU. During negotiations it was agreedthat: (a) HWW would enter into a twinning arrangement with a reputable foreign water supply andsewerage utility; (b) HWW would not contract management functions of the utility to third parties, unlessappropriate competitive procedures agreed with the Bank had been followed; (c) HWW would increaseits tariffs by 19 percent in real terms duiring calendar year 1995; and (d) HWW would maintain anoperating ratio below 85 percent. Conditions for effectiveness of the proposed loan are that: (a) allconditions precedent to the effectiveness of the BITS and Govemment of Finland grants have beenfulfilled; (b) a subsidiary loan agreement be executed between the GOE and HWW; and (c) HWW haveappointed a manager, accountant and bilingual secretary for the PIU.

23. Environental Aspects. hIplervientation of the proposed Project would have positiveenvironmental benefits through: (a) reductioxi of untreated wastewater discharges to the Baltic Sea;(b) amelioration of water quality in the town of Haapsalu; (c) pollution reduction in the Haapsalu andMatsalu Bays; and (d) protection of Matsalu State Nature Reserve thrugh effective enviromnentalmanagement. The proposed Project has been placed in environmental screening category "B". An

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environmental review consistent with the provisions of the requirements of the Estonian "Order onCarrying Out Environmental Impact Assessment" and the provisions of World Bank Operational Directive4.01 "Environmental Assessment" has been prepared for the WWIC. Supplemental environmentalreviews would be prepared as part of the detailed planning process for activities supported under theEMC. The proposed Project would not involve involuntary resettlement and is not anticipated to havcan impact on known archaeological or historical sites in Haapsalu or the Matsalu Reserve.

24. Participatory Anproach. The preparation of the water and wastewater component of theproposed Project has been carried out in close cooperation with the MOE, MOH and HWW, thusstrengthening their capacity for project implementation in the future. The work of the consultants wassupervised by a steering group that included representatives of the MOE, MOH, HWW, the Swedish andFinnish Ministries of Environment, and the Bank. This process included regular consultation withrepresentatives of the locally elected City Council. The EMC was developed with the participation of theATT and the management plan for the Matsalu State Nature Reserve was prepared by a joint Estonian-WWF team. The management !lan includes specific provisions for the participation of local residents inits inplementation, including vgetation maintenance and reed harvesting programs.

25. Project Benefits. The benefits of the WWIC would include: (a) improvements in waterquality through reduction of leakages of wastewater into the groundwater and reduction in discharges ofuntreated and partially treated wastewater, thereby improving water quality in Haapsalu Bay, providingprotection for the curative mud deposits and allowing for recreational use of the waters; (b) reductionsin operating costs and maintenance requirements in the water and wastewater systems; and(c) improvement in the quality and reliability of the services through establishment of an autonomouswater and wastewater utility. The benefits of the EMC would include: (a) strengthened overall projectcoordination and implementation capacity in the MOE; (b) support for the MOE's efforts to decentralizeproject management and implementation to local authorities; (c) expanded recreational use of beaches andwaters around Haapsalu and Matsalu Bays through reducing pollution; (d) upgrading of environmentalmanagement of the Matsalu State Nature Reserve; (e) provision of a basis for a long-term program tocontrol non-point sources of pollution affecting Matsalu Bay; and (f) expanding the opportunities forenvironmentally sound tourism in western Estonia.

26. Pro=ect Sustainability. Important elements in assuring sustainability for the WWIC include:(a) timely implementation by HWW of the agreed implementation plan, which would promote theestablishment of an autonomous and efficient utility; and (b) development and maintenance of a realistictariff structure for municipal and industrial users of the water and wastewater systern. The sustainabilityof the EMC would be determined by: (a) strengthening of the MOE; (b) the level of coordination betweenthe MOE, cooperating county and local govermnents, and cooperating non-governmental organizations;(c) the level of local participation in design and implementation of activities; and (d) the development ofa solid implementation structure for the long-tenn management of Matsalu State Nature Reserve; and(e) the development of a management structure for point and non-point source pollution in the MatsaluBay catchment area.

27. Risks. The main risks are: (a) the commitment and ability of the Haapsalu City Council tosupport an independently managed water and wastewater utility which may interfere, interalia, with thecommnitment of the Municipality of Haapsalu to adjust tariffs; and (b) possible resistance from localgovernments and private landowners to reconunended actions to manage point and non-point sourcepollution in the Matsalu Bay catchment. These risks would reduced by: (a) carefully monitoring therequirements for tariff incrases and providing significant institutional devclopment support to the utility

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to improve its financial management practices; (b) ensuring appropriate project managemnent arrangementsare in place in a timely manner; and (c) incorporation of an active local participation process indevelopment and implementation of the proposed management activities for Matsalu State Nature Reserveand the Matsalu Bay catchmnent.

28. Recommendation. I am satisfied that the proposed loan would comply with the Articles ofAgreement of the Bank and recommend that the Executive Directors approve the proposed loan.

Lewis T. PrestonPresident, by Mr. Sandstr6m

Washington, D.C.March 21, 1995

Attachments: Schedules A - D

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S-cliedule A

HAAPSALU AN-D MAT1SALUM BAYS E NV-IRONMUENT PRtOJECT

Estimated Costs and Financini Plan*(US S million)

Local Foreign Total %Foreign

Estimated Project CostA. Water and Wastewater Improvement

Component (WWIC)Project Implementation Unit 0.18 0.43 0.61 70%Water Supply 0.18 0.23 0.42 56%Sewerage 0.44 0.41 0.85 48%Wastewater Treatnent Plant 0.56 1.75 2.31 76%Technical Assistance and Training 0.06 0.36 0.42 86%

Base Cost for WWIC 1.43 3.17 4.60 69%

B. Enviromnental Management Component(EMC) 0.83 0.72 1.55 46%

Physical Contingencies 0.21 0.37 0.58 64%Price Contingencies 1.08 0.22 1.30 17%Value Added Tax 0.34 0.34

Total Project Cost 3.89 4.48 8.37 54A

Financing PlanLocal Foreign Total- - US $ million--

IBRD, (loan) 0.73 1.27 2.00BITS, Sweden, (grant) 0.02 1.58 1.60Min. of Enviromnent, Finland, (grant) 0.00 1.02 1.02Min. of Environment, Denmark, (grant) 0.42 0.18 0.60Swedish Env. Protection Agency, (grant) 0.23 0.10 0.33EU (PHARE), (grant) 0.20 0.10 0.30Government of Estonia 2.02 0.24 2.26Municipality of Haapsalu 0.26 0.00 0.26

TOTAL 3.89 4.48 8.37

v Addmions amy nox be filly consis;e due to rounding up.

S9cbdMaluRPape I of 3

SuMMary of PtRonoed Procurement muaet(US $ million)

TotalProject Element ICB Other N.B.F Cost

A. Water and Wastewater ImprovementComponeit

Project Implementation Unit 0.74 0.74Qs *

WaLer Supply: Works and Goods 0.55 0.55

Sewerage: Works and Goods 1.05 0.15 "" 1.20Lo 120

Wastewater Treatment Plant: Works 1.59 1.59

Wastewater Treatment Plant: Goods 0.05 *** 1.27 1.32gm0 0am

Training & Technical Assistance (Twinong) 0.50 0.50

B. Environmental Management Component 2. 2 2.12

Sub total 1.61 0.94 5.48 8.03'lalue Added Tax *""t 0.17 0.01 0.16 0.34

TOTAL 1.78 0.95 5.64 8.37The Bank LS 0.8

rlined nwnrbu in italics- IBRD loan financedN.B.F = Not Bank Financed

* Bank "Guiddines for Usc of Consultans" (August 1981)= US $ million 0.44

*Local Shopping = US S million 0.03" Internional Shopping = US S million 0.15

la Intcrnational Shopping = US S million 0.05total 0.68

* VAT to be paid from local contribution

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(US $ miNion)

IBRD Percent of ExpenditureAmount to be Financed

A. Water ad Wastewter Imiprovement Cmnponent

Civil Work and LerwW Eq _imetSewerage 1.05

Water Supply 0.27 (For goods: 100% of foreign expenditures100% of local ex-factory expenditures, and

Smolkr EqIpmet 80% of local expenditure. for other items procured locilly.Sewerage 0.20 For works: 100% of foreign expenditures, and

80% of local expenditures).Project Implementation Unit (PJU)Office equipment 0.03

Consultant ServicesStaffing for the PIU 0.44 (100% of expenditures)

S. Environmental N[anagenent Cmponen 0

Total Disbwsement 2.00

-1I-Schedule RPage 3 of 3

(US $ million)

FY Quarter Loan Disbursement CumulativeSince Approval This Qtr. Cumulative Total

FY 1996 Sep-95 0.00 0.00 0%Dec-95 0.08 0.08 4%Mar-96 0.13 0.21 11%Jun-96 0.21 0.42 21%

FY 1997 Sep-96 0.10 0.52 26%Dec-96 0.13 0.65 33%Mar-97 0.16 0.82 41%Jun-97 0.26 1.08 54%

FY 1998 Sep-97 0.09 1.17 59%Dec-97 0.12 1.29 65%Mar-98 0.15 1.44 72%Jun-98 0.24 1.69 84%

FY 1999 Sep-98 0.08 1.77 88%Dec-98 0.09 1.86 93%Mar-99 0.11 1.97 98%Jun-99 0.03 2.00 100%

Loan Closing Date: 30-Jun-99

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Schledule C

HAAPSALU A,ND MATSALU BAYS ENVIRONMENT PROJECT

Timetable of Key Project Processinig Events

(a) Time taken to prepare the project: II months, April 1994 - February 1995

(b) Prepared by: Ministry of Environment, Haapsalu Water Works(using Consultants), World Wide Fund forNature, with Bank assistance

(c) First Bank mission: April 1994

(d) Appraisal mission departure: January 1995

(e) Date of Negotiations: February 1995

(f) Planned date of effectiveness: June 1995

(g) List of relevant PCRs and PPARs: None

The project was prepared by the following:

Department Director: Basil KavalskyDivision Chief: Geoffrey FoxTask Manager: Stephen F. LintnerDeputy Task Manager: Sari S6derstr6m

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Schedule D

HAAPSALU AND MATSALU BAYS ENVIRONMENT PROJECT

Status of!BakGoupOprtiosinEstonia

A. STATEMENT OF BANK LOANS AND IDA CREDITS(as of February 3, 1995)'

Amount (US$ million)(net of cancellation)

Loan No. FY Borrower Project Bank Undisbursed

3522-EE 1993 Government of Estonia Rehabilitation 30.0 1.4373 I-EE 1994 Government of Estonia Highway Maintenance 12.0 12.03740-EE 1994 Government of Estonia District Heating Rehab. 38.4 36.23803-EE 1995 Govermnent of Estonia Financial Inst. Development*10.0 10.03835-EE 1995 Govermnent of Estonia Health* 18.0 18.0

Total 108.4Of which repaid 0.0

Total now held by Bank 108.4Of which repaid 0.0

TOTAL Undisbursed 77.6* not yet effective

B. STATEMENT OF IFC INVESTMENTS(as of January 25, 1995)

Investment Loan Equity TotalNo. FY Borrower -- US$ Million)- ---

R93-214 1994 Kunda Nordic Cement 6.0 4.0 10.0

3487 1994 Rudus Oy 0.0 1.5 1.5

Total Gross Conmnitments 6.0 5.5 11.5

Less cancellations, telninations,repayments and sales 0.0 0.0 0.0

Total Commitments now held by IFC 6.0 5.5 11.5

TOTAL Undisbursed 6.0 5.5 11.5

1 The status of these projects is described in a separate report on all Bank-financed projects in execution, which is updatedtwice yearly and circulated to the Executive Directors on April 30 and October 31.

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