PUBLIC

DOCUMENT OF THE EUROPEAN BANK

FOR RECONSTRUCTION AND DEVELOPMENT

Approved by the Board of Directors on 9 June 2022 1

NORTH MACEDONIA

REGIONAL SOLID WASTE PROJECT

[Redacted in line with the EBRD’s Access to Information Policy]

[Information considered confidential has been removed from this

document in accordance with the EBRD’s Access to Information Policy
(AIP). Such removed information is considered confidential because it
falls under one of the provisions of Section III, paragraph 2 of the AIP]

1 As per section 1.4.8 of EBRD’s Directive on Access to Information (2019), the Bank shall disclose
Board reports for State Sector Projects within 30 calendar days of approval of the relevant Project
by the Board of Directors. Confidential information has been removed from the Board report.

For the avoidance of any doubt, the information set out here was accurate as at the date of
preparation of this document, prior to consideration and approval of the project.
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TABLE OF CONTENTS

Page

TABLE OF CONTENTS ...................................................................................... 2

ABBREVIATIONS / CURRENCY CONVERSIONS .......................................... 3
PRESIDENT’S RECOMMENDATION ............................................................... 4
BOARD DECISION SHEET ................................................................................ 5
ADDITIONAL SUMMARY TERMS FACTSHEET ........................................... 6
INVESTMENT PROPOSAL SUMMARY ........................................................... 7
1. STRATEGIC FIT AND KEY ISSUES......................................................... 7
1.1 STRATEGIC CONTEXT ........................................................................... 7
1.2 TRANS ITION IMPACT ............................................................................ 9
1.3 ADDITIONALITY .................................................................................. 11
1.4 SOUND B ANKING - KEY R IS KS............................................................. 12
2. MEASURING / MONITORING SUCCESS .............................................. 12
3. KEY PARTIES........................................................................................... 15
3.1 BORROWER ........................................................................................ 15
3.2 IMPLEMENTING ENTITY AND KEY PARTIES INVOLVED ......................... 15
4. MARKET CONTEXT................................................................................ 16
5. FINANCIAL / ECONOMIC ANALYSIS .................................................. 17
5.1 ECONOMIC ANALYS IS ......................................................................... 17
5.2 SENS ITIVITY ANALYS IS ....................................................................... 17
5.3 PROJECTED P ROFITABILITY FOR THE B ANK........................................ 17
6. OTHER KEY CONSIDERATIONS .......................................................... 17
6.1 ENVIRONMENT .................................................................................... 17
6.2 INTEGRITY .......................................................................................... 19
6.3 CONCESS IONAL GRANT CO -FINANCING .............................................. 19
ANNEXES TO OPERATION REPORT ............................................................ 20
ANNEX 1- PROJECT DESCRIPTION AND MAP ........................................... 21
ANNEX 2 - ECONOMIC ASSESSMENT .......................................................... 26
ANNEX 3 - GREEN ASSESSMENT SUMMARY ............................................. 27
ANNEX 4 - TRANSITION IMPACT SCORING CHART................................. 29
ANNEX 5 - PROJECT IMPLEMENTATION ................................................... 30
ANNEX 6 – WBIF INFORMAL EXPERT GROUP ON ISRP .......................... 31

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ABBREVIATIONS / CURRENCY CONVERSIONS

CAPEX Capital Expenditures
CDIS Corporate Development and Institutional Support
CP Conditions Precedent
ECEPP EBRD Client e-Procurement Portal
EIRR Economic Internal Rate of Return
EPG Economics, Policy and Governance
ESAP Environmental and Social Action Plan
ESD Environmental and Sustainability Department
ESDD Environmental and Social Due Diligence
ESIA Environmental and Social Impact Assessment
ETI Expected Transition Impact
EU European Union
EUR Euro
FIDIC International Federation of Consulting Engineers
GDP Gross Domestic Product
GET Green Economy Transition
GHG Greenhouse Gas
IFI International Finance Institution
IPA Instrument for Pre-Accession Assistance
ISRP Inclusive and Socially Responsible Procurement
KTPA Kilo-tonnes per annum
MoEPP Ministry of Environment and Physical Planning
MoF Ministry of Finance
MSW Municipal Solid Waste
OCCO Office of the Chief Compliance Officer
OGC Office of the General Counsel
PEP Politically Exposed Person
PIA Project Implementation Adviser
PIU Project Implementation Unit
PP&R Procurement Policies & Rules
PPAD Procurement Policy and Advisory Department
PSD Project Summary Documents
PTI Portfolio Transition Impact
PUE Public Utility Enterprise
RAROC Risk-adjusted return on capital
RWMS Regional Waste Management Systems
SECO The Swiss State Secretariat for Economic Affairs
SIDA Swedish International Development Cooperation Agency
SOE State-Owned Enterprise
SSF Shareholder Special Fund
SW Solid Waste
SWM Solid Waste Management
TA/TC Technical Assistance/Technical Cooperation
TI Transition Impact
TOR Terms of References
WBIF Western Balkans Investment Framework

FX: 1 EUR = 61.53 MKD (3 May 2022)

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PRESIDENT’S RECOMMENDATION
This recommendation and the attached Report concerning an operation in favour of the
Government of North Macedonia (“North Macedonia” or the “Borrower”) are
submitted for consideration by the Board of Directors.

The facility will consist of a sovereign loan of up to EUR 55 million to the Republic of
North Macedonia for establishing regional waste management systems in five
administrative regions in the country (“Project”) covering local and regional levels in
accordance with the EU Waste Framework Directive. The proposed loan will consist
of two tranches: (i) a first tranche of up to EUR 47.5 million will be committed at
signing (“Tranche 1”) and (ii) a second tranche of up to EUR 7.5 million will be
committed at the Bank’s discretion following completion of the due diligence
(“Tranche 2”). Subject to approval, the Swiss State Secretariat for Economic Affairs
(“SECO”) will co-finance the Project activities under Tranche 1 for the investment in
the Solid Waste Management (“SWM”) system of the Polog region with a grant of up
to EUR 6 million. The Ministry of Environmental and Physical Planning (“MoEPP”)
will be responsible for implementing the Project.

The Project's transition impact is associated with the “Well-Governed” quality by

supporting improvements to the existing tariff methodology and introduction of an
autonomous department within the regulator. The Project will also support the
establishment of two inter-municipal companies responsible for the operation of the
new transfer stations and regional, sanitary landfills. The “Inclusive” quality is
supported through improvements to policy practices and standards at the level of the
national implementing agency as well as the Western Balkans Investment Framework
(“WBIF”) through the implementation of inclusive procurement in the solid waste
sector, opening up skills and employment opportunities for currently underserved
groups including Roma individuals. The Project is 100 per cent GET eligible , and
Gender Additional.

The Project will involve technical cooperation (“TC”) support totalling EUR 6.2
million expected to be funded by SECO, WBIF, from the Bank’s Shareholder Special
Fund or by an international donor to provide capacity building and implementat ion
support to the MoEPP, implementation of inclusive procurement as well as preparation
of the feasibility study for Tranche 2.

I am satisfied that the operation is consistent with the Bank’s Strategy for North
Macedonia, the Municipal and Environmental Infrastructure (“MEI”) Sector Strategy,
the Green Economy Transition (“GET”) Approach, the Equality of Opportunity
Strategy, the Strategy for the Promotion of Gender Equality and with the Agreement
Establishing the Bank.

I recommend that the Board approve the proposed loan substantially on the terms of the
attached Report.

Odile Renaud-Basso

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BOARD DECISION SHEET

NORTH MACEDONIA
REGIONAL SOLID WASTE PROJECT- DTM 52828
Transaction / Board Board approval2 is sought for a senior loan of up to EUR 55 million in favour of
Decision the Republic of North Macedonia (the “Borrower”) for the benefit of the
Ministry of Environment and Physical Planning (“MoEPP” or the
“Implementing Entity/Agency”) to finance the modernisation and expansion of
basic solid waste management (“SWM”) infrastructure in five regions (“the
Project”). The Loan comprises two tranches: up to EUR 47.5 million to finance
SWM infrastructure in the Pelagonija, Southwest and Polog regions, to be
committed at signing (“Tranche 1”), and EUR 7.5 million to finance SWM
infrastructure in the Vardar and Southeast regions, to be committed at the sole
discretion of the Bank (“Tranche 2”). It is proposed the approval of Tranche 2
be submitted to Board on a no objection basis, unless the investment is classified
as Category A, in which case it would be submitted for full board approval.
Client The Borrower is the Republic of North Macedonia, represented by the Ministry
of Finance (“MoF”). As of 1 April 2022, the Bank’s total North Macedonian
sovereign exposure was EUR 664.0 million (including operating assets of EUR
254.7 million).
Main Elements of Transition impact: The Well-Governed quality (primary) is demonstrated by
the Proposal support for improvements to the existing tariff methodology as well as the set up
of an autonomous solid waste department responsible for setting tariffs on a
commercialised basis within the existing Regulatory commission. The project
will also support the establishment of two inter-municipal companies
responsible for the operation of the new transfer stations and regional, sanitary
landfills. The Inclusive quality (secondary) is demonstrated by improvements to
policy practices and standards through the first-time implementation of inclusive
procurement in the solid waste sector.
Additionality – (i) Financing structure - EBRD offers financing that is not
available in the market from commercial sources on reasonable terms and
conditions; (ii) Risk mitigation - EBRD helps the client to mitigate carbon
transition risks and take climate action; (iii) Standard-setting - Client seeks
EBRD expertise on best international procurement standards; and gender
additionality by promoting equal opportunities, (iv) Knowledge, innovation and
capacity building - EBRD provides expertise, innovation, knowledge and/or
capabilities that are material to the timely realisation of the project’s objectives,
including support to strengthen the capacity of the client.
Sound banking – The transaction is a sovereign loan. North Macedonia is rated
at BB- (Stable) by S&P and BB+ (Negative) by Fitch.
Key Risks Implementation risk: The MoEPP will be the implementing entity. While Solid
waste EU funded project for the East / North East region is currently being
implemented by Client’s IPA department, MoEPP has no previous experience in
implementing IFI funded projects on this scale. Implementation risk is mitigated
by: (i) engagement of TC consultants to support project implementation, (ii)
tendering works contract components under the Yellow FIDIC where an
experienced contractor will be responsible for design and execution of works
monitored by a Supervision Engineer, and (iii) establishment of an adequately
staffed PIU.
Strategic Fit The proposed Project will promote the sustainability and recourse efficiency of
Summary SWM infrastructure in line with the Bank’s MEI Sector Strategy and the Bank’s
Country Strategy for North Macedonia. The Project fully supports the Bank’s
GET Approach, the Equality of Opportunity Strategy and the Strategy for the
Promotion of Gender Equality.

2 Article 27 of the AEB provides the basis for this decision

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ADDITIONAL SUMMARY TERMS FACTSHEET

Client The Borrower is the Republic of North Macedonia, represented by the Ministry of
Finance (“MoF”).
EBRD Transaction Sovereign loan of up to EUR 55 million to be provided in two tranches: Tranche 1 of
up to EUR 47.5 million to be committed at signing, and Tranche 2 of up to EUR 7.5
million to be committed at the Bank’s discretion and after separate due diligence. It
is proposed the approval of Tranche 2 be submitted to Board on a no objection basis,
unless the investment is classified as Category A, at which point it would be
submitted for full board approval.
Existing Exposure As of 1 April 2022, the Bank’s total sovereign exposure to the Borrower was EUR
664.0 million (including operating assets of EUR 254.7 million).
Maturity/Repayme 15 years tenor [REDACTED]
nt
AMI financing N/A
Use of Proceeds TRANCHE 1: Part 1: Pelagonija and Southwest regions: (i) construction of a
regional sanitary landfill, transfer stations including civic amenity sites, (ii) waste
collection infrastructure, (iii) bulky waste collection infrastructure, (iv) closure of the
Novaci dumpsite and (v) works supervision. Part 2: Polog region: (i) construction
of a regional sanitary landfill in Rusino, (ii) transfer station including civic amenity
site, (iii) waste collection infrastructure (iv) bulky waste collection infrastructure and
(v) works supervision;
TRANCHE 2: Part 3: Vardar and Southeast regions: (i) construction of regional
waste management systems and transfer stations and (ii) works supervision.
[REDACTED].
Investment Plan [REDACTED]
Financing Plan [REDACTED]
Key Parties  Government of North Macedonia represented by MoF as Borrower.
Involved  MoEPP as Implementing Entity and the Borrower's authorised representative for
disbursements.
Conditions to Conditions to effectiveness (Tranche 1 and 2):
effectiveness and  Project Agreement signed and effective. [REDACTED]
disbursement  Establishment of the Regional Solid Waste Company for management of the
Vardar and Southeast regions.
Key Covenants  [REDACTED]
 Appoint suitably qualified PIU consultants;
 Satisfactory implementation of the Environmental and Social Action Plan
(“ESAP”) and compliance with the EBRD Environmental and Social (“E&S”)
Policy.
Security / Sovereign loan
Guarantees
Other material [REDACTED]
agreements
Associated Donor Pre-signing
Funded TC and co-  TC 1: Technical Due Diligence (“DD”) Study. The cost of this assignment was
investment EUR 199,419, financed by Swedish International Development Cooperation
grants/concessional Agency (“SIDA”);
finance  TC 2: Environmental and Social Due Diligence Study. The cost of this
assignment was EUR 74,460, financed by SIDA.

Post-signing
 TC 3: PIU support for Tranche 1. The assignment will include review of
designs, technical specifications, tender preparation, procurement and
implementation of works and supply contracts. Estimated cost: EUR 700,000, to

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be funded by an international donor or the EBRD Shareholders’ Special Fund

(“SSF”).
 TC 4: Corporate Development and Institutional Support (“CDIS”). The
assignment will support (i) the formation/development of the institutional
arrangements for the three future waste management systems (ii) new Solid
Waste (“SW”) dedicated department to be established within the Regulatory
Commission for Energy and Water Services including preparation of the new
tariff methodology. Estimated cost: EUR 3 million expected, to be funded by
SECO;
 TC 5: Inclusive Procurement Inputs and Implementation to integrate
inclusive procurement requirements into tender processes and implement on-site
training for inclusion target groups. Estimated cost: EUR 0.5 million, to be
funded by the WBIF private sector TA window;
 TC 6: PIU support for Tranche 2. Support for review of designs, technical
specifications, tender preparation, procurement, and other implementation
support of the Tranche 2. Estimated cost: EUR 300,000, to be funded by WBIF,
an international donor or the SSF. Given that Tranche 2 is subject to a separate
approval, the corresponding PIU support TC for Tranche 2 is to be approved prior
to commitment of Tranche 2.
B. Co-investment grants
 SECO Investment Grant totalling EUR 6 million will be allocated to Polog
Region only (subject to approval);
 The Borrower intends to seek an investment grant from the EU
WBIF.[REDACTED]
Cost Sharing:
The above TC assignments are non-reimbursable transactional TCs, with a total cost
of up to EUR 4.5 million, required to structure the Project and achieve the Project
objectives. If applicable, the Borrower will be responsible for paying any VAT and
other indirect taxes that are applied to the post-signing TC assignments (VAT is
levied at 18 per cent in North Macedonia). In addition, Client will providing a parallel
contribution in the amount EUR 2.5 million to be spent on project supervision
services to be funded by the Loan.
[REDACTED]

INVESTMENT PROPOSAL SUMMARY

1. STRATEGIC FIT AND KEY ISSUES
1.1 STRATEGIC CONTEXT

Current waste management practices in North Macedonia primarily focus on waste

collection and final disposal, mainly in non-engineered dumpsites; treatment of
Municipal Solid Waste (“MSW”) and source-separation of recyclables and bio-waste
is basically not existent. The total MSW generated in the project area [REDACTED] is
disposed of at non-engineered dumpsites without implementation of appropriate control
measures such as base lining system, landfill gas and leachate collection and
treatment/utilisation. This causes significant adverse impacts on human health and the
environment, mainly pollution of soils, surface and groundwater sources, spreading of
vermin, odour and greenhouse gas emissions.

Regular waste collection services are mainly limited to urban areas, providing up to 90
per cent waste collection service coverage in the cities and their outskirts. In total
around 70 per cent of the population in the project regions receives regular waste
collection services, while the remaining 30 per cent, residing in rural settlements distant
from the main collection areas, manage waste on their own. There are 73 municipal

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non-compliant landfills, with none in compliance with the minimal requirements of the
EU Directive on the landfill of waste (1999/31/EC)). All waste that is not covered by
regular waste collection services, ends up in non-engineered, local dumpsites, causing
severe impacts on human health and environment.

Although the country has developed the key national strategic documents such as the
National Waste Management Strategy (“NWMS”) and the Waste Management Plan
(“WMP”) 2018-2024, with an aim to develop an integrated waste management in line
with the EU Directives (including the waste hierarchy as set out in the Waste
Framework Directive (2008/98/EC)), and to ensure environmentally safe recovery and
disposal of solid waste, the implementation of the legislation is [REDACTED] lagging
behind, and the results are not visible yet. In September 2021, a new Law on Waste
Management (“LWM”), which is fully aligned and harmonised with the definition in
the Waste Framework Directive as well as the EU landfill directive, entered into force.
It entails the principles of waste management and the waste hierarchy that were missing
from the previous legislation.

The proposed project is the very first nation-wide undertaking in the Solid Waste
Management (“SWM”) sector in North Macedonia and an important step towards a
sustainable solution for solid waste management services. This is also the very first
Bank’s project in the Macedonian SWM sector which will support the introduction of
solid waste services compliant with the respective EU standards in the sector, covering
a population of more than one million residents across three solid waste planning
regions and 45 municipalities of urban and rural nature in the country.

To address the current status in the sector and to reduce the adverse impacts, the Bank
will finance the construction of two regional, sanitary landfills according to EU
standards and the closure and remediation of two major dumpsites. In addition, the
Bank will finance the construction of six transfer stations strategically allocated across
the regions, including transport equipment and civic amenity sites as well as collection
infrastructure for recyclables, green waste / bulky waste and mixed waste. The proposed
investment project will increase waste collection service coverage rates across the
regions and therefore minimise illegal dumping. In addition, the net of transfer stations
and regional sanitary landfills will make local dumpsites obsolete and provide
environmentally safe disposal practices according to EU standards at regional level.
The waste management system will move towards an integrated system following the
waste hierarchy, as civic amenity sites and infrastructure for the source-separation of
recyclables, green waste and bulky waste will be introduced.

The Project will increase recycling rates, provides environmentally safe and sound
disposal and will significantly reduce greenhouse gas emissions. The Project is 100 per
cent GET eligible and will generate significant GHG emissions reduction of
[REDACTED] CO2 equivalent per annum. This will be achieved through dumpsite
closure and remediation, new sanitary landfill construction according to EU standards
and increased source separation of recyclables and green waste.

The Project's policy-level goals will focus on the establishment of an effective

governance system for the solid waste sector as well as the development of market-
relevant technical and green skills among currently underserved groups. The Project
will support the development of key pillars of an operational SWM sector, including:
(i) the establishment of two new regional operators to manage new landfills and transfer
stations funded from the loan proceeds in the relevant regions; and (ii) the development

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of a regulatory framework and tariff policy improvements via support to the Regulatory
Commission and establishment of a new department dedicated to SWM.

In parallel, the Bank will support the MoEPP in integrating inclusive procurement
principles into its tender processes for the first time ever. This comes in the context of
a EUR 4.1 million non-transactional policy dialogue programme on Inclusive and
Socially Responsible Procurement (“ISRP”) put forward under the WBIF. The ISRP is
a flexible and cost-effective approach to open up training opportunities at the level of
private sector contractors and it is explicitly recognised in the EU’s 2014 Public
Procurement Directives. It is of particular interest to the European Commission in the
context of the WBIF Economic and Investment Plan (“EIP”) as a way to strengthen
human and entrepreneurial capacity in the region (see Annex 6). A particular focus lies
on the integration of the Roma community. Access to economic opportunities is
severely limited for Roma individuals. Only 56 percent of Roma men and 30 percent
of Roma women participate in the Macedonian labour market. This creates major
concerns in terms of equality of opportunity, considering that Roma are estimated to
represent around 9.6 percent of the national population.

Against this backdrop, the Project aims to demonstrate how large infrastructure projects
in the solid waste sector can contribute to greater economic inclusion of marginalised
groups. If successful, the approach is expected to be replicated in future procurements
by MoEPP and other public entities, as well as under the WBIF. Contractors will also
be required to develop and implement Gender Action Plans (“GAPs”) and ensure the
participation of female trainees in the programme.

Considering the above, the Project is aligned with the MEI Sector Strategy which
supports local governments in the delivery of essential urban services and identifies SW
investments as one of the core strategic directions: "New sanitary landfills in
accordance with EU standards; closure and remediation of dumps; basic waste
collection services and upgrade of collection infrastructure (bins/containers, vehicle
fleet); pre-treatment of waste and waste-to-energy solutions". The Project also aligns
with the Bank's Strategy for North Macedonia, the Promotion of Gender Equality, the
Equality of Opportunity Strategy and the EBRD’s Green Economy Transition
Approach. It contributes to many UN Sustainable Development Goals (SDGs),
including SDG 9, 11, 12, and 17.

The Project is also incorporated in the Memorandum of Understanding between

Government of the Republic of North Macedonia and EBRD in respect of cooperation
to support progress towards EU accession signed between the Bank and the
Government of North Macedonia in November 2020.

1.2 TRANS ITION IMPACT

Primary Quality: Well-Governed

Obj.
Objective Details
No.
1.1 The project supports an The project will support expansion of the current
improvement to the existing competencies of the Energy and Water Services
tariff regulatory regime or Regulatory Commission by introducing a new
tariff methodology. dedicated department that will be responsible for
setting up a new commercially based tariff
methodology.

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1.2 The project and associated The project will, through technical assistance,
TC activities will introduce introduce a new sector wide regulator for solid
an autonomous new waste, within the Energy and Water Services
economic/sector wide Regulatory Commission. The department will be
regulator (i.e. not just in charge for setting up new commercially based
applicable to the project methodology for SW tariffs.
client/stakeholder).

Secondary Quality: Inclusive

Obj.
Objective Details
No.
2.1 The project will significantly MoEPP will, for the first time in the country,
improve policy practices integrate inclusive procurement requirements in the
and standards (e.g. equal solid waste sector, opening up skills and
opportunity legislation, or; employment opportunities for currently
new skills standards). underserved groups. Inclusive requirements will be
implemented in at least two of the three regional
tenders, encouraging contractors to provide on-the-
job training to the local population, including
women and Roma individuals. The Roma
population is traditionally involved in informal
waste picking activities in North Macedonia and
face significant barriers to economic inclusion. To
date, MoEPP has not adopted a comprehensive
approach to addressing the livelihood needs of
Roma people participating in the solid waste value
chain. With support from the WBIF, the Project
will support MoEPP in opening up skills and
employment opportunities for this group in the
construction as well as operation and maintenance
of new solid waste infrastructure. Additionally, the
Project will introduce an initiative to develop the
entrepreneurial ecosystem for minority-led
businesses along the solid waste value chain. These
improved policy practices are expected to create
systemic change beyond North Macedonia, by
creating a blueprint for future projects under the
WBIF applying inclusive procurement principles.

Delivery risks:
MoEPP’s lack of experience with EBRD Procurement Policies and Rules (“PP&Rs”)
and capacity could delay implementation and timing of CO2 reductions. This will be
mitigated through the appointment of an experienced PIU consultant which will be
working together with MoEPP. Moreover, the Corporate Development and
Institutional Consultant (“CDIS”) will help the Client to work on the TI related
benchmarks and objectives. Lastly, the implementation will be supervised by an
independent Supervision Engineer which will further reduce the implementation risks.

North Macedonia is committed to improve its waste management sector as

demonstrated in the development of key national strategic documents such as the
National Waste Management Strategy, the Waste Management Plan 2018-2024 as well
as the new Law on Waste Management, which has been in force since September 2021.

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1.3 ADDITIONALITY
Identified triggers Description

No triggers identified. Not applicable

Additionality sources Evidence of additionality sources

Financing Structure
- EBRD offers financing that is not - Long-term financing required for
available in the market from commercial infrastructure projects in North Macedonia
continues to be available predominantly
sources on reasonable terms and
from the IFIs.
conditions, e.g. a longer grace period.
Such financing is necessary to structure
the project of this nature;

-EBRD investment is needed to close the - Tenor is 15 years [REDACTED] is not

funding gap (for the Polog region) with available in the local market.
IFIs, government, commercial banks
and/or complements them.
Risk mitigation

- EBRD helps the client to mitigate - Through inclusion of climate change

carbon transition risks and take climate adaptation measures in the Project design
action, such as to move along a low and operations & maintenance, the Project
carbon transition pathway. will support the strengthening the climate
change adaptation Macedonian waste
management system.

Policy, sector, institutional, or regulatory

change

- EBRD's involvement in a project is - The MoEPP is the Implementing Entity for

considered additional when it is the Project and the main authority
designed to trigger at the sector or developing waste management policies and
country level (through the introduction regulations in the country. Over the last
of cost-reflective tariffs for solid waste decade, North Macedonia has revised its
management). regulatory framework in the field of waste
management in an attempt to comply with
EU policies. This Project will support
further regulatory alignment with the EU.

Standard-setting: helping projects and clients

achieve higher standards

- Client seeks/makes use of EBRD - The MoEPP lacks expertise and know how
expertise on corporate governance in implementing projects under IFI
improvements, including for climate risk procurement policies and rules. The Bank is
management. – providing technical assistance for tendering
process which will be carried out in line with
- Client seeks/makes use of EBRD best international standards and contribute to
expertise on best international enhanced technical and implementation
procurement standards capacities of the MoEPP.
- Contractors will be required to implement
- Gender SMART at Additionality level Gender Action Plans (“GAPs”) to address
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the strong horizontal and vertical gender
segregation currently observed in the solid
waste sector.
Knowledge, innovation, and capacity building

- EBRD provides expertise, innovation, - The EBRD provides expertise and

knowledge and/or capabilities that are knowledge gained from previous waste
material to the timely realisation of the management transactions in the Western
project's objectives, including support to Balkans region. This will help in
strengthen the capacity of the client. implementing best practice in the Project.

1.4 SOUND B ANKING - KEY RIS KS

Risks Probability / Comments
Effect

Implementation Medium/High The nature of the civil works contracts to be financed under the
risk Project are of moderate to high complexity. As this will be the first
project for the MoEPP, support from experienced PIU consultants
has been secured through technical cooperation funds. These
consultants will help the MoEPP with both procurement and project
implementation. Moreover, an independent supervision engineer
will be hired to follow the physical implementation of the project.
Sovereign risk Medium/ In 2021, public debt (comprising of state debt, municipal debt and
Medium debt of state-owned enterprises guaranteed by the government)
reached an estimated 62 per cent of GDP while the fiscal deficit
narrowed to 5.5 per cent of GDP. Despite the increase in public
debt, the IMF valued the public debt as sustainable in February
2022, mostly backed by an improvement of its composition. Also,
Fitch maintained its credit rating of BB+ with a negative outlook,
while S&P confirmed country’s rating at BB- with a stable outlook.
Government of North Macedonia measures to mitigate the impact
of the pandemic and to protect households from rising food and
energy prices in the wake of the war in Ukraine led to an increase
of public debt and to a higher deficit in 2021 and 2022
[REDACTED].

2. MEASURING / MONITORING SUCCESS

Overall objectives of project Monitoring benchmarks Implementation timing
- On-time project implementation [REDACTED] [REDACTED]

TI indicator(s), primary Quality: Well-Governed

Obj. Baselin Due

Monitoring indicator Details Target
No. e date
1.1 Regulatory body established or Establishment of the SW [REDA [REDA [REDA
strengthened as targeted department within the CTED] CTED] CTED]
[REDACTED] [TC][Donor] existing Energy and Water
Services Regulatory
Commission.
1.2 Tariff reform in target segment Adoption of new SW [REDA [REDA [REDA
adopted by authorities methodology for tariffs. CTED] CTED] CTED]
[REDACTED] [TC][Donor]

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TI indicator(s), secondary Quality: Inclusive

Obj. Baselin Due
Monitoring indicator Details Target
No. e date
2.1 Practices of the relevant MoEPP to reflect inclusive [REDA [REDA [REDA
stakeholder procurement requirements in the CTED] CTED] CTED]
improved [TC][Donor] tender process for
Pelagonia/Southwest and
Vardar/Southeast regions.
2.2 Partnership between MoEPP adopts structured [REDA [REDA [REDA
private sector, NGO, approach to collaboration with CTED] CTED] CTED]
civil society group and Roma civil society partners on
education providers training, employment and
established or entrepreneurship development.
strengthened
[TC][Donor]
2.3 Tailored accredited Contractors provide on-the-job [REDA [REDA [REDA
training programme training for inclusion target CTED] CTED] CTED]
developed and groups, in collaboration with
implemented local inclusion partners.
[TC][Donor]
2.4 Number of individuals Combined total of individuals [REDA [REDA [REDA
from previously participating in on-the-job CTED] CTED] CTED]
excluded groups training and entrepreneurial
enhancing their skills as capacity building support.
a result of training (f/m)
[TC][Donor]
2.5 Number of employees Regional solid waste companies [REDA [REDA [REDA
from excluded group, employ women and Roma CTED] CTED] CTED]
sex-disaggregated individuals.
[TC][Donor]
2.6 Recommended policy or WBIF to reflect inclusive [REDA [REDA [REDA
strategy or regulatory procurement requirements in CTED] CTED] CTED]
framework/ standard future project guidance.
agreed by relevant
stakeholder(s)
[TC][Donor]

Additional Indicators
Indicator Monitoring Details Baselin Target Due
type indicator e date
Advisory Practices of the Contractors of landfill (re-) [REDA [REDA [REDA
& Policy relevant construction works have CTED] CTED] CTED]
Indicators stakeholder developed and implemented
improved (equal Gender Action Plans (GAPs)
opportunity
practices of
companies in the
client's supply
chain)
[TC][Donor]

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TC Project preparation Bank decides how to progress [REDA [REDA [REDA
Indicator product approved with investment based on project CTED] CTED] CTED]
(Technical Due preparation product
Diligence &
Environmental and
Social Due
Diligence)
TC Project Project implementation support [REDA [REDA [REDA
Indicator implementation implemented as targeted: in line CTED] CTED] CTED]
support completed with project specifications and
EBRD requirements

Advisory Legal, institutional Establishment of two inter- [REDA [REDA [REDA

& Policy or regulatory municipal companies CTED] CTED] CTED]
Indicators frameworks in
target areas
improved.
[REDACTED]
[TC][Donor]

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3. KEY PARTIES

3.1 B ORROWER

The Borrower is the Republic of North Macedonia, represented by MoF. While

relatively modest prior to the Covid-19 outbreak (48 per cent of GDP in 2019), the
country’s public debt increased to an estimated 62 per cent of GDP in 2021 on the back
of economic contraction coupled with rising fiscal bill to support the economy during
the pandemic. Although public debt is still expected to rise and peak at 63 per cent of
GDP in 2023, the IMF assessed that the composition of public debt is improving as the
average maturity of domestic government securities is increasing and interest payments
remain contained (IMF Country report, February 2022). Subsequently, the IMF valued
the public debt sustainable in February, given no further significant shocks.

In 2021, the country started recovering from the impacts of the Covid-19 pandemic,
with a 4 per cent activity expansion driven by both domestic and external demand and
a GDP which should be higher than that of 2019. The main risks and uncertainties now
come from the war in Ukraine. Although North Macedonia has limited exposure to
Russia or Ukraine in terms of direct economic links, the country is impacted through
rising commodity prices which have led to an increased fiscal spending above what was
initially planned. In addition to ongoing expenditures to uphold the energy sector and
maintain subsidised electricity prices for households, authorities adopted a package of
measures in the amount of EUR 400 million in March 2022 to protect households from
rising food and energy prices and to help firms maintain liquidity. [REDACTED]. The
authorities [REDACTED] issued a six-year EUR 700 million Eurobond in May 2020
and a seven-year EUR 700 million Eurobond in March 2021 to foster the recovery from
the pandemic. [REDACTED]. In 2022, North Macedonia is rated at BB- (Stable) by
S&P and BB+ (Negative) by Fitch. More details are provided in Annex 2.

3.2 IMPLEMENTING ENTITY AND KEY PARTIES INVOLVED

The MoEPP will be in charge of overall project implementation including procurement

of the various project components and implementing respective works contracts.
[REDACTED] The specially formed Project Implementation Unit (“PIU”) team will be
supported by independent PIU support consultants and supervision engineers.

At the regional level, the regional Public Utility enterprise (“PUE”) (i.e. the regional
waste management companies) will be responsible for managing the SWM
infrastructure once physical implementation is completed.

At the local level, the Municipalities and their Municipal Utility Companies will have
limited involvement in the implementation of the Project. They will only operate the
waste collection vehicles and use the waste containers as receptacles for their citizens.

Regional and municipal companies will benefit from comprehensive capacity building
assignment extended via TC funded Corporate Development and Institutional Support
(“CDIS”) consultant to build their capacity to manage and operate the SWM assets
provided to them as result of the Project in a sustainable manner.

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Moreover, the MoEPP has already applied for a WBIF Technical Assistance grant
which will finance consultants to facilitate the process of selection of a landfill site for
the Vardar and Southeast region (for Tranche 2).

4. MARKET CONTEXT
The National Waste Management Plan (2018-2024) coupled with the new Law on
Waste Management entered into force in September 2021 reflect clear and
unambiguous intention of the Macedonian Government to bring waste management
aligned and harmonised with the definition in the Waste Framework Directive
(2008/98/EC).

Municipal solid waste management in North Macedonia is currently based mainly on

waste collection, transportation and landfilling. Final disposal takes place in non-
engineered municipal dumpsites or indiscriminate dumping by inhabitants. The latter
is the case in rural areas that are less covered by regular waste collection services. While
the waste collection service coverage rates range from only 25 per cent in some rural to
nearly 100 per cent in urban areas, the average waste collection coverage rate in five
regions is approx. 83 per cent. The project envisages to increase this [REDACTED].

The project supports formation of a SW system based on partial regionalisation and

comprising waste collection by the municipal public utility companies and operation of
transfer stations and landfills by regional companies. The responsibility for waste
collection and the collection of fees from households and other, commercial and
institutional waste generators will remain the responsibility and under the control of the
municipal public utility companies.

Currently tariffs for SWM services are set by the Municipal Councils. As prescribed in
the Law on Waste Management, the responsibility for tariffs setting for SWM services
will shift from the municipalities to the Regulatory Commission for Energy and Water
Services. The Regulatory Commission will therefore set up a solid waste department,
which will develop the regulations and methodology for determining waste
management tariffs. The Instructional TC is envisaged to facilitate reaching this
fundamental step in changing the tariff setting model and introducing an essential
feature of setting tariffs by an independent entity.

Non-governmental stakeholders in the SW sector include the private sector such as

companies implementing the Extended Producer Responsibility (“EPR”) schemes,
companies using SWM services and companies providing SWM services, as well as
non-governmental organisations (“NGOs”), the informal sector and the general public .

Whereas public systems do not achieve considerable recycling rates in the country, EPR
schemes for packaging waste are operated by Pakomak, Euro Ekopak, Eco Packaging
and Alpak Eko. Other collective EPR systems are in place for waste electrical and
electronic equipment (“WEEE”) and batteries. [REDACTED].

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5. FINANCIAL / ECONOMIC ANALYSIS

5.1 ECONOMIC ANALYS IS

[REDACTED]

5.2 SENS ITIVITY ANALYS IS

[REDACTED]

5.3 PROJECTED PROFITABILITY FOR THE B ANK

[REDACTED]

6. OTHER KEY CONSIDERATIONS

6.1 ENVIRONMENT

Categorised B (ESP 2019). The independent Environmental and Social Due Diligence
(“ESDD”) was finalised in early March 2022 and consisted of a review of national
Environmental Impact Assessments (“EIAs”) and other reports, site visits, meetings
with the Project Implementing Agency, community members and a significant number
of national NGOs. As regional waste management enterprises/landfill operators are yet
to be established, the ESDD focused on analysis of skills, competencies and operational
procedures that will be required for the proper implementation of the Project. The
ESDD identified that the new landfills will be located in the areas with existing
environmental degradation and adjacent to existing non-compliant landfills. The
estimates of the waste to be disposed of at the new landfills are not high, each below
100 tonnes/day. The ESDD identified that the Project will foster the implementation of
North Macedonia’s national waste management strategy and conversion of existing
unused and heavily degraded areas into modern regional centres for waste disposal and
recycling; reduce pollution caused by unsanitary disposal of waste; reduce emissions
of greenhouse gases (“GHG”) improve the visual characteristics of existing heavily
modified areas by planned re-cultivation of landfill sites.

Initially two separate national EIAs were prepared for Pelagonia and Southwest
regions, that were subsequently merged into a consolidated Environmental and Social
Impact Assessment (“ESIA”) in 2021. The landfill site for both the existing and the
planned landfills is located inside the depleted Suvodol lignite mine area. The buffer
zone of the planned landfill site marginally overlaps with the boundary of the Important
Bird Area (“IBA”) site (MK024) Pelagonia. Pre-construction rapid biodiversity surveys
will need to be conducted during spring/early summer; relevant actions have been
included in the Environmental and Social Action Plan (“ESAP”). The air quality in the
area is poor due to uncontrolled waste disposal and burning from the existing landfill,
which have resulted in emissions of pollutants (mainly СО2, methane and organic
compounds), odours and dust. There are no sensitive receptors in the vicinity of the
landfill site and the closest settlement is located at a distance of 1.2 km. There are
approximately 10 Roma families who collect waste on the existing landfill. Domestic
cattle from the nearby village forage on organic waste and thus poses the risk of
contamination through the food chain.

The regional sanitary landfill for the Polog region is planned at the location of the
existing non-compliant landfill Rusino. A national Draft EIA study was completed in
December 2021 and disclosed by the MoEPP, and the public consultation process is
ongoing. No flora or fauna species of conservation concern or protected areas have been
identified. Seasonal watercourses near the landfill site are filled with illegally fly-tipped
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industrial waste and pose the risk of soil, groundwater and surface water contamination.
A single-parent Roma family collects waste metal and small electric appliances and
sells them to the local scrap metal companies. The family has been living on the landfill
for six years and will require support to obtain adequate housing. There is also a small
weekend house attached to the landfill, whose owner is engaged in buying and reselling
plastic waste.

For both Pelagonija, Southwest and Polog regions, there will be Supplementary
Environmental and Social (“E&S”) Analysis conducted prior to the construction to fill
gaps in existing impact assessments and to identify potential impacts related to the final
siting for Transfer Stations and Composting Plans. The findings of the Analysis will be
used to update E&S Management and Monitoring Plans.

The proposed site for the regional landfill for the Vardar Southeast Region
(uncommitted tranche) is located in the area of the existing non-compliant landfill
Shapkar, which has been in use since 1992. No national EIA has been commissioned
for the proposed landfill as yet. The new landfill is planned to be built adjacent to the
existing landfill. This proposed site is a public land; and while registered as a
pastureland, it is however unused. The process of land conversion from agricultural to
construction land has been initiated. About 10 Roma families regularly collect waste on
the existing landfill. They have been collecting waste as their only source of income at
this landfill for 10-20 years. Impacts on waste pickers has been assessed as a major
negative impact.

A Livelihood Restoration Framework (“LRF”) has been developed as part of this

Project. The ESAP contains a requirement to develop a Livelihood Restoration Plan
(“LRP”), based on the LRF, to address specific impacts.

The new waste management facilities will be designed and built in line with the EU
Waste Framework Directive, Landfill Directive and Best-Available-Technology
(“BAT”) Conclusions for Waste Treatment; and relevant technical specifications will
be included in tender documents. The design of the landfills will mitigate any potential
impacts related to leachate and landfill gas collection, air emissions, odours and impacts
on soil and groundwater. Temporary issues during the construction will be mitigated
through the development and implementation by the contractors of the Contractors'
E&S Management Plan, Erosion Control plan and air and ground and surface water
monitoring.

In order to enable the successful implementation of the Project the MoEPP will also
need to establish a Project Implementation Unit (“PIU”) staffed with qualified and
experienced personnel. The MoEPP along with the PIU and regional
operators/companies will need to implement the ESAP, LRF and the Stakeholder
Engagement Plan (“SEP”). The MoEPP disclosed the Non-Technical Summary
(“NTS”), the LRF and SEP on their website. The ESAP was finalised and agreed. Some
of the ESAP actions include developing a Project-specific Environmental and Social
Management Plan, inclusive of contractors’ management provisions, development and
implementation of Construction and Operational Environmental and Social
Management Plans, activities aimed at minimising and monitoring impacts on soil,
surface and groundwater.

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6.2 INTEGRITY

Integrity due diligence was undertaken on the Ministers, Deputy Ministers and parties
responsible for Project implementation within the Ministries. [REDACTED] No
[REDACTED] integrity concerns have been identified. All actions required by
applicable EBRD procedures relevant to the prevention of money laundering, terrorist
financing and other integrity issues have been taken with respect to the Project, and the
project files contain the integrity checklists and other required documentation which
have been properly and accurately completed to proceed with the project.

6.3 CONCES SIONAL GRANT CO -FINANCING

The Project is expected to be co-financed by a EUR 6 million SECO investment grant,

which will be used for the Polog region. [REDACTED]. The investment grant is a vital
component in the financing structure of the Project as it helps to overcome potential
affordability constraints within the population. The investment grant will help North
Macedonia to achieve substantial environmental and social benefits which go beyond
the local standards. In addition, the project is in a sector where market based allocation
is not feasible and there is thus no harm to market development. The TCs under the
Project will promote adherence to such higher standards through providing necessary
support to the MoEPP and monitoring support to ensure long-term sustainability of the
Project.

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ANNEXES TO OPERATION REPORT

ANNEX 1 Project Description and Map

ANNEX 2 Economic Assessment

ANNEX 3 Green Assessment Summary

ANNEX 4 Transition Impact Scoring Chart

ANNEX 5 Project Implementation (Procurement Plan)

ANNEX 6 WBIF Informal Expert Group on ISRP

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ANNEX 1- PROJECT DESCRIPTION AND MAP

The loan comprises two tranches: up to EUR 47.5 million to finance Pelagonija &
Southwest Region and Polog, to be committed at signing (“Tranche 1”), and EUR 7.5
million to finance Vardar & Southeast Region, to be committed at the sole discretion
of the Bank (“Tranche 2)”. Figure 1 shows the planning regions.

Figure 1: Planning regions of North Macedonia

1. The Polog Region - has a total area of 2,379 km² and is located in the north-western
part of the country. It borders the South-western and Skopje statistical regions. The.
The Polog region is formed of nine municipalities, with two largest Tetovo and
Gostivar, as administrative units of lower level, which in total include 184
settlements. The municipalities are listed in Table 1.

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Table 1 Municipalities in Polog Region

Municipalities in Polog Region

Bogovinje Jegunovtse Vrapchishte

Brvenitsa Teartse Mavrovo and Rostusha

Gostivar Tetovo Zhelino

Polog region has a population of approximately 325,000 inhabitants generating around

120,000 tonnes of MSW per year expected to increase to more than 125,000 tonnes in
2040. The percentage of waste collected differs per municipalities and varies between
58 per cent and 93 per cent. In addition, in all municipalities there are so-called “wild”
dumpsites where various types of waste are deposited (municipal waste, construction
and demolition waste, agricultural waste).
Figure 2 below shows the envisaged solid waste management (“SWM”) system for the
Polog region.
Improvement of waste collection starts with the supply of waste collection equipment
(bins and waste collection vehicles in rural and urban areas) and a progressive waste
collection service coverage growth is envisaged [REDACTED] .
One Transfer station is planned to be built near the Tetovo Municipality to serve the
municipalities in the northern part of the Polog Region.
The regional, sanitary landfill is in vicinity of Gostivar (Rusino landfill) and will start
operation as sanitary landfill [REDACTED] . A new sanitary landfill, fulfilling the EU
Landfill Directive requirements, is planned to be constructed on top of the existing
dumpsite (thus on top of the existing waste body) and has been designed for household
(and similar) waste only.

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Figure 2: SWM System for Polog region

2. The Pelagonija & Southwest Region are located in the south of the Republic of
North Macedonia. The Pelagonija Region borders Greece and internally the Vardar
and Southwest Regions. The Southwest Region borders Albania and internally the
Pelagonija, Polog, Skopje and Vardar Region. The two Regions are comprised of
eighteen municipalities in total or nine municipalities per region. These
Municipalities are listed in Table 2.

Table 2 Municipalities in Southwest and Pelagonia Region

Municipalities in Southwest Region Municipalities in Pelagonia Region

Centar Župa Bitola

Debar Demir Hisar

Debarca Dolneni

Kičevo Krivogashtani

Makedonski Brod Krushevo

Ohrid Mogila

Plasnica Novatsi

Struga Prilep

Vevčani Resen

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They have a combined population of around 450,000 who together generate approx.
138,000 tonnes of MSW per year. This amount is expected to decrease to approx.
130,000 in 2040 due to a declining population. Waste collection rates vary per
municipality between 15 per cent and 100 per cent.
For both Regions, a regional waste management plan (“RWMP”) has been prepared but
preparations for an inter-municipal entity to manage the regional SWM facilities have
not yet started.
The current waste collection services in the region are managed by the Municipalit ies ,
but the actual services are delivered by PCEs owned by the Municipalities. Each of the
18 municipalities in the PSW regions have their own PCE, inter alia, for waste
collection and disposal. The PCEs also have tasks in water supply and sanitation and
maintenance of public property and roads. None of the cities engage the private sector
for waste management services.
The SWM systems in the region are based on waste collection and final disposal in
dumpsites, which do not comply with EU legislation on landfills (1999/31/EC).
Figure 3 shows the envisaged solid waste management system for the Pelagonija and
Southwest Region .
Figure 3: SWM System for Pelagonija and Southwest Region regions

Proposed waste collection concept consisting of bins for households and containers at
communal points of urban and rural areas and waste collection vehicles. At households,
the bins are meant to store mixed waste fractions and containers at communal points
are meant to store recyclables and biodegradables (green waste).
Five transfer stations will be implemented in Debar, Kichevo, Ohrid, Bitola and Prilep
municipalities.

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The proposed site for the new sanitary landfill (Novaci landfill) to serve the region is
located approximately five and a half kilometres northeast of the centre of Novaci, just
south of the road R1311. The existing dumpsite is located opposite the proposed site
just north of the R1311. Both the new and the existing site are located close to the
Novaci thermal power plant and the open cast mine where lignite coal for the power
plant is mined.
The Vardar & Southeast Region : The region comprises the Vardar planning region and
the Southeast planning region. The Southeast Region is located in the southern part of
the Republic of North Macedonia and is comprised of ten municipalities and has a total
area of 2,734 km2. The region borders Bulgaria and Greece. Internally it borders the
Vardar and Eastern Regions. The Vardar region covers an area of 3,995 km2 and is
formed by nine municipalities. The Vardar Region borders Greece and internally the
Southeast, Southwest, Pelagonija, Skopje and Eastern Regions. The municipalities of
the Vardar & Southeast Region are listed in Table 3.
Table 3 Municipalities in Vardar and Southeast Region

Municipalities in Vardar Region Municipalities in Southeast Region

Veles Bogdanci

Gradsko Bosilovo

Demir Kapija Valandovo

Kavadarci Vasilevo

Lozovo Gevgelija

Negotino Dojran

Rosoman Konche

Caska Novo Selo

Sveti Nikole Radovish

Strumica

The regions have a combined population of over 300,000 who together generate just
under 100,000 tonnes of MSW per year, an amount which is expected to decrease
[REDACTED].

The level of preparation for the SWM system in the VSE Region is quite limited. In
order to develop a regional landfill and regional waste management centre, a feasibility
study will have to be prepared and an environmental due diligence will have to be
conducted including alternative locations will have to be considered.

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ANNEX 2 - ECONOMIC ASSESSMENT

The economic assessment was prepared as part of the feasibility study for each of the
three project regions. The methodology and assumptions used for the preparation of the
economic analysis is presented below. [REDACTED].

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ANNEX 3 - GREEN ASSESSMENT SUMMARY

Introduction

The proposed investment will improve the municipal solid waste management system
in three planning regions in North Macedonia through increased and improved waste
collection and transportation services and through improvement of waste disposal
practices in line within the legislative framework of the EU and national legislation.
Two planning regions were merged into one waste management region, namely the
Pelagonija & Southwest Regions, whereas the Polog region is a stand-alone region.
Investment components focus on the upgrade of waste collection infrastructure for
mixed waste and introduces infrastructure for the source-separation of recyclables and
bulky waste/green waste. In addition, five transfer stations in the Pelagonija and
Southwest regions and one transfer station in the Polog region will be implemented; the
transfer stations also include civic amenity sites aiming at providing additional
infrastructure for residents to drop off recyclables and other waste streams. The
proposed design of the Project's facilities - new sanitary landfills, dumpsite closure and
remediation as well as transfer stations - is based on the EU Landfill Directive and BAT
Conclusions for Waste Treatment Facilities.
Significant environmental benefits (and GHG emission reductions) will be achieved by
closing two major dumpsites and by establishing two regional, sanitary landfills. The
regional landfills will be equipped with landfill gas collection systems and flares,
therefore preventing uncontrolled GHG emissions. In addition, the closure and
remediation of two major dumpsites will minimise methane emissions into the
atmosphere.
GET attribution of 100 per cent is related to the improvements in the solid waste
management that the Project will bring along, i.e. the reduction of the negative impacts
due to dumpsite closure and remediation, new sanitary landfills according to EU
standards and increased source separation of recyclables and green waste.
Regarding adaptation, the Project does not face any potentially material physical
climate risks and it is unlikely to undermine climate resilience of the system in which
it operates.

Paris alignment assessment

General screening of alignment with the mitigation goals of Paris Agreement

 Some of the project’s components (i.e. infrastructure for the collection of

recyclables, green waste, i.e. bins/containers/vehicles and civic amenity sites) are
included in the 'aligned list'.
 Regarding project/economic activities, there are no activities included in the 'non-
aligned list'.

GET attribution

Based on a forecast of municipal solid waste generation and an increase of collection

service coverage, the Project's Feasibility Study estimates average GHG emissions
reduction [REDACTED] per annum ([REDACTED] in Pelagonija and Southwest region

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and [REDACTED] in Polog region) during the Project's operational stage mainly due to
landfill gas collection at the new, regional landfills instead of venting in dumpsites.
[REDACTED]

Economic assessment

Please refer to Annex 3 for the Economic Assessment of the Project.

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ANNEX 4 - TRANSITION IMPACT SCORING CHART

Score for primary transition quality Score for secondary transition quality

Quality: Well-Governed Quality: Inclusive

Component: National-level governance Component: Regions

Quality average score: 67.5 Quality average score: 80.0

↓ ↓
ATQ adjustment ATQ adjustment

Country: North Macedonia Country: North Macedonia

ATQ adjustment: National-level ATQ adjustment: Regions: -1.9%

governance: 2.0%

Adjusted Quality score: 68.9 Adjusted Quality score: 78.5

↓ ↓
Weighted TI score*

Base TI score (ATQ-adjusted): 71.3

↓
Adjustment for Country Strategies

Adjustment: 0.0% – Not applicable

NA Adjusted score: 71.3

↓
Final TI score

Final TI score: 71

*The Primary Quality score is weighted 75% for the calculation of the Base TI Score. The
Secondary Quality is weighted 25%.

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ANNEX 5 - PROJECT IMPLEMENTATION

Procurement classification – Public Sovereign

[REDACTED]

Contracts risk assessment Moderate High

Project implementation arrangements:

MoEPP will establish a dedicated Project Implementation Unit (“PIU”) in the Solid
Waste Sector with adequate resources and suitably qualified personnel to coordinate,
manage, monitor and evaluate all aspects of the project implementation including
procurement. MoEPP’s PIU will be strengthened by a Project Implementation
Consultant to coordinate and support with all procurement activities under the Project.
In addition, a Supervision Engineer will be selected to carry out the duties of the
Engineer under the Contract(s) to assist MoEPP with supervision and monitoring of the
contracts until completion.
This structure should strengthen project implementation ability within the MoEPP and
mitigate risks of procurement and project implementation delays, while significantly
speeding up the implementation of the project.

Procurement arrangements:
All EBRD funded contracts under the Project will be procured following open tendering
procedures by using ECEPP in accordance with the requirements of the EBRD PP&R
for public sector operations.

https://ecepp.ebrd.com/

The Bank’s standard tender documents as available in ECEPP will be used for the
procurement exercises. The intention is to use FIDIC Conditions of Contract for
Construction based on the Employer’s design for the Works contracts, and the Bank’s
standard Contract Conditions for the Goods contracts.

The consultancy contracts will be procured by using open competitive selection

procedure.

Additional information:
The Project is co-financed alongside SECO for Polog region only with EBRD as Lead
Financial Institution and being responsible for procurement oversight. [REDACTED].

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ANNEX 6 – WBIF INFORMAL EXPERT GROUP ON ISRP

Inclusive and Socially Responsible Procurement (“ISRP”) is an emerging practice

aimed at achieving positive outcomes for the wider society and economy from the
implementation of large, often public contracts in the infrastructure sector. The
concept is explicitly recognised, for example, by the EU’s 2014 Public Procurement
Directives which states that social aspects can be taken into account throughout the
procurement cycle. The “inclusive” part of ISRP relates to the inclusion in the labour
market of vulnerable and marginalised groups, which can be achieved through the
integration of an additional clause into the procurement documentation to commit
contracting companies to offer on-site training opportunities or implement other
activities benefitting inclusion target group members’ labour market integration. The
“socially responsible” part of ISRP combines its inclusion benefits with other social,
green, circular and innovation criteria for a more comprehensive impact and
sustainability of public investments.

The EBRD has been implementing ISRP on a number of investments across the
Western Balkans and beyond. The majority of ISRP projects has been in the road sector,
followed by urban transport and water-wastewater projects. These projects have
unlocked skills and employment opportunities for over 500 people to date, including
particularly hard-to-reach groups such as refugees. The EBRD has also helped its client
develop and implement dedicated Gender Action Plans (“GAPs”) at the level of
contracting companies. [REDACTED].

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