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					             UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION


PROJECT NUMBER:
COUNTRY:                            Bosnia and Herzegovina

TITLE:                              Transfer of environmentally sound technology in Bosnia
                                    and Herzegovina Danube river basin

TOTAL UNIDO BUDGET:                 USD 405,000 (excluding programme support costs)
                                    USD 457,650 (including 13% programme support costs)

ESTIMATED STARTING DATE: March 2005
PLANNED DURATION:        25 months

EXECUTING AGENCY:                    UNIDO
PROJECT SITE:                        Bosnia and Herzegovina
PROJECT COUNTERPARTS:                Ministry of Physical Planning and Environment
                                     Center for environmental sustainable development
                                    (CESD)
__________________________________________________________________________________


Summary description of project objective

The UNDP/GEF Pollution Reduction Programme has identified 130 major manufacturing
enterprises of concern (known as hot spots) within the Danube River Basin; a significant
number of these are contributing to transboundary pollution in the form of nutrients and/or
persistent organic pollutants. Seventy five percent of Bosnia and Herzegovina territories
belong to the Danube river basin and some industrial hot spots have been identified as
contributing to the regional pollution problems. Bosnian enterprises are also facing numerous
challenges as they go through a radical reshaping in their move towards market economies. At
the same time, they are in the process of responding to the environmental objectives of the
Danube River Protection Convention (DRPC) and to the environmental pressure from the
nearby EU market.

The objective of this project is to build national BACKGROUND
capacities in existing Bosnian cleaner production institutions to apply the UNIDO TEST
integrated approach for the transfer of environmentally sound technology (TEST). The project
will focus on bringing selected demonstration enterprises (Hot Spots) into compliance with
environmental norms of the Danube River Protection Convention while at the same time
taking into account their needs to remain competitive. The project aims at replicating the
successful experience of the TEST project in five other Danubian countries (Hungary,
Slovakia, Romania, Croatia and Bulgaria) and will transfer an integrated methodology
utilizing the already established regional capacities.
I. 1. Background

1.1 Pollution in the Danube River Basin and industrial contribution


The Nnorth-easternern part of Bosnia and Herzegovina belongs to the Danube river basin,
while the south-westernern part water streams flow to Adriatic Sea. The Aarea which belongs
to the Danube river basin is 38 719 km2, equivalent to 75,7% of the entire Bosnian territories
approximately what makes a little bit less than 5% of the total Danube river basin
hydrological catchmentcatchments area (802 890 km2). and 75,7 % of the total area of Bosnia
and Herzegovina (51 220 km2).
The Bosnian and HerzegovinianHerzegovina part of the Danube river basin has borders is
bordering with Croatia and Serbia and Montenegro.

The Bosnian territories are crossed by Main tributaries are four main rivers: Una (9,130 km²
or 23,6 % of the whole Sava catchment area in Bosnia and Herzegovina), Vrbas (6,380 km² or
16,5 %), Bosna (10,457 km² or 27%) and Drina (boundary border river with Serbia and
Montenegro - 7,240 km² or 18,7%). All of them are tributaries to of the river Sava1, which
enters the Danube in Belgrade.
Sava is 355 km long in Bosnia and Herzegovina.




The terrain Bosnian territories ranges from the mountain region in the south of the sub-basin
(some 700 metres above sea level) to a hilly part in the middle and to the lowlands in the
north along the Sava river.

1   The Sava rivers crosses Bosnia and Herzegovina for 355 Km.
 Regarding Tthe climate of the Sava river sub-basin has is continental climate:. the annual
average precipitation is is at 950 mm/year - increasing from the North with some 770 mm
towards to the South (about 1,100 mm). The aAverage temperature varies from between
+12°C in the lowlands to +9°C in the mountainous regions.

A common characteristics of all the Sava tributaries that are crossing Bosnia & Herzegovina
is a big the significant altitude altitude difference between their sources in the mountainous
regions and the mouths in the lowlands. All the four Bosnian main rivers have Llarge water
quantities flows, which makes it them important for hydropower productiongeneration.

In the sub-river basin area of the Sava river live there are 2,95 approximately 3 million
inhabitants people equivalent to (74% of the total population of Bosnia and Herzrcegovina
total).. With 129 inhabitants / km², the population density of the Sava sub-basin in the
lowlands is much above the country’s average of (57 people per km²)2 .
(without the big cities Tuzla, Zenica, Doboj, Prijedor, Banja Luka, and the capital Sarajevo -
all with more than 100,000 inhabitants).

According to the data represented in by the International Commission for the Protection of the
Danube River (ICPDR) in the annual report of 2003 Annual Report for 2003, the phosphorus
load3 (from all sources: point and diffuse pathways) from generated within the Sava sub-basin
in Bosnia and Herzegovina is about 3, 400 tons per annum year (equal to 5 % of the total
Danube load which is 67 780 tons per annum), and while the nitrogen load is
27, 000 tons per annum year (about equal to 4 % of the total Danube load which is 667 420
tons per annum).

TheAgricultural hot spots are mainly located in the northern regions along the border with
Croatia, while the i. Industrial and municipal hot spots of all categories are distributed along
the entire sub-river basin area. Various kind types of industries can be found in the sub-basin
– food, textile, leather, chemical, wood, metal processing, mining and many others.




2 Without the big cities Tuzla, Zenica, Doboj, Prijedor, Banja Luka, and the capital Sarajevo - all with
more than 100,000 inhabitants.
3 This data includes pollution loads from both point sources and diffuse pathways
The


International Commission for the Protection of the Danube River ICPDR has presented
prepared the second complete emission inventory of pollution point sources of, which cover
the whole Danube river basin4 in the document Emission Inventory 2000 - Municipal and
industrial discharges in the Danube River Basin. The following tables provide a summary of
municipal and industrial pollution sources
Survey of data of from this report relating to Bosnia and Herzegovina.


Table 1. - Municipal Discharges

Discharger        Latitude    Longitude      Main river       Raw        Waste         Total load discharged into
 location                                                    water       water           receiving waters (t/a)
                                                              load      volume
                 deg   min    deg   min                      (TPE)     discharge   BOD5       COD        N          P
                                                                       d (Tm3/a)
Sarajevo         43     48    18     25    Bosna / Sava       524       37 843      7644      13 321    621     176
Zenica           44     13    17     54    Bosna / Sava       146       13 285      3187       5 793    531     159
Doboj            44     45    18      5    Bosna / Sava       103        9 357      2245       4 078    374     112


4   Emission Inventory 2000 - Municipal and industrial discharges in the Danube River Basin
Tuzla          44     32     18     41      Jala / Spreca /         132        12 032      2888      5 246         481    144
                                             Bosna / Sava
Prijedor       44     57     16     42      Sana/Una/Sava           113        10 263      2463      4 485         412    123
Banja Luka     44     45     17     12       Vrbas / Sava           195        17 808      4274      7 764         712    214



Abbreviations:
deg       Degree                                                     BOD5        Biochemical oxygen demand (5
                                                                                 days)
min       Minute                                                     COD         Chemical oxygen demand
TPE       Thousand population equivalents                            N           Nitrogen
Tm3/a     Thousand cubic metres per year                             P           Phosphorus
t/a       Tons per year                                              Cl          Chlorides

Table 2. - Industrial Discharges

      Discharger       Longitude         Main river        Sector     Waste water       Total load discharged into
       location                                                         volume            receiving waters (t/a)
                                                                      discharged
                                                                       (Tm3/a)

                       deg    min                                                        BOD5      COD        Cl


KTK - Tannery -
Sarajevo                18     25        Bosna / Sava          9                          782
Iron Work - Zenica      17     54        Bosna / Sava          6                         509,2
Coal Mine Pit
Raspotocje - Zenica     17     54        Bosna / Sava          5
Coal Mine Pit           17     54        Bosna / Sava          5                         335,8
Stranjani - Zenica
Coal Separation -       17     54        Bosna / Sava          5
Zenica
Steam Power Plant -     18     41        Jala / Spreca /      11                          387
Tuzla                                    Bosna / Sava
Pulp and Paper
Industry - Maglaj       18      6      Bosna / Sava            3                         246,3     513,3
Brewery - Sarajevo      18     25      Bosna / Sava            1          1 135 296       931                 189
Soda Factor -           18     34     Spreca / Bosna           2          7 568 640       652                5404
Lukavac

Industrial Sectors:
1 food industry              4 fertiliser industry            7 metal surface treatment      10 agriculture
2 chemical industry          5 mining                         8 textile industry             11 other relevant industry
3 pulp and paper industry    6 iron and steel industry        9 leather industry
Table 2 provides a description of the Bosnian industrial hot spots. However, besides those
large polluters There is another problemthere are a number of other sources of industrial
pollution, such as small which should be addressed as soon as possible. Namely, in Bosnia
and Herzegovina there is a long tradition of extensional live-stock raising and thus existing of
numerous small slaughterhouses with very poor animal waste treatment. Due to the out-break
of «mad cow disease» this situation could generate transboundary problem. Because of the
size and of the diffuse distribution of the slaughterhouses, none of them forms represents a
real hot spot and thus the problem has been overlooked. However due to the spread of «mad
cow disease» this situation could generate transboundary problems.
II. Host country strategy

Presently, Austria, Bulgaria, Croatia, the Czech Republic, Germany, Hungary, Moldova,
Romania, the Slovak Republic, Slovenia, Serbia and Montenegro, Ukraine and the European
Community are Contracting Parties to the Danube River Protection Convention. Bosnia and
Herzegovina has an observer status and it plans to sign up this year. In the sense of mutual
people understanding and integration of the different on-going activities in the Danube River
Basin, the adherence of Bosnia and Herzegovina to the Convention framework has a
significant impact on the entire region.

Bosnia and Herzegovina has completed in 2003 the preparation of the National
Environmental Action Plan (NEAP) in conformity with the provisions of the DRPC. The goal
of the NEAP is the identification of short and long-term priority actions and measures for the
implementation of a long-term environmental protection strategy in accordance with the
economic, social and political situation of Bosnia and Herzegovina. The intention of the
NEAP is to facilitate the preparation of a unified environmental protection policy in the
context of macroeconomic reforms, poverty reduction strategy and the transition process. The
NEAP is an “open” document that will be updated regularly (goals, measures, directions and
activities).

The government of It has to be emphasized that there is real interest in Bosnia and
Herzegovina is also starting to address more specifically the “industrial hot spot” problems in
order to to promote a sustainable industrial development. Main reasons are:In this
directiondirection, the government has approved in 2003 the Law on Environment Protection,
which introduces the principles of the IPPC (Integrated Pollution Prevention and Control)
EU Directive. This law introduces an integrated permitting process and forces the Bosnian
industries to introduce Best Available Techniques (BAT) in order to comply with the IPPC
requirements by 2008.

So far several international projects dealing with environmental issues have been
implemented in Bosnia and Herzegovina. Most of these projects have successfully addressed
the subject from the governmental level (hot spots determination, legislation etc.) preparing
the legal framework conditions for programmes and actions targeting directly the industrial
pollution sources. Therefore, in the current situation, the local government is willing to
initiate programmes, which will be supporting the private sector in adopting more sustainable
means of production. Besides, numerous highly motivated and educated people are aware of
inevitability of sustainable development in Bosnia and Herzegovina.


In 2004 within the context of the NEAP, 100 priority projects (out of 450) have been selected
for implementation. Few of them focus on industry and in particular on remediation of
contaminated industrial sites. Little emphasis has been put on the implementation of projects
oriented to preventive environmental issues of industrial production. The international
community has financed several projects in Bosnia and Herzegovina (e.g. UNIDO funded
several projects related to replacement of freons 2000-2003, EcoLinks funded the project
“Developing a Water-Loss Reduction Plan for Konjic Municipality Water Utility“ 2002-
2003). However none of the implemented project has addressed industrial hot spots of the
Danube river basin.
Based on the above considerations it appears that the existing framework conditions (political,
economical and environmental) in Bosnia and Herzegovina are very favorable for initiating a
UNIDO-TEST like project.


III. Due to the 1992-1995 war, significant part of industry in Bosnia and
Herzegovina is out of operation. “Conditio sine qua non” for the recovery of
Bosnian economy is fast revitalization of industrial capacities.
In the post war period financing of the state owned sector (all industries were
state owned) was restricted. Without funding, start up of the existing industry
was slowed down seriously and significant part of the industry is still waiting to
restart their production properly.
Long industrial tradition of Bosnia and Herzegovina (e.g. already at the end of
19th century industrial areas of Tuzla, Zenica and Jajce were of regional
importance).
     Law on Environment Protection from 2003 has introduced IPPC
       (Integrated Pollution Prevention and Control) permitting process.
       Compliance with existing IPPC demands should be achieved in 2008.

Besides, numerous highly motivated and educated people are aware of
inevitability of sustainable development in Bosnia and Herzegovina.

Several international projects dealing with environmental issues of Bosnia and
Herzegovina have been performed, but most of them treated the subject from the
state level (hot spots determination, legislation etc.). Therefore, it is right
moment now, to apply approach, which will be aimed at process and technology
of pollution sources.Thus, TEST Project with its methodology and tools can
significantly improve efficiency of local economy restructuring.

Target group represents industry in the process of restructuring and restart up, as
well as, operating industrial capacities that do not comply with existing IPPC
demands.

Extent and emphasise of applied methods will be determined for each case.
Generally, very efficient combination of technical expertise and economic
evaluation in the early phase of projects´ consideration will be necessary.

Project Justification

A. Reasons for UNIDO assistance

In 1997, the United Nations Development Programme (UNDP), with the financial support of
the Global Environment Facility (GEF), launched the ‘Pollution Reduction Programme for the
Danube River basin’, through which it identified 130 major manufacturing enterprises known
as ‘hot spots’ that were significant sources of pollution of to the waters of the Danube River
basin. A significant number of these enterprises were contributing to transboundary nutrient
and/or persistent organic pollution.

In April 2001, UNIDO started the implementation of the TEST programme. The challenge is
to effectively demonstrate to the industries in five Danubian countries (Bulgaria, Croatia,
Hungary, Romania and Slovakia) that it is possible to comply with environmental standards
and still maintain, or even enhance their competitive position. The programme’s primary
financial supporter was GEF, with some participation from UNIDO and other donors (the
Hungarian and Czech Governments). The project’s national partners (counterparts) were the
National Cleaner Production Centres (NCPCs) of Croatia, Hungary, and Slovakia (members
of the UNIDO/UNEP network of NCPCs), the Institute for Industrial Ecology (ECOIND) in
Romania, and the Technical University of Sofia in Bulgaria.

The main objective of the UNIDO TEST project was to build capacity of the national
counterparts in the five Danubian countries, to apply the TEST integrated approach so that
they will, in turn, pass on the acquired expertise to other enterprises and institutions in their
own countries. Through the TEST programme in the Danube River basin 17 hot spots of
industrial pollution, from various industrial sectors (chemical, food, machinery, textile, pulp
and paper) have been targeted for technical assistance. The selected industrial polluters have
been introduced to the TEST integrated approach having the opportunity to learn how to use
environmentally sound technologies to improve productivity, whilst at the same time
complying with environmental norms and regulations.

A summary of the results of the TEST programme in the five Danubian countries is reported
in Annex I.

Within the framework of the TEST project a dissemination phase was conducted in
cooperation with ICPDR in other countries of the Danube river basin, in order to make the
results of the project accessible to a larger number of stakeholders in the region. The
dissemination stage was conducted by UNIDO in cooperation with the project national
counterparts. In particular, utilizing the established national capacity of the Croatian Cleaner
Production cCenter, it was organized a dissemination seminar in Bosnia-Herzegovina in
cooperation with the Center for Environmentally Sustainable Development (CESD) of
Sarajevo. As a follow-up of this seminar, Bosnian national stakeholders (industries
representatives and governmental authorities) have expressed their concrete interest to initiate
a TEST-like programme in Bosnia. This project proposal is the direct response to this national
request.

B. Current situation – problems to be addressed

The history of Bosnia and Herzegovina industry has a long tradition: already at the end of 19th
century industrial areas of Tuzla, Zenica and Jajce had a regional importance. However, due
to the 1992-1995 war, a significant part of the Bosnian industry has been destroyed. During
the post war period, the financing for the reconstruction was restricted, thus a significant part
of the industry is still waiting to restart their production properly. Bosnian industries are still
in a process of restructuring from state-owned to private entities. The “Conditio sine qua non”
for the recovery of Bosnian economy is the fast revitalization of the industrial sector.
Therefore it’s important to address environmental concerns before industrial output begins to
rise in the near future as expected.
Moreover the operating industrial capacities are far from complying with the existing IPPC
requirements and BAT standards that have been just recently introduced by the Bosnian
government. Industries are lacking of the technical skills and the financial resources to
promptly address the issue of a sustainable production. While going through a radical
reshaping in their move toward market economies, the Bosnian enterprises are facing
numerous challenges. They are in the process of responding to the environmental objectives
of the Danube River Protection Convention (DRPC) and to the environmental pressure from
the nearby EU market.

There is a lack of convincing practical demonstrations with enterprises of concern that show it
is possible to comply with environmental norms and still remain or perhaps enhance their
competitive positions. Although there are capacities in Bosnia and Herzegovina to provide
many of the services needed by industry to pursue the simultaneous objectives of
competitiveness enhancement, social responsibility and environmental compliance, these
capacities remain isolated in separate institutions and companies. These services are not being
provided as an integrated service package that is needed by the enterprises to pursue the three
objectives simultaneously.

TEST Project with its integrated approach and tools can significantly contribute to support
local industries in enhancing their efficiency while undertaking the necessary restructuring
actions.

C. End of project situation

The project will offer to Bosnian enterprises the opportunity to learn how to use new
approaches (TEST integrated approach) to increase their competitiveness by making use of
the existing environmental challenges. The TEST integrated approach to industrial
environmental management developed by UNIDO, is designed to assist enterprises in the
developing and transitional countries to effectively adopt Environmentally Sound Technology
(EST5). The TEST–MED project will prove that the adoption of the TEST integrated
approach and its tools, leads to continuous improvement of the economic and environmental
profiles of enterprises.

Implementation of the TEST project will lead to the following outcomes:

a) The project will enhance the existing national capacity to address industrial environmental
management in an integrated manner. Participating technicians and managers will be enabled
to apply innovative methodologies (TEST integrated approach) to promote diffusion and
adoption of EST.

b) The TEST integrated approach will be successfully introduced and demonstrated at
selected enterprises: skills of enterprise employees will be upgraded in modern environmental
management tools while corrective actions will be initiated to correct negative industrial

5 “Environmentally sound technologies in the context of pollution are “process and product technologies that
generate low or no waste for prevention of pollution. They also cover “end of the pipe” technologies for
treatment of pollution after it has been generated. Environmentally sound technologies are just not individual
technologies, but total systems which include know-how, procedures, goods, and services, and equipment as well
as organizational and management procedures”(Agenda 21, Chapter 34 -Transfer of Environmentally Sound
Technology, Cooperation and Capacity Building).
practices resulting in more efficient consumption of production inputs and reduction of
pollution loads generation. Feasible cleaner production measures requiring no or moderate
investment will be implemented at the first place at the demonstration enterprises.
Additionally EST options requiring high investment (some combination of advanced process,
pre-treatment and final pollution control technologies) will have been successfully identified
for the demonstration enterprises. EST investment project will be prepared and funding
sources will be identified for the demonstration enterprises6.

c) As a result of the project a newly-educated and motivated cadre of Bosnian professionals
will become engaged in networking to promote the outcomes of trainings and hands on-
experience (case studies) and will serve to extend the lessons learned from the project to other
hot spots. This will result in improved sharing and dissemination of information on industrial
best environmental practices for regional, national and local governments, environmental
management practitioners, NGOs, and other stakeholders.


D.
Target Beneficiaries


UNIDO will assist national institutions and independent experts (counterparts) to enhance
their understanding of the need for and their abilities to provide enterprises the integrated
package of services that constitute the TEST (Transfer of Environmentally Sound
Technology) programme. Perhaps the most important skill developed will be the realization of
the necessity to work in teams to be able to provide the diverse services needed by enterprises
to be able to incorporate ESTs (Environmentally Sound Technologies) in their production
operations.

The target beneficiaries will be the 5 enterprises (hot spots) that will be advised on how to
reduce their pollutant discharges and how to improve their production efficiency, at the same
time. These beneficiaries include the workers of the enterprises who would have the prospect
of a more secure economic future.

The ultimate beneficiaries will be those who are adversly affected by the national as well as
transboundary pollution in the Danube river. The Danube river as well as the Black Sea,
which is, the ultimate sink for wastes discharged in the Danube, provides vital services such
as drinking water supply and recreation, as well as sustaining aquatic life forms that can
survive only in a clean environment.


E. Project Strategy and institutional arrangements
6 - At least 80% of the demonstration enterprises will have successfully introduced the TEST approach and its
tools
  - At least 50% of the identified feasible CP measures requiring no or moderate investment will be
      implemented at the demonstration enterprises
   - Significant pollutant reductions (at least 30 per cent), with an emphasis on persistent toxic substances
        (PTS), will have resulted in at least one-half of the participating enterprises and some pollutant
        reduction in the other-half as a result of implementing only cleaner production measures
Bosnia and Herzegovina has been targeted for the implementation of the TEST project based
on the following criteria:

   1. Framework condition (economical/political/environmental)
   2. Existence of relevant number of pollution hot spots
   3. Presence of a national cleaner production center or its equivalent

The criteria pointed at number 1 and 2 have already been discussed in the background section
of this document. Concerning the criteria at point 3, it has to be mentioned that in Sarajevo is
located the Centre for Environmentally Sustainable Development (CESD), which is a non-
governmental institution active in promoting cleaner production country-wise. CESD will be
the national counterpart of the TEST project. Detailed information on CESD is provided in
section F of this document.

The project strategy is based on UNIDO’s substantial experience in implementing the TEST
project in the Danube river basin (Hungary, Slovakia, Croatia, Bulgaria and Romania) and
industrial environmental projects. The implementation strategy of the project consists of
three major stages (components). The first component consists of establishing a TEST focal
point at the national counterpart and network of partnership in the participating country. The
second component is to use the TEST network established to introduce and demonstrate the
TEST integrated approach, at the selected number (5) of enterprises in the country. The third
component is to disseminate the results of the demonstration within the country and initiate
the TEST integrated approach in other industrial hot spots. Figure 1 shows the TEST
implementation strategy as well as the individual tools used at each stage of implementation.
                       Stage I:              Set-up of National Counterparts and Project Advisory Board

                    "Start-up of the
                   TEST Programme"                    Selection of Demonstration Enterprises




                                                                    Initial Review




                                         P
                                         h
                                                   CPA                                         EMS
                                         a                        Good Management
                                         s                       Practices and Process
                                                                      Optimization
                                         e
                                                                         EMA
                                         1


                                                      Good Management Practices Introduced
                                                                        &
                                                       Environmental and Economic Benefits


                                         P
                                                   ESTA
                      Stage II:          h    Techno-Economic
                                         a      Assessment              Cleaner
                                                                   Technology and
                  "Introduction of the   s                         Pollution Control          EMS
                    TEST approach"
                                         e                           Technology          Implementation
                                                 Investment
                                                 Promotion
                                         2



                                                         High Cost Environmentally Sound
                                                     Technologies Identified for Implementation


                                         P          Project Evaluation and Strategic Reviews
                                         h
                                         a                      Project Evaluation
                                         s
                                         e
                                                              Sustainable Enterprise
                                                                     Strategy
                                         3



                                                     Environmental and Social Considerations
                                                       Integrated Into the Business Strategy



                     Stage III:
                                               Dissemination of Results and Experience
                   "Dissemination"




Fig. – 1 TEST implementation strategy


E1. Component 1 – Start-up of the TEST project/Institutional strengthening

The first component (stage I) of the project will generate the following outputs: i) Set up of
national focal points (national advisory boards and national counterparts), ii) introduction of
the TEST integrated approach at national counterpart, iii) set-up of the information
management system, iv) identification and selection of demonstration enterprises, v)
preparation of initial review at demonstration enterprises including market and financial
viability and initial environmental review.

National Project Advisory Boards will be set up at the country level at the start-up of the
project including: national and local authorities (e.g. representatives from the Ministries of
Industry, Environment, etc.), academia, industrial associations, chambers of commerce and
NGOs. The National Project Advisory Board is a platform, which includes all the major
country’s stakeholders that are relevant for the project, established to assure that the
implementation will focus on national/local priorities and that the results are properly
disseminated throughout the country.

A national coordinator (country manager) and a financial expert(s)7 will be appointed at the
national counterpart (CESD). An information management system will be set up that would
enable local team to access relevant database on case studies and international standards. The
national counterparts will be then introduced to the UNIDO TEST integrated approach
through ad hoc training seminars.

A number of demonstration enterprises8, will be identified within the priority hotspots and
will serve as a pilot to demonstrate the effectiveness of the TEST integrated approach. The
hands-on experience that the national counterparts will be gaining through the demonstration
will enhance its credibility and its practical ability to deliver services to the local industries. A
core principle of the TEST approach is that it will only work if enterprise participation in the
project is voluntary; importance is therefore given to “marketing” the project through on-site
visits and seminars. Enterprises are selected on the basis of a multicriteria approach. The
selection criteria will be developed by consensus amongst UNIDO and its partners within the
TEST project advisory Board. The main criteria for selection must include, but are not limited
to, enterprises that are:

                located within, and ‘contributing’ to, priority pollution hot spots
                financially viable
                interested in participating in the project and committed to environmental
                 improvements

One of the main selection criteria for enterprises is the viability pre-assessment, which
determines if the enterprise has the potential to remain in business for more than five years
given its market position and costs of production. An initial viability assessment will be
carried on those enterprises that are in line with the other selection criteria. If the enterprise in
not viable it will not be included in the project because new investment in the plant, which
will include investment in advanced process technology, will not be warranted. If the answer
will be positive, then the enterprise would be included in a short list.

The selected short-listed enterprises will proceed then with the initial review to define the
terms for the application of the TEST approach. Company strategy and market viability will
be checked in detail in order to identify the strengths, weaknesses, opportunities and threats
(SWOT) relating to each enterprise and to determine areas to enhance the enterprise
competitive advantage. Company environmental aspects and legal gaps will be also identified
in order to define the focus areas of each TEST tools to be introduced (EMS, CPA, ESTA,
EMA, SES). At the end of the initial review demonstration enterprises are finally selected.
The work-plan of activities of the TEST approach will be finalized for each demonstration
enterprise and the local counterpart will have signed letters of commitment/contracts the with

7 The financial expert will be responsible for conducting the market and financial viability assessment of the
selected enterprises. There could one or more expert depending on industrial sector involved in the
demonstration component. Viability assessment will require approximately 20 man days for each demonstration
site.
8 The number of enterprises will vary from one country to another according to private sector conditions.

However at a minimum 3 enterprises will be selected in each country.
selected enterprises to start-up demonstration activities.


E2. Component 2 – introduction of the TEST approach at demonstration hot spots

Component 2 of the project occurs when the demonstration enterprises are chosen and the
initial reviews are completed, and it consists of applying the integrated TEST approach at the
selected companies. This stage of the project will generate the following outputs: i)
implementation of Cleaner Production Assessment (CPA) at demonstration enterprises; ii)
Introduction of EMS principles and design of EMS at demonstration enterprises; iii)
Introduction of Environmental Management Accounting (EMA) practices at demonstration
enterprises; iv) preparation of EST investment project for the demonstration enterprise and
investment promotion; v) introduction of principles for preparation of enterprise sustainable
strategies (SES).

Introduction of the TEST integrated approach at the enterprise level is in the following
sequence: first, the existing situation is improved by better management of the existing
processes, then the introduction of new technology or of end-of-pipe solutions is considered.
Finally, the lessons learned from each TEST project’s implementation is reflected in the
respective company’s business strategy. Introduction of the TEST approach at enterprise level
will be done in three phases.

The first phase aims at improving the operation of the existing processes and technology by
introducing and integrating three different ‘soft’ and complementary environmental
management tools into the company’s daily operations: Cleaner Production Assessment
(CPA), Environmental Management Systems (EMS) and Environmental Management
accounting (EMA). The TEST approach includes a methodology that introduces the tools
simultaneously and in an integrated fashion to take advantage of the synergies this creates.
Although they can still be quite effective when implemented independently, this streamlining
of data flows simplifies the work required and increases the overall effectiveness of the tools
by generating more results that are positive. However, depending on the specific situation of
the company, a step-by-step implementation may be the best option.

The cleaner production assessment will be initiated focusing on those priority aspects
identified during the initial review (completed at the end of stage I), which revealed to a have
a potential in terms of economical savings. This will be done first because through a cleaner
production assessment the enterprise can identify pollutant reduction measures that could be
adopted using available financial resources. These easy savings will help commit the
company more strongly to the project. In parallel each enterprise will introduce elements of
Environmental Management System (EMS) for its operations as most of the preparatory work
for setting up the system will have to be integrated with the CP assessment.

Only after the CP assessment is completed will an enterprise move on to the introduction of
an Environmental Management Accounting (EMA) system on a pilot level. The general use
of EMA information is for internal organizational calculation and decision-making, which
provides for the transition of data from financial accounting and cost accounting to highlight
costs associated with un-efficient use of production inputs, with cost related to environmental
risk and environmental protection. EMA also allows the calculation of long-term
environmental savings and benefits that are not correctly taken into account when cleaner
production project are prepared.
CPA, EMA and EMS are environmental management tools that are mutually beneficial and
combining their introduction will result in a substantive long-term improvement of the
company’s environmental performance and its competitiveness. National experts will be
trained in how to integrate CPA with EMS and EMA and will initiate the in plant CPA
assessment at the selected enterprises providing training of employees and the necessary
assistance during the identification and selection of cleaner production measures. National
experts will also be trained on how to design EMS and EMA systems and will be assisting the
demonstration enterprises in implementing those management systems on a pilot scale.

At the end of this phase, good management practices will have been identified and
implemented and processes optimized. The results of this phase will generate the first tangible
environmental and economic benefits that the company achieves from the project.9 This is
very important, since it allows the demonstration enterprises to see results, quite quickly and
can give them the added impetus and enthusiasm to go on to the next phase.

The scope of the next phase within component 2 is to identify the higher capital investment
requirements for environmentally sound technologies (EST). At the end of the CPA module,
the company will have collected a large amount of information about its production processes
and on opportunities for improvements, some of which will require little-to-no finances to
implement and others that will require some capital investment. Traditional CP projects
assume that companies will perform a technology assessment using their own resources. This
has normally resulted in very general pre-feasibility studies of investments needs. These are
the core reasons why the second phase starts with an Environmentally Sound Technology
Assessment. The ESTA module continues where the CPA ends, to broaden the scope to
include both large cleaner technology investments (technology change) and end-of-pipe
solutions. ESTA modules can build on information supplied from the CPA and EMA modules
generated during phase I of the stage II. Practical experience shows that separating CP
assessments and EST assessments into two steps has very positive results. This approach
demonstrates the importance of providing sufficient resources for the financial appraisal of
large investments to address both issues in an integrated way.

The ESTA module primarily consists of technical and economic evaluations of potential EST
investment projects, which take into account long-term environmental savings and benefits.
To do this, computational tools10 are used and the following activities are undertaken:
     Preparation of a pre-feasibility study
     Preliminary identification of possible suppliers
     Preliminary identification of affordable sources of capital for the technology
       investment

Contingency environmental costs that arise from expected changes in regulatory regimes or
from potential risks to the environment are also considered during the calculation of the
financial indicators of the investments. At the end of this phase, the EST options are
incorporated into the investment decision-making process and managers are provided with
pre-feasibility studies showing the higher profitability of the combined CP/EST investments.



9 CP/EST measures identified in this phase that require a higher capital investment are forwarded to Phase II for
further investigation.
10 Similar to the UNIDO-COMFAR software for financial appraisals
National experts will be trained in the UNIDO COMFAR software for investment appraisal,
and each national counterpart will be provided with software package and license. Sectorial
international experts will assist national experts during the technical assessment that will
identify potential combinations of advanced process and pollution control technologies that
would bring plants into compliance with major environmental norms and at the same time
contribute to the extent possible to improve productivity.

Once the pre-feasibility studies will be completed for the identified EST solutions, possible
sources of cheap capital at country level will be identified (including environmental funds,
bilateral credit lines as well as put forward to multilateral funding groups, World Bank,
EBRD, EIB, GEF and EU). A portfolio of investment project proposals will be prepared for
promotion within the existing UNIDO Network of Investment Promotion Offices (IPOs) that
will help to explore and identify opportunities for direct foreign investment in the identified
EST projects.

The third phase under component 2 aims at ensuring the continued use of the TEST approach
at the pilot facilities. For the approach to be continued, the experience must be reflected in a
facility’s strategic level (e.g. business plan development), which should in turn also lead to
new insights and desired changes in the enterprise’s values and strategies. The sustainable
enterprise strategy (SES) is the module, in the integrated TEST, aimed at accomplishing this
integration of environmental and social dimensions into the enterprise’s culture. This phase of
the project builds on:

      Project indicators, which should be selected to best reflect the results of TEST
       approach implementation at each enterprise
      An effective management system, which will ensure continued measurement and
       evaluation of enterprise performance against the selected project indicators, and
      Relaying the experience that was gained on how to bridge the gaps between the old
       and new values, goals and strategies; how the experience was integrated into their
       business; and how any related challenges were overcome

During this phase, the performance indicators set up at project’s start and during the project’s
implementation should be measured, evaluated and the results analyzed, interpreted and
reflected upon. This stage presents an opportunity to improve the company’s relationship with
the stakeholders and to learn more of their expectations. It is also an opportunity to educate
the stakeholders about the experience and lessons learned, which may in turn alter their
opinions and expectations. All this is crucial to further improve company performance.


E3. Component 3: Dissemination of project results

The assistance, given to the pilot enterprises is to be used to demonstrate the advantages of
adopting the integrated TEST approach. The capacity built at the national counterparts in
providing environmental services will be made available on a country level on how to
implement the TEST approach. Provision is made in the TEST project to provide case studies
to national counterparts, which in turn are to share the information in these case studies with
companies in the country or region. Relaying the successful results made possible at the pilot
locations will demonstrate its value to other companies. It is expected that this will generate a
demand for TEST-related services from the national counterparts.
Component 3 of the TEST-MED project consists of the following activities: i) preparation of
national publications on the application of the TEST approach at the demonstration
enterprises; ii) organization of national seminars in each country; iii) provision of limited
technical assistance to other national enterprise on the TEST approach/tools.

F. Counterpart support Capacity



The Centre for Environmentally Sustainable Development (CESD) is a non-governmental
organization, which operates in Bosnia and Herzegovina in the field of environmentally
sustainable development by rising awareness activities, human resources development and
networking with similar regional and international centres. CESD was established with the
help of the Austrian Committee of the World University Service and started operating in the
year 2000.

Supporting national companies in understanding and applying cleaner production is one of the
main Centre’s activities. The objective of the Centre is to encourage companies to adopt
business practice and technologies, which would help them to achieve effective reduction of
waste flows and emissions generated in production processes.

CESD is active in developing programs aiming at strengthening the participation of local
communities in addressing different environmental problems and their engagement in
regional cooperation activities. Particular emphasis has been given to building communication
platform between industry, government, local and scientific community.

CESD has a library with books, magazines and study materials related to cleaner production.
CESD is a member of Danube Environmental Forum (DEF), which assembles non-
governmental organizations whose activities are devoted to the protection of the Danube
River. Additional information on CESD can be found on the webpage
http://www.coor.ba/en/index.html .

At the moment CESD has 18 staff members (15 experts and 3 technical support associates),
all of them engaged on a part time basis. CESD has participated in the implementation of
several project in the field of capacity building in cleaner production” – EU-LIFE Third
countries project, in the preparation of local environmental action plans, environmental
impact assessments, and in projects related to the environmental aspects in agriculture, small
slaughterhouses, mine waters, textile industry, food industry, metal finishing industry etc.


G. Coordination arrangements

The project will be executed by UNIDO. The UNIDO Project Manager will be responsible for
routine monitoring of the activities of the TEST focal point (national counterpart) in the
country. Some of the project activities under component 2 will be executed in cooperation
with the Croatian Cleaner Production Center11 that will provide the needed technical
assistance (trainers and consultancy).

11The CROCPC has been actively involved in the TEST project in the Danube river basin. Capacity has been
built at the CROCPC in the UNIDO TEST integrated approach and will be partly utilized to provide technical
The national counterpart will be CESD that will be responsible for insuring coordination with
other on-going technical assistance activities addressing industrial pollution in Bosnia and
Herzegovina. CESD will be responsible for periodic reporting and communication to the
UNIDO project manger on the progress in implementing the TEST programme.

A national project coordinator will be hired within CESD and will be responsible for the
overall coordination of the project activities. Short-term national consultants that will be
required at each project stage will be hired through the CESD. CESD and the national
coordinator will be directly responsible of the quality assurance and of the performance of the
short-term national experts that will be involved in the various project activities.


IV. Development Objective

The development objective of this project is to improve industrial environmental management
by major industrial enterprises in Bosnia and Herzegovina, resulting in major reductions in
pollutant loadings and consequently risk to the Danube river and Black Sea aquatic
environments.

The implementation of the project will be subdivided into three operational components:

       Component I. Institutional Strengthening
       Component II. Enterprise Demonstrations
       Component III. Dissemination of Results

Under each component there is one major objective and several outputs.

The following tables present the relationship among the components, objectives, outputs,
successs criteria, activities, lead agencies, national counterparts, budget lines / associated
USD funds (these tables reflect the full level of funding needed to implement the project).



V. Immediate Components

COMPONENT I. Institutional Strenghtening

Objective 1. Set up of the national focal point that would facilitate the transfer of ESTs
to industrial enterprises in Bosnia and Herzegovina

The first step is to strengthen the Center for Environmentally Sustainable Development
(CESD) from Sarajevo (national counterpart). Success under this objective would be
strengthened institutional capacity to apply the TEST approach. The availability of the
strengthened capacity would be measured by the availability of trained local team leaders in
the TEST approach, by the existence of operating information management systems and by


assistance to CESD. The CROCPC is the most suitable partner for assisting UNIDO in this project, due to
former and on-going cooperation activities with CESD and due to the close cultural linkages (language).
existence of a board of advisors actively involved in enterprises selection and oversight of
project activities.
Outputs:
1.1 TEST focal point initiated
                        Activities                               Responsible parties      Budget      Month
                                                                                           line
1.1.1     Finalization of the country nominations for                 CESD                              1
          TEST programme lead institution and                         UNIDO
          collaborating public / private sector institutions /
          companies that will provide the national experts
1.1.2     Set up project advisory board.                              CESD                              1
                                                                      UNIDO
1.1.3     Designate team leader (national coordinator12)              CESD                 17-01        1
          for the TEST national team based on                         UNIDO
          recommendation of advisory board with review
          by UNIDO
Outputs:
1.2 TEST team trained
                         Activities                                Responsible         Budget line    Month
                                                                     parties
1.2.1     Introduce TEST project at country level                    UNIDO               11-50          2
          (national counterparts and project advisory               CROCPC               15-01
          board):                                                                        16-01
               Project objectives and activities
               Role of national counterparts, and

                   UNIDO requirements
               Marketing of the TEST project
               Selection process of demonstration
                   enterprises
1.2.2     Train national counterpart team in the TEST                UNIDO               11-50          2
          integrated approach:                                      CROCPC               33-01
                TEST integrated approach
                Overview of TEST tools
                Selection of case studies from the
                   TEST project in the Danube River
                   Basin
                Initial review: market and financial
                   viability, environmental review
1.1.4     Set up TEST team office- including clerical                 CESD               17-01          1
          support.
Outputs:
1.3 Information management system setup
                     Activities                                    Responsible          Budget line    Month
                                                                     parties
1.3.1     Install equipment (PC supported by necessary               CESD                  45-01            2
          hardware and software elements)                            UNIDO
1.3.2     Establish Internet linkages with relevant                  CESD                  17-01            2
          databases and institutional Centre, EU, US as             CROCPC
          well as the ICPDR information systems                      UNIDO
1.3.3     Find and assemble relevant sub-sectorial case              CESD                  17-01            2
          studies about the successful implementation of            CROCPC
          ESTs. Information to be used in marketing                  UNIDO
          TEST programmes to enterprises as well as
          training TEST team members.
1.3.4     Document relevant EU and national                          CESD                  17-01            2
          environmental standards for pollution release             CROCPC

12The national coordinator will be the country project manager. He/She will be selected by UNIDO based on
CESD and project advisory board nomination (short-list of three candidates). He/She will be located at CESD
and will be responding directly to CESD Director.
         into the environment.                                      UNIDO
Outputs:
1.4 Demonstration enterprises identified
                        Activities                               Responsible          Budget line      Month
                                                                   parties
1.4.1     Market TEST project among industrial hot spots           CESD                  17-01            3
          in the participating countries (prepare marketing                              33-01
          material, introductory local seminar for
          enterprises)
1.4.2      Visit potentially interested enterprises and              CESD                17-01            3
           conduct preliminary financial viability                                       17-50
           assessment.
1.4.3      Select short list of potential participating              CESD                17-01            3
           enterprises. Exclude those already receiving
           international assistance.
1.4.4     Finalize selection of demonstration enterprises           CESD                 17-01            3
           in close cooperation with and national project           UNIDO
           advisory board
1.4.5     Secure letters of commitment from top                      CESD                17-01            4
           management of enterprises to participate in
           project. Letter should designate enterprise
           TEST team leader for the project.
Outputs:
 1.5 Initial Review: detailed Market and financial Viability
 and initial environmental review prepared for the selected
 enterprises
                         Activities                              Responsible          Budget line      Month
                                                                   parties
1.5.1     Conduct a detailed market and financial viability        CESD                  17-50            4
          of the short-listed demonstration enterprises,            NEs13
          including the strengths, weaknesses,
          opportunities and threats (SWOT) relating to
          each enterprise
          1
1.5.2     Based on the results of the activity 1.5.1,                CESD                17-50            4
          identify specific measures necessary to enhance             NEs
          the competitive advantage and secure enterprise
          future viability and profitability.
1.5.3     Conduct an initial environmental review at each            CESD                17-01            4
          company following UNIDO guidelines to assess                NEs
          company environmental aspects and legal gaps
          in order to identify the focus areas for the
          implementation of the TEST tools (CPA, ESTA,
          EMA, SES, EMS).
1.5.4     Final selection of demonstration enterprises              CESD                 17-01            5
          based on the findings of the market and financial         UNIDO                17-50
          viability assessment and initial environmental
          review. TEST teams in consultation with
          UNIDO and enterprises, prepare the detailed
          work plan for the introduction of the TEST
          approach at each company.
1.5.5     Enterprise TEST team appointed and contracts               CESD                17-01            5
          signed between local counterpart (CESD) and
          demonstration enterprises for the provision of
          the technical assistance under the TEST project14

13National experts
14The contract to be signed, should possibly envisage a small financial contribution of the enterprise to the
implementation of the project activities. The contracts should also include a provision for the reimbursement of
the costs of the technical services provided by the local counterparts under the TEST project, in case the
          .
1.5.6     Finalize the TORs for contracting national                  UNIDO                 11-50             5
          counterpart (CESD) and partners (CROCP) -
          contracts preparation



COMPONENT II. Enterprise Demonstrations

Objective 2. Apply the TEST approach to at least five enterprises located in Bosnia and
Herzegovina

Under this objective national team will apply the TEST approach in order to show 5
enterprises that it is possible to comply with environmental norms and still maintain or
perhaps enhance their competitive positions. Success under this objective would be enterprise
application of the TEST approach, both individual tools and of all tools. Successful
application would be measured in terms of at least 3 out of the 5 participating enterprises
applying the full TEST approach to their operations, and the rest of companies applying most
of the tools. In addition, at the end of the project, there should be significant pollutant
reduction (at least 30 percent) by at least three out of five enterprises and some pollutant
reduction by the other two. Full compliance with environmental norms will take additional
years because of the need to install the EST packages at the enterprises.

Outputs:
2.1 Cleaner production assessment undertaken at the
selected enterprises
                        Activities                                  Responsible           Budget          Month
                                                                      parties               line
2.1.1     Train the trainers (national experts) in integrated        CROCPC                11-50             6
          CPA methodology (one week) Including                        CESD                 21-01
          integration with EMS and EMA
2.1.2     Training of enterprise teams in CPA by national             CESD                 21-01            6–9
          CP experts                                                   NEs
          In plant CPA assessment at the selected                    CROCPC
          enterprises and identification of feasible CP
          measures
2.1.3     Assist enterprises during implementation of                  CESD                21-01           9 -15
          identified CP measures (3 to 6 months)                        NEs
Outputs:
2.2 Environmental Management systems introduced at
demonstration enterprises
                        Activities                               Responsible parties       Budget line      Month
2.2.1   Training of the participating enterprises and TEST           CROCPC                  21-01           7-8
        teams (national experts) in designing EMS                     UNIDO                  11-50
                                                                       IEs15
2.2.2   Assist enterprises in the elaboration of                       CESD                   21-01          8- 15
        environmental policy and overall design of EMS                NEs/IEs
        according to international standards
2.2.3  Assist enterprises during the implementation of                   CESD                 21-01          15-17
       EMS (evaluation, monitoring and internal audit)                  NEs/IEs
Outputs:

enterprise will withdraw from the project before completion of the project activities. The contract should also
include a provision stating the commitment (willingness) of the management to implement the measures that will
be pollution reduction that will be identified during the project state its willingness to share project results with
other enterprises.
15 International Experts
2.3 Environmental Management Accounting (EMA)
principles and practices introduced at demonstration
enterprises
                           Activities                            Responsible parties   Budget line   Month
2.3.1     Train national counterpart and TEST teams in                UNIDO              11-50         9
          Environmental Management accounting                        CROCPC
          principles                                                   IEs
2.3.2     Introduction of EMA systems at selected                      CESD              21-01       10 – 15
          enterprises (including the design of the                    NEs/IEs            11-50
          information system for EMA and the “set of
          adjustments” to current cost accounting systems)
2.3.3     Assist the selected enterprises during                        CESD             21-01       15 -17
          implementation of EMA systems (evaluation and                NEs/IEs
          monitoring)
Outputs:
2.4 EST investment projects prepared for the selected
enterprises and investment promotion
                          Activities                             Responsible parties   Budget line   Month
2.4.1     Train national experts in the UNIDO COMFAR                  UNIDO              21-01        12
          software for investment appraisal, and provide                IE               15-01
          counterpart with software package and license.             CROCPC
2.4.2      Initiate the EST assessment at each enterprise to           CESD              21-01         13
           identify potential combinations of advanced                NEs/IEs            11-50
           process and pollution control technologies that           CROCPC
           would bring plants into compliance with major
           environmental norms and at the same time
           contribute to the extent possible to improved
           productivity.
2.4.3      Prepare pre-feasibility studies (using UNIDO                CESD              21-01       13-16
           software, COMFAR or P2 finance) for the                    NEs/IEs
           identified EST investment projects. Prepare
           detailed project profile.
2.4.4      Assist during the identification of technology              CESD              21-01         16
           suppliers the availability, costs and conditions of       IEs / NEs
           selected EST packages.                                     UNIDO
                                                                     CROCPC
2.4.5     Identify possible sources of cheap capital for               CESD              17-01       16 - 17
          financing of the identified EST investment                  UNIDO              21-01
          projects at country level (including bilateral
          credit lines as well as put forward to multilateral
          funding groups, World Bank, EIB, EBRD, GEF
          and EU)
2.5.3     Assist enterprises during the preparation of                 CESD              17-01         18
          application for financial aid for the prepared                NEs              21-01
          EST projects                                                                   33-01
Outputs:
2.5 Introduction of principles for preparation of
Sustainable Enterprise Strategies at demonstration
enterprises
                           Activities                            Responsible parties   Budget line   Month
2.5.1      Evaluate project results at enterprise level and           CESD               17-01        19
           calculate TEST project indicators – Compare                 NEs               21-01
           with situation at project start and present overall
           results to enterprise management.
2.5.2      Train national experts in Sustainable Enterprise           UNIDO              21-01         20
           Strategy (business plans, social action                   CROCPC              11-50
           commitments and negotiated environmental                    IEs
           compliance schedules) in order to have a
           uniform and proven methodology in all five
          countries. One week workshop.
2.5.3     Prepare draft SES reports for the participating            CESD               21-01        21
          enterprises with the enterprise teams andother              NEs
          appropriate groups.
2.5.4     Present and review SES reports with members                CESD               17-01       21-22
          of the project advisory board                              UNIDO



COMPONENT III. Dissemination of project results

Objective 3. Dissemination of experience with the five pilot enterprises to other
enterprises of the Danube river basin

The ultimate aim of the project is to persuade other polluting enterprises in the Danube river
basin that national institutions are available and capable of assisting them in identification of
cost effective plans for compliance with environmental norms that would also increase their
productivity. Success under this objective would be wide spread awareness and demand for
the TEST approach among the major industrial enterprises causing transboundary pollution.

Outputs:
3.1 National publication of case studies prepared
                          Activities                           Responsible parties   Budget line   Month
3.1.1    Prepare national publication of case studies to            CESD               17-01       20-21
         record the experience of undertaking TEST                                     21-01
         project for participating enterprises, highlighting
         lessons learned and impacts on the future of the
         enterprises..
3.1.2    Circulate publication for review and for                   CESD               17-01         22
         comments                                                   UNIDO
3.1.3    Finalize manual and print.                                 CESD               21-01         22
Outputs:
3.2 National dissemination seminar held
                          Activities                           Responsible parties    Budget       Month
                                                                                        line
3.2.1    Liaise with national industrial associations and            CESD              17-01        22
         national authorities (project advisory boards) to
         identify suitable events where the TEST project
         results could be presented (work-shops,
         periodical conferences, etc)

3.2.2    Organize a national seminar in cooperation with             CESD             21-01         23
         industrial associations to disseminate project                               17-01
         results to other enterprises in the country
Outputs:
3.3 Five additional enterprises offered limited technical
assistance for the introduction of the TEST approach/tools
                          Activities                           Responsible parties    Budget       Month
                                                                                        line
3.3.1    Identify 5 enterprises among those participating            CESD              17-01        23
         at the national seminar, interested in exploring
         the benefits of the TEST approach
3.3.2    Offer a three-days tailor-made seminar and in-              CESD             17-01        23-24
         plant assessment at each selected enterprise for                             21-01
         application of TEST approach and its tool.
3.3.3    Evaluate response of enterprises and negotiate the          CESD             17-01         24
         terms for replication of the TEST approach in the
        interested enterprises
3.3.4   Initiate the initial review (market and financial       CESD              21-01           25
        viability and environmental review) in at least 2                         33-01
        interested enterprises. Prepare a proposal for
        introduction of TEST approach/tools and discuss
        it with top management.



VI.      INPUTS
A. Government Inputs

       The national government coordinators for the Danube River Convention will provide all
        necessary information and facilitate dialogue with enterprises that will participate in the
        project.

       The CESD will provide clerical support and office space and contacts with national experts
        that could participate in the project.


B. UNDP BUDGET

The following table provides a summary of the project cost for each component by budget line.
Budget line 21-01 subcontract under component 2 and 3 – includes the costs for national experts and
local trainings (renting of rooms and equipment, local transportation costs for participants, etc..). The
breakdown of the project costs under budget line 21-01 for component 2 is provided in annex II.
 Budget              Description                Duration  TOTAL      TOTAL Costs
  line                                           (w/m)   Cost [USD] [USD] including
                                                                      AOS (13%)
Component 1: FIRS T S TAGE

11 50         International experts
                                                   3           20,000    22,600
15-00         Project staff travel                              5,000    5,650
16-00         UNIDO        staff   missions/
              evaluation
                                                                3,000    3,390
17 01         National coordinator                 4            8,000    9,040
17-50         National experts (market &
              financial viability)                 5           15,000    16,950
45-01         Equipment                                         4,000    4,520
33-01         In-service training/seminars                      4,000    4,520
51-01         M iscellaneous                                    3,000    3,390
99            Subtotal                                        62,000     70,060

Component 2: S ECOND S TAGE
11 50         international experts
                                                   10          90,000   101,700

15-00         Project staff travel countries                   10,000    11,300
16-00         UNIDO        staff    missions/
              evaluation                                        3,000    3,390
17 01         National coordinator
                                                   18          36,000    40,680
21 01         sub contract                                    140,000   158,200
45-01         Equipment                                         4,000    4,520
33-01         In-service training/seminars
                                                                4,000    4,520
51-01         M iscellaneous                                    3,000    3,390
99            Subtotal                                       290,000    327,700
Component 3: THIRD S TAGE
11 50       international experts
                                                   2           15,000    16,950

15-00         Project staff travel countries                    5,000    5,650
16-00         UNIDO        staff    missions/
              evaluation                                        3,000    3,390
17-01 to 04   National coordinator
                                                   3            6,000    6,780
21 01         Subcontract                                      20,000    22,600
51-01         M iscellaneous                                    4,000    4,520
99            Subtotal                                         53,000   59,890
TOTAL                                                         405,000   457,650
VII. RISKS

F. 1. Major risks

       a. The environmental authorities in Bosnia and Herzegovina may not enforce the
          environmental norms that are necessary to protect the environment. If they fail to
          enforce norms, there may not be sufficient incentives to participated in the TEST
          project The risk is there, but it is acceptable because the national government has
          already introduced the necessary legal instruments for the introduction of BAT at
          industrial hot spots.

       b. The EST options (combined process and pollution control technologies) identified
          for some of the demonstration plants may be too costly. If implemented by some
          enterprises, they could no longer be profitable operations. This risk is acceptable
          because there is considerable evidence (see annex I) that the costs for compliance
          with environmental regulations are not excessive.

       c. Financing may not be available for the enterprises to implement the identified EST
          option. This risk is acceptable both because there are a number of programmes
          providing financial support for environmental investments and the enterprises
          themselves must begin to address environmental problems with their own
          resources if they are to stay in operation.

F. 2. Minor risks

       a. Some of the participating enterprises may drop out of the TEST programme,
          diminishing the number of plant demonstrations undertaken during the project.
          This risk can be monitored and probably avoided by (i) sound selection of
          demonstration facilities based on the project crtiteria; (ii) by signing a contract that
          would encompass a small financial contribution by participating enterprises for the
          provision of the technical assistance; (iii) by maintaining a continuous dialogue
          with the enterprises about their concerns and the results of project activities.


VIII. PROJECT REVIEWS, REPORTING AND EVALUATION

(a)    The project will be subject to review (joint review by members of the project advisory
       board and donors) every 12 months, the first meeting to be held after the first 12
       months of the start of full implementation.

(b)    Project evaluation reports will be prepared by UNIDO project manager for
       consideration at the terminal review meetings. They shall be prepared in draft
       sufficiently in advance to allow the yearly review.

IX.    EXPECTED FOLLOW-UP

         It is expected that by the end of the project, the national counterpart (CESD) will have
the capacity to apply the TEST approach to other enterprises (hot spots). It is also possible
that a similar project will start to build capacity within the remaining Danubian countries.


                                               27
                                            Annex I
                   Results of the TEST project in the Danube river basin

Overview

In April 2001 within the framework of the UNDP-GEF “Pollution Reduction Programme for
the Danube River Basin”, UNIDO started the implementation of the TEST project in five
Danubian countries (Bulgaria, Croatia, Hungary, Romania and Slovakia) with the aim to
effectively demonstrate that it is possible enhance the environmental performance of
industrial hot spots of concern and still maintain, or even enhance their competitive position.

The main programme objective was to build capacity of the national counterparts in the five
Danubian countries, to apply the TEST integrated approach for industrial environmental
management developed by UNIDO so that they will, in turn, pass on the acquired expertise to
assist enterprises and institutions in their own countries and throughout the Danube River
Basin.

The project’s national partners (counterparts) were the National Cleaner Production Centres
(NCPCs) of Croatia, Hungary, and Slovakia (members of the UNIDO/UNEP network of
NCPCs), the Institute for Industrial Ecology (ECOIND) in Romania, and the Technical
University of Sofia in Bulgaria.

The UNIDO-TEST project in the Danube River basin targeted 17 hot spots of industrial
pollution, from various industrial sectors (chemical, food, machinery, textile, pulp and paper).
The list of enterprises is provided in table 4.

Table 4 – List of enterprises participating in the TEST project


          Country          Selected Enterprise                     Industrial Sector
   1    Croatia        Agroproteinka                  Meat Rendering
   2                   Gavrilovic d.o.o.              Integrated meat processing
   3                   Herbos                         Pesticides- Atrazine plant
   4                   IPK Tvornica Secera Osijek     Sugar
   5    Romania        ASTRA Romana                   Petrochemical - refinery
   6                   Rulmentul                      Machinery – bearing production
   7                   Chimcomplex                    Intermediate Chemicals -Isopropyl-
                                                      amine
   8                   SOMEŞ                          Pulp and paper
   9    Slovakia       AssiDoman Sturov               Pulp and paper
   10                  Zos Trnava                     Machinery - repair railway wagons
   11   Hungary        Gunter – Tata Kft.             Machinery – Heat exchanger
                                                      manufacturing
   12                  Indukcios es Vedogazos         Steel heat treatment
   13                  VIDEOTON Audio                 Electronic products, plastic and wood
                       Company                        processing
   14                  Nitrokemia 2000                Intermediates Chemicals
   15   Bulgaria       Yuta JSC                       Textile
   16                  Slavianka JSC                  Fish processing
   17                  Zaharni Zavodi AD              Sugar - Alchool production



                                                28
The TEST project’s primary financial supporter was GEF, with some participation from
UNIDO and other donors (the Hungarian and Czech Governments). However, apart, apart
from the direct financial contributions to project activities, significant co-financing was
provided by the 17 participating enterprises in terms of cash and in-kind. Fig. XXure 1 (please
add the correct number to this figure) provides a breakdown of the total TEST project
financial contributions, including the total co-financing provided by the 17 Danubian
companies (labor cost estimated by the total number of man /days of labor force involved in
TEST-related activities, including trainings, multiplied by the average daily salary).

Fig. 1 – TEST project in the Danube river basin: financial contributions




Results of the project

Through the project the participating industrial polluters have been introduced to the TEST
integrated approach having the opportunity to learn how to use environmentally sound
technologies to reach continuous improvement of their economic and environmental profiles.

Tangible results were achieved, both in terms of increased productivity and in terms of
improved environmental performance. The threats identified in the business environment,
often perceived by the companies as survival threats connected with environmental
compliance issues and production costs , were reduced and new opportunities were identified.

Increased productivity was achieved through the implementation of identified CP/EST
measures, leading to a reduction of specific production inputs costs (increase of profit
margins), increased of production capacity, better control of production costs related to
process inefficiencies, and better labour conditions. In many of the participating
companiescompanies, the identified measures also resulted in improved quality of the final
product.

Better management of environmental aspects was achieved through introduction of EMS
elements. By December 2003 4 enterprises obtained ISO 14001 certification, while the
remaining companies have adopted the main EMS procedures, prepared an environmental
policy and an environmental management programme. In 9 of the 17 enterprises the EMS was
fully integrated into the existing quality management system (QMS). Furthermore, as a direct
result of the EMS component of the TEST projects, several organizational changes occurred


                                              29
in the environmental function of the companies such as the creation of an environmental
department or the increase of its staff, appointment of the environmental manager.

EMA principles were also introduced in the participating companies to increase cost
transparency by allocating environmental costs to production steps and products.
Environmental costs were calculated and pulled out of the overheads accounts, new
environmental accounts were created within the accounting department for environmental
expenditures and, internal procedures were put in place to monitor the environmental costs of
the company on a periodic basis and for allocation to product costs.

Other less tangible benefits, like improved relationships with stakeholders leading to the
projection of a better image towards local authorities and customers, were also achieved. This
was, especially true in those companies that introduced a full EMS and obtained the ISO
14001 certification.

Both the tangible and the less tangible benefits contributed to strengthen the position of the
enterprises and their competitive advantages, thus reducing the existing barriers to access to
both local and foreign markets (especially the EU market).

Fig. XXXFigure 2 summarizes summarizes the total number of CP/EST measures that were
identified vs. the number that were implemented. A total of 230 CP measures were that had
already been implemented by the end of the project, comprising good-housekeeping measures
(type A) and low cost measures with short pay-back periods (type B). The total investment
entered into by the 17 enterprises to implement the 109 type B measures was approximately
1.7 MUSD, while the total estimated financial savings were approximately 1.3 MUSD per
year.

Fig. 2 –total number of measures identified vs. those implemented at the 17 enterprises.




A number of CP/EST measures requiring high investment (type C) were also identified at
each company. These investments include both new cleaner technologies (requiring large
investments) and some EOP end-of-pipe technology. These measures were evaluated
technically and financiallyand financially within the scopeframe of the TEST project anand
approved (by the top management) for implementation. Table XXXTable 5 provides a
summary of the investmentrequiredinvestments required, the related financial benefits, the


                                              30
value of the related financial indicators (IRR, NPV), and the expected implementation for
each company. The total total investmentss required for the 17 enterprises are are
approximately 47 MUSD.




                                           31
Table 5: EST investments at the 17 enterprises

                                          Total
                                                      Total Yearly         Financial Indicators         Expected Date of
     Country        Enterprise        Investments
                                                     Savings [USD]           (IRR, NPV, PBP )            Implementation
                                         [USD]
     Croatia    Agroproteinka                                                     IRR: 33%
                                       7,500,000         1,500,000                                          April 2007
                Gavrilovic d.o.o.      3,500,000          440,000                 IRR: 26%               September 2006
                Herbos                  800,000       0 (end-of-pipe)                  -                     Mid-2006
                IPK Tvornica Secera
                Osijek                  800,000           400,000                 IRR: 110%              September 2004

     Romania    Astra Romana
                                                      1% reduction of        NPV: 319 - 943. Eur
                                       3,162,000                                                            2004/2007
                                                       product cost           IRR: 10.45-11.2%
                Rulmentul                                                      NPV: 2.4 Mill Eur
                                        400,000          2,500,000                                             2003
                                                                                IRR: 1002%
                Chimcomplex
                                                                           NPV: positive after 4 yrs.
                                        270,000           220,000                                        Under negotiation
                                                                           IRR: positive after 6 yrs.
                Somes                                                       NPV: Mill. Eur: 3.3-4.4
                                       11,500,000        1,370,000                                         2004 - 2006
                                                                               IRR: 14-18%
     Slovakia   AssiDoman Sturov                                           NPV: 0.228 - 4.725 Mill.
                                       4,050,000         2,293,000          EUR IRR: 38.42% -                  2005
                                                                                  60.85%
                Zos Trnava                             75,000 only for
                                                                             NPV: 40 - 626 kUSD
                                       7,167,500      penalties, 4 times                                       2009
                                                                               IRR: 4% - 17%
                                                    increased production
     Hungary    Gunter – Tata Kft.
                                        898,828       0 (end-of-pipe)                  -                       2007
                Indukcios es
                                        18,560        0 (end-of-pipe)            PBP: 6.8 yrs.                 2004
                Vedogazos
                VIDEOTON Audio
                                        35,783        0 (end-of-pipe)                  -                       2007
                Company
                Nitrokemia 2000                                                PBP: 1.54 yrs.
                                        265,500           171,817                                              2006
                                                                             NPV: 206,749 USD
     Bulgaria   Yuta JSC                                                       min. PBP: 4 yrs.
                                       2,500,000       Not available                                        2003-2005
                                                                              max. PBP: 5.3 yrs.
                Slavianka JSC                                                    Not available                 2005

                                                                           min. PBP: 3.5 yrs. Max.
                                       4,700,000          350,000                                           2004-2005
                Zaharni Zavodi AD                                                PBP: > 5 yrs.

                                      47,568,171        5,361,817
TOTAL



The environmental benefits were significant in terms of reduced consumption of natural
resources (including fresh water consumption and energy), reduced wastewater discharges
and pollution loads16 into the Danube River and its tributaries, as well as reduction of waste
generation and air emissions17.

Fig. XXXFigure 3 provides a summary of the reductions in specific water consumption at
each TEST enterprise after implementation of the identified CP/EST measures. As of the end
of 2003, Tthe range of reduction varied between 2 and 89 percent of the initial value, leading
already by the end of 2003 to an impressive total reduction in wastewater discharges, into the
Danube river River basin, of of 4.6 Millions of m3 per year. It is expected. Expected


16 Pollution loads in the wastewaters were reduced in most of the companies, including COD, BOD, oily products,
TSS, heavy metals, toxic chemicals (e.g. PCE), herbicides (Atrazine) and nutrients.
17 Significant reductions were achieved in terms of VOC and H S emissions as well as CO .
                                                                2                       2




                                                           32
additional reductions in wastewater discharges, after full implementation of the large EST
investments, would be 7.8 Millions of m3 per year.

Fig 3: Specific water consumption at the enterprises at project start, by December 2003 and
after implementation of large EST investments




Additional information on the results of the TEST project (at each enterprise) can be found in
the UNIDO-TEST publications “Increasing productivity and environmental performance: an
integrated approach –Know-how and experience from the UNIDO-TEST project in the
Danube river Basin” (http://www.unido.org/doc/26190) and in the national publications,
available from UNIDO upon request.

Besides the tangible economic and environmental benefits achieved at the 17 pilot enterprises,
which proved the effectiveness of the TEST integrated approach, other important results need
to be mentioned, especially in relation to capacity building and awareness raising, both at the
national counterpart level of the national counterpart and at the level of the participating
enterprises. Fig. XXXA total number of 90 trainees from the national counterparts and more
then 600 from the 17 enterprises were trained in the TEST approach and its tools for
approximately 2000 man/days of training.

In terms of the capacity built in the national counterpart institutions, it should be mentioned
that one of the major benefits for them of the TEST programme for them, was besides the
trainings training, the hands-on- experience they gained in new environmental management
tools (such as EMA or EMS). The TEST programme represented presented a great
opportunity to reinforce the skills of the national counterparts, and it offered them the
possibility of expanding the range of technical services they could offer to local enterprises.
Table XXX


                                              33
The capacity built at the enterprise level and the increased awareness raised among the
employees and the mangers led to the following outcomesimprovements:

      Empowerment and reorganization reorganization of the environmental function within
       the company
      Improved internal communication between top managers/middle management and
       employees
      Improved external communication with local authorities and the (ability to
       communicate the environmental performance of the company to all its stakeholders)
      Environmental considerations taken into account during investment decision making
       processes (increased bargaining power of the environmental function)
      Adoption and continued use of CPA, EMS, EMA on a continual basis proved as
       evidenced by the fact that several companies replicated the use of these tools in other
       production units, at their own expense (using the skills developed during the TEST
       project).
      Integration of environmental considerations at the level of individual companies’
       business strategies.

Lessons learned

One of the major challenges implementing the TEST programme in the Danube River basin
was the identification and selection of demonstration enterprises. Finding industrial hot spots
was not difficult, given the previous UNDP project, but being in a hot spot was not a
sufficient reason to be considered for the project.

The challenge was to identify good pilot sites that would participate effectively in the project
and that were financially viable. Only financially viable companies will undertake the
necessary investment and upgrades in EST and will really be interested in having a long-term
sustainable strategy. One of the major principles of a TEST project is that involvement as
demonstration enterprise is voluntary. Therefore, as enterprises in the Danube River basin had
to be convinced that they would achieve significant benefits (economical in the first place and
environmental) from their participation in the project. Thus, , marketing the programme was a
crucial activity for its successful start-up. Considerable effort was required, since it was
particularly important to find enterprises with a strong commitment, to avoid the possibility
that they would withdraw during project.

The identification of the correct drivers existing in the business environment was very
important, not only during the firststagefirst stage, when the project was being marketed and
pilot sites were being selected, but also during the overall implementation of
theprogrammethe programme, to maintain the commitment of the managers. For instance, the
possibility of achieving potential savings through the introduction of CP measures was
difficult to explain to managers (although they were convinced by the end of Phase I of the
second stage). This resistance was mainly due to the fact , mainly because in this part of the
world the costs in this part of the world, for utilities and many raw materials, are low, as are
wastewater and solid waste disposal fees and penalties.




                                              34
Low stakeholders level of interest of stakeholders in a companies’ environmental
performance, low awareness of stakeholder interests at the companies and limited external
motivating factors to improve the environmental performance of the companies,, represented
serious impediments to persuading companies to participate in theprogrammethe programme.
What the project implementation showed was that usually economic drivers18 are are much
stronger than environmental ones and it is these economic drivers that are pushing companies
to improve the efficiency of their operations and to acquire EMS certification.

Even though their participation was mostly subsidized by funds from the programme. itself
the demonstration enterprises were required to make a small (token) financial contribution.
This proved to be an effective strategy to strengthen their commitment and active
participation in the project.

The results achieved by each of the 17 enterprises varied because of a number of different
factors such as level of commitment of the top management, company’s position on the
market and internal communication issues. The net result was that some enterprises were
more successful in implementing soft management tools (CPA, EMS, EMA), while others
achieved significant results in the implementation of new EST. However in all cases the
utilization of an integrated approach (TEST) that introduces the tools simultaneously and in
an integrated fashion has generated significant synergies. Streamlining of data flows
simplified the work required and increased the overall effectiveness of the tools by generating
more positive resultsmore results that are positive (however, they can still be quite effective
when implemented independently.

It should be noted that none of the selected enterprises withdrew from the project, and even
though there were different levels of success in each of the enterprises, all of them achieved
measurable results by implementing the integrated TEST approach. The Pprimary reason for
thisrimarily, this is because the project was able to confirm one of the basic theses of the
TEST approach, namely that improving environmental performance does not have to be at the
expense of competitiveness. The most financially feasible measures, both organizational and
technical, were identified and partially implemented to bring the enterprises into compliance
with the environmental norms of the Danube River Protection Convention and the EU’s IPPC
Directive, while also accommodating their need to remain competitive.




18The pre-accession process to the European Union undertaken by many countries in the Central and Eastern
Europe has created a very favourable condition for the development of economic drivers in the direction of a more
sustainable industrial development.


                                                       35
                                                           Annex II

 Breakdown of project activities under component 2 – Budget line 21-01 (subcontract)


                                                                                      National experts -
                                                                     National experts Costs by activity     TOTA L by        Lo cal Training
                                                                     average m/days per company (150       activity fo r 5     co sts per
   Project activities (component 2)                                   per company        USD per day)      co mpanies            co untry

2.1 Implementation of Cleaner Production Assessment (CPA) at
demonstration enterprises                                                  25               3750             18750               8000
2.2 Introduction of EMS principles and design of EMS at
demonstration enterprises;                                                 40               6000             30000               8000
2.3 Introduction of Environmental Management Accounting
(EMA) practices and design of EMA systems at demonstration
enterprises;                                                               25               3750             18750               8000
2.4 Preparation of EST investment project and investment
promotion for the demonstration enterprises(including financial
expert)                                                                    45               6750             33750
2.5 Introduction of basic principles for preparation of enterprise
sustainable strategies (SES).                                              15               2250             11250               2000

TOTALs                                                                    150              22500            112500              26000




                                                                36
                          ABBREVIATIONS


BAT     Best Available Technique (includes process changes /cleaner production/,
        pretreatment and final treatment)

CCPC    Croatian Cleaner Production Centre, Zagreb

CESD    Center for Environmentally Sustainable Development, Sarajevo

CP      Cleaner production

DRPC    Convention on Cooperation for the Protection and Sustainable Use of the Danube
        River (Sofia, 1994-06-29)

EBRD    European Bank for Reconstruction and Development

EMAS    Eco-Management and Audit Scheme

EMS     Environmental management system

EST     Environmentally sound technology (combination of advanced process, pretreatment
        and final pollution control technologies)

EU      European Union

GEF     Global Environmental Facility

ICPDR   International Commission for the Protection of the Danube River (decision-making
        body of DRPC)

IE      International expert (consultant)

IPPC    Integrated Pollution Prevention and Control

IPS     UNIDO Investment Promotion Office

NCPC    National Cleaner Production Centre

NE      National expert (consultant)

PMTF    The Programme Management Task Force (special supporting body of DRPC)

PCU     Programme Coordination Unit (provides daily management and supports activities
        of the PMTF)

PPC     Pollution Prevention Centre

PRP     UNDP/GEF Pollution Reduction Programme

SES     Sustainable Enterprise Strategy

SWOT    Strengths, weaknesses, opportunities and threats

TEST    Transfer of Environmentally Sound Technology

UNIDO   United Nations Industrial Development Organization




                                   37

				
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