INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Public Disclosure Copy Report No.: ISDSC163 Date ISDS Prepared/Updated: 11-Oct-2011 I. BASIC INFORMATION A. Basic Project Data Country: Croatia Project ID: P127308 Project Name: Second Science & Technology Project (P127308) Task Team Paulo Guilherme Correa Leader: Estimated 04-Sep-2012 Estimated 17-Jan-2013 Appraisal Date: Board Date: Managing Unit: ECSPF Lending Specific Investment Loan Instrument: Sector: General industry and trade sector (85%), Central government administration (15%) Theme: Infrastructure services for private sector development (33%), Education for the knowledge economy (33%), Micro, Small and Medium Ent erprise support (17%), Technology diffusion (17%) Financing (In USD Million) Financing Source Amount Public Disclosure Copy Borrower 5.38 International Bank for Reconstruction and Development 26.88 Financing Gap 0.00 Total 32.26 Environmental U - Not Rated (for all adjustment operations except for SECA) Category: Is this a No Repeater project? B. Project Objectives The objectives of the proposed project are to (i) improve the capacity of Croatia's R&D and innovation institutions to implement Europe 2020 Strategy for increased investments in R&D through efficient absorption of EU funds, and (ii) develop a pipeline of public and private R&D projects, including research groups, that could qualify for financing through EU structural funds. C. Project Description STP II will have a dual approach, combining TA to the public sector and financing of risk-sharing programs supporting R&D in SMEs (sub-financing), using these instruments with a focus on preparing Croatia for efficient absorption of EU funds for R&D. Public Disclosure Copy (i) Preparing selected institutions through Technical Assistance (TA). It is envisaged that the TA component of the proposed STP II will focus on building capacity in the Government to efficiently manage the applications and disbursement of EU structural funds and implement the objectives of the Europe 2020 Strategy. The component is expected to include the following activities: (i) preparation of the strategic frameworks explaining the links between policy priorities and country needs (ii) training of government staff on EU procedures for project preparation and implementation; (iii) and strengthening of institutions of the National Innovation System # improve the quality of public expenditures through better design, management, monitoring and evaluation of policies, programs and research organizations in conformity with Europe 2020 goals. (ii) Developing a pipeline of public projects for EU funds. It was agreed that at least five projects will be fully prepared during the implementation of STP II and will be ready for submission when funds become available. Two of these projects refer to the preparation of the "Grant Schemes" to finance R&D by SMEs during the different phases of the innovation process, and R&D for public research organizations oriented towards strengthening the country's R&D human capital. The "Grant Schemes" to be prepared will consist of the adjustment of three existing BICRO programs (RAZUM, SPREAD and Proof of Concept) and selected UKF programs to EC regulations and procedural norms. The other three projects are in the field of R&D infrastructure, mainly associated with preparation of prototypes and updating of equipment used for research and development. (iii) Developing a pipeline of private projects. According to the Government request, STP II will provide financial support to existing programs that are expected to be financed by the EU structural funds (possibly BICRO#s RAZUM, SPREAD and POC; and UKF). This will help build a credible number of innovative SME projects and research projects expected to absorb the funds from the future "Grant Schemes." Some funds would be reserved for a running pilot of programs under the structural fund guidelines. Public Disclosure Copy D. Project location and salient physical characteristics relevant to the safeguard analysis (if known) The STP II project will through different programs (grant schemes and programs) include: a) sub- financing of R&D projects supported by BICRO and UKF; and b) preparation of individual project applications for EU financing, in the form of the grant schemes for which there is a need to show a solid pipeline of sub-projects to be eligible for EU funds when Croatia joins EU, and in the form of stand-alone infrastructure R&D project proposals. In addition to creation of a solid pipeline of sub- projects, the existing programs need to show a good track record in financing R&D projects (mainly pilots). At this stage of the STP II project, the eligible sub-projects for financial support have not yet been identified. It is expected that they will be identified prior to appraisal stage (end of October 2011) or at least that eligibility criteria will be set. The project is not expected to finance infrastructure R&D (such as physical facilities for R&D support), it will solely support preparation of infrastructure R&D project proposals for EU funds. E. Borrowers Institutional Capacity for Safeguard Policies The borrower has experience with implementation of the World Bank project, but solely with category C projects (STP I). Through STP I many applications have been prepared and Croatian environmental legislation was followed. STP I project was categorized as environmental category C. The reasoning for this was (excerpt from appraisal stage ISDS for STP I): In accordance with the Bank's Operational Directive on Environmental Assessment (OD 4.01 Annex E), the proposed project is Category "C". The project Public Disclosure Copy will not finance civil works. The most important component from the safeguards point of view under STP I was establishment of financial intermediary under BICRO which had a soft loan mechanism and matching grants. Eligible expenditures encompass a large number of activities, including patent applications. Examples are: Pneumatic grinder, Development and research of 3K tunnel ventilation, Development of road crossings on the basis of axle counters, hydrosphere airship, Automated robot for hydrodynamic treatment of iron and concrete in construction, prototype ship, etc. This was done under sub- financing mechanisms and some funds of the follow-up project would continue to provide for similar projects. F. Environmental and Social Safeguards Specialists on the Team Natasa Vetma (ECSS3) II. SAFEGUARD POLICIES THAT MIGHT APPLY Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment OP/ TBD The exact category of the project will be BP 4.01 determined prior to appraisal. As the list of pilot sub-projects (although unlikely to be infrastructure R&D) to be financed is not yet determined nor did the eligibility criteria, it has been agreed to work with the client on determining the pipeline and/ or criteria by the end of October 2010. Public Disclosure Copy If the project is determined to be Category C then no safeguards due diligence document will be required prior to appraisal. However, if it is determined to be Category B, an environmental due diligence document will need to be prepared and disclosed prior to Appraisal. It is anticipated that this will be an Environmental Management Framework which basically will ensure that: (i) under components 2 and 3, any projects prepared for the EU pipeline will be prepared in a manner consistent with WB Safeguard Policies (this will be addressed in the TORs for the TA); (ii) any pilot projects financed under the project will also be implemented in a manner consistent with WB SG policies; and (iii) the Checklist EMP will be applied for any small scale infrastructure construction or rehabilitation. The team will meet with RSC after pipeline or Public Disclosure Copy eligibility criteria have been established (end of October, 2011) and revise the ISDS accordingly. Natural Habitats OP/BP 4.04 No Forests OP/BP 4.36 No Pest Management OP 4.09 No Physical Cultural Resources OP/ No BP 4.11 Indigenous Peoples OP/BP 4.10 No Involuntary Resettlement OP/BP No 4.12 Safety of Dams OP/BP 4.37 No Projects on International No Waterways OP/BP 7.50 Projects in Disputed Areas OP/BP No 7.60 III. SAFEGUARD PREPARATION PLAN A. Tentative target date for preparing the PAD Stage ISDS: 19-Dec-2011 B. Time frame for launching and completing the safeguard-related studies that may be needed. The specific studies and their timing1 should be specified in the PAD-stage ISDS: Public Disclosure Copy To be confirmed prior to appraisal. IV. APPROVALS Task Team Leader: Name: Paulo Guilherme Correa Approved By: Regional Safeguards Name: Agnes I. Kiss (RSA) Date: 11-Oct-2011 Coordinator: Sector Manager: Name: Lalit Raina (SM) Date: 27-Jul-2012 1 Reminder: The Bank's Disclosure Policy requires that safeguard-related documents be disclosed before appraisal (i) at the InfoShop and (ii) in country, at publicly accessible locations and in a form and language that are accessible to potentially affected persons.