Federation of BiH suffers from public health and environmental impacts due to poorly developed water and wastewater infrastructure. 60% of the Federation BiH population currently has access to public water supply, 33% to the public sanitation system, and nearly 2% is connected to waste water treatment plants. With the apparent need for improvement in this area considering the above statistics, Project WATSAN FBiH was initiated to respond to needs of the FBiH municipalities for improvement of water supply and public health situation, with reduction of water pollution through collection and treatment of waste waters that are presently discharged directly into environment without any treatment.

Discussions and preparations for cooperation with the European Investment Bank (EIB) started in mid-2006, through meetings between the representatives of EIB and the Federal Ministry of Finance (FMF), while the Federal Ministry of Agriculture, Water Management and Forestry (FMoAWMF) got actively involved in May 2007, when the EIB financial experts carried out an assessment in BiH and submitted their financial proposal for approval to the EIB Management Board. The Ministry of Finance and Treasury of BiH (MFT BiH) was informed that a loan arrangement in the amount of EUR 60 million was proposed, i.e. that the EIB proposed to finance the Project with EUR 121.3 million of total investment costs. Apart from investment in construction of facilities and procurement of equipment and proper technologies, this amount is expected to include financing of project documentation development, implementation of efficiency measures, project management, so as technical and price contingencies.

Finance Contract was initialled in March 2008 by the EIB and BiH representatives and thereafter signed in two steps. The Contract was firstly signed by the representatives of Bosnia and Herzegovina (MFT BiH) and the Federation of BiH (FMF and FMoAWMF), in Sarajevo on 15 July 2008, and then it was signed by the EIB representatives in Luxembourg, on 18 August 2008. Pursuant to the Contract, the Federation of BiH undertakes to implement the Project consisting of investment municipal schemes to be carried out by the municipalities from FBiH included in the Project, through the FMoAWF and FMF, using the loan funds in the amount of EUR 60 million and the equal amount of municipal contribution funds, which according to the Contract totals 121.3 million EUR. Financing of the Project is secured with the Guarantee Agreement, entered into force on 29 August 2007, by and between the European Community and the Bank, pursuant to Article 8 of the Council Decision 2006/1016/EC of 19 December 2006.

General aims of this loan arrangement are focused on improving current living conditions of the population, securing adequate hygienic conditions in the area of water supply and sanitation, and implementation of environmental protection measures, in line with the obligations of EU accession and harmonization with EU Legislation, in particular with the Water Framework Directive, Drinking Water Directive and Urban Waste Water Directive.

Purpose of the Project is to use available financial resources (EIB Loan, grants and municipal funds) for ensuring the implementation of measures contributing to the improvement of infrastructure and provision of services aimed at the adequate (both in terms of quality and quantity) water supply and waste water treatment in the municipalities included in the project.

In a nutshell, the Project aims at development of sustainable water and sanitation services (waste water collection and treatment) in the Federation of BiH, through construction of necessary facilities, development of adequate infrastructure of the sector and strengthening of municipal operators -   public utility companies (PU).

Apart from the construction of needed facilities and reconstruction of existing water supply and sanitation systems, including waste water treatment plants (currently 2% of urban population is covered by waste water treatment scheme), the Project is also expected to produce the following:

• Improved services provided for population by public utility companies, in the field of water supply and sanitation within municipalities (better billing conditions resulting in collection rate increase);
• Better public awareness regarding the activities of public utility companies;
• Uninterrupted water supply;
• Reduction of losses in water supply systems to an economically optimal level;
• Establishment of conditions leading to operational efficiency and financial sustainability of public utility companies and improvement of water supply and sanitation services;
• Establishment of conditions resulting with increased autonomy of public utility companies.

Considering the fact that apart from the international procedures Project implementation will include local construction and procurement procedures as well, the Project is expected to contribute to improvement of the FBiH and more specifically local economy.

Organizational structure of the Project WATSAN FBiH is established through respective Agreements signed at the State, Federal and Municipal level. As the main agreement ruling the whole project is the Finance Contract, all responsible institutions involved are mainly defined within this Contract. Finance Contract with the European Investment Bank (EIB) as the Creditor was concluded by Bosnia and Herzegovina (BiH) represented by the Minister of Finance and Treasury of BiH having the role of the Borrower and main Beneficiary of the project, and by the Federation of BiH (FBiH) having the role of the Entity and represented as the case may be by the Federal Minister of Finance and/or Federal Minister of Agriculture, Water Management and Forestry.

Project Management Unit (PMU) is established within the Federal Ministry of Agriculture Water Management and Forestry (FMAWMF). Participating municipalities from FBiH are Final Beneficiaries of the project. Formed by Decisions of Municipal Mayors and Municipal Councils, Project Implementation Teams (PITs) of participating municipalities are responsible for day-to-day implementation at municipal level.

Federal Water Agencies (Water Agency Jadran and Water Agency Sava) provide standing technical assistance to PMU with their representatives being members of PMU and selected additional personnel always available for conducting specialist technical affairs whenever needed. Project implementation has also been assisted through the Technical Assistance Consultants secured through EU support programs, namely Infrastructure Project Facility of the Western Balkans Investment Framework (WBIF/IPF) and Project Preparation facility (PPF). Since February 2014, Project WATSAN FBiH has been supported by the Tendering Assistance and Central Supervision Consultant, responsible for supervision over all works implemented within the Project. This Consultant is also available for services of Technical Assistance, subject to official request of individual municipalities.