ATTACHMENT_1-_IEE.pdf

DCN: 2015-MOL-001

Moldova / Moldova Economic Growth Project 1

US Agency for International Development (USAID) Regional Mission to Ukraine, Moldova, Belarus and Cyprus

Initial Environmental Examination (IEE) Project Data

Project Name: Moldova Economic Growth Project (MEGP)

Assistance Objective: 4. Economic Growth

Program Area: 4.6 Private Sector Competitiveness

Country(ies) and/or Operating Unit: Moldova

Originating Office: Moldova Date: 12/15/2014 PAD Level IEE: Yes No Supplemental IEE: Yes No RCE/IEE Amendment: Yes No

DCN of Original RCE/IEE:

DCN of Amendment(s):

DCN(s) of All Related EA/IEE/RCE/ER(s):

2011-MOL-002; 2014-MOL-009, 2013-MOL-006, 2013-MOL-

002, 2010-MOL-005; IDEA ODP DGP (SIEE) 12-AID-117-A-

12-00003 ND, ODP DGP IEE_FY0813; 2014-WNIS-003; 2010-

MOL-003, 2008-MOL-008; 2013-MOL-005, 2011-MOL-004,

2003-MOL-004; 2014-EE-006; DCN 2012-EE-002; 2014-MOL-

005, 2014-MOL-004, 2013-MOL-004, 2012-MOL-003, 2012-

MOL-001, 2009-MOL-007, 2009-MOL-006; 2014-MOL-001,

2011-MOL-006; 2014-WNIS-003 and 2014-WNIS-002.

Implementation Start/End: LOP: 01/2015 – 12/2020

Funding Amount: LOP Amount: $84 million

Recommended Environmental Determination:

Categorical Exclusion: Positive Determination:

Negative Determination: Deferral:

Additional Elements:

Conditions: Local Procurement:

Government to Government: Donor Co-Funded:

Sustainability Analysis (included): Climate Change Vulnerability Analysis (included):

1. Background and Project Description

1.1. Purpose and Scope of IEE

The IEE covers the Moldova Economic Growth Project (MEGP) a Development-Objective (DO) level project linked to the Moldova Country Development Cooperation Strategy (CDCS). Many activities anticipated under this IEE will be similar to those covered by several on-going projects’ IEEs and IEE Amendments, which include IEEs and IEE Amendments with the following DCNs: 2011-MOL-002 (BRITE Project, AID-117-TO-12-00001);

2014-MOL-009, 2013-MOL-006, 2013-MOL-002, and 2010-MOL-005 (LGSP, AID-117-C-12-00001); ODP DGP IEE_FY0813 and IDEA ODP DGP (SIEE) 12-AID-117-A-12-00003 ND (Local Government Water Management Capacity); 2014-WNIS-003 (Informational Technology Center of Excellence or ITCE); 2010- MOL-003 and 2008-MOL-008 (CEED II, AID-121-C-00-11-00702); 2014-EE-006; 2012-EE-002 (Regional Energy Security Activity); 2013-MOL-005, 2011-MOL-004, and 2003-MOL-004 (DCAs); 2014-MOL-005, 2014-MOL-004, 2013-MOL-004, 2012-MOL-003, 2012-MOL-001, 2009-MOL-007, and 2009-MOL-006 (ACED, AID-117-C-11-00001); 2014-MOL-001 and 2011-MOL-006 (Women’s Career Development Program, 121-A-00-09-00703-00); 2014-WNIS-003 (ITCE) and 2014-WNIS-002 (National Wine & Vine Registry). IEEs

ATTACHMENT 1 - IEE

Moldova / Moldova Economic Growth Project 2 for existing MEGP activities remain valid. Supplemental IEEs for new MEGP activities will be developed as needed.

1.2 Project Overview

MEGP addresses the improved living standards aspect of the CDCS goal of “A Better Governed Moldova with Improved Living Standards” and it will work in conjunction with the democratic governance project under DO1, “More Effective and Accountable Democratic Governance.”

The MEGP purpose is supported by two project objectives (or components) which, respectively, address the regulatory and business environment broadly, and more specifically the competitiveness of targeted industries (such as high-value agriculture (HVA), apparel and fashion accessories, IT, tourism, and wine). The MEGP objectives are aligned with the CDCS DO2 Intermediate Results - IR 2.1: Improved Economic Foundation for Growth, and IR 2.2: Improved Private Sector Competitiveness in Selected Industries.

1.3 Project Description

MEGP includes the following two components:

Component 1: Improved Economic Foundation for Growth (approximately 30% of the planned level of efforts)

With a focus on microeconomic governance, there are two sub-components under MEGP Component 1. These sub-components are designed in line with the two sub-IRs included in DO2 of the CDCS, and are focused respectively on an improved business and trade enabling environment, and on increased access to finance. As part of improving the enabling environment, targeted assistance will seek to facilitate and catalyze improvements to economic infrastructure in the targeted sectors.

The specific inputs planned for Component 1 of MEGP include the provision of technical assistance (TA) to support the improvement of government policies and regulations, build loan guarantees and public private partnerships (PPPs). Policy and regulatory reform is critical to improving Moldova’s annual “Doing Business” rankings, an important proxy for the government’s success in promoting reforms to promote economic growth.

Therefore, USAID will help the GOM and Moldovan private sector institutions to develop and amend policies and legislation, which would improve the business regulatory environment. In particular, the TA provided through Component 1 will include TA intended to reduce the number of days needed to complete basic business requirements – such as opening or closing a business – and to streamline the requirements for construction activities. USAID TA will also target critical areas such as tax and customs administration, as well as the phyto-sanitary inspection and testing capacity which is closely linked to Moldova’s ability to export agricultural products and to respond to recent trade disputes involving claims of poor quality of Moldovan goods.

Inputs related to improved business-enabling infrastructure will include local government and Regional Development Agencies (RDA) infrastructure projects covered by five IEEs (2014-MOL-009, 2013-MOL-006, 2013-MOL-002, and 2010-MOL-005), as well as pilot PPPs in targeted sectors under MEGP Component 2 (Information and Communications Technology (ICT); wine production and export clustered with the tourism sector; and light industry (clustered textiles and apparel with footwear sectors). In particular, MEGP activities will help alleviate the energy infrastructure problem by focusing on improving energy efficiency and energy regulations.

In addition to TA, MEGP includes the use of Development Credit Authority (DCA) guarantees targeting key sectors as a means of increasing access to finance to improve competitiveness. Work with financial institutions directly, including study tours and training, will also increase those institutions’ knowledge of key industries in order to help promote more interest and engagement in providing appropriate credit products for each sector.

Component 1 outputs and outcomes will include revised governmental policies and regulations for business activities, reduced costs for compliance with regulations, increased availability of appropriate credit products and accompanying increased loan activities, and the development of new pilot PPPs for enabling-infrastructure in the targeted sectors, specifically an ICT excellence center and post-harvest infrastructure. Other expected outcomes

Moldova / Moldova Economic Growth Project 3 will be the strengthened tax and customs administration, greater access to finance for local firms – including those in targeted industries under Component 2 – and development of new PPPs.

Component 2: Improved Private Sector Competitiveness in Selected Industries (approximately 70% of the planned level of efforts)

Economic growth is directly tied to increased productivity at the firm level, which translates into increased Gross Domestic Product (GDP) at the national level. As the CDCS’ goal of improved living standards is measured by the change in per capita income created though increased GDP, it is critical that MEGP include a strong focus on competitiveness such that firm-level productivity will continue to increase. At the same time, both improved job skills and increased job opportunities are necessary to help to respond to the problem of out-migration of Moldovan workers seeking employment abroad. MEGP is therefore focused on supporting the competitiveness of those industries, which both have the capacity to be competitive domestically and regionally and to lead to job creation.

USAID will work at the firm and the association level to continue to contribute to the improvement in productivity that is the basis of sustainable economic growth. Inputs for Component 2 of MEGP will include activities to promote technology transfer in targeted industries, including study tours, twinning projects, and expert TA. MEGP will improve firms’ ability to implement quality standards required for expanded trade, particularly with the EU, and will complement these improvements in productivity with efforts to create and expand market linkages abroad. For example, inputs to increase linkages with export markets will include sector branding campaigns, participation in trade promotion events, and inward-directed buyers’ tours.

MEGP will, where possible, build on existing relationships with private sector firms and associations in targeted sectors to expand the focus of cooperation to incorporate workforce development activities under planned mechanisms providing support to targeted sectors (both agricultural and non-agricultural), such as industry-specific job skills training activities, support for job fairs, and support for the development of career training and preparation for students. Training and mentoring will improve business leaders’ management skills along the lines of best international practice and a skills gap analysis for targeted sectors will be conducted to identify critical workforce development needs.

There are plans to complement the above-mentioned efforts by two current DCA activities (covered by IEEs DCN: 2011-MOL-004 and 2013-MOL-005), i.e. loan portfolio guarantees provided to qualified Moldovan banks in connection with qualified loans/loan portfolios, and to start one or more new DCA activities. Two current DCA activities were designed to secure significant local funding for (1) local small and medium size enterprises (MSMEs) operating in six target industry clusters/value chains - winemaking, textile and apparel, ICT, footwear, furniture, and ‘emerging export industries’ (as identified by CEED II) - and individuals from ICT sector, and (2) any Moldovan businesses interested in using modern energy efficient technologies to reduce their production and storage costs. Increased availability of credit is expected to improve the competitiveness of Moldovan private sector and, particularly, the productivity of USAID-supported industry clusters/value chains as well as to increase local economic opportunities.

In terms of outcomes, MEGP Component 2 will lead to the increased adoption of new technologies and increased productivity in targeted industries, with improved product quality, more streamlined business practices, and more modern management practices, contributing to increased value-added sales of Moldovan products. Expanded market linkages created through MEGP engagement will lead to increased value of exports and domestic sales in each targeted industry. New partnerships between the private sector and public sector institutions will improve job skills training and curricula design. Increased technical skills in the labor force will contribute to industries’ efforts to expand and develop new investments.

Additionally, MEGP funds may be used to provide advisory support to the Government of Moldova (GOM) through experts or consultants and to conduct assessments, program evaluations or other studies and/or designs related to ongoing, completed or new activities.

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2. Baseline Environmental Information

2.1. Locations Affected and Environmental Context

Moldova has an area of 33,843 square km and a population of 3,559,500 people (2012 estimate). It is located at the intersection of three bio-geographic zones: the Central-European zone, the Euro-Asiatic zone, and the Mediterranean zone. Many species typical for each of these zones are at the limit of their natural range in Moldova. The country has a rich biota relative to its size, considering that the highest elevation point is only 430 m above the see level.

Today, natural ecosystems occupy approximately 10 percent of Moldova. A significant proportion of this area is highly degraded. Agricultural lands cover 75 percent of the country. Native steppe and steppe associated wet meadows have been systematically converted to cropland and pastures. The extent of loss of steppe is not thoroughly documented, but less than one percent remains of some types of grassland and wet meadow ecosystems that were once common in Moldova. Forests cover about 10 percent of the country and, moreover, 86 percent are planted forests (Economic Commission for Europe, 1998).

Scientific evidence suggests that business activities have an impact upon the ecosphere and that the negative consequences of current practices will be detrimental to the natural environment (Stern 2006). While the individual impact of MSME activities is usually small, and they are by no means homogeneous, collectively they are critically important. Globally, as a sector, MSMEs could contribute up to 70% of all industrial pollution (Hillary 2004). It was also reported that most of the economic, environmental and social impacts of large companies occur through their supply chain and the MSMEs in those chains (Global Reporting Initiative 2011a).

2.2. Description of Applicable Environmental and Natural Resource Legal Requirements, Policies, Laws, and Regulations

The GOM has passed over 50 laws and regulations related to environmental protection, including the following:

Environmental Legislation - The Natural Resources Law, 1997 (as amended in 2013)

The Environmental Protection Law, 1993 (as amended in 2012)

The Riparian Zones Protection Law, 1995 (as amended in 2012)

The Protected Areas Law, 1998 (as amended in 2013)

The Environmental Impact Assessment Law, 1996 (as amended in 2011)

The Fauna (Animal Kingdom) Law, 1995 (as amended in 2011)

The Water Law, 2011

The State Surveillance of Public Health Law, 2009

The Ecological Network Law 2007 (as amended in 2010)

The Local Green Areas Law, 1999 (as amended in 2010)

The Plant Protection Law, 1999 (as amended in 2009)

The Potable Water Law, 1999 (as amended in 2009)

The Environmental Pollution Taxes Law, 1998 (as amended in 2008)

The Biological Security Law, 2001 (as amended in 2007)

The Air Protection Law, 1997 (as amended in 2007)

The Flora (Vegetation Kingdom) Law, 2007

The Red Book Law, 2005 (as amended in 2007)

The Law on Veterinary and Sanitary Activities, 2007

The Degraded Land Forestation Law, 2006

The Law on Fisheries and Conservation of the Aquatic Biological Resources, 2006

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The Hydro-meteorological Activities Law, 1998 (as amended in 2005)

The Law on Amelioration (through Afforestation) of Degraded Lands, 2000 (as amended in 2004)

The Forest Code, 1996

Related Legislation - The Civil Code, 1996 (as amended in 2013)

The Access to Information Law, 2000 (as amended in 2012)

The Law on Industrial Safety of Industrial Dangerous Objects, 2012

The Earth Bowels Code, 2009 (as amended in 2011)

The Energy Efficiency Law, 2010

The Renewable Energy Law, 2007 (as amended in 2010)

The Radioactive Waste Management Law, 2009

The Hazardous Substances and Product Management Law, 1997 (as amended in 2007)

The Monument Protection Law 1993 (as amended in 2007)

The Settlements Sanitation Concept, 2007

Energy Strategy through 2020, 2007

The General Product Safety Law, 2006

Law on Leasing, 2005

The Law on Urban and Territorial Development Principles, 1997

The Cadaster Law, (1998 and as amended)

National Policies -

The Waste Management Strategy in 2013-2027 (2013)

The Soil Fertility Conservation and Improvement Program for 2011-2020 (2011)

The National Ecological Network Building Program for 2011-2018 (2011)

National Strategy on Water Resources Development, 2011

The Ecological Security National Program for 2007-2015 (as amended in 2009)

Biosafety Action Plan for 2009-2015, 2009

The Water Supply and Sanitation Strategy for 2008-2025, 2007

Executive Branch Regulations - Regulations on Water Pollution Prevention caused by Agricultural Activities, 2013

The Sanitary Protection Zones of Water Intakes Regulations, 2013

The Collection, Treatment and Discharge of Used Waters in Sanitation System and/or in Water Bodies Regulations, 2013

The Solid Biofuels Regulations, 2013

The Underground Waters Quality Regulations, 2013

The Regulations on Monitoring of Surface and Underground waters’ State, 2013

The State Water Cadaster Regulations, 2013

Identification, Delimitation, and Classification of the Water Bodies Methodology, 2013

The Regulations on Environmental Requirements for Surface Waters, 2013

Unique window for environmental authorization for special water use Regulation, 2013

The Regulations on requirements to the discharged used waters in the water basins, 2013

The Evidence and Reporting of the Used Waters Regulations, 2013

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The Governmental Decision (GD) on Limits of Hidrographyc Basins and Subbasins, 2013

The Drought Management Planning Regulations, 2013

The Waters Use for Community, Irrigation and Pisciculture Needs Regulations, 2013

The Management of Flood Risks Regulations, 2013

Normative acts for implementation of Plants Protection and phyto-sanitary quarantine, 2012

Flood Protection Embankments Regulations, 2012

Rules for notification of intercepting a cargo or a pest from abroad that represents imminent phyto-sanitary risk, 2012

The Regulations on Recreational Areas near Water Basins, 2002 (as amended in 2010)

The Polychlorinated Biphenyls Regulation, 2009 (as amended in 2010)

Technical regulations on soil protection measures within the agriculture practices framework, 2008

Regulations on Procedures for Establishing a Natural Protected Area, 2002 (as amended in 2006)

The Regulation on Ecological Audit of the Enterprises, 1998 (as amended in 2006)

The Instruction on Calculation of Environmental Pollution Payment, 2000 (as amended in 2006)

The State Ecological Expertise Instructions, 2002 (as amended in 2006)

Authorization of activities related to use of natural resources and environmental pollution prevention, The GD on transportation of dangerous loads and crash consequences liquidation, 1994 (as amended in 2004)

The Guidance on Assessing the Damage Caused to Soil Resources, 2004

The Guidance on Assessing the Damage Caused to Atmospheric Air when Managing Production and Household Wastes, 2004

The Scheme of Localities for Floods Protection, GD#1030, 2000 (as amended in 2003)

The Methodology for Assessing the Environmental Damage Caused as a Result of Water Law Breach, The Wastes Delivery Regulations (2001)

The Natural and Constructed Protected Areas Regulations, 2000

The Framework Regulations on National Parks, Natural Monuments, Resource and Biosphere Protected Areas (2000)

The methodology to estimate the damage caused to environment as a result of underground waters pollution, 1999

The Integrated Ecological Monitoring System Regulations, 1998

The Pollution Prevention of Water Bodies Regulations, 1997

The Ministry of Health Requirements for Potable Waters for Decentralized Supply, Protection of Water Sources, and Arrangement and Maintenance of Wells (#06.6.3.18-96, 1996)

The GD on Restoration of Degraded Lands (#404, 1994)

Labor Safety Regulations - The Sanitary Regulation to Avoid Risks of Chemicals Presence at Workplace, 2013

The GD on health safety signs at the work place, 2013

The GD on Temporary or Mobile Building Sites 2012 The GD on Workers Protection from Asbestos Exposure, 2013

The Technical Regulations on Fire Protection in the Republic of Moldova (RT DSE 1.01-2005) The Norms for Labor Protection Measures, 2001

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Some laws, codes, and regulations are specifically related to the impact of agriculture and use of pesticides, including:

Legislation and policies related to crop production

Laws - The Seeds Law, 2013

The Land Code, 1991(as amended in 2013)

The law on production and household wastes, 1997 (as amended in 2012)

The Law on Water for Irrigation Users Associations, 2010

The Law on Phyto-sanitary Quarantine, 2009

Law on Organic Agro-Food Production, 2007

The Agricultural Ecological Production Law, 2005

National Policies - National strategy on sustainable development of the agri-industry complex (2008-2015) (as amended in 2008)

National concept of ecological agriculture, production and commercialization of ecological and genetically non-modified foods, 2000

Regulations - The Regulation for Variety Testing and Registering in Plants Varieties Catalog, 2013 (as amended in December 2013)

The Methods for Sampling for Micotoxins Level Determination, 2013

The Regulation on Transfer of Irrigation Systems, 2013

The Norm on Production, Control, Certification and Commercialization of Seedlings, 2013

The Maximum Admissible Limits of Pesticides in Food Sanitary Regulation, 2011

The Methods of Sampling of Pesticides Residues, 2011

The Production, Harvesting, Packing, Storing and Transportation of Fresh Fruits and Vegetables Norm, 2010

The Ecological Food Technical Regulation, 2008

The Packing, Transportation and Storage of Fresh Fruits, Vegetables and Mushrooms Technical Regulation, 2008

The Seeds, Saplings and Vegetables Seedling Materials Technical Regulation, 2007

Legislation and policies related to Fruit and Vegetable Processing

Laws - The Food Safety Law, 2012 (as amended in 2013)

The Law on Vineyards and Wine, 2006

Regulations - The GD on Nitrites Control in Food of Vegetal Origin, 2013

The GD on National Agency for Food Safety, 2013

The GD on National Office for Vineyards and Wine, 2013

The Sanitary Regulation on Plastic Materials and Objects that are Designated for Food Products, The Low Capacity Waste Water Treatment Plants Norm (NCM G.03.01-20122013)

The Sanitary Regulations on Food Additives, 2013

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The Vineyards and Wine Fund Regulations, 2013

The Frozen Foods Designated for Human Consumption Norms, 2013

The Norms on Labeling of Food and Norms on Labeling of Household Chemicals, 2003 (as amended in 2011)

The Technical Regulation on Fast Cooled Fruits and Vegetables, 2007

The regulation on registration of economic agents involved in ecological foods production, 2006

The guidelines on regulating wood packaging materials in international commerce, 2005

Legislation and policies related to Fertilizers, Pesticides, and Machinery

Laws The GD to Control Nitrates in Food Products, 2013

The Hazardous Products and Substances Law, 1997 (as amended in 2010)

Policies The National Program on sustainable management of chemicals in the Republic of Moldova, 2010

(as amended in 2013)

The National Strategy to Eliminate Persistent Organic Pollutants (POPs) and the National Plan to implement Stockholm Convention on POPs, 2004

Regulations The List of Standards Used for Technical Regulation of Mineral Fertilizers, 2013

Technical regulations on mineral fertilizers, 2012

Sanitary norms on nutritional labeling, labeling of special diet food products, labeling of genetically modified products or products made from genetically modifies organisms (GMO), 2004

Regulation on management of pesticides and fertilizers in national economy, 2003

Hygiene norms on pesticides residues in the environment, 2003

Sanitary regulations on storing, neutralization, use, and inhumation of toxic substances and residues, Legislation and policies related to Marketing, Storage, and Transportation The Law on Industrial Security of Industrial Dangerous Objects, 2012

The Small and Medium Enterprises Development Strategy for 2012-2020 (2012)

Technical regulations on commercial requirements for fresh and dried vegetables, 2009 (as amended in 2013).

The Republic of Moldova seeks to align its national environmental policy with regional and international best practices and the Law on Environmental Protection confirms that international conventions and agreements take precedence over national legislation if the provisions in the international agreements are more stringent. For example, the Moldova Academy of Sciences included a broader species of insects under protection to protect biodiversity. Also, a National Commission was established by a presidential decree (November, 1996) to oversee the implementation of the provisions of different international agreements. More information on Moldova’s international commitments can also be found in UNECE Environmental Performance Reviews (2014, http://www.unece.org/fileadmin/DAM/env/epr/epr_studies/Synopsis/ECECEP171_Synopsis.pdf).

Moldova ratified most of the major international biodiversity related agreements with the major ones and date of ratification provided in the Table 1 below.

Table 1: International Treaties and Agreements

International Environmental Agreements to which Moldova is a Party Date Ratified Convention on the Conservation of European Wildlife and Natural Habitats (Bern, 1979) 23 June 1993

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Convention on EIA in a Transboundary Context (Espoo, 1991) 23 June 1993 Convention on the Protection and Use of Transboundary Watercourses and International Lakes (Helsinki, 1992)

23 June 1993

UN Convention on Biological Diversity (Rio de Janeiro, 1992) 16 March 1995 UN Framework Convention on Climate Change (Rio de Janeiro, 1992) 12 June 1995 UN Convention on Combating Desertification (Paris, 1994) 24 December 1998 Convention on Cooperation for the Protection and Sustainable Use of the Danube River (Sofia, 1994)

17 March 1999

Convention on the Access to Information, Public Participation in Decision Making and Access to Justice in Environmental Matters (Aarhus, 1998)

7 April 1999

Convention on Wetlands of International Importance especially as Waterfowl Habitat (Ramsar, 1971)

14 July 1999

Convention on Conservation of Migratory Species of Wild Fauna (Bonn, 1979), Agreement on Conservation of bats in Europe and Agreement on Conservation of African–Euro-Asian Migratory Water Birds

28 September 2000

Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) (Washington, 1973)

28 September 2000

Convention on European Landscape (Florence, 2000) 12 October 2000 Convention on POPs (Stockholm, 2001) 19 February 2004

Additionally, Moldova signed a number of agreements with other countries in the region to ensure mutual cooperation in the management of natural resources.

2.3. Country Environmental Capacity Analysis

Historically, governmental organizations have played the leading role in biodiversity conservation in Moldova.

The supreme representative body of the people and the sole legislative authority of the State in the Republic of Moldova is the Parliament. The Parliament (www.parlament.md) has the role to approve the decisions regarding ratification of or accession to international and regional treaties, approves strategies, concepts and action plans for the most important areas, including biodiversity conservation. The Parliament Commission on Environment and Climate Change is the working body of the Parliament of the Republic of Moldova - most directly related to biodiversity conservation.

The executive branch of the Government of Moldova (GOM) is responsible for the implementation of national and international environmental protection policies. GOM is responsible for implementing programs, strategies, concepts, and action plans adopted by the Parliament. Within the executive branch, there are several central government institutions that directly or indirectly are responsible for protecting and conserving biodiversity. In accordance with the law, the most important ecological issues will be considered by the Supreme Security Council subordinated to the President of the Republic of Moldova. All other important issues will be considered by the State Chancellery, an institution that coordinates the work of other national authorities implementing applicable laws/regulations and monitoring the implementation. The State Chancellery has the Agriculture and Environment Division.

Other primary central government institutions responsible for biodiversity conservation in Moldova are: the Ministry of Environment (MOE), Ministry of Agriculture and Food Industry (MAFI), and Agency Moldsilva (Moldova Forest Service).

The MOE (www.mediu.gov.md) is the national environmental authority that develops and defines governmental policies related to the environmental protection, rational use of natural resources, waste management, biodiversity conservation and state control of ecological activities. The MOE assesses and monitors biodiversity, manages some protected areas, coordinates research, ensures cross-sectorial cooperation, monitors compliance, and develops reports on the state of the environment in Moldova. At the same time, the MOE (together with its subordinated divisions and institutions) is the main governmental body responsible for ecological expertise and environmental impact assessment.

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One of the main scopes of the ecological expertise, according to the Law on Ecological Expertise and Environmental Impact Assessment (1996) is to maintain the ecological equilibrium, genetic fund, biodiversity and to create the optimum conditions for human life. The ecological expertise is compulsory to all legislative acts, methodologies, regulations and standards referencing to environment and that could impact the environment during their application, and to all new projects design documents. A series of project design documents may require the Environmental Impact Assessment (EIA). The EIA process in Moldova considers the physical and biological impacts of proposed developments on the environment: air, land, water, biodiversity and people. Its scope includes a review of the effects that could bring adverse changes to the natural environment and the resulting short- and long-term effects that these changes could have on people and biodiversity.

Environmental permitting and enforcement in the Republic of Moldova are performed by the State Ecological Inspectorate (SEI), which is subordinated to the Ministry of Environment. The Agency “Moldsilva”, public institution on State policy in forestry and hunting, is also in charge of issuing permit on forest related issues.

Other governmental agencies such as “Apele Moldovei” Agency, State Services for Public Health, and Agency for Geology and Mineral Resources are also involved in permitting procedure.

According to the 1993 Law on Environmental Protection, SEI performs State control regarding compliance with environmental legislation requirements. SEI also performs State ecological expertise and issues permits of emissions into the air and for the special use of water. The total staff of SEI is 310 persons, from which 59 are in the central body of the institution and 251 are assigned to the territorial units which include 4 ecological agencies located in Chisinau, Balti, Cahul, and Autonomous Territory of Gagauzia and 32 ecological inspections in districts. The structure of SEI is presented on figure 2.1. The cutback of SEI staff has been continuous from 1998 when it had 521 employees. In 2005, the staff number was 411.

The procedure of State ecological expertise is described in the 2003 Instruction No.188, on the order of organizing and conducting State ecological expertise. It determines the scope, tasks, principles, objects and subjects of ecological expertise, order of ecological expertise organization and undertaking, requested urban and spatial planning documents and the procedure for their presentation for review. The Instruction was not amended since 2003.

The Aquatic Resources Management Division and the Natural Resources and Biodiversity Division of the MoE are involved in aspects of biodiversity conservation. The Aquatic Resources Management Division is primarily involved in fisheries and water-related issues. The Natural Resources and Biodiversity Division has wider responsibilities and includes two relevant units, the Aquatic, Soil and Underground Resources Unit and the Protected Areas, Biodiversity and Biosafety Unit, which is responsible for protected areas, compliance with international biodiversity treaties, such as the Convention on International Trade in Endangered and Threatened Species (CITES) and the Convention on Biological Diversity and other related activities. The Policy Analysis, Monitoring and Evaluation Division develop and promote environmental and sustainable development policies.

MOE also includes other entities that are directly involved in aspects of biodiversity knowledge and conservation. The main institutions include:

National Ecological Fund1 provides grants to local public authorities, institutions, private companies and NGOs to work on environment improvements in the country.

State Ecological Inspectorate (www.inseco.gov.md) controls all economic activities related to the use of natural resources and enforces environmental legislation.

Moldovan Waters (www.apelemoldovei.gov.md) implements state policy in the management of water resources, hydro-melioration, water supply and sewerage.

Fishery Service (www.sp.gov.md) protects fish resources by the study and restocking of fish species, enforcing fishing laws and ensuring that the fishery legislative framework is followed.

Other subordinated institutions of the MOE that take part in the integrated environmental monitoring are the State Hydrometeorological Service (www.meteo.md), National Agency for Geology and Natural Resources, National Agency for Regulation of Nuclear and Radiological Activities.

1 http://mediu.gov.md/index.php/component/content/article/79-categorii-in-romana/despre-minister/institutii-subordonate/72-fondul-ecologic-national

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The Institute of Ecology and Geography (http://www.ieg.asm.md/) and the Environmental Information Centre of the MOE are responsible for the design and maintenance of key environmental databases, development of environmental action plans and production of ‘State of Environment’ reports.

Moldsilva (www.moldsilva.gov.md) is a Ministerial level agency that manages forestry and game/hunting in the country through the implementation of policies and international treaties on rural development and employment, sustainable forest management and wildlife protection, conservation of biodiversity etc. Moldsilva is structured into 25 regional entities, including sixteen forest enterprise activities, four forestry and hunting enterprises, four state natural reserves and the Forest Research and Management Institute (ICAS). Activities of these entities are enacted through 82 local forest districts.

MAFI (www.maia.gov.md) is the central state body that promotes state policy in agriculture and food industry, with responsibilities of development in relation to economy and social infrastructure. It has a number of subordinated entities, such as public institutions (research institutions, agencies, phyto-sanitary and plant protection sections etc.), education institutions (Agrarian State University and various Colleges), state enterprises (wineries, plant and animal husbandries) and commercial units dealing with processing and products marketing.

MAFI has limited interest in biodiversity or the protected area system. It is largely involved in the management of manufactured landscapes and utilization of plants and animals for agricultural purposes.

Academy of Sciences of Moldova (www.asm.md) is the only public science institution in the country and its specialists provide scientific assistance to other public authorities to ensure the scientific basis for biodiversity conservation and protected areas management. The Academy’s Division of Life and Natural Sciences has eight institutional members: Institute of Zoology, Institute of Microbiology and Biotechnology, Institute of Ecology and Geography, Institute of Plant Protection and Ecological Agriculture, Institute of Genetics and Plant Physiology, Institute of Chemistry, and Institute of Physiology and Sanocreatology.

Several of these authorities are directly involved in biodiversity conservation. The Botanical Institute and the Zoological Institute provides technical and professional research, monitoring and information management support to the protected area system and are responsible for the management of botanical and zoological gardens.

They are the main repositories of expert information and knowledge about biodiversity and protected areas. The only existing tool for biodiversity monitoring is through the Institute of Zoology and Institute of Botany.

Academy of Sciences through their subordinated Institutes (Institute of Zoology, Institute of Botany and Institute of Ecology and Geography) and Universities that include biodiversity and nature resource management in their curricula play an active role in promoting environmental and life sciences.

A handful of environmental NGOs and other stakeholders that utilize natural resources are involved in biodiversity issues as well. The most active environmental NGOs involved in research, planning and management of projects in the areas of environmental management in Moldova are: Ecological Society Biotica, REC Moldova, International Environmental Association of River Keepers Eco-tiras, NGO Bios, etc. These local NGOs have developed the draft National Wetland Strategy of the Republic of Moldova, Guide on the Management Plan for key elements of the ecological network, draft Management Plans for Lower Dniester Ramsar site, draft Management Plans for Unguri-Holosnita Ramsar site, etc.

One of the main constraints faced by the MOE is the lack of capacity to develop adequate legislation and to enforce it, including issues related to inadequate financial support, weak biodiversity conservation training programs and low level of staffing for critical functions. For instance, there are only four permanent staff members in the Protected Areas, Biodiversity and Biosafety Division, far fewer than are needed to be effective.

There is also weak coordination with academic institutions, Moldsilva, and local authorities in the study and management of biodiversity. There appears to be no formally defined mechanism for consulting and involving the Academy of Sciences. This has led to criticism that different Institutes within the Academy are consulted on different issues, preventing the preparation of consistent responses from the Academy as a whole. In part, this could be due to lack of a clear process for consultation and decision-making and due to deficiencies in internal communication within the Academy between the Institute of Botany and the Institute of Zoology and the Institute of Ecology and Geography, which is also subordinated to the Ministry of Environment.

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The other inefficiency of the environmental protection system is that scientific institutions, like the Institute of Zoology and the Institute of Botany, which are involved in biodiversity conservation, represent the only existing system of biodiversity monitoring. However, these activities are sporadic and there is a lack of reporting mechanisms to the MOE.

Some aspects of the Moldsilva operation could also be improved. For instance, there are limited staff policies regarding activities of biodiversity conservation and a lack of financial capacity to engage in this work.

Moldsilva has improved its communication with the public, but still lacks transparency in its activities and thus has an unclear image in the mass media leading to perceived mismanagement of forests and forest resources.

There is lack of coordination with other ministries; however there is an increased cooperation with local communities interested in afforestation and creation of new forests. The current management of Moldsilva, with donor support, undertook an Institutional Reform Strategy on Forestry and this reform aims at improving the overall forest management in Moldova.

The frequent reorganization of national and regional government agencies was certainly a source of confusion and complicated the horizontal cooperation of authorities enforcing environmental legislation. The changes in geographical coverage and the consequent transfers of files, changes in staff and leadership, and changes in priorities delayed the development of inter-ministerial cooperation mechanisms. Environmental information from other governmental agencies often was not available to the MOE even though it was required by law. The other governmental agencies lacked specialists and/or departments to deal with environmental issues.

2.4 Sustainability Analysis:

The MEGP is designed to promote sustainable improvements in Moldova’s business environment and competitiveness of selected industries/value chains. It is expected that all MEGP implementing partners (IPs) will coordinate their efforts and consider both positive and negative outcomes of their activities (including the possible impact on the environment and human health) at the activity design stage. The Mission also expects that MEGP IPs will: (1) engage all relevant stakeholders in designing and/or implementing USAID-funded interventions, (2) promote application of the pertinent best international standards and practices in Moldova, (3) advocate for/coordinate international partnerships that may help Moldovan organizations achieve sustainable results, (4) use various media and ICTs for increasing public awareness of and engagement in USAID-funded or USAID-promoted improvements, (5) support the enhancement of local capacity to appraise the effects of the proposed improvements at the national, regional, and local levels and, in particular, to conduct life-cycle analysis of products and/or services promoted with USAID funds, and (6) promote the green office/building concept in Moldova.

In particular, through the regulatory assistance MEGP IP(s) will look to see if they can help Moldova prevent further loss of high value ecosystems, restore poor quality ecosystems and re-establish ecosystems that are needed for flood control, soil erosion control and biodiversity health. It is anticipated that MEGP regulatory efforts could help Moldova to coordinate their business development policies and environmental legislation, and vice versa, so business including agriculture can be more sustainable, and to address environmental issues such as tax policy for food production, zoning to preserve prime farmland and water recharge areas, ecotourism as a driver to restore high quality ecosystems, and related important natural ecosystem functions such as flood protection. Similarly, IP(s) promoting improvements in agriculture will look at the sustainability of the farm lands to see if any improvements can be made to maintain or improve the soil, use integrated pest management or move to organic practices, reduce soil erosion, and use sustainable techniques such as composting.

In addition, based on a preliminary analysis of planned MEGP activities (listed in tables below), the Mission has identified conditions/mitigation measures (discussed below) that need to be fulfilled/taken by MEGP IPs involved in the implementation of the listed activities and promoted among the local stakeholders. Any additional MEGP activities (and their anticipated effects) will be discussed with the Mission prior to being funded by the USG.

Based on the proposed combination of development activities, the sound development practices that will be demonstrated by USAID IPs, a predefined set of environmental mitigation measures (listed in this IEE), and cooperation with responsible stakeholders, the Mission can reasonably expect that the improvements promoted

Moldova / Moldova Economic Growth Project 13 with USAID funding under the MEGP will be sustainable. Additional sustainability analyses may be undertaken when new MEGP activities are designed. Any significant findings, conclusions, and recommendations on environmental sustainability of MEGP activities will be reflected in either amended MEGP IEE or supplemental IEE(s).

2.5 Climate Change Vulnerability Analysis:

Some of the proposed MEGP activities – primarily, assistance in improving irrigation management, building public private partnerships (PPPs), and revising laws and regulations – may cause climate changes. Therefore, the Mission has identified conditions/mitigation measures (discussed below) that need to be fulfilled/taken by MEGP IPs involved in the implementation of the listed activities and promoted among the local stakeholders.

Any additional MEGP activities (and their anticipated effects) will be discussed with the Mission prior to being funded by the USG. This approach will allow avoiding any significant climate change associated with USAID assistance.

3. Analysis of Potential Environmental Impact

Component 1: Improved Economic Foundation for Growth

Illustrative Activities Potential Impacts

Improved business and trade enabling environment

1.1 Review existing business regulations No adverse impacts are likely

1.2 Help the GOM modify (or eliminate) regulations to improve

Moldova business environment Potential impacts on land, water, air, biodiversity and human health

1.3 Help the GOM improve the Regulatory Impact Assessment (RIA) Potential impacts on land, water, air, biodiversity and human health

1.4 Help the GOM implement the Deep and Comprehensive Free

Trade Area (DCFTA) Agreement

Potential impacts on land, water, air, biodiversity and human health

1.5 Help the GOM facilitate trade with neighboring countries through trade shows, in-ward buyer trips and study tours.

No adverse impacts are likely

1.6 Help the Customs Agency improve the management of customs processes based on existing legislation

Potential impacts on land, water, air, biodiversity and human health

1.7 Help the Customs Agency review export/import licenses and permits

No adverse impacts are likely

1.8 Help the GOM modify (or eliminate) export/import licenses and permits

Potential impacts on land, water, air, biodiversity and human health

1.9 Help the GOM improve communications between the State Tax Service and the private sector

No adverse impacts are likely

1.10 Help the GOM improve tax administration and, particularly, reduce tax administration burden

Potential impacts on land, water, air, biodiversity and human health

1.11 Help the GOM implement e-Government solutions to reduce

corruption opportunities and administrative burden on businesses

No adverse impacts are likely

1.12 Help targeted industry associations build their organizational capacity including strategic planning and public relations functions

No adverse impacts are likely

1.13 Help Moldova create an Alternative Dispute Resolution Center and build its capacity to provide arbitration and mediation services

No adverse impacts are likely

1.14 Help Moldova increase public awareness and support of business climate reforms

No adverse impacts are likely

1.15 Help the GOM adjust national energy regulations to meet its international commitments

Potential impacts on land, water, air, biodiversity and human health

1.16 Review legal and regulatory environment for PPP and

concessions

No adverse impacts are likely

1.17 Help Moldova explore opportunities for and promote PPPs in No adverse impacts are likely

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Illustrative Activities Potential Impacts

ICT and agriculture

1.18 Help Moldova design/form PPPs (ICT and/or agriculture)

Potential impacts on land, water, air, biodiversity and human health

Increased access to finance

1.19 Help Moldova develop a DCA to provide loan portfolio

guarantees to selected financial institutions for the wine sector (in cooperation with the European Investment Bank)

Potential impacts on land, water, air, biodiversity and human health

1.20 Help local banks and non-financial institutions develop new financial products and services for selected industries including agriculture, textile and apparel, footwear, furniture assembling, ICT, and tourism.

Potential impacts on land, water, air, biodiversity and human health

1.21 Help Moldova develop a DCA to provide loan portfolio

guarantees to selected financial institutions for loans intended to finance energy efficiency solutions such as insulating a home, installing fluorescent lights, etc.

Potential impacts on land, water, air, biodiversity and human health

1.22 Help industries and industry associations develop business plans and gain access to finance for energy efficiency projects.

No adverse impacts are likely

1.23 Help Moldova develop a DCA to provide loan portfolio

guarantees to selected financial institutions for loans intended to finance clean energy (such as solar, wind, geothermal heat, etc.)

production

Potential impacts on land, water, air, biodiversity and human health

1.24 Help Moldova improve legislation and organizational procedures to strengthen its deposit insurance system and increase public confidence in the banking system

No adverse impacts are likely

1.25 Advisory support to the GOM and assessments, program

evaluations or other studies and/or designs related to ongoing, completed or new activities

Potential impacts on land, water, air, biodiversity and human health

Component 2: Improved Private Sector Competitiveness in Selected Industries

Illustrative Activities Potential Impacts

2.1 Help selected companies and business/professional associations in target sectors improve product quality, marketing and branding activities, and introduce the best industry practices

No adverse impacts are likely

2.2 Help selected companies and business/professional associations in target sectors introduce new technologies

Potential impacts on land, water, air, biodiversity and human health

2.3 Help selected business/professional associations design/roll-out sector-level branding campaigns in targeted markets, conduct trade promotion activities and inward buyer missions

No adverse impacts are likely

2.4 Help selected business/professional associations identify imports that can be produced in Moldova

No adverse impacts are likely

2.5…