Second Additional Financing for the Serbia Accelerating Innovation and Growth Entrepreneurship Project

active

The second Additional Financing (AF) in the amount of Euro 25 million (US$27 million equivalent) is proposed to the Serbia Accelerating Innovation and Growth Entrepreneurship (P170185) parent project. The SAIGE Project currently includes an IBRD loan in the amount of €43 million (US$48 million), signed on December 13, 2019, and declared effective on May 18, 2020. It also includes an EU IPA 19 funded, recipient-executed grant of €26.88 million (US$28.52 million) processed as Additional Financing in July 2023. This first AF was not processed at the same time with the original IBRD Loan due to the slightly later approval of EU IPA funds in December 2019, and, at the time prolonged negotiations on the EU-WB Financial Framework Partnership Agreement, finalized on July 8, 2021. The first AF enables the scale-up of activities in the parent Project in line with approved development objectives through the same implementing entities and programs. In August 2023, a Government delegation led by the Minister of Science, Innovation and Technological Development (NITRA), requested additional support (IBRD lending) for the innovation agenda, for the SAIGE project. Following this visit, in September 2023, the Bank received a written request for a second Additional Financing for: 1) further developing the field of Artificial Intelligence (AI) in Serbia, 2) strengthening of R&D management capabilities, and 3) supporting the management and overall project implementation.Specifically, the Government has requested:1) €18.5 million (US$20 million equivalent) for the Artificial Intelligence (AI) programs. This funding is to support grant programs that will incentivize research and application of AI, administered by the IF and SF. In addition, the AI Institute will receive technical support and grants against their existing Transformation Plan, part of the ongoing R&D Institutes transformation program, implemented currently under the oversight of the PIU and the Ministry. The NITRA, SF and IF, the current Project Implementing Entities (PIE) will remain as the PIE for the proposed AF..2) €3.8 million (US$4 million equivalent) for continued support and capacity building within the BIO4 campus, both for tenants (R&D Institutes) and BIO4 company (designated managing entity). This funding will cover the following activities: (i) capacity building for BIO4 company staff and researchers (managing and operational running of Core Facilities within the BIO4 Campus) and (ii) funding for transformation of BIO4 participating RDIs with a focus on promoting science-business collaboration. 3) €2.7 million (US$3.0 million equivalent) for project implementation and monitoring. This will cover capacity building for the implementation of new grant programs of the IF and SF, , along with support for the participating institutions as part of RDI Reforms.The new requests are well covered by the existing PDO, however, a longer implementation period would be needed to ensure successful implementation. Thus, the Government has also requested an extension of 24 months.Considering the PIU budget was not increased when EU IPA funding was added in July 2023, despite increased demands for overall project management, the PIU requires the above-mentioned additional budget to cover increased staffing, office space, and IT equipment to continue the smooth implementation of any new and ongoing project activities.Changes proposed through the AF entail expanding the scope of the activities financed by the Parent Project, adjusting its overall design, and extending the closing date of the Parent Project by 24 months. The relevant implementation documents, such as POM and the grant manuals will be upgraded to include provisions related to improved risk impact assessment framework for safe, secure, responsible trustworthy and reliable AI (Trustworthy AI) ethics, environmental and social issues/impacts. Furthermore, the Bank proposes to utilize the Bank executed technical assistance within the overall SAIGE program to include a training program with a dedicated session on anticipating/managing AI risks for the implementing agencies and the beneficiaries (on how their products/processes assess/manage the AI risks). Implementation arrangements have been reviewed by Legal and FM teams and no changes are envisaged.