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Implementation Completion Report (ICR) Review - Privatization & Capacity Building Project


  
1. Project Data:   
ES Date Posted:
08/09/2000   
PROJ ID:
P000568
Appraisal
Actual
Project Name:
Privatization & Capacity Building Project
Project Costs(US $M)
 11.0  11.0
Country:
Congo Republic
Loan/Credit (US $M)
 9.0  2.96
Sector, Major Sect.:
Private Infrastructure,
Private Sector Development
Cofinancing (US $M)
 2.0  1.2
L/C Number:
C2775      
   
Board Approval (FY)
  95
Partners involved
Agence Francaise de Développement 
Closing Date
06/30/1999 06/30/1999
         
Prepared by: Reviewed by: Group Manager: Group:  
Kevin N. Lumbila
John H. Johnson Ruben Lamdany OEDCR

2. Project Objectives and Components:

a. Objectives
The project's objectives were to: (a) help the Government prepare regulatory frameworks for five major public enterprises in control of petroleum distribution, transportation, telecommunications, power and water distribution, and open the sectors up to competition progressively; (b) conduct the privatization of these major public enterprises; (c) liquidate other non-viable PEs; and (d) support regulation and competition in the financial sector and reforms in banking institutions.

b. Components
These objectives were to be achieved by providing technical assistance to the following three components of the project:(1) regulation and privatization (US $7.8 million); (2) liquidation of other non-viable PEs (US$ 0.9 million); (3) reform of financial institutions and the public sector (US$1.2 million).

c. Comments on Project Cost, Financing and Dates
The credit, for US$9.0 million, was approved in September 1995 and made effective in January 1996. Disbursements under the credit were suspended in July 1997 because of the resumption of the civil war; an undisbursed balance of US$5.1 million was canceled and the project was closed in June 1999. The Agence Francaise de Développement cofinanced the operation in the amount of US$0.9 million equivalent. A US$0.5 million Japanese PHRD grant financed the development of proposals for reforming the financial sector.


3. Achievement of Relevant Objectives:

None of the project objectives were fully achieved when the civil war resumed in June 1997. Preparation of regulatory frameworks in five sectors: a Telecommunications Act was adopted in May 1997, while the legal framework for the post, power and water sectors was in the process of being established. Privatization of five major PEs: At the close of the project, none of the five PEs had been privatized, but most of the privatization dossiers were brought to the point of sale. Liquidation of other non-viable PEs: 15 out of 104 Government-owned or controlled enterprises were liquidated since December 1998, and 20 more were scheduled for liquidation by April 30, 2000. Reforming the financial institutions and the public sector: No progress has been achieved on this component.

4. Significant Outcomes/Impacts:

The most significant achievement was the adoption by the Government of a Telecommunications Act in May 1997. Moreover, the project helped the Government to define sectoral strategies, promote the concept of competition and privatization in the country, and benefit from external expertise.

5. Significant Shortcomings (include non-compliance with safeguard features):

Given the decline in Government commitment and / or ability (after project effectiveness) to proceed with reforms and the resumption of the civil war in June 1997, the ambitious agenda of this project was not accomplished. In particular, privatization of major PEs was undertaken without prior adoption of a clear regulatory framework.
6. Ratings:ICROED ReviewReason for Disagreement/Comments
Outcome:
UnsatisfactoryUnsatisfactory
Institutional Dev.:
PartialNegligible
    The ICR does not provide evidence on how and/or to what extent institutional development was accomplished.
Sustainability:
LikelyUncertain
    Of the few benefits achieved, little is likely to be sustained. The Telecommunications Act adopted was already in the process of being revised or replaced at the time of the ICR preparation. On the other hand, the public savings from liquidation of 15 Government-owned or controlled enterprises are likely to be durable. In sum, the benefits from this project appear to be of uncertain sustainability.
Bank Performance:
SatisfactoryUnsatisfactory
    The Bank misjudged the Government's ability and willingness to proceed with ambitious reforms. Privatization of five major PEs in a high-risk country, politically and ethnically divided, was overly ambitious.
Borrower Perf.:
DeficientUnsatisfactory
    Differences in menu of ratings.
Quality of ICR:
Satisfactory

7. Lessons of Broad Applicablity:

In a country where the public sector represents the dominant sector of the economy, privatization of major PEs undoubtedly encounters strong opposition from a variety of sociopolitical groups. Therefore, gauging the society's acceptance of such reform, and thereby the Government's ability to create consensus and commitment to proceed with reforms, is a crucial component of any appraisal of a project designed to help bring about such important change in the structure of the economy. The Bank successfully contributed, in the case of Congo, to build a solid consensus among the main stakeholders at the beginning of the project. The Government's commitment to proceed with reforms was strong initially but was pushed aside by the escalation of the conflict and the deterioration of governance.

8. Audit Recommended?  No

          Why?  

9. Comments on Quality of ICR:

The ICR is of high quality: it is well written and insightful. The ICR gives a balanced account on key subjects of this ambitious project. However, it does not indicate how and to what extent capacity building was accomplished and the degree to which technical assistance was developmentally effective. Nor does the ICR elaborate on the reasons for the decline in government commitment after project effectiveness.

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