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Implementation Completion Report (ICR) Review - Ml - SAC III


  
1. Project Data:   
ES Date Posted:
09/10/2004   
PROJ ID:
P072785
Appraisal
Actual
Project Name:
Ml - SAC III
Project Costs(US $M)
 70.00  104.96
Country:
Mali
Loan/Credit (US $M)
 70.00  85.00
Sector, Major Sect.:
Crops, Central government administration, General education sector, Health,
Agriculture fishing and forestry; Law and justice and public administration; Education; Health and other social services
Cofinancing (US $M)
   19.96
L/C Number:
C3582      
   
Board Approval (FY)
  1
Partners involved
Netherlands 
Closing Date
06/30/2003 06/30/2004
         
Prepared by: Reviewed by: Group Manager: Group:  
Pierre M. De Raet
Asita R. De Silva Kyle Peters OEDCR

2. Project Objectives and Components:

a. Objectives
In addition to maintaining macro-economic stability, there were two objectives: (i) help restore the basis for stable economic growth by restructuring the all-important cotton sector to make it more efficient and capable of adjusting smoothly to changing international economic conditions; and

(ii) improve the tools for planning and managing public expenditures for more effective poverty reduction.

b. Components
There were two components corresponding to the objectives:
1) Cotton sector. Revitalization of the sector by: (i) resolution of the short-term financial crisis faced by the sector; (ii) cost reduction in the State-owned Compagnie Malienne pour le Développement des Textiles (CMDT) and achievement of greater efficiency in the sector; and (iii) preparation of a longer-term reform program.
2) Public expenditures. Improvement in public expenditure management by: (i) strengthening the budget formulation process, with a view to arriving gradually at a system linking expenditures to medium-term development objectives; (ii) strengthening the budget execution process; and (iii) improving the transparency, accountability, and monitoring of expenditures, particularly of priority poverty-related sectors (i.e., health and education).

c. Comments on Project Cost, Financing and Dates
The Credit was in three tranches, the first disbursed upon effectiveness in January 2002, the second in December 2002, upon satisfying amended tranche release conditions, and the third in August 2003.
The Board approved an amendment to the DCA in December 2002, with respect to two second tranche conditions relating to the cotton sector, i.e., bringing to the point of sale the cotton seed oil division of CMDT and the assets of CMDT and of OHVN (Office de la Haute Vallée du Niger) in the OHVN cotton zone. These two conditions were transferred to the third tranche and two conditions of the third tranche were deleted. Thus, the two second tranche conditions replaced the third tranche conditions relating to the cotton sector. The reason for the amendment was to provide timely BOP support in response to the negative impact of the crisis in Côte d'Ivoire on the Malian economy, without further waiting for the two conditions to be fulfilled.
The closing date was extended twice, the first time to December 30, 2003 to allow time for meeting the now third tranche conditions pertaining to the cotton sector, and the second time to June 30, 2004 after a supplemental grant of US$15 million had been approved, requiring to keep the project active during the grant implementation period.


3. Achievement of Relevant Objectives:

1) The objectives in the cotton sector were partially achieved: cost-saving measures were identified and implemented in 2002/03; a market-based price formula for cotton lint was adopted by all stakeholders and partially implemented for the 2002/03 crop year (the formula was implemented only partially on account of a misunderstanding by the Government); the social plan aimed at downsizing CMDT was implemented in June 2003 and a three-year financial plan was completed in early 2004; the conditions relating to bringing to the point of sale the oil division of CMDT and the assets of CMDT and OHVN in the OHVN zone were met but, in both cases, the bidding/negotiation process was inconclusive; a longer-term plan for the full liberalization of the sector, including the privatization of CMDT' s and OHVN 's agro-industrial and commercial activities was substantially completed, with negotiations with IFC serving as investment advisor well advanced. However, the divestiture to the private sector of CMDT' s and OHVN' s assets was not completed. As of ICR writing, all assets remained Government' s property.

2) The objectives of improving public expenditure management were substantially achieved: a budget nomenclature for local governments compatible with the one at the cental level was completed and applied in the 2003 budget year; MTEFs for health and education were completed and incorporated in the 2003 budget, although there remain doubts that they will become fully operational; an overall MTEF compatible with the macro framework was prepared; three-year budget allocations for all sectors, compatible with the macro framework, were prepared starting with the 2003 budget; a procedural manual for the budget execution process was prepared and is in use; a functional and technical study to define an information system integrating the various units of the Ministry of Economy and Finance was completed and the system became fully implemented with the 2004 budget; consolidated Treasury balance statements are produced and issued monthly; internal control mechanisms were strengthened; and the Auditor's General Office (Section des Comptes - currently part of the Supreme Court) was considerably strengthened and is to be transformed into a fully independent "Cour des Comptes" following a referendum.

4. Significant Outcomes/Impacts:

1) Despite continued low cotton prices and the crisis in Côte d'Ivoire, the macro-economic framework was kept on track, in no small part thanks to external assistance. Mali reached the completion point under the enhanced HIPC in March 2003, and the full PRSP was approved by the Bank and Fund Boards in March 2003 as well.
2) Stability and timely assistance from donors permitted to protect social services and the rural poor.
3) The improved expenditure management will facilitate progress towards achieving poverty reduction goals and the generalization of MTEFs will improve monitoring of results and impact.
4) Progress under SAC strengthened Mali's integration into the WAEMU (West Africa Economic and Monetary Union).

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

The commitment of the Government to the reform of the cotton sector remains questionable. This is illustrated, inter alia, by the fact that it failed at times to take the necessary decisions to ensure progress, such as that required to maintain the unit responsible for restructuring the sector fully equipped and operational. In addition, its capacity to manage the reform process was sometimes inadequate, causing delays and possibly missing promising opportunities for privatization. Only active involvement by the Bank helped keep the long-term vision for the sector on track.

6. Ratings:ICROED ReviewReason for Disagreement/Comments
Outcome:
SatisfactorySatisfactory
Institutional Dev.:
Not RatedModestThe rating of modest is justified by the improvements in managing public expenditure, for instance by the effective implementation of an integrated information system in MOEF.
Sustainability:
LikelyLikely
Bank Performance:
SatisfactorySatisfactory
Borrower Perf.:
SatisfactorySatisfactory
Quality of ICR:
Exemplary

7. Lessons of Broad Applicablity:

1) Development policy operations focusing on a limited structural reform agenda are more likely to succeed than ambitious or complex operations in countries with weak institutional and administrative capacity.
2) Global experience shows that restructuring and/or privatization of SOEs should be planned in terms of decades rather than years, over several operations. In addition, it should be accompanied by well targeted TA, providing critical expertise.
3) The ICR is correct in stating that sale of assets is preferable to sale of shares, because of the inevitable encumbrances attendant to the latter.

8. Audit Recommended?  Yes

          Why?  As part of the series of SACs covering the complete reform of the cotton sector.

9. Comments on Quality of ICR:

The ICR is excellent in most respects. It is comprehensive, concise, well structured and well written. Footnotes provide the necessary and useful insight into the context. The lessons are appropriate. It deserves to be disseminated in the region as a model.

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