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Implementation Completion Report (ICR) Review - Competitiveness Enhancement Technical Assistance


  
1. Project Data:   
ES Date Posted:
03/21/2005   
PROJ ID:
P040824
Appraisal
Actual
Project Name:
Competitiveness Enhancement Technical Assistance
Project Costs(US $M)
 20.0  18.27
Country:
El Salvador
Loan/Credit (US $M)
 16.0  15.32
Sector, Major Sect.:
Central government administration, Law and justice, Banking, Non-compulsory pensions insurance and savings, Payment systems securities clearance & settlement,
Law and justice and public administration; Law and justice and public administration; Finance; Finance; Finance
Cofinancing (US $M)
 4.0  2.96
L/C Number:
L3946      
   
Board Approval (FY)
  96
Partners involved
 
Closing Date
06/30/1999 06/30/2004
         
Prepared by: Reviewed by: Group Manager: Group:  
Kris Hallberg
Ronald S. Parker Alain A. Barbu OEDSG

2. Project Objectives and Components:

a. Objectives
The overall objective of the project was to accelerate outward-oriented private sector development and raise productivity. This was to be achieved by improving the enabling environment in three areas: (a) the business environment, by lowering the cost of doing business in El Salvador; (b) the environment for technological capabilities of private sector enterprises and labor, in order to raise productivity and international competitiveness; and (c) the environment for building consensus on competitiveness issues, by facilitating the flow of public information and public sector-private sector dialogue.

b. Components
(i) Business Environment component ($10.5 million, 52.5% of project costs) assisting in the design and drafting of laws, regulations, and procedures relating to domestic competition, the private provision of infrastructure services, trade and investment deregulation and trade facilitation, and financial markets development.

(ii) Technological Capabilities component ($3.2 million, 16.0% of project costs) to assist in developing a public-private institutional framework for technology development, with studies to design a national quality and productivity program, identify priorities for science and technology policy, and design a national scheme for demand-driven technical training.
(iii) Public Information Component ($5.0 million, 25% of project costs) to disseminate information on the Government's reform initiatives and support study tours and working groups.

c. Comments on Project Cost, Financing and Dates
While the components were not formally revised, the amount of activity under each varied significantly over time. Some subcomponents were implemented throughout the lifetime of the project, others got underway early but were discontinued, and others were implemented mainly toward the end of the project.

The project was originally intended to close in 1999, but ultimately closed in June 2004, approximately four years later than scheduled. Delays were due to GOES budget constraints, the 2001 earthquakes, and three changes of government.


3. Achievement of Relevant Objectives:

Improving the business environment:
  • As a result of draft legislation prepared under the Project, a Competition Law was passed by the Parliament five months after the project closed.
  • As a result of the Project, the Commercial Registry Law was revised in 2001, and the registries were modernized that same year.
  • As a result of the Project, the Consumer Protection Office was restructured and strengthened between 1998 and 2003.
  • Legislation governing infrastructure services was modernized under the Project, and this contributed to the privatization of telecommunications, electricity, and telephone companies.
  • As a result of the Project, an Investment Law was passed in 1998 that established a one-stop window for business registration (the National Investment Office, ONI) . ONI reports indicate that foreign firms can start a business in 7 to 10 days, down from the previous 3 to 6 months.
  • The Project financed and trained the staff of the Investment Promotion Agency (PROESA), which has helped bring in 123 new foreign firms.
  • The Project was instrumental in the passage of the new Free Trade Zone Law in 1998, and modernized the legal framework governing the use of these areas. The number of FTZs increased from 7 in 1995 to 16 in 2004.
  • As a result of the Project, Trade Point was launched in 2002 to provide export-related information to small- and medium-scale enterprises.
  • The Project's matching grant program financed participation in trade fairs, the design of new packaging systems, sending of samples abroad, etc. which probably contributed to the increase in exports reported by a sample of beneficiaries.
Public information:
  • For the four pilot clusters selected under the Project, working groups identified specific public and private initiatives to enhance sectoral competitiveness. Some of these were included in the Government's program budget. The studies conducted for the pilot clusters encouraged the formation of 11 other clusters.

4. Significant Outcomes/Impacts:

The achievements listed above can be considered mainly "outputs" of the Project rather than "outcomes". The ICR provides little evidence on the achievement of final outcomes.

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

Due to the lack of an adequate monitoring and evaluation system, there is little evidence on the achievement of intended competitiveness outcomes (increased exports and productivity) attributable to the project.
  • The outcome of the second of the three components, the Technological Capabilities component, was judged to be Unsatisfactory in the ICR. Activity in this component was virtually ended in 2001 after a 2000 supervision mission rated its progress as unsatisfactory.
  • Although the time required to register a business was reduced substantially for foreign investors, the Project had less impact on registration procedures for domestic investors.
  • Concerns about the constitutionality of the Movable Assets Law and opposition from some private sector groups have caused delays in the passage of this legislation.
  • The sustainability of some of the activities initiated under the Project is questionable: (i) PROESA was financed by the Project until 2002, when its funding shifted to the privatization fund. Its budget has been reduced by one half by the new Government. (ii) In early 2004, Trade Point became a part of EXPORTA, a newly-formed agency partly financed by the Project. Currently, EXPORTA remains without a director.
  • 6. Ratings:ICROED ReviewReason for Disagreement/Comments
    Outcome:
    SatisfactorySatisfactory
    Institutional Dev.:
    SubstantialSubstantial
    Sustainability:
    LikelyLikely
    Bank Performance:
    SatisfactorySatisfactory
    Borrower Perf.:
    SatisfactorySatisfactory
    Quality of ICR:
    Satisfactory

    7. Lessons of Broad Applicablity:

    In the area of competitiveness, the most important change may be in the mentality of firms -- with respect to exports, quality and productivity, and innovation.
    • Institutional change takes time, and projects that have substantial institutional objectives may benefit from longer timeframes and greater flexibility.
    • Building consensus -- both between the public sector and the private sector, and within the public sector, among different government agencies -- is critical to the success of this type of project.

    8. Audit Recommended?  No

              Why?  

    9. Comments on Quality of ICR:

    The ICR does a good job of describing project outputs achieved, but there is little evidence (due to the lack of a monitoring and evaluation system in the Project) of final outcomes achieved.
    The ICR contains a very good contribution by the Government, although it was not translated from the original Spanish.

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