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Implementation Completion Report (ICR) Review - Economic Governance & Recovery Grant III

1. Project Data:   
ICR Review Date Posted:
Cote d'Ivoire
Is this review for a Programmatic Series?
First Project ID:
Project Name:
Economic Governance & Recovery Grant III
Project Costs(US $M)
 90  89.9
L/C Number:
Loan/Credit (US $M)
 90  89.9
Sector Board:
Economic Policy
Cofinancing (US $M)
Board Approval Date
Closing Date
06/30/2011 06/30/2011
Crops (34%), Central government administration (22%), General finance sector (22%), Mining and other extractive (11%), Power (11%)
State-owned enterprise restructuring and privatization (34%) Corporate governance (22%) Public expenditure financial management and procurement (22%) Other environment and natural resources management (11%) Export development and competitiveness (11%)
Prepared by: Reviewed by: ICR Review Coordinator: Group:
Stefano Migliorisi
Michael R. Lav Navin Girishankar IEGPS2

2. Project Objectives and Components:

a. Objectives:
The objectives of the Third Economic Governance and Recovery Grant (EGRG-3) were to support government-owned reforms:

    • to improve governance, transparency, and efficiency in public expenditure management; and
    • to deepen structural reforms aimed at strengthening governance and transparency in the energy, cocoa, and financial sectors.
    The focus of the first objective was to strengthen budget preparation, execution, controls, and accountability. The second was aimed at increasing the transparency of the energy sector and attracting new investment into it. The third sought to deepen institutional reforms in the cocoa sector to improve its governance, transparency and efficiency. The fourth envisaged reductions in losses of and subsidies to key state-owned financial institutions.

    The Financing Agreement does not include a description of the program’s development objective. IEG therefore uses the Program Development Objectives provided in the Program Document (p. v).

b. If this is a single DPL operation (not part of a series), were the project objectives/key associated outcome targets revised during implementation?

c. Policy Areas:
As noted in the Program Document, the Government program focused on (i) carrying out deeper reforms to strengthen public financial management (PFM) to improve efficiency and effectiveness in the use of public resources and to hold the Government accountable for the appropriate use of public funds; and (ii) enhancing transparency, accountability and efficiency of state institutions and processes in the cocoa and energy sectors (the two key generators of exports and public revenues) as well as the critical financial sector. The operation helped to improve governance, transparency and efficiency in the following policy areas/sectors:

  • Public Expenditure Management: The operation supported the implementation of a medium-term public finance management (PFM) and procurement reform program that responded to weaknesses identified in the 2008 Public Expenditure Management and Financial Accountability Report (PEMFAR). The Government's program included normalization of the budget cycle; capacity enhancements in budget preparation such as stronger investment public investment planning and macro-economic modeling; improvements in budget classification and nomenclature, budget execution; inter-linkages between budget execution, procurement, treasury accounting, and payroll systems; improved economic and financial information; strengthened audit and controls; and enhancing transparency and efficiency of public procurement.
  • Energy Sector: Based on audits in the areas of oil and gas exploration, development and production, as well as oil refining, and electricity, the Government strategy for the energy sector focused on enhancing efficiency and sector management, and improving transparency of physical and financial flows. The operation supported efforts to (a) restore the country’s ability to attract foreign investment into the sector through the definition of the legal status of the Société de Gestion du Patrimoine du Secteur de 1'Electricité' (SOGEPE) as the electricity sector asset holding company; and (b) to improve transparency in the energy sector through regular public reporting of payments to, and revenues received by the Government for the extractive industries (mining, oil and gas) in line with the Extractive Industries Transparency Initiative (EITI) criteria, and publication of the annual audit of the National Company for Petroleum Operations in Cote d'Ivoire (PETROCI);
  • Cocoa Sector: The main source of income for a fifth of Cote d'Ivoire's population. the cocoa sector was saddled by taxation and governance problems, which the Government's comprehensive sector reform sought to address. The operation support these reforms, and specifically, the streamlining of cocoa sector management by reducing and redeploying quasi-fiscal levies to rural investments, improving the transparency of financial management, strengthening oversight through a Cocoa/Coffee Committee, and communicating budgets for key cocoa entities. In particular, the operation support Government efforts to reduce taxation in the cocoa sector and rationalize the institutional structure of managing cocoa entities with a view to ultimately enhancing the incomes of cocoa farmers.
  • Financial Sector: In addressing a number of challenges and vulnerabilities the financial sector, the Government sought to build on the Financial Sector Assessment Program (FSAP) with an action plan for sector reform, in-depth restructuring of the microfinance sector (to bring its net worth back to a positive level), convert the National Savings Fund into a bank, and reform the institutional framework for the Government employee pension fund. These efforts, particularly in microfinance, were supported by the operation.

The four policy areas covered by this operation (i.e., PFM, energy, cocoa, and the financial sector) were previously supported by two grant-financed development policy operations. In supporting these continuing efforts, the EGRG3 employed nine prior actions spanning the four policy areas.

d. Comments on Project Cost, Financing, Borrower Contribution, and Dates

Cost. The cost of EGRG3 was SDR58.8 million (US$90 million equivalent) at appraisal.

Financing. One IDA grant of SDR58.8 million (US$90 million equivalent), including SDR9.8 million (US$15 million equivalent) in pilot Crisis Reform Window (CRW) resources, funded EGRG3.

Borrower Contribution. There was no Borrower contribution.

Dates. There was only one major and one negligible deviation from planned dates during the course of the operation. Approved by the Board on May 4, 2010, EGRG3 became effective on June 17, 2010 (one day later than planned) and closed on June 30, 2011 as planned. A mid-term review was envisaged (January 2011), but never took place due to the outbreak of conflict in the country.

3. Relevance of Objectives & Design:

a. Relevance of Objectives:
IEG assessed the relevance of the original objective as substantial for the following reasons:

    • The program responded to identified constraints as well as Government's commitment to address them. At appraisal, Côte d’Ivoire was emerging from a long civil conflict that had significantly weakened governance through a progressive deterioration in budgetary discipline, financial management and procurement. Under the previous operations, EGRG1 and EGRG2, and through its analytical work, the Bank had identified governance, institutional, and other performance constraints in the energy, cocoa and the financial sectors. The Government has committed to continuing these reforms.
    • EGRG3 is clearly fully aligned with the government’s reform agenda with the 2009 Poverty Reduction Strategy Paper (Strategy for Re-launching Development and Reducing Poverty) covering the period up to 2015. EGRG3 falls under outcome 1 (“Restoring and Reaffirming the foundations of the Republic”), Orientation 1 (Consolidation of peace, protection of life and property and promotion of good governance), Area 3 (Governance) and Expected Result 4 (The management of resources and public affairs is participatory, transparent and efficient).
    • EGRG3 continues to support the first pillar of the Bank’s Country Partnership Strategy for the period FY10-FY13. Under this pillar, the Bank has committed to helping rebuild institutions and strengthen economic governance, both in PFM and sectors such as cocoa, energy and financial services.
    • This operations complements a Post-Conflict Reconstruction and Recovery Grant (PCRRG), which was approved by the Board in September 2011 and supports additional reforms on governance, transparency and efficiency in public expenditure and in the key sectors of cocoa, energy and finance. A programmatic series of operations focusing on the same areas is currently under preparation, confirming the continuing relevance of these objectives, and the long term nature of the required effort.

b. Relevance of Design:
IEG assessed relevance of the original design of EGRG3 as substantial based on the following:

  • EGRG3 had a simple design with a relatively small number of prior actions and indicators, that were drawn from the government’s own agenda and crucial for economic recovery, thus ensuring ownership. The prior actions selected were critical and coherent as a basis for the operation, and were consistent with the country’s international commitments, and focused on key sectors of the economy.
  • This operation was the third in a non-programmatic series of single tranche Development Policy Operations (DPOs), an appropriate choice ensuring continuity and flexibility in a politically unstable situation. As noted in the Bank’s 2009 Developing Lending Retrospective (p. 42), “the use of a non-programmatic design to address a crisis situation remains an important and flexible option for a rapid response whenever quickly disbursing funding is required.” The situation in Cote d’Ivoire at program was extremely fragile during project preparation and implementation, as proven by the political and social events described elsewhere in this review. EGRG1 and EGRG2 addressed some of the reforms sequentially. For example, the request to join EITI was a prior action of EGRG1, the preparation of the 2006 EITI Report a prior action of EGRG2, and the publication of the 2006, 2007 and 2008 EITI reports an outcome indicator of EGRG3.
  • EGRG3 builds on a substantial body of analytical work that identified key constraints in the sectors covered by this DPO. More details on such analytical work are provided in Section 8(a) of this review. The 2008 PEMFAR had identified the deterioration in budget discipline as a major issue, while several studies of the cocoa sector had highlighted that the institutional set-up, a product of entrenched vested interests, was hindering the sector’s development. While EGRG3 sought to address these constraints, the design -- and specifically, identification of policy areas -- would have benefitted from a more thorough political economy analysis of the energy sector.
  • The emphasis on transparency measures was necessary but not sufficient to improve sector governance. Further actions to support both the demand and supply sides of accountability are of course needed to ensure that improved transparency is translated into improved governance.

  • 4. Achievement of Objectives (Efficacy) :

    Based on the information available, the achievement of EGRG3's objectives was assessed as follows:
      • Public Expenditure Management. The budget execution report and declaration of conformity for fiscal year 2008 has been issued by the Office of the Auditor General (OAG) and published on its website one month later than envisaged at effectiveness, while its submission to the OAG was a prior action of EGRG-3. The efficacy of this objective is therefore rated as substantial.
      • Energy Sector. Even though SOGEPE had been given legal status as the electricity sector asset holding company, it did not obtain any announcement of intention to finance investments in the electricity sector given the breakdown of peace in 2010 and the investors’ wait-and-see attitude. In addition, increased transparency was supposed to be achieved through the publication of EITI Reports for 2007, 2008 and 2009. While the EITI Report for 2007 has been validated and made public in October 2010, three months after the target date, the 2008-2009 report is being finalized and has not been made public as of end June 2012. The efficacy of this objective is therefore rated as negligible.
      • Cocoa Sector. External audits for FIMR, and the bagging, weighing and quality control programs made public; and changes in the institutional arrangements made in accordance with the findings of the audits. The audits and the programs had been completed under EGRG-3’s prior actions, and made public through FIMR website, and the Management Committee made several changes to the management of the fund, as recommended in the audits. In addition, a new institutional structure for the cocoa sector has been put in place. As noted in Letter of Intent addressed to the IMF in April 2012, the Minister of Economy and Finance stated that “the coffee-cocoa sector reform adopted November 2, 2011 by the Council of Ministers is currently under way. The government has made it clear that there is no turning back from the reform.” A central body (Conseil du Café et du Cacao, or CdC) for the management, regulation, development, and price stabilization of the sector, and a committee to monitor implementation of the reform were set up in January 2012. The efficacy of this objective is therefore rated as substantial.
      • Financial Sector. Under the restructuring plan, 50 percent of the non-performing loans of UNACOOPEC have been recovered to meet EGRG-3’s prior actions, and 16 non-performing decentralized centers closed. Losses have been reduced to about FCFA 2 billion, well below the original target of FCFA 4 billion. Since CNCE was granted a banking license and unrecoverable debt was written off meeting one of EGRG-3 prior actions, FCFA 5 billion were transferred to CNCE in 2010, below the target of FCFA 5.4 billion. The efficacy of this objective is therefore rated as substantial.
      Overall, IEG concurs with the ICR's observation (on p. 4) that the operation “achieved many of its development objectives despite the fragile political situation and the high-risk environment that followed effectiveness. Furthermore, progress in many areas has continued since closing.” However, this review notes the poor performance of reforms in the energy sector shows cause for concern given the modest ambition of these efforts under EGRG-3.

    5. Efficiency (not applicable to DPLs):

    6. Outcome:

    IEG assessed the relevance of objectives and design, and efficacy as substantial, on balance. Even still, there were shortcomings related to the selection of the energy sector as a policy area without adequate political economy analysis, and negligible achievements in that sector (including due to less than expected progress on EITI). Therefore, the outcome is assessed as moderately satisfactory.

    a. Outcome Rating: Moderately Satisfactory

    7. Rationale for Risk to Development Outcome Rating:

    IEG concurs that the risk to development outcomes is high. A primary risk is political instability. As noted in the ICR (p. 5), for example, the 2011 post-election violence “led to the suspension of many of the reform activities that the program had supported; in effect, in addition to the great human cost of the conflict, about a year of progress was lost.” In addition, the efficacy of transparency measures -- a major focus of this operation and good governance overall -- depends on robust demand-side response from societal actors and improved capacity on the part of formal accountability institutions. Absent these complementary elements, the risk of reversal of transparency efforts is also high.

    a. Risk to Development Outcome Rating: High

    8. Assessment of Bank Performance:

    a. Quality at entry:
    IEG assessed Bank performance at entry as satisfactory for the following reasons:

    • The operation was based on strong analytical underpinnings. Key analytical inputs included a 2002 study of cocoa taxation, several analytical papers prepared in 2004 on long-term growth performance and competitiveness, a 2006 poverty assessment which included the impact of cocoa taxation, a 2006 EC report on optimal taxation in the cocoa sector, and a post-conflict Social Assessment completed just before the operation. Inputs on the financial sector included a 2009 FSAP, which provided understanding of issues in micro-finance and rural access to financial instruments. On PFM, the 2008 Public Expenditure Management and Financial Accountability Review (PEMFAR) provided a diagnostic of strengths and weaknesses.
    • The resultant design contained a relatively simple set of 9 prior actions and 7 outcome indicators that were technically desirable and, in general, politically feasible (with the exception of the energy sector). The operation sought to build on progress in the same policy areas (with a similar M&E framework) as those supported under EGRG1 and EGRG2 operations. These design features enabled program to achieve most of its objectives even under unfavorable circumstances.
    • The approval of EGRG3 as a stand-alone operation (following EGRG1-2) was appropriate given the need to be flexible -- yet remain engaged -- in a highly unstable political situation.
    • Finally, the operation was complemented by the Governance and Institutional Development TA Grant (US$13 million) that focused on capacity building in PFM and the cocoa and energy sectors.

    Quality-at-Entry Rating: Satisfactory

    b. Quality of supervision:
    The operation benefitted from continuous supervision from the Abidjan office with regular reviews and one ISR completed in December 2010. The staff resident in the Abidjan office monitored the implementation of the program and the macroeconomic situation. The co-TTL, also located in the Abidjan country office, kept a constant dialogue with the authorities on the EGRG-3 implementation.
    The continuation of Bank support even during the 2010 conflict has been essential in maintaining donor and, to some degree, investor confidence in Côte d’Ivoire’s ability to recover, as noted in the Borrower’s comments to the ICR. There was strong resistance to the publication of some of the audits that revealed episodes of corruption. The Bank did not bow to pressure and all audits were eventually published.

    Quality of Supervision Rating: Satisfactory

    Overall Bank Performance Rating: Satisfactory

    9. Assessment of Borrower Performance:

    a. Government Performance:
    The Government commitment to the bulk of reforms has remained strong along the life of the program, notwithstanding the difficult political situation, particularly with the outbreak of conflict at the end of 2010. The Inter-Ministerial Committee that led the implementation of the program was effective, thanks, inter alia, to the leadership of senior managers at the Ministry of Finance and key sector ministries and the fact that it was kept small and involved senior technical staff from the line ministries.

    The achievement of the HIPC completion point was an important driver for government performance, as it provided substantial political leverage to the reformers in government and the civil service.

    However, as noted in section 6, there were significant shortcomings in energy sector reform that were due to limited commitment on the government side.

    Government Performance Rating: Not Applicable

    b. Implementing Agency Performance:
    According to ICR review guidelines, in DPOs where government and implementing agency cannot be distinguished, a rating is given only for the overall borrower performance.

    Implementing Agency Performance Rating: Not Applicable

    Overall Borrower Performance Rating: Moderately Satisfactory

    10. M&E Design, Implementation, & Utilization:

    a. M&E Design:
    The Monitoring and Evaluation (M&E) system used a simple set of indicators and was based on the structure of the M&E systems used for EGRG-1 and EGRG-2, under the responsibility of the Ministry of Finance. It was more focused on outputs rather than outcomes. For instance, the results framework for the energy sector was weak in part because measures such as EITI publication represented an output not an outcome. Overall, the system was not designed to gauge the impact of reforms supported by EGRG3 on poverty reduction.

    b. M&E Implementation:
    Monitoring of the program was supported by Bank staff from the Abidjan Office worked effectively until the office was evacuated from December 2010 to April 2011. The ICR, however, does not provide adequate information on implementation of the M&E system.

    a. M&E Utilization:
    The ICR does not provide adequate information on how the Government or the Bank utilized M&E.

    M&E Quality Rating: Modest

    11. Other Issues:

    a. Safeguards:
    There were no safeguard issues concerning EGRG-3.

    b. Fiduciary Compliance:
    No issue

    c. Unintended Impacts (positive or negative):
    No issue

    d. Other:

    12. Ratings:

    IEG Review
    Reason for Disagreement/Comments
    Moderately Satisfactory
    Moderately Satisfactory
    Risk to Development Outcome:
    Bank Performance:
    Borrower Performance:
    Moderately Satisfactory
    Limited progress achieved on energy sector reforms. 
    Quality of ICR:
    - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006.
    - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate.

    13. Lessons:
    The main lessons identified in the ICR and by IEG's review include the following:

      • A well-designed, non-programmatic series of stand-alone operations can form the basis for reasonably predictable policy-based support, even in highly uncertain political environments. This lesson is consistent with IEG's findings that adjusting the content of programmatic DPOs in the midst of crises is generally difficult (see, for example, IEG's 2010 study, The World Bank Group's Response to the Global Economic Crisis (p. 108).
      • The choice of the appropriate counterparts in government is an essential element for success, especially if these counterparts are real influences or decision makers.
      • Even in a difficult environment characterized by political instability and weak capacity, progress can be achieved by focusing policy lending on a few actions that are in line with the country’s own priority, politically feasible and technically ready thanks to a sufficient body of knowledge built through analytical work and technical assistance.
    Additionally, IEG noted that operations like EGRG3 are better monitored from the field, particularly where there is a determined government counterpart who needs support. When the Bank’s Task Team Leader (TTL) is not in the field, the use of a locally based co-TTL should be considered.

    14. Assessment Recommended?


    15. Comments on Quality of ICR:

    The ICR provides useful information to assess the program’s performance and identify lessons. It helps understand factors that contributed to EGRG3’s achievements as well as candid comments from the Borrower. The ICR, however, does not provide adequate evaluative information on the impact of the program on its ultimate beneficiaries (e.g., cocoa farmers). While this gap can be explained by the weaknesses in M&E design, the ICR could have gathered the relevant data from other sources.

    a. Quality of ICR Rating: Satisfactory

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