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Implementation Completion Report (ICR) Review - Tn-integration And Competitiveness Dpl

1. Project Data:   
ICR Review Date Posted:
Is this review for a Programmatic Series?
First Project ID:
Project Name:
Tn-integration And Competitiveness Dpl
Project Costs(US $M)
 250  250
L/C Number:
Loan/Credit (US $M)
 250  250
Sector Board:
Economic Policy
Cofinancing (US $M)
 AfDB$250; EU Euro 70  AfDB $250 EU Euro 70
Board Approval Date
Closing Date
06/30/2011 06/30/2011
General industry and trade sector (61%), Other industry (19%), Capital markets (7%), Banking (7%), Micro- and SME finance (6%)
Export development and competitiveness (37% - P) Regulation and competition policy (33% - S) Micro Small and Medium Enterprise support (16% - S) State-owned enterprise restructuring and privatization (7% - S) Tax policy and administration (7%)
Prepared by: Reviewed by: ICR Review Coordinator: Group:
Brian Ames
Michael R. Lav Navin Girishankar IEGPS2

2. Project Objectives and Components:

a. Objectives:

    The Integration and Competitiveness Development Policy Loan (ICL) is a stand-alone, two-tranche development policy loan (DPL) whose overall program development objective (PDO) is to support efforts to deepen Tunisia’s global integration and enhance the capacity of Tunisian firms to exploit the opportunities offered by greater integration. The specific objectives are: (a) reducing trade transactions costs and deepening Tunisia’s global integration; (b) further improving the business climate to encourage private investment and facilitate business operations; and (c) strengthening the financial sector to increase its capacity to finance investment. (ICL PAD, pg. iii, 22).

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:

The ICL covered three policy areas:

1. Trade and Global Integration—Reduce trade transaction costs and deepen global integration: The government’s trade integration program aims to deepen international integration for trade in goods, strengthen the effectiveness of trade facilitation and logistics services, and foster trade in services. The ICL supports the government’s efforts in this area, including reducing the number of tariff bands, adopting a law related to product standards and quality norms, strengthening the National Council of Services and reforming the regulatory framework for the services sector, implementation of a risk assessment import management system, creation of a one-stop trade control procedures office and electronic platform.

2. Business Climate—Further improve the business climate: The government’s investment climate reform program aims to ease business entry and operations, strengthen the application of the competition law, and improve regulation and information on labor. The ICL supports the government’s efforts to reduce the time necessary for businesses to acquire industrial land, maintain an effective and updated electronic Registry of Commerce, streamline the number of start-up activities subject to prior authorization, create a unique identification number for each business, and conduct a regulatory and competition assessment of businesses in new areas within the services sector.

3. Financial Sector—Enhance the capacity of the financial sector to finance investment. The government’s financial sector program has a focus on non-bank finance and aims to improve risk management, facilitate the development of venture capital and regulated mutual funds, strengthen the stock exchange, and develop the micro finance market. The ICL support the government’s efforts to put in place the legal framework for venture capital and mutual funds, reduce non-performing loans and increase their provisioning, increase the market capitalization of the stock market, and improve the performance of the micro-finance market.

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

The ICL was financed by an IBRD loan in the amount of US$250.00 million. It was appraised on January 26, 2009, approved by the Bank Board on March 24, 2009, became effective on August 11, 2009, at which time the first tranche of US$125 million was released. The second tranche of US$125 million was released in December 2010, some five months later than expected, after a waiver was granted regarding the partial completion of the condition related to a decline in, and provisioning of, non-performing loans (see Section 4 below). It was closed on schedule on June 30, 2011. The program supported by the ICL also benefited from financial assistance from the European Union (Euro 70 million) and the African Development Bank ($250 million).

3. Relevance of Objectives & Design:

a. Relevance of Objectives:

The overall and specific objectives of the ICL remain relevant to both the government’s and the Bank’s current strategies for the country. The ICL supported the key strategic elements of Tunisia’s 11th National Development Plan (2007-11) which sought to strengthen growth and ensure that this growth was translated into employment. It was also a cornerstone of the Bank’s FY05-08 Country Assistance Strategy (CAS) and 2007 CAS Progress Report, and was featured in the new Country Partnership Strategy (FY10-13) that was being prepared at that time. The ICL was implemented during a period of political change that occurred in early 2011 which led to a new Government and Constitution. The new government was dissatisfied that the previous system favored the politically well-connected. Whereas under the previous regime, the politically sensitive issues of removing anti-competitive practices and absorbing an increasingly educated work force had to be treated as technical issues, the new environment allowed the opportunity to address them in a more direct and overt manner. Moreover, under the new regime, the previously politically sensitive issues of governance are now being tackled within the context of a successor Governance and Opportunity DPL. While the objectives of the two operations remain the same, the means to the end differ now in light of the opportunities permitted by the new political environment. The relevance of objectives rating was substantial.

b. Relevance of Design:

The design of the ICL was consistent with its PDOs. It drew extensively on earlier analytical work carried out by the Bank (“Tunisia: Global Integration Study”), which allowed staff to address politically sensitive issues such as competition policy and service sector reform in the DPL in a depoliticized, technical manner. The ICL’s focus at the design stage on reducing trade transaction costs, enhancing competitiveness, and developing the financial sector regarding non-bank forms of finance were directly relevant to the government’s overarching objective of strengthening growth and increasing employment. The selection of the six prior actions for the first tranche and the ten conditions for the second tranche was appropriate, judicious, and in line with the good practice principles for conditionality. There was strong “ownership” of the ICL since all the measures were derived directly from the Government’s 11th National Development Plan. Moreover, the measures were selected in a “harmonized” manner with other key development partners involved in supporting and co-financing the reform effort (i.e., the AfDB and the EU). While there were no exogenous factors and/or unintended effects identified in the ICL’s PAD, the ICR rightfully noted that the set-up of donor coordination and joint collaboration on subsequent development operations could be considered as an unintended positive outcome of the design of the program. Importantly, the design of the measures took into account the lesson previously learned by both the government and its partners implementing such reforms. Finally, since the Government had asked the Bank to maintain a focus on trade integration, business climate, and financial sector, the staff was able to limit conditionality to only those measures that were critical for achieving the results.

Notwithstanding these strengths, the design faltered for three reasons:

    • Linkages between performance indicators selected for the operation and the ICL's broader expected outcomes -- i.e., increased global integration and improved competitiveness -- were weak. For instance, one of ten conditions set for disbursement of the second tranche entailed the “enactment of an action plan to reform the regulatory framework of the services sector.” While the action plan was adopted, it was quite weak and did not lead to any of the intended major impacts on the regulatory framework (ICR, p. 6),
    • Some of the identified performance indicators could not be easily measured. For instance, another one of the 10 conditions involved publishing statistics on a declining non-performing loans and higher provisioning rate need to be better specified as an input with intermediate and end-of-program quantitative targets. In any case, the condition was not met and required a Board waiver.
    • There was no separate results framework. Instead, program performance was to be evaluated based on the performance indicators specified in the program matrix, which was also used by the AfDB and EU. While the matrix provided a clear presentation of the program development objectives and the causal link (i.e., actions and conditions) to the expected outcome, it used outcome indicators that were not linked to the ICL’s broader development objectives (i.e., increased global integration, improved competitiveness). Moreover, the two-tranche DPL's two year time horizon was not sufficient to achieve the significant changes envisaged as part of higher order development outcomes. As a result, the staff selected indicators that were linked directly to the policy actions in the program matrix.

The relevance of design was modest.

4. Achievement of Objectives (Efficacy) :

Overall Objective

The Program Matrix/Results Framework did not have a separate set of expected outcomes/outputs nor performance indicators related to the ICL’s overall objective of supporting the Government’s efforts to deepen Tunisia’s global integration and enhance the capacity of Tunisian firms to exploit the opportunities offered by greater integration. Rather, it included expected outcomes/outputs and performance indicators for each of the three specific objectives, implying that performance in achieving the overall objective would be related directly to performance on each of the three specific objectives. As the ICR indicated, it would be unrealistic to expect significant changes in higher order development outcome given the short (two-year) time frame of the ICL. Nonetheless, the Program Matrix/Results Framework could have identified intermediate indicators that would have gauged progress towards these higher order development outcomes. Since no expected outcomes/outputs or intermediate performance indicators were specified, monitored, or measured, efficacy in achieving the overall objective is rated negligible.

Specific Objectives

Specific Objective 1: Reducing Trade Transaction Costs and Deepening Tunisia’s Global Integration. Performance in achieving the five targeted outcomes regarding this objective was mixed, with only one performance indicator target apparently achieved, three indicator targets partially achieved, and one indicator indeterminate. The ICR asserts that the simple mean of MFN import duties at the HS 6 digits level declined as expected from 21.7 percent in 2009 to 17 percent in 2010. The indicator regarding the expected one-third decline in the number of product standards and quality norms that are not identical to international standards was not achieved since the full implementation of the law passed in 2009 allowing for the substitution of up to half of the obligatory norms with voluntary norms will take place in 5 years. Similarly, the target to reduce the share of import transactions subject to technical controls to 90 percent in 2010 from 100 percent in 2008 was not met since the installation of a software system capably of applying this principal to imports has been delayed until 2012. The target regarding the reduction in the mean time of port clearance from 5.6 day in 2009 to 3 days or less in 2010 was only partially achieved, as the current clearance time is 3.55 days. Finally, the target of doubling the number of meetings organized annually by the National Council on Services could not be assessed since this indicator is not systematically measured. Moreover, even if it was measured, this variable is really more of an output than a performance indicator. Although the PAD’s Program Matrix included a sixth expected outcome/indicator (“At least 3 activities proposed in the Inter-Ministerial Council action plan to reform the regulatory framework of the services sector are reflected in official documents), no data or assessment were provided in the ICR and, hence, there is no basis to assess such performance. Efficacy in achieving the first specific objective is rated modest.

Specific Objective 2: Further Improving the Business Climate to Encourage Private Investment and Facilitate Business Operations.

The targeted outcomes were partially achieved. The ICL’s Program Matrix identified five expected outcomes for this objective, of which three had associated quantitative performance indicators and two were actually outputs associated linked to second tranche conditionality. The performance indicator on reducing the average delay for approving an industrial zone outside of areas with an existing urban development plan from 3.5 years in 2008 to 6 months in 2010 was not achieved. It is strange, however, that such a quantitative indicator was selected in the first place given that data on such delays are not systematically collected nor did the ICL’s M&E framework collect such data separately. Moreover, according to the ICR, the authorities indicated that there has been no improvement in this area. The performance indicator on increasing the number of companies with updated data in the Registry of Commerce from 268,330 in 2008 to 300,000 in 2010 appears to have been achieved as data at end-2011 indicated that there were 335,046 companies recorded even though no data were available for end-2010. The indicators regarding the adoption an action plan for a unique common identification number for businesses and the reduction of anti-competitive practices, are actually more of an “input” than “outcomes” and were achieved in the context of meeting the conditions for the second tranche disbursement. Efficacy in achieving the second specific objective is rated modest.

Specific Objective 3: Strengthening the Financial Sector to Increase its Capacity to Finance Investment. The targeted outcomes were achieved. The stock market capitalization increased from 16.3% at end 2008 to 24.1 percent at end-2010, well above the target of “at least 20 percent”. However, it is possible that the increase in stock market capitalization could have occurred for reasons other than an increase in the number of privatizations implemented through the stock market (i.e., new company listings, greater valuation of listed companies, etc.) and there is no way to determine the causality based on available information. Moreover, performance indicators regarding a decline in credit deposit margins from the 2007 baseline level and an increase in the volume of project investment by venture capital firms from its baseline level in 2009 were specified the ICL’s Program Matrix, but were not included or evaluated in the ICR for some reason. As noted in section 2.d (above), the second tranche condition regarding non-performing loans and loan loss provisioning was partially me and required a waiver. Also, it is unfortunate that quantifiable performance indicators regarding the development of venture capital funds, regulated mutual funds, and/or micro-finance institutions were not included since these were the novel aspects of ICL’s support for financial sector development. Efficacy in achieving the third specific objective is rated modest.

Economic growth was strong (6.3 percent) owing to sound macroeconomic management and continued structural reform. But growth was insufficient to reduce unemployment which stood at 14% of the labor force due to demographic pressures arising from the rapid increase in the labor supply. Inflation accelerated during the first quarter of 2008, reaching a peak of 6 percent (year-on-year) before moderating by year end. The main drivers were higher food and energy prices, rising liquidity due to higher foreign direct investment inflows, and a slight depreciation in the exchange rate (by 2.8 percent). The fiscal deficit (excluding grants and privatization receipts) remained at 3 percent of GDP in 2007 as rising revenues offset the sharp increase in expenditures on food and energy subsidies. The current account, has continued to weaken (rising to 2.6 percent of GDP in 2007 from 2 percent in 2006), although foreign direct investment inflows remained significant and allowed an increase in foreign reserves to the equivalent of 4.5 months of imports of goods and services.

5. Efficiency (not applicable to DPLs):

6. Outcome:

The “moderately unsatisfactory” rating reflects the “substantial” relevance of the programs’ objectives, the “modest” relevance of the programs’ design, and the mainly “modest” achievements of the overall and specific program objectives. Although there were implementation delays regarding reducing trade transaction costs, there were nevertheless modest advances in key areas such as port clearance time and reductions in import duties. There were also clear improvements in the business climate and private investment environment as key elements of doing business improved, including reductions in the time required for business registration, creation of a unique business identification number, and reductions in anti-competitive practices. Finally, there were noticeable improvements in the health of the financial sector with regard to facilitating private investment from the domestic stock market and from a relatively more healthy banking system, although progress was less clear regarding the development of venture capital funds and micro-finance institutions. However, taken together, these improvements are insufficient, measured against the shortfalls outlined in section 4, to merit an outcome rating of "moderately satisfactory." . Therefore, the outcome rating is "moderately unsatisfactory."

a. Outcome Rating: Moderately Unsatisfactory

7. Rationale for Risk to Development Outcome Rating:

The risk that the development outcomes overall will not be maintained going forward is moderate. There are two main risks: (a) the impact of continued economic slowdown in Europe and (b) the chance of reversal of policies by the new government. The global financial crisis, particularly with regard to Europe, could have further negative economic implications for Tunisia and place pressure on the new Government to take protective measures. There is also the possibility that the change of Ministers following the installation of the new government at end-December 2011 could be problematic. Although it is too early to tell, there have not been any policy reversals to date and the risk to development outcomes is mitigated by the fact that the government technicians who worked on the ICL remain in place and are continuing to implement the previous policy. Moreover, the development objectives of the ICL remain relevant to addressing the civil dissatisfaction with the structure and performance of the economic system since they aim at increase the economy’s capacity to absorb an increasingly educated work force by reducing anti-competitive practices. A follow on operation (ICL II) had originally been envisioned which would deepen the reforms pursued under ICL. However, the new Government indicated an interest in a new operation which would focus more directly on transparency and accountability and the Governance and Opportunity (GO) DPL was subsequently approved by the Bank’s Board in June 2011. In many ways, the GO will allow the authorities to address politically sensitive governance issues directly versus indirectly as had been the case under the ICL. Moreover, it is likely that the authorities will return to the agenda planned for the ICL II as soon as the political and constitutional circumstances allow and likely from a stronger governance foundation.

a. Risk to Development Outcome Rating: Moderate

8. Assessment of Bank Performance:

a. Quality at entry:

The Bank’s performance regarding quality at entry was moderately satisfactory. As the ICR points out, there are two positive factors. The first is with regard to the critical role that earlier Bank analytical work had on program design for both this and the subsequent DPL. The second is regarding the catalytic role that the DPL played in generating additional donor assistance. On the down side, as the ICR also rightfully notes, there were severe limitation to the M&E framework at entry which could have been addressed by the Bank at the design stage. Even though it is often more difficult to observe results in DPLs, this simply reinforces the need for good indicators of intermediate outcomes, and for staff to systematically include and assess these indicators in such operations. This was not the case in the ICL.

Quality-at-Entry Rating: Moderately Satisfactory

b. Quality of supervision:

The quality of supervision was moderately satisfactory as supervision focused principally on meeting disbursement conditions. Supervision was therefore able to catch problems regarding the condition on provisioning early on. In this regard, the presence of the World Bank TTL in the field is particularly noteworthy. However, there appears to have been no systematic attempt to assess the ICL’s performance indicators during or after the supervision mission. It can be argued that this is understandable in a multi-tranche DPLs such as the ICL. But, it does not reduce the importance or need for reliable reporting on program implementation, particularly with regard to intermediate performance indicators linked to the program development objectives.

Quality of Supervision Rating: Moderately Satisfactory

Overall Bank Performance Rating: Moderately Satisfactory

9. Assessment of Borrower Performance:

a. Government Performance:

There was strong government ownership of the ICL as both the policy measures and the monitoring framework were derived directly from the Government’s 11th National Development Plan. Moreover, the core technical counterparts in the key ministries remained unchanged after the Revolution, which facilitated the continued implementation of the reform agenda following the installation of the new Government. At the same time, the Government faced serious challenges regarding inter-ministerial coordination and cooperation which impeded program implementation. It also faces similar challenges regarding its monitoring and evaluation system, whose strengthening is being supported by donors. Yet, despite these challenges, the Government was able to deliver on its commitments and implement its program in a satisfactory manner, although it will need to strengthen its M&E system going forward.

Government Performance Rating: Moderately Satisfactory

b. Implementing Agency Performance:

The implementing agency (the Ministry of Planning and International Cooperation) is indistinguishable from the Government and, hence is not rated.

Implementing Agency Performance Rating: Not Applicable

Overall Borrower Performance Rating: Moderately Satisfactory

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

a. M&E Design:

The PAD indicated that the monitoring and evaluation of the program and its expected results would be fully embedded in the M&E framework of the Government’s National Development Plan, with the Bank and other development partners providing support to the Government to strengthen M&E, improve data quality and management, and enhance capacity for using development outcomes to inform policy making. The focus was rightfully placed on using and strengthening existing local institutions rather than creating stand-alone, one-off systems. It is also commendable that AfDB, EU, and Bank staff coordinated their support using a common framework and an agreed set of performance indicators that were drawn from those in the Government’s program. As noted in the discussion on relevance of design, however, the main problem is with regard to the choice of expected outcomes and performance indicators in terms of being meaningful, relevant, quantifiable, and monitorable. Two second tranche conditions for disbursement and several of the performance indicators were more outputs than outcomes and a few could not be systematically measured. In addition, there could have been better coverage and linkages between the program development objectives and the performance indicators for both the overall and specific objectives. Most importantly, the ICL could have benefited from having a separate results framework which would have included baseline value, original targets and actual values for each of the performance indicators to be monitored.

b. M&E Implementation:

M&E of expected development outcomes was not thoroughly carried out, as Bank supervision was focused principally on monitoring the completion of the second tranche conditions as evidenced in the mission’s aide memoires and ISR. Moreover, as there was no formal mid-term review, there was no opportunity to address and correct for any of these shortcomings. It is also not clear why out of the 14 performance indicators set out in the PAD, the ICR reports and evaluates only 8 of them. In sum, although implementation was severely constrained by the critical problems in the M&E design, Bank supervision should have focused on monitoring the development outcomes from whatever information was available for whatever indicators that could in fact be monitored. The existence of a Results Framework would have facilitated M&E Implementation in this regard.

a. M&E Utilization:

There is no discussion in the ICR on M&E Utilization. It would have been useful if the ICR had flagged the importance of learning from past mistakes regarding M&E design and systems as it is critical that the lessons learned in the design of the ICL regarding expected outcomes and performance indicators be taken into account in the design of any subsequent DPLs.

M&E Quality Rating: Negligible

11. Other Issues:

a. Safeguards:

The ICR did not discuss safeguards. However, the PAD indicated that the program supported by the proposed loan was not likely to have any significant direct effects on the environment and natural resources and safeguard policies do not apply to this operation.

b. Fiduciary Compliance:

The ICR did not mention any outstanding fiduciary issues nor do there appear to be any apparent issues regarding fiduciary compliance. The program document indicated that the fiduciary framework is basically sound and provides strong control environment and that the CPIA assessment continue to point to a low fiduciary risk.

c. Unintended Impacts (positive or negative):

The ICR indicates that the outcome of great donor coordination and collaboration could serve as an unintended positive outcome of the program which ultimately allowed the Government to leverage additional resources to finance its development program.

d. Other:

12. Ratings:

IEG Review
Reason for Disagreement/Comments
Moderately Satisfactory
Moderately Unsatisfactory
Shortfalls in achievement of objectives discussed in Section 4 require a rating of "Moderately Unsatisfactory". 
Risk to Development Outcome:
Bank Performance:
Moderately Satisfactory
Bank performance with regard to both quality at entry and supervision failed to take into account the measurement of expected outcomes and importance of a effective M&E system, which was not in place. 
Borrower Performance:
Moderately Satisfactory
The problems experienced regarding inter-ministerial coordination and cooperation impeded program implementation and monitoring. 
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 four main lessons learned from the implementation of the ICL are:

1. The importance of grounding DPLs in solid analytical work. The design of the ICL benefited from the Bank’s analytical work on the “Tunisia: Global integration Study”, as did that of the successor program. As a result, an assessment of many of the key problems and possible solutions were available to Bank and Government staff, which greatly facilitated the design and impact of the ICL. Other DPLs could usefully follow and benefit from this practice.

2. The value of locating the TTL in the field. The TTL for the ICL was based in Tunis. This greatly facilitated interactions with the authorities and other key development partners in the design, implementation, and monitoring of the program. Observers believe that this also contributed to the ability of staff to respond quickly and flexible as problems arise. Resources permitting, TTLs for large projects should be based in the field.

3. The need to factor political tensions more explicitly into risk assessments. Although no one could have predicted the revolution that occurred mid-way through the project, the risk of such a possibility should have been included in previous assessment. Fortunately, the recent changes in Tunisia did not undermine the implementation of the ICL and are in fact appear to have opened up the development agenda to issues that were previously politically taboo. Nevertheless, risk assessments should include socio-political-economic evaluations on key matters that could affect program implementation, particularly in the case of DPOs which are grounded in the government’s program.

4. The importance of putting in place an effective monitoring system up front. A well thought out and designed M&E system is critical to assessing the development impact of Bank programs and projects. If the designs and systems are not properly in place up front, there is little that can be done at the M&E Implementation stage to correct for it midstream, especially in a stand-alone, two-tranche DPL. While it is true that it is more difficult to measure long-term results in DPLs, it is nevertheless critical to include good indicators of intermediate outcomes so that one can know if the DPL is likely to achieve its development objectives. The Bank should redouble its efforts to ensure that reasonable appropriate systems are put in place prior to Board approval of operations.

14. Assessment Recommended?


15. Comments on Quality of ICR:

The ICR was comprehensive and its tone candid. It underscored the program’s strong degree of country ownership (even in the midst of Revolution), the relevance of the program to the Government’s development objectives, and the key measures that were to be the first in a series of reforms that would be picked up in successor programs. At the same time, it pointed out in a frank manner the deficiencies in the program’s M&E system design, as well as the Bank’s focus on implementation of conditionality rather than on monitoring expected outcomes. The ICR could have focused more on assessing the expected development outcomes and performance on key intermediate indicators (even if these indicators were not formally part of the Program Matrix/Results Framework).

a. Quality of ICR Rating: Satisfactory

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