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Implementation Completion Report (ICR) Review - Sn-priv Inv Promotion Sil (fy03)


  
1. Project Data:   
ICR Review Date Posted:
04/12/2013   
Country:
Senegal
PROJ ID:
P051609
Appraisal
Actual
Project Name:
Sn-priv Inv Promotion Sil (fy03)
Project Costs(US $M)
 49  44.4
L/C Number:
C3762
Loan/Credit (US $M)
 46  44.4
Sector Board:
Cofinancing (US $M)
 3  0
Cofinanciers:
Board Approval Date
  05/20/2003
 
 
Closing Date
12/31/2008 12/31/2011
Sector(s):
General industry and trade sector (43%), General public administration sector (25%), Telecommunications (15%), Postal services (10%), Compulsory pension and unemployment insurance (7%)
Theme(s):
Export development and competitiveness (29% - P) Regulation and competition policy (29% - P) Personal and property rights (14% - S) Legal institutions for a market economy (14% - S) Tax policy and administration (14% - S)
         
Prepared by: Reviewed by: ICR Review Coordinator: Group:
Melvin P. Vaz
Stefano Migliorisi Ismail Arslan IEGPS2

2. Project Objectives and Components:

a. Objectives:


    According to the Development Credit Agreement (page 11), the objective was "to assist the Borrower in creating conditions to stimulate a sustained increase in private sector investment in the Borrower's economy through an improved investment climate, the fostering of a greater participation of the private sector in economic activities, and related policy and sector reforms."

    According to the Project Appraisal Document (page 2), "to help create the conditions to stimulate a sustained increase in private investment in Senegal through an improved investment climate, greater private participation in economic activities, and policy and sector reform. The project is thus expected to make important incremental contributions towards attaining 8 percent GDP growth called for in the Government's poverty alleviation program."

    The main difference between the objective of the project as stated in the Project Appraisal Document and Development Credit Agreement is that, in addition to the statement of objective in the Development Credit Agreement, the Project Appraisal Document makes a reference to an 8 percent GDP growth. Therefore, this review assesses the original objective of the project as stated in the Project Appraisal Document.

    The project had undergone a Level I restructuring on July, 2010 which involved dropping the reference to the 8 percent GDP growth from the PDO, and revision and simplifications to the results framework by significantly reducing the number of key performance indicators. The statement of the objective in the Restructuring Paper (page 2) and revised Development Credit Agreement (page 11) were similar.

    "To create the conditions to increase private investment. This will be accomplished through an improved investment climate, greater private participation in economic activities, and policy and sector reforms." (Restructuring Paper, page 2)

b. Were the project objectives/key associated outcome targets revised during implementation?
Yes

If yes, did the Board approve the revised objectives/key associated outcome targets? Yes

Date of Board Approval: 07/14/2010

c. Components:

Original Components:
-----------------------------

1. Improving the Investment Climate (Planned: US$ 7 million; Actual: US$ 5.45 million)

The component would improve the investment environment by: strengthening legal and judicial reforms; improvements in the business environment and in trade facilitation;enhancing the capacity of the Government to regulate infrastructure and resolve post-privatization issues; and reactivating the public/private consultative process.

2. Facilitating Private Participation and Enhancing Competitiveness (Planned: US$ 11.5 million; Actual: US$ 12.96 million)

The component would include the following four sub-components:

    • Investment facilitation support to help APIX (an investment promotion agency operating on the basis of international best practice) reach its strategic objectives by financing: APIX's business plan to focus on results; preparation of studies to help determine the viability of infrastructure projects identified as priorities by government, and which would be used to encourage private interest in those projects; and general economic and specific training for staff of embassies and the Ministry of Foreign Affairs;
    • Matching-grant facility to improve private sector competitiveness by enabling enterprises to enhance their know-how through access to business development services on a 50:50 cost-sharing basis;
    • capacity building to help ensure that the institutions play their facilitation role under the matching-grant component, and to help develop sound business plans to enhance their sustainability; and
    • support to divestiture and oversight of public entities.

3. Stimulating Sector Investment and Implementing Policy Reforms (Planned: US$ 21.8 million; Actual: US$ 16.97 million)

This component would promote sub-sector reforms that would: directly stimulate growth in areas where Senegal benefits from untapped potential; improve the linkages that affect the ability of the private sector to operate effectively and competitively; and free-up public and private resources which would be available to fund pro-poor private initiatives and indirectly finance private investments. These objectives would be achieved through the implementation of the following activities: pension reform; telecommunication reform and development of the information technology sector; postal reforms covering both post and financial services; support to the development of tourism; promotion of the music industry; and assistance to edible oil sector reform.

4. Supporting Implementation and Capacity Building (Planned: US$ 5.7 million; Actual: US$ 9.06 million)

The Project Management Unit would be housed within APIX, but accountable to the project steering committee. It would oversee the financial management, procurement, monitoring and evaluation, audit, undertaking the impact assessment of various components, preparing quarterly progress reports, facilitating the mid-term review and orderly closing of the project, a public information and communication campaign, strengthening UPE (a think tank in the Ministry of Finance), and implementation and dissemination of the new procurement code. The management of the matching grant would be outsourced to a team of local and international consultants.

Revised Components:
-----------------------------

The level 1 restructuring approved by the Bank's Management on July, 2010 resulted in the following changes in the project's components:

1. Improving the Investment Climate (Planned: US$ 10.2 million; Actual: US$ 5.45 million)

The project restructuring proposed to increase the importance of improving the investment climate, while focusing on the most needed reforms in light of changes noted since the project's effectiveness. The assistance would foster the improvement of time and cost related to four aspects: (a) general entry and operation requirements; (b) import and export procedures for trade; (c) construction licenses procedures; and (d) tax administration and payment. The sub-component to provide assistance to upgrade technology infrastructure as well as to facilitate the movement of passengers and baggage would be dropped because the government was building a new international airport in Dakar with private investors. Also, the sub-component on infrastructure regulation which financed capacity building for the telecommunication regulatory agency would be dropped (refer to information below under component 3 - Stimulating Sector Investment and Implementing Policy Reforms).

2. Facilitating Private Participation and Enhancing Competitiveness
(Planned: US$ 13.8 million Planned; Actual: US$ 12.96 million)

The investment promotion assistance provided by this project would be complemented by a well- performing technical learning for SMEs through a matching grant to provide a broad range of support to SMEs. The matching grant would focus on the following five strategic sectors: agriculture and agro- industry; information technology and telecommunication; tourism and cultural industry; textiles; and fisheries and aquaculture. This component would also enable financing the technical assistance and providing partial guarantee for a portfolio of loans to participating commercial banks that meet the eligibility criteria specified in the Risk-Sharing Framework Agreement. The sub-component to support divestiture and oversight of public entities would be discontinued. Also, the support to the Ministry of Foreign Affairs would be discontinued due to lack of demand.

3. Stimulating Sector Investment and Implementing Policy Reforms
(Planned: US$ 17.0 million Planned; Actual: US$ 16.97 million)

The number of sector policy reforms would be reduced from 6 to 3 by ending project assistance to: telecommunications reform and the development of Information Technology sector; postal reforms; and edible oil sector reform.

4. Supporting Implementation and Capacity Building
(Planned: US$ 10.3 million Planned; Actual: US$ 9.06 million)

It would include: formally moving the project implementation unit to APIX; revamping the project steering committee; and hiring of a dedicated team of high caliber professionals by APIX to carry out functions such as, project coordination, procurement, and financial management.

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

Project Cost: The total estimated cost at appraisal was US$ 56.69 million. The actual cost at closing was US$46.04 million. Total cancellation at closing was US$ 6.8 million. The level 1 restructuring approved by the Bank Management on July 2010 resulted in the following changes:

Financing: Of the total project cost, US$ 1.6 million was financed by the government (US$ 7.7 million at appraisal), US$ 44.44 million from the IDA credit (US$ 46 million at appraisal) and US$ 0 from contributions to the matching grant scheme by local firms (US$ 3 million at appraisal).

Dates: The project was appraised on February 02, 2003, approved on May 20, 2003 and the credit became effective on February 26, 2004. The original closing date (December 31, 2008) was extended twice: first, by 19 months (August 2010) to make up for the lost time due to suspension of disbursements between July 03, 2008 and December 15,2008; and second, by 16 months (December 2011) due to project restructuring.


3. Relevance of Objectives & Design:

a. Relevance of Objectives:

Country Conditions: Performance of the private sector in Senegal was uneven due to the decrease in private investment from 17 percent of GDP in 2000 to 15 percent in 2004 and the relative stagnation of exports at around 27 percent of GDP. Streamlining bureaucracy and improving transparency were key challenges that were illustrated by Senegal's poor ranking in Doing Business Indicators and the 2005 World Bank's Report on The Observance of Standards and Codes on Auditing and Accounting Practice (Country Assistance Strategy for Senegal, FY07-10, page 13).

Borrower Strategy: The core growth objective of the 2006 Poverty Reduction Strategy Paper for Senegal for 2006-10 was to raise the economic growth to about 7-8 percent per year, the level estimated to be needed to bring poverty incidence to 30 percent by 2015, in line with the targets set out in the Millennium Development Goals (April, 2011, PRSC V, page 10). One of the key objectives of the government's Accelerated Growth Strategy which was finalized in January, 2007 was -- "improving the overall investment climate in the economy by focusing on a series of cross-cutting issues (including in the areas of justice, taxes, infrastructure, and administrative barriers)" (Country Assistance Strategy for Segenal, FY07-10, page 13 and 17).

Bank Strategy: Promoting a competitive investment climate and facilitating access to financial resources by small and medium enterprises were some of the outcomes under the accelerated growth/wealth creation pillar of the Country Assistance Strategy (CAS) for Senegal (FY07-10). Also, strengthening GDP growth to an annual rate of 7 percent was perceived by Senegal as one of its prerequisites for reaching MDGs (CAS FY07-10, page vi). According to the FY07-10 CAS Progress Report (May, 2009) "Given the impact of the crisis on growth and poverty reduction, the key challenges identified in the CAS -- ... and enhancing private sector development -- continue to be in line with the government's development agenda and are still relevant today".

Although the original objective (to help create the conditions to stimulate a sustained increase in private investment ...attaining 8 percent GDP growth called for in the Government's poverty alleviation program) was linked to both the borrower and bank strategies, the statement was quite broad because it included reference to contributions towards attaining 8 percent GDP growth. The relevance of original objectives is rated Substantial.

The project was restructured on July, 2010 and PDO was revised to be more realistic because Senegal was not going to achieve the 8 percent GDP growth (refer to Restructuring Paper, page 3). The main difference between the original and revised objective was the reference to contributions towards attaining 8 percent GDP growth in the original objective. The revised objective (To create the conditions to increase private investment. This will be accomplished through an improved investment climate, greater private participation in economic activities, and policy and sector reforms) was linked to both the borrower and bank strategies. However, the project should have been restructured much before July, 2010 because the annual economic growth rate averaged only 3.3 percent during the period 2006-11 due to exogenous shocks (such as, food and fuel global prices, global financial and economic crisis, energy crisis and drought crisis in Sahel). The relevance of revised objectives is rated Substantial.

b. Relevance of Design:

Before restructuring: Modest

    • The reference to contributions towards attaining 8 percent GDP growth in the original objective was over ambitious due to problems attributing the results to the contributions made by this project.
    • The sub-objective (policy and sector reforms) within the statement of project development objective was too broad and the component (Stimulating Sector Investment and Implementing Policy Reforms) related to this sub-objective was overly complex because it involved implementation of reforms in multiple sectors (such as, pension, telecommunication and information and technology, postal, tourism, music industry, and edible oil sector) within an original time frame of only 5 years and 7 months.
    • Although, each of the project components (Improving the Investment Climate, Facilitating Private Participation and Enhancing Competitiveness, and Stimulating Sector Investment and Implementing Policy Reforms) was closely linked to the sub-objectives (improved investment climate, greater private participation in economic activities, and policy and sector reform), the extent to which the project components and sub-objectives contributed to the attainment of the 8 percent GDP growth was unclear in the results framework i.e., there was no direct linkage between the project components and sub-objectives to contributions towards GDP growth. Also, both the PAD and ICR did not illustrate the causal chain between an improved investment climate, increased Private Investment, and accelerated GDP Growth of 8 percent.
    • Some activities such as support to monitor the residual government participation in State Owned Enterprises (SOEs) and support to the music industry were too generic and difficult to link to the objective of the project (ICR page 12).
    • There was no apparent linkage between the removal of import taxes for edible oil and an increase in private investment because removal of this tax seemed to be more of a pro-poor initiative than an activity aimed at increasing private investment (ICR page 12).

After restructuring: Modest
    • Except for dropping the reference to attaining an 8 percent economic growth, the statement of the revised objective remained unchanged.
    • The project objective remained too broad despite dropping several activities from each of the three project components during restructuring.
    • There were problems in attributing the new PDO outcomes, such as job creation, to the contributions made by this project.


4. Achievement of Objectives (Efficacy) :

The original objective was to help create the conditions to stimulate a sustained increase in private investment in Senegal through an improved investment climate, greater private participation in economic activities, and policy and sector reform. The project was thus expected to make important incremental contributions towards attaining the 8 percent GDP growth called for in the Government's poverty alleviation program.

Improved Investment Climate:

The extent to which improvements in the investment climate have been achieved will be evaluated by first identifying the areas of greatest improvement in the Business Environment from the 2013 Doing Business report for Senegal and then by assessing the contributions made by this project in these areas. According to the 2013 Doing Business Report for Senegal (page 9), the following were the four areas of greatest improvements in the Business Environment during the period 2005 to 2012:
    • Starting a Business. The project helped in establishing within APIX a one-stop-shop for business registration and licensing to facilitate the start up of a business within 48 hours. During the life of the project the time taken to register a firm declined from 67 days in 2002 to 5 days in 2011.
    • Getting Credit. Although the activities related to the implementation of matching grants and partial credit guarantees were given special attention during project restructuring, both interventions were abandoned prior to project closing. The development of the business plans to enhance the sustainability of institutions (ADEPME, SODIDA, UNAQUA, etc. who are intermediaries for the matching grant schemes) was started but not completed at project closing.
    • Trading Across Borders. The center for arbitration, a mechanism for appeals and resolution of disputes with customs, was operational and effective in resolving conflict. However, Customs was not converging towards ISO 9000 certification and the target for reducing the time to clear goods for export/import was not achieved (i.e., it took an average of 14 days to clear goods through customs, significantly above the target of 8 days).
    • Resolving Insolvency. Resolving Insolvency is defined as the time and cost required to resolve bankruptcies. It is used to identify weaknesses in existing bankruptcy laws and the main procedural and administrative bottlenecks in the bankruptcy process. The project did not contribute towards resolving insolvency.
    • On balance efficacy for this objective is rated modest.

Increased Private Investment:
    • APIX, with the project's support, became one of the best investment promotion agencies in Africa (according to 2009 Global Investment Promotion Benchmarking report commissioned by the Foreign Investment Advisory Service) and plays a crucial role in leading investment climate reform in Senegal.The level of private investment, at US$ 3.2 billion, slightly exceeded its target of US$3 billion and there is evidence from the World Development Indicators that the share of GDP that is used by the private sector investment increased during the life of the project from 15 percent in 2003 to 19 percent in 2011. However, post-restructuring improvements to the investment climate were not the main driver of new investments due to slow progress made in implementing investment climate reforms during that period. Moreover, this review agrees with the ICR (page 16) that it is difficult to isolate the effect of incentives provided to firms from the real impact of overall improvements to the business environment supported by the project, giving rise to questions of attribution.
    • Based on the cumulative data collected by APIX during the period 2004 to 2010, 772 new firms were established and commenced operations utilizing investment climate incentives, significantly exceeding the target of 100 new firms. Also, 155,000 directly attributable new jobs were created by the end of the project, exceeding the target of 130,000. The attainment of these indicators was largely attributable to pre-restructuring activities.
    • According to the ICR (page 28), the infrastructure studies to determine the viability of infrastructure projects identified as priorities by Government and to encourage private interest in those projects have been carried out.
    • According to the ICR (page 28), the Presidential Investment Climate Council (whose objective was to ensure that an effective private-public consultative process remains in place) was in place and organized once a year while technical discussions were ongoing.
    • The matching grant scheme was ineffective at developing skills and was not sustainable due to poor implementation of the mechanism. Moreover, it dit not contribute to increasing manufacturing output or job creation (ICR, page 28).
    • On balance efficacy for this objective is rated Substantial.
    Contributions to Senegal's Growth target of 8 percent:

    According to the latest Article IV Consultation Report from the IMF (December 9, 2012, p.4), exogenous shocks (i.e., food and fuel global prices, global financial and economic crisis, and more recently, the electricity sector crisis and drought in the Sahel) were partly responsible for the decreased growth rate to an average of 3.3 percent in 2006–2011 from a relatively strong average growth rate of 4.5 percent in 1995–2005.

    Although Private Sector Investment for Senegal increased from 15 percent in 2003 to 19 percent in 2011, average GDP growth with and without Private Sector Investment remained almost at the same level of 4.2 percent (below table). Even though the project contributed to the increase in Private Sector Investment through APIX, it is difficult to attribute the increased Private Sector Investment to the contributions made by this project due to the reasons explained under the Increased Private Investment paragraph.
    Efficacy for this objective is rated Modest.

    Both the original and revised objectives were the same except for the reference to contributions towards Senegal's GDP growth. Slow progress made in implementing investment climate reforms after restructuring suggests negligible efficacy duting this period.

5. Efficiency:


The cost-benefit analysis presented in the PAD (page 64) is no longer applicable because the assumption of "a minimum of 400 firms are expected to use the matching grant scheme with an average amount of $7,500 per beneficiary" used in the model is no longer valid because the interventions related to the matching grant scheme and partial credit guarantee were cancelled prior to project closing. This review agrees with the ICR (page 17) that the model only considered the costs incurred by APIX and claims full responsibility for jobs generated, while overlooking the cost of investors.
Despite two extensions of the closing date, about 20 percent of original commitments were cancelled. The cancelation of the matching grant undermined expected gains in private sector productivity, and the cancelation of the partial credit guarantee led to a loss of investment opportunities (ICR page 17).

Efficiency rating is Modest.

a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return at appraisal and the re-estimated value at evaluation:


Rate Available?
Point Value
Coverage/Scope*
Appraisal:
Yes
19.8%
100%
ICR estimate:
No
%
%

* Refers to percent of total project cost for which ERR/FRR was calculated

6. Outcome:

The project contributed to some improvements in Senegal's Business Environment. The achievements under Starting a Business can be attributed to the project because it helped in establishing within APIX a one-stop-shop for business registration and licensing to facilitate the start up of a business. Also, the achievements under Trading across Borders can be attributed to some extent because of the establishment of the center for arbitration for appeals and resolution of disputes with customs. However, achievements under Getting Credit cannot be attributed to the project because matching grants and partial credit guarantees were abandoned prior to project closing. Although, private sector investment in Senegal increased during the life of the project, there were problems attributing the results to the project because of difficultly in isolating the effect of incentives provided to firms from the real impact of overall improvements to the business environment supported by the project. Analysis shows that increased private sector investment did not have an impact on Senegal's GDP growth.

Original objective: Based on Substantial relevance of objectives, Modest relevance of design, Modest achievement of the development objective, and Modest efficiency, the outcome based on the original project objectives is rated Moderately Unsatisfactory.

Revised objectives: Based on Substantial relevance of objectives, Modest relevance of design, Negligible achievement of the development objective and Modest efficiency, the outcome based on the revised project objectives is rated Unsatisfactory.

The overall project outcome is based on the average of these ratings, weighted by the amount of the total loan disbursed before (94%) and after (6%) restructuring, or Moderately Unsatisfactory.

a. Outcome Rating: Moderately Unsatisfactory

7. Rationale for Risk to Development Outcome Rating:

The regulatory agency for telecom and postal services was self-sufficient and project closing would not jeopardize its existence. However, Public Procurement Regulatory Agency was operational, but not financially self sufficient at project closing.

Sustainability of the reforms to the administration of intellectual property rights is dependent on the implementation and approval of associated decrees, and additional technical and financial assistance would be required to ensure that decrees are designed and adopted.

At the time of project closing, La Poste required financing to maintain or upgrade its V-SAT system. Also, the failure of government to recapitalize La Poste would mean that the institution has not achieved financial sustainability despite major improvements to its operations and commercial performance (ICR, page 11).

Establishment of the “Société de gestion collective” (SONACOS) as a public corporation to manage royalty fees in the music industry was not operationalized at project closing. Further consultation with stakeholders (musicians, producers, etc.) would be needed before a general assembly can be convened for the adoption of the corporation charter and governance structure (ICR, page 11).

a. Risk to Development Outcome Rating: Significant

8. Assessment of Bank Performance:

a. Quality at entry:

The scope of the project was too broad involving implementation of reforms in multiple sectors in order to achieve an increase in private sector investment and attain an overly ambitious GDP growth rate of 8 percent. During appraisal, the task team proposed to split the project into two separate projects in order to simplify the project. However, this approach was not chosen because of the risk that the synergy would be lost, especially if the processing of one of the projects experienced delays.

  • Despite lessons from the previous Bank interventions on judicial reform, telecoms, pension, and the business environment, the project's design did not sufficiently acknowledge the weak institutional and implementation capacity of primary stakeholders, and time required to implement social sector reforms such as, pension parametric reforms and introduction of pension funds (ICR page 6 & 7).
  • The PAD (page 34) did address some of the important risks (such as, complex design hinders implementation, PIU is not capable of managing projects, and counterpart funds are not available.) However, they were insufficiently assessed and rated "Modest". The above risks materialized during implementation delays and significantly impacted project outcomes (ICR page 6).
  • There was a lack of consensus between the task team and beneficiaries on project outcomes. For instance, at appraisal, technical working groups from the Ministry of Culture did not agree with the content of proposed project activities, and felt disenfranchised by the proposed implementation scheme, which they felt granted too much responsibility to industry private actors (ICR page 7).
  • The initial composition of the steering committee was unbalanced and lacked the necessary authority required for overall guidance of project implementation (ICR page 20).

Quality-at-Entry Rating: Unsatisfactory

b. Quality of supervision:

There were 4 Task Team Leaders (TTLs) during the life of the project, with the last two TTLs located in the field. There was a significant delay in appointing a new TTL after the departure of the first TTL. Supervision was conducted regularly with about two missions per year (ICR page 20 & 21).

  • There was a lack of candor in reporting the Implementation Progress and Development Objective ratings in the Implementation Status Report, prior to the finalization of the MTR. For instance, Implementation Progress and Development Objective ratings were consistently rated satisfactory between 2004 and 2006, despite slow disbursement (ICR page 21).
  • The presence of a dedicated TTL in Senegal positively impacted the quality of the supervision and more intimate knowledge of project implementation resulted in a subsequent downgrading of the project as a consequence of violations of the credit agreement identified by the task team (ICR page 21).
  • Project restructuring was delayed with proposals finalized only in July 2010, 18 months after lifting the disbursement suspension. This was mainly due to: slow progress by the task team in finalizing the restructuring package; deterioration of the relationship between the then TTL and APIX, after lifting the disbursement suspension; and Bank management did not set a clear timeline for the team to complete the restructuring of the project (ICR page 21 & 22).
  • Inflexibility of the Bank in considering the borrower’s request to use local expertise for the management of the matching grant contributed to the dropping of the scheme. Overhauling the manual of procedures in line with international standards could have been sufficient to ensure adequate management of the matching grant by local expertise, as was demonstrated in Burkina Faso and Cote d’Ivoire (ICR page 22).
  • According to the TTL (at project closing), there was a lack of coordination between the TTL (at the time of restructuring) and the government on the matching grant scheme because most of the coordination was between the TTL and the PIU. In the case of the partial credit guarantees, it was formally added to the project only at the time of project restructuring. Therefore, there was not enough time to implement this activity towards the end of the project due to: prolonged discussions between IFC and the Financial Institution (Awtijeri Bank) which lasted for 2 years; IFC not agreeing with the terms of contract; Awtijeri Bank not responding quickly; and at times Awtijeri Bank was difficult (such as, it wanted most of the documents in French and not in English).

Quality of Supervision Rating: Moderately Unsatisfactory

Overall Bank Performance Rating: Unsatisfactory

9. Assessment of Borrower Performance:

a. Government Performance:

The government demonstrated ownership of the project and commitment to the proposed reform agenda through the course of project preparation and initial commencement of implementation. However, the government was substantively distracted due to unforeseen domestic shocks (such as, flooding in the capital city suburbs and electricity crisis) thereby, shifting the interventions supported by the project (investment climate, intellectual property rights) to the bottom of the government’s reform agenda (ICR page 22).

  • Some early delays are attributable to the government's failure to fulfill effectiveness and disbursement conditions in a timely manner. Following the Mid Term Review, the government's opposition to the restructuring of the Steering Committee further delayed the reorganization of implementation arrangements (ICR page 22).
  • The government’s failure to provide counterpart funding for restructuring of postal financial services and to implement actions to finalize the process of reforms on pension schemes, negatively impacted the achievement of project objectives (ICR page 22).
  • Following project restructuring, the government failed to ensure that APIX hire a dedicated project team which contributed to further delays in implementation.

Government Performance Rating: Moderately Unsatisfactory

b. Implementing Agency Performance:
The implementation arrangements were structured around 3 layers: project steering committee to provide strategic guidance; PIU for fiduciary management and to provide support to the steering committee; and technical working groups which were beneficiary institutions for implementing their respective components.

  • Due to lack of capacity within the beneficiary institutions, the proposed technical working groups were not set up during implementation resulting in significant efficiency gaps in the management and coordination of the project, and over-reliance on the PIU which in turn lacked technical capacity. Also, poor capacity within beneficiary institutions in terms of preparation of Terms of References, technical specifications for equipment and request for proposals led to significant delays during implementation (ICR page 8).
  • Until the suspension of the project in 2008, the steering committee was relatively ineffective due to the fact that the committee was chaired by the director of Unite de Politique (UPE) (a think tank within the Ministry of Finance), a beneficiary of the project without effective administrative or political power (ICR page 8).
  • Limited interaction between the PIU and the beneficiaries prevented the early identification of bottlenecks and the implementation of adequate mitigation measures (ICR page 23).
  • There was poor oversight of the PIU by the Project Steering Committee. For instance, PIU submitted annual work programs and budget to IDA without prior discussion and approval by the steering committee (ICR page 23). Also, APIX did not understand its role as a PIU because it was basically, a beneficiary of this project.
  • Following the closure of the PIU and the transfer of activities to APIX, there was no formal hand over between the two entities. As a consequence, APIX had to rely on the task team and beneficiaries to retrieve information (ICR page 23).
  • Disagreement between the task team and APIX on the need to hire a dedicated fiduciary team contributed to a breakdown in dialogue. When the team was eventually hired there was insufficient time to complete key project activities, which were ultimately dropped (ICR page 24).
  • The project targeted capacity building interventions in key public institutions, while insufficient support was extended to strengthening the competitiveness of private firms and the capabilities of business associations (ICR page 20).

Implementing Agency Performance Rating: Moderately Unsatisfactory

Overall Borrower Performance Rating: Moderately Unsatisfactory

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

a. M&E Design:

M&E indicators in the original design were mostly process based and outcome indicators did not accurately capture the various aspects of the PDO. Despite the large number of project activities geared toward enhancing private investment flows, the M&E framework did not include investment related measurements (ICR, page 9).

    • The M&E framework did not include indicators that could measure the contributions towards the 8 percent GDP growth (ICR, page 9).
    • New indicators that were added to the M&E framework were insufficiently aligned to the PDO. For instance, none of the new indicators could capture the potential impact of the project on improvements in the investment climate (ICR page 10).
    • The capacity building activities were enhanced in the restructured project, but were not effectively monitored for impact (ICR page 10).
    • Although, there were difficulties in accurate measurement of some of the indicators (such as, job creation), the project did not make an effort to conduct impact assessment studies towards the end of the project.

b. M&E Implementation:
Over the course of project implementation, the PIU had a dedicated M&E officer for only one year i.e., the person was hired in 2004 but left in 2005 and was never replaced which resulted in inadequate oversight of beneficiary activities (ICR page 10).

    • Despite numerous requests, the preparatory study for an investment strategy produced by the Institution de Prévoyance Retraite du Sénégal (IPRES) was not provided to the IDA team in a timely manner. As a result, the support needed to translate the recommendations into a strategy was never provided to the institution. Also, this indicator was a trigger for the disbursement of the third tranche of the Private Sector Adjustment Credit (PSAC) budget support operation (ICR page 10).

a. M&E Utilization:
No information is provided in the ICR concerning the utilization of the project’s M&E system.

M&E Quality Rating: Negligible

11. Other Issues:

a. Safeguards:

The project was categorized as a Category C project because it was aimed to provide technical support to the government of Senegal.

b. Fiduciary Compliance:

The shortcomings in financial management relate to (ICR, page 11):

    • failure to implement internal control recommendations arising from an internal audit mission, and to regularize a debt amounting to 85 million CFA francs contracted by beneficiaries (Postal system, the ARTP and Customs) before project closure; and
    • inappropriate reimbursement of ineligible expenditures of CFA francs 3.5 million arising from counterpart funds which led to a six month suspension of project disbursements.
    Procurement Management (ICR, page 11):
      • The PIU lacked the capacity to handle the procurement of numerous consultancy services, large information technology systems, Customs, La Poste, and Network of Chambers of Commerce.
      • A conflict of interest in procurement by a beneficiary of consultancy services contributed to the suspension of disbursement in 2008.

c. Unintended Impacts (positive or negative):
None

d. Other:
None



12. Ratings:

ICR
IEG Review
Reason for Disagreement/Comments
Outcome:
Moderately Unsatisfactory
Moderately Unsatisfactory
 
Risk to Development Outcome:
Moderate
Significant
Due to sustainability issues of: Public Procurement Regulatory Agency (ARTP); reforms to administer the intellectual property rights; La Poste; and “Société de gestion collective” (SONACOS) to manage royalty fees in the music industry 
Bank Performance:
Unsatisfactory
Unsatisfactory
 
Borrower Performance:
Moderately Unsatisfactory
Moderately Unsatisfactory
 
Quality of ICR:
 
Satisfactory
 
NOTES:
- 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 following lessons are taken from the ICR with some adaptation:
    • Consensus with the stakeholders on the content of project activities is critical to ensure ownership and successful implementation of the project(refer to 3rd bullet in section 8 (a)).
    • Project supervision requires close oversight and active decision-making from the management in light of early warning signals i.e., the task team and management should be more proactive by restructuring the project at an early stage in order to maximize its impact (refer to 3rd bullet in section 8 (b)).
    • Capacity of the implementing agencies should be thoroughly assessed prior to project approval or effectiveness (refer to bullet points 1 to 4 in section 9 (b)).
    • Adequate M&E framework and impact evaluation mechanisms should be institutionalized at project inception (refer to sections 10 (a) and (b)).
    • Steering committee composition should be balanced and inclusive, and benefit from high level representatives able to influence and/or accelerate decision-making (refer to bullet 4 in section 9 (b)).

14. Assessment Recommended?

No

15. Comments on Quality of ICR:

The ICR is well written, frank and extensive and provides an in-depth review of this project. The quality of evidence and analysis provided in the ICR is excellent. For instance, ICR (page 16) clearly explains that the increase in private investment to US$ 3 billion (page 16) was not due to post-restructuring improvements to investment climate because of slow progress during that period. Design issues such as, underestimation of risks in the PAD, lack of consensus with the stakeholders on the content of project activities etc were clearly identified in pages 6 & 7. The ICR (page 7 & 8) conducted an in-depth analysis of implementation issues such as, delays in project effectiveness due to the government's failure to fulfill effectiveness and disbursement conditions in a timely manner, lack of capacity within beneficiary institutions, poor coordination between PIU and the steering committee etc. The ICR (page 9 & 10) conducted a detailed review of the M&E framework such as; indicators were mostly process oriented, framework did not include investment related measurements, and explanation on why creation of jobs cannot be fully attributed to the contributions made by this project. The lessons highlighted in the ICR (page 25 & 25) were based on the analysis and evidence presented in the ICR.

However, the following were some shortcomings in the ICR: it did not illustrate the causal chain between improvements in the investment climate, increased Private Investment, and increased GDP growth rates; it did not update the cost-benefit analysis after some activities were dropped (such as, matching grant scheme and partial credit guarantees); and, it did not provide information on M&E utilization.

a. Quality of ICR Rating: Satisfactory

(ICRR-Rev6INV-Jun-2011)
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