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Implementation Completion Report (ICR) Review - Iq-emergency Private Sector Development

1. Project Data:   
ICR Review Date Posted:
Project Name:
Iq-emergency Private Sector Development
Project Costs(US $M)
 55.0  61.48
L/C Number:
Loan/Credit (US $M)
 55.0  61.48
Sector Board:
Cofinancing (US $M)
Board Approval Date
Closing Date
06/30/2007 06/30/2012
General information and communications sector (60%), General finance sector (20%), General industry and trade sector (20%)
Conflict prevention and post-conflict reconstruction (50% - P) Infrastructure services for private sector development (50% - P)
Prepared by: Reviewed by: ICR Review Coordinator: Group:
Aghassi Mkrtchyan
Robert Mark Lacey Lourdes N. Pagaran IEGPS2

2. Project Objectives and Components:

a. Objectives:

    The Trust Fund Grant Agreement Technical Annex defines the project’s overall objective as “to lay the foundation by addressing certain key priorities in institutional capacity building and essential communications infrastructure to help foster the development of the private and financial sectors. A secondary objective of the project is to generate job creation through the development of the private sector” (page 9).
    According to Annex 1 of the Technical Annex, these general objectives were to be achieved through the following specific objectives: (i) to provide the foundation for a sound investment climate from a financial and institutional perspective; (ii) to develop a pipeline of opportunities for the private sector that would lead to job creation; and (iii) to make essential infrastructure for the survival of a modern private sector, namely a reliable payments system, supported by necessary telecommunications infrastructure.

    The Technical Annex proposes the following key associated outcome indicators.

    Objective 1: Strengthening of the Investment Promotion Agency, the Export Promotion Agency, and the Economic Development Fund, and preparation of Development Plans for two industrial zones at Erbil and Basra.

    Objective 2: Supporting an Export Promotion Fund at the Ministry of Trade which would channel technical assistance to 100 eligible firms to develop export plans; and supporting the Economic Development Fund at the Ministry of Planning and Development Cooperation (MoPDC) in channeling technical assistance for Iraqi private enterprises to develop feasibility a studies for new funding from financial institutions

    Objective 3: Connecting the Central Bank of Iraq (CBI) with two government owned banks and the headquarters of 20 private banks in Iraq with high capacity and reliable communication infrastructure; and rehabilitation and upgrading of three of five national background microwave routes.

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

c. Components:

There were four components (according to the TCFTA) in addition to two project management components:

Component 1: Development of enabling public institutions that support the private sector (estimated cost at appraisal - US$ 6.8 million; actual cost- US$6.6 million). The component was to include developing Industrial Zones Development Plans; Public awareness campaign to promote investments; business plans development for to support private sector development by. public institutions.

Component 2: Improving the competitiveness of Iraqi private firms by improving their ability to access finance and foreign markets (estimated cost at appraisal - US$ 5.0 million; actual cost- US$ 5.0 million. The component was to include assisting export ready firms to develop viable export plans and feasibility plans through Export Promotion Agency and Economic Development Fund.

Component 3: Building reliable telecommunications infrastructure to interconnect key parts of the Central Bank’s payments and settlements system (estimated cost at appraisal - US$ 3.0 million; actual cost- US$ 3.2 million). This component was to finance capacity connectivities in the three routes and training in technical, legal, management, procurement and financial management affairs.

Component 4: Building a high capacity national backbone communications network capable of supporting corporate needs and develop the human capacity to operate it efficiently (estimated cost at appraisal - US$ 39.5 million; actual cost - US$ 49.6 million).This component was to finance availability of 1,200 lines of interconnection and 2 megabits per leased lines; rolling-out of 2,050 km digital microwave routes, 10 corporate users and service provider; technical assistance for improvement of the ICT sector, and improving access to telephone and internet services.

Component 5 and 6: Financing expenditures directly related to project management (estimated cost at appraisal - US$ 0.7 million; actual cost - US$ 0.9 million). (Note: The reason why project management has two components is because it was implemented through two agencies – MoPDC and Iraq Telecommunications and Post Company (ITPC)).

Restructuring (February 2010)

The project was restructured twice, in March, 2010, and March, 2012. Neither restructuring involved Board approval, and neither involved any change in the development objectives. The restructuring in March 2010 allocated an additional US $10 million to the project for capacity building for private sector development and technical assistance for the telecommunications component; reallocated proceeds including replenishment of operating budget of the PMT (Project Management Team); and extended the closing date to March 31, 2012. The restructuring of March 2012 extended the closing date by a further three months, to June 30, 2012 to allow completing two main consultancies.

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

Project costs
The original commitment from the Trust Fund at appraisal was US$ 55 million. The dollar amount of the project was increased in October 2008 by US$10 million to accommodate costs overrun resulting from fluctuations of the Euro/US$ exchange rate (as most of major contracts were in Euro). However, most projected cost overruns did not materialize because the exchange rate stabilized. The additional resources were, therefore, reallocated to the private sector development and telecommunications components for additional capacity building and technical assistance during the restructuring in 2010.

The grant was financed from the Iraq Trust Fund (ITF). There were no other external sources of financing.

Borrower contribution
There was no Borrower contribution.

The original closing date was June 30, 2007, which was changed to March 31, 2012 and then to June 30, 2012. The first extension of the closing date was due to slower than expected project implementation resulting mostly from deterioration of the security situation in 2006-08. The second change in the original closing date (by three months) was to allow two main consultancies to be completed.

3. Relevance of Objectives & Design:

a. Relevance of Objectives:

The project's objectives are substantially relevant to the Country Partnership Strategy for the Fiscal Years 2013-2016, which, in its results area of supporting economic diversification focuses on improving business environment and strengthening infrastructure services. The project’s objectives were also relevant to the 2004 Interim Strategy Note for Iraq, which highlighted the need for short-term job creation through the private sector, as well as rehabilitation of infrastructure.

The objectives were also relevant to Iraq's national priorities identified through the contribution of Iraqi stakeholders in the workshops following the donor conference in Madrid in early 2004. The list of pressing issues for which Iraq was seeking external assistance included such areas as investment climate reform, payment system and telecommunication sector reforms.

b. Relevance of Design:
The project's statement of development objectives is output rather than outcome oriented.

The results framework presented in the Technical Annex states the project objectives, and describes the links with outputs and outcome indicators. The Annex provides a detailed description of funded activities and sets out a causal chain between funded activities and outcomes. However. design has the following shortcomings:

    • Outcome targets presented in the logical framework mostly describe outputs, such as developing of feasibility plans for exports and access to finance, connecting the Central Bank with commercial banks, and rehabilitation of national backbone routes. The outcomes identified during the 2010 restructuring mostly have an attribution problem that weakens the causal chain with project activities.
    • The causal chain between the first objective on foundations of investment climate and the supporting project component is weak. It is not clear how technical assistance to public agencies with varying level of technical capacity and political support could be expected to strengthen the foundations of a sound investment climate.
    • Design did not take sufficient account of, or incorporate adequate measures to address, the weak institutional capacity of implementing agencies in Iraq at the time of project preparation (2004-07).

4. Achievement of Objectives (Efficacy) :

Objective 1: Provide the foundation for a sound investment climate from a financial and institutional perspective. Negligible

This objective was to be achieved by (i) strengthening the Investment Promotion and Export Promotion Agencies and the Economic Development Fund through a public awareness campaign and through endorsement by the government of three business plans developed for public institutions to support the private sector; and (ii) preparing and implementing development plans for the industrial zones at Erbil and Basra.
  • No major activities in public awareness campaign and business plan development for public institutions were undertaken due to weak ownership by the authorities.
  • The project financed a number of proposals and plans for re-organization of the Economic Development Fund. However, the Fund was closed in 2011.
  • Bank-financed consultants prepared and developed proposals for establishment of the Industrial Zones in Basra and Erbil that were delivered to the authorities in a workshop in 2010.
  • No evidence is provided that the Investment Promotion and Export Promotion Agencies were strengthened. Most planned activities in relation to these Agencies were not undertaken.
  • There is no evidence provided that the proposals and plans for re-organization of the Economic Development Fund were implemented or that the Fund had been strengthened as a result of project activities.
  • According to the ICR, the diagnostic work on the three public agencies was later used by the authorities as part of their new National Development Plan. Subsequent implementation of the plans for establishment of the Industrial Zones in Basra and Erbi was slow. The plans were taken over by UNIDO to be included in their three-year project launched in 2011.

Objective 2: Develop a pipeline of opportunities for the private sector that would lead to job creation. Negligible

This objective was to be achieved (i) through supporting the Export Promotion Fund of the Ministry of Trade in channeling technical assistance to 100 eligible firms, 75 of which would be expected to produce export plans; and (ii) supporting the Economic Development Fund at the Ministry of Planning and Development Cooperation to channel technical assistance to 100 firms, 50 of which would develop feasibility studies to be used as the basis for seeking finance.

  • The ICR reports that technical assistance was provided to the Export Promotion Fund.
  • 30 export development plans were prepared, 45 less than the target.
  • The capacity building component for export market research was abandoned in 2009.
  • The Economic Development Fund assisted 30 firms in developing feasibility studies for new funding requests from financial institutions, 20 less than the target.
  • Training workshops were provided to strengthen the administration of the Economic Development Fund by introducing and adapting modern systems for assessing risks and administering loans for small and medium-sized enterprises.
  • There is no evidence provided that project activities led to new business projects, investments and job creation by beneficiary private firms.
  • There is no evidence provided showing that the preparation of feasibility studies enhanced private firms’ access to credit.

Objective 3: Make essential infrastructure for the survival of a modern private sector, namely reliable payment system, supported by necessary telecommunications infrastructure. Substantial

This objective was to be achieved by (i) the establishment of the Iraq Inter-Bank Network (IIBN) connecting the Central Bank of Iraq with two government-owned and 20 private banks; and (ii) the rehabilitation and upgrading of three out of five national background microwave routes and their associated spurs, accompanied by technical assistance for the improvement of the management and operation of the Information and Communications Technology (ICT) sector.
  • The ICR reports that the IIBN had been established by project closure. A detailed technical annex lists the various investments made.
  • The output targets for the rehabilitation and upgrading of the microwave routes were the provision of 1,200 lines of interconnection and leased lines with a capacity of two megabits per second; and a roll-out of 2,050 kilometers of digital microwave routes. There would be ten corporate users and service providers (Technical Annex, page 31).
  • The ICR does not indicate whether the 1,200 interconnection lines were in fact made available.
  • The ICR reports that the three microwave routes were fully rehabilitated as anticipated at appraisal.
  • No information is provided on the number of corporate users and service providers that materialized
  • Capacity building of ICT sector stakeholders reportedly exceeded appraisal estimates; US$1.7 million of the additional US$10 million made available for the project were used for this purpose. Among other things, the project financed the development of sector policy and the audit of all technical and human resource assets of Iraq Telecommunications and Post Company (ITPC), laying the ground for the effective transformation of the state-owned operator, and many highly technical training courses for the Ministry of Communications and the Communications and Media Commission in order to improve the capacity of the regulatory body to deliver its mandate.
  • The objective was formulated in output terms – “make essential infrastructure” – and this was achieved.
  • According to the ICR (page 14), the technical assistance provided by the project enabled the ICTsector to achieve a value of 3 (baseline zero) in the scale of 1 to 5 used in OPCS guidelines. These indicate that a value of 3 is justified (i) if “a project results in guidelines addressed to regulators and policymakers that cover a modest share of the sector and/or which may result in changes to the existing regulatory environment”, or (ii) if “a project makes a modest impact on the capacity of the regulator, such as participation by regulatory staff in a regional training program, or the provision of fellowships for study”, or (iii) if “the project has a significant impact on the sector policy environment, for example by helping drafting a universal access policy through engaging relevant stakeholders.” The impact of the project-supported technical assistance enabled these criteria to be met or surpassed.
  • Access to telephone and internet services increased from a baseline of 66.7% (number of fixed lines plus cellular phones per 100 people) and 4.0% (number of subscribers per 100 people) respectively to 79.8% and 10.4%, exceeding the targets of 73.4% and 4.4%. However, there is evidence to suggest that this cannot be attributed to the project. The network improvements financed by the project and controlled by ITPC were underutilized at the time of completion of the ICR. The expansion is access is due principally to investments by private telecommunication companies. These companies provided their own networks, in part to avoid the high transaction costs, poor management and governance issues involved in dealing with ITPC.
  • Project-financed investments were, however, used for the banking system. By project closure, 52 banks had been connected to the Central Bank via the IIBN, exceeding the target by 250% (IIBN’s full capacity is 75 participating banks). The ICR reports that the network was “reliable” (undefined) and “positively affected several important functions of [the Central Bank]” (also undefined). Although there was a substantial increase in the overall volume and number of transactions through the network it is not clear whether the higher number of banks connected to the system is the result of improved coverage thanks to the project or because of the emergence of new banks for which the marginal cost of joining the network was very low.

5. Efficiency:


The project’s efficiency suffered from the challenging security situation in Iraq, which added extra costs to both technical assistance and physical investments, and from implementation that took five years longer than planned.

The ICR reports that it is difficult to measure the efficiency of the first two components because of the nature of interventions aimed at public agencies for institutional capacity building. However, these two components combined absorbed around US$12 million between 2004 and 2012, and with little to show in the way of results.

As for the infrastructure investments, no cost-benefit analysis was undertaken. The ICR reports various estimates of the unit costs of physical outputs, providing a range of data for international comparison. It shows that the unit cost of the IIBN was around USD 25,000 per kilometer, which is higher than in the European comparators, but is in line with that of in Lebanon. High unit costs are explained by extremely difficult operational environment in a violence stricken country that required special security arrangements. The ICR (page 26) also reports that unit costs per beneficiary are also reasonable given the operational environment.

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
ICR estimate:

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

6. Outcome:

Moderately Unsatisfactory

Relevance of objectives is rated high, and that of design modest. The project succeeded in putting in place new and rehabilitated infrastructure for the inter-bank network and for the ICT sector more generally, and related technical assistance had a beneficial impact on ICT management, operations and regulation. Although there are attribution issues surrounding some of the outcomes, the goal of establishing the infrastructure was achieved and the efficacy of the objective is rated substantial. The project did not deliver most of the expected outputs related to the two private sector development objectives, and no evidence was provided concerning the anticipated outcomes of providing the foundation for a sound investment climate, or a pipeline of opportunities for the private sector leading to job creation. Efficacy of both these objectives is, therefore, rated negligible. Delays in implementation, many of them associated with the security situation, together with the lack of a quantitative assessment, lead to a modest rating of efficiency.

a. Outcome Rating: Moderately Unsatisfactory

7. Rationale for Risk to Development Outcome Rating:

The overall political and security environment remains very challenging in Iraq. More specifically related to the project, there is evidence that poor coordination between the government and private sector may hinder full utilization of the new telecommunication infrastructure put in place. The ICR reports that ITPC operated with losses, and that “brain-drain” was a major problem affecting the company’s performance. In addition, weak government ownership would make it difficult to sustain the few achievements made in strengthening institutional support for private sector development.

a. Risk to Development Outcome Rating: High

8. Assessment of Bank Performance:

a. Quality at entry:

The project was prepared in an emergency context in view of Iraq’s transition and was aimed to address immediate reconstruction needs pertaining to private sector development, including institution-building and reconstruction of critical infrastructure. The project's objectives were relevant to national and Bank priorities for the country.

There were, however, significant shortcomings in the Quality at Entry. The choice of project interventions were inconsistent with the weak institutional capacity of implementing agencies in Iraq at the time. The links between components were loose (strengthening the export promotion fund and rehabilitation of the payment system, for example), and the rationale of putting them together in one operation is unclear . Although the Bank team carried out analytical work to underpin project preparation, the short preparation time affected the quality of this diagnostic work. Borrower commitment was weak in a number of areas, which was not fully taken into account. M&E design suffered from major shortcomings (see Section 10a below).

Quality-at-Entry Rating: Moderately Unsatisfactory

b. Quality of supervision:

For the first three years of implementation, supervision was conducted through missions from Washington DC. During these missions the Bank team organized various workshops with the national stakeholders. Since 2010, the task team leader was based in Baghdad, and this contributed to addressing implementation issues and faster implementation of the telecommunication component. The restructuring of the project in 2010 extended the closing date, revitalized the telecommunication component and introduced new output indicators to better monitor project results. Shortcomings at the project preparation phase, however, affected implementation, although challenging political and security environment was the dominant factor affecting supervision. The Bank’s response to the lack of timely implementation of institution-building components could have been more proactive. Little was done to improve M&E design, and the continuing lack of an effective M&E framework, even after the 2010 restructuring, hindered supervision.

Quality of Supervision Rating: Moderately Unsatisfactory

Overall Bank Performance Rating: Moderately Unsatisfactory

9. Assessment of Borrower Performance:

a. Government Performance:

The Government initially showed a high level of commitment to the areas covered by the project but the focus on some of the components weakened during implementation mostly due to different views within government regarding the institutional framework for private sector support. In particular, the Economic Development Fund, that was expected to play an important role in assisting private sector firms to develop feasibility studies for access to finance, was closed in 2011 after a number of restructuring attempts. In general, the quality of project implementation in many areas was hampered by overall poor coordination within the Government. In areas where the need for coordination was less (such as the payments system and the telecommunication components) the project’s achievements were more substantial. Moreover, the Government’s focus on rehabilitation of the physical infrastructure was stronger, which contributed to more successful implementation.

Government Performance Rating: Moderately Unsatisfactory

b. Implementing Agency Performance:

The Ministry of Planning and Development Cooperation (MoPDC) and the Ministry of Communication (MoC) were the implementing agencies. Little information or analysis is provided in the ICR concerning their performance, Project components for which MoPDC was in charge (institutional strengthening in support of private sector development) did not achieve the intended results. MoC performed better, and was able to achieve most of the expected outputs for the payments system and telecommunications activities despite very difficult security conditions during much of the implementation period.

Implementing Agency Performance Rating: Moderately Unsatisfactory

Overall Borrower Performance Rating: Moderately Unsatisfactory

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

a. M&E Design:

M&E design suffered from major shortcomings. The target values for some of the indicators were not established at the project design stage and many baseline figures were missing. The hierarchy of some output and outcome indicators was unclear. Responsibility for M&E was placed with the two project management teams at MoPDC and MoC.

b. M&E Implementation:

The ICR notes that M&E was not a priority for the project management teams, particularly in the first years of implementation. The focus on M&E strengthened somewhat at the time of the restructuring when new monitoring indicators and target values were added to some of the existing indicators. Three output indicators that were added to the framework, however, were not very helpful. The usefulness of the indicators on increased phone and internet usage was undermined by lack of attribution to the project, while the indicator on the impact of technical assistance on the ITC sector is based on self-assessment by the team. The project management team at MoC submitted monitoring reports only at the end of project implementation.

a. M&E Utilization:

The ICR does not report any utilization of the M&E system beyond monitoring program implementation.

M&E Quality Rating: Negligible

11. Other Issues:

a. Safeguards:

The project was classified as Category "B". The ICR does not provide information on environmental assessments: although as an emergency operation the project was exempted from the need to conduct an environmental assessment prior to Board approval, an assessment should have been carried within a twelve month period following approval. However, the ICR states that there were no safeguards-related issues. It also reports that all infrastructure activities were successfully completed in compliance with the recommendations of Bank’s Environment and Social Safeguards Framework, and that "Safeguards compliance is rated satisfactory" (page 8).

b. Fiduciary Compliance:
The ICR reports that the project’s financial management was outsourced to a private company - the Fiduciary Monitoring Agent (FMA). FMA staff visited the project frequently for fiduciary purposes. Nevertheless, because of frequent turnover of financial management staff at the ministries the initial stage of project implementation saw an occurrence of ineligible expenditures and some inaccuracies in accounting. The ICR reports that these were addressed during the second half of project implementation, although it does not provide further details. The ICR reports payments delays in domestic currency linked to slow bank transactions. "The auditor issued unqualified “clean” opinions on the audited financial statements except for 2009. The 2009 audit report was qualified due to an insignificant ineligible amount of US$197 and incorrect classification of expenses by the Project Management Teams (PMTs) in one submitted withdrawal application. Both issues were rectified by the PMTs.

The ICR also reports that the procurement was rated as Satisfactory. Procurement was closely monitored by the Bank team since the launch of the project, and counterparts were provided with detailed training in procurement guidelines. Procurement was also reviewed by FMA. The ICR reports delays in procurement in 2006-08 mostly because of higher than expected bid amounts due to security situation. The ICR reports deficiencies, such as sub-standard construction, that were eventually fixed by the counterparts.

c. Unintended Impacts (positive or negative):

d. Other:

12. Ratings:

IEG Review
Reason for Disagreement/Comments
Moderately Satisfactory
Moderately Unsatisfactory
Although relevance of objectives is high, and the project succeeded in establishing the infrastructure for the payments system and the ICT sector, it did not deliver most of the expected outputs related to the two private sector development objectives, and no evidence was provided concerning the anticipated outcomes. Efficiency is rated modest.  
Risk to Development Outcome:
The risks to development outcome are rated high because of 1) the challenging security and political situation in Iraq in general; 2) the lack of ownership in institution-building for private sector support; 3) the poor performance of ITPC; and 4) lack of coordination both within government and with private operators. 
Bank Performance:
Moderately Satisfactory
Moderately Unsatisfactory
The short preparation period and lack of strong analytical underpinning adversely affected Quality at Entry, while efforts during implementation to revitalize the project were only partly successful. 
Borrower Performance:
Moderately Satisfactory
Moderately Unsatisfactory
The authorities lacked ownership in institutional reforms related to the investment climate and private sector development. Poor coordination between various government agencies also adversely affected project implementation. 
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:

This ICR presents a list of relevant lessons from preparation and implementation. The key ones are the following:
    • Projects that are ambitious in scope and objectives are difficult to implement in challenging operational environment such as in Iraq.
    • Complex projects require adequate implementing capacity.
This Review supports these lessons and adds the following:
    • Emergency projects are not adequate mechanisms for achieving strengthening in state institutions to provide effective support for private sector development, since such objectives require a substantial body of analytical work, scrupulous preparation of activities and strong political commitment to project goals
    • Investing in Infrastructure without addressing institutional bottlenecks will undermine a project's achievements as evidenced from the underutilization of ITC infrastructure primarily caused by weak governance in ITPC and inadequate public-private coordination.

14. Assessment Recommended?

To verify the ratings and investigate more thoroughly attribution issues.

15. Comments on Quality of ICR:

The ICR provides a good account of what the project achieved, also providing candid reflections on the operation’s shortcomings. It provides a comprehensive set of lessons that are useful for future operations in similar contexts. However, the ICR could have done a better job in helping to understand important developments affecting the project, especially given that the operation was complex with lengthy implementation. The ICR uses a hierarchy of objectives and sub-objectives that sometimes confuses the reader. There is, at times, a somewhat liberal interpretation of the scope of project components and the links between them. The ICR reports conflicting target values for some of the indicators (for example, between the Data Sheet and page 13 of the main text). The total amount of disbursements presented in the Data Sheet is different from the one in Annex 1 (US$ 61.48 million vs US$ 65 million). The ICR does not provide sufficient information on safeguards compliance or on implementing agency performance.

a. Quality of ICR Rating: Satisfactory

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